The Abbott government chalked up a modest win this week with the first of its social services budget measures passed by the Senate with the help of Labor and Senators Day, Leyonhjelm and Muir. One budget measure yet to pass the Senate is the government’s proposal to tighten Newstart eligibility for those 55 and over.
According to the Department of Employment these reforms are needed because current policy settings allow “55-59-year-old jobseekers to effectively retire on Newstart while undertaking a bit of voluntary or part-time work,” at the taxpayer’s expense despite having many productive years ahead of them.
With 152,838 Newstart recipients aged 50 and over as of June 2012, two thirds of whom had been on payment for more than 12 months, it is understandable that policy makers are focused on moving older Newstart recipients into work.
Currently those on Newstart who are aged 55 and over need not look for work. These recipients can meet their activity tests through volunteer work for just 15 hours a week. Most other Newstart recipients are required to look for work or, where employed, work for at least 35 hours a week to avoid job search requirements.
While it is inequitable that some Newstart recipients get to choose volunteer work while others face the hard slog of job search, if there is a ‘grey army’ descending on Centrelink offices seeking early retirement then they are intending to do so on a tightly means tested, and relatively modest, (maximum) annual payment of $13,406 for singles or $12,103 for a member of a couple.
Moreover, unlike the age pension, the Newstart assets test shifts single homeowners off payment at $202,000 and non-homeowners at $348,500. Newstart recipients with these assets, who are able to secure a return of 6%, are only earning $12,120 and $20,910 a year, respectively, which would reduce their payment.
Newstart recipients with assets approaching these amounts would most likely choose job search over volunteer work unless they had significant superannuation balances.
Assuming a 6% return on just under $433,000 of combined assets, a member of a non-homeowner couple might be able to retire on a household income of $55,062, $5,318 of which would be Newstart. However, this assumes a significant amount of assets (excluding partner’s super) and every dollar of partner income over $23,764 would reduce this payment by 60 cents.
Regardless of whether early Newstart retirement is a major issue, the Senate should pass the over-55s reforms. Funding age pension payments, which are set to increase to $72.3 billion by 2023-24, is going to take tax receipts from gainfully employed Australians, not Newstart subsidised volunteer work.
Matthew Taylor is a Research Fellow at the Centre for Independent Studies.
Home > Commentary > Opinion > The Grey Army of early Newstart retirees
The Grey Army of early Newstart retirees
According to the Department of Employment these reforms are needed because current policy settings allow “55-59-year-old jobseekers to effectively retire on Newstart while undertaking a bit of voluntary or part-time work,” at the taxpayer’s expense despite having many productive years ahead of them.
With 152,838 Newstart recipients aged 50 and over as of June 2012, two thirds of whom had been on payment for more than 12 months, it is understandable that policy makers are focused on moving older Newstart recipients into work.
Currently those on Newstart who are aged 55 and over need not look for work. These recipients can meet their activity tests through volunteer work for just 15 hours a week. Most other Newstart recipients are required to look for work or, where employed, work for at least 35 hours a week to avoid job search requirements.
While it is inequitable that some Newstart recipients get to choose volunteer work while others face the hard slog of job search, if there is a ‘grey army’ descending on Centrelink offices seeking early retirement then they are intending to do so on a tightly means tested, and relatively modest, (maximum) annual payment of $13,406 for singles or $12,103 for a member of a couple.
Moreover, unlike the age pension, the Newstart assets test shifts single homeowners off payment at $202,000 and non-homeowners at $348,500. Newstart recipients with these assets, who are able to secure a return of 6%, are only earning $12,120 and $20,910 a year, respectively, which would reduce their payment.
Newstart recipients with assets approaching these amounts would most likely choose job search over volunteer work unless they had significant superannuation balances.
Assuming a 6% return on just under $433,000 of combined assets, a member of a non-homeowner couple might be able to retire on a household income of $55,062, $5,318 of which would be Newstart. However, this assumes a significant amount of assets (excluding partner’s super) and every dollar of partner income over $23,764 would reduce this payment by 60 cents.
Regardless of whether early Newstart retirement is a major issue, the Senate should pass the over-55s reforms. Funding age pension payments, which are set to increase to $72.3 billion by 2023-24, is going to take tax receipts from gainfully employed Australians, not Newstart subsidised volunteer work.
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