Deal to pass tougher assets test includes more scrutiny of retirement income

Greens leader Richard Di Natale made a deal with the government to allow changes to the pension. AAP/Mick Tsikas

The government has struck a deal with the Greens to pass tougher eligibility arrangements for the pension, in a move that will save A$2.4 billion over the forward estimates.

To secure the agreement, the government has extended the period for submissions to the tax white paper and broadened its “stakeholder engagement” to cover retirement income more extensively.

The Greens have wanted a full inquiry into retirement income.

Treasurer Joe Hockey said the six-week extension for submissions until July 24 allowed more time for interested parties to put their views on key interactions between the age pension, superannuation, tax and employment, “consistent with the government’s objective of ensuring stability and the commitments we have made to the Australian people”.

This would promote more detailed consideration of the interactions between the tax system and the transfer system, including the sustainability of Australia’s retirement income arrangements, Hockey said.

The government continues to insist it has no plans to change the tax arrangements for superannuation.

But Greens leader Richard Di Natale said the government’s agreement to give special consideration to retirement incomes in the white paper meant “we can finally look at superannuation as part of the equation”.

The deal on the pensions legislation – which is a significant achievement for Social Services Minister Scott Morrison – was announced after Labor confirmed on Tuesday that it would oppose the changes.

The pension changes would see 91,000 current part-pensioners becoming ineligible and another 235,000 having their part-pension reduced.

But more than 170,000 with low or modest levels of assets would have an increase of around $30 a fortnight from when the new arrangements start in January 2017.

The measure will increase the assets test free areas, which will help pensioners with few assets and increase the taper rate by which a pension is reduced when the free areas are exceeded.

Those who lose access to the part-pension because of the new taper rate will still have access to the Commonwealth seniors health card.

Morrison said this was the single largest savings measure in this year’s budget. He said incorporating the additional consultation into the tax white paper process fell within the original scope of the tax paper.

Earlier, Opposition Leader Bill Shorten said the changes would mean another 700,000 people now working in their 50s and early 60s would face cuts to their pension. “The Liberals are coming after your pension,” Shorten said.

The budget changes to the assets test replaced the government’s 2014 budget plan to alter the pension indexation arrangements that would have seen a big erosion in real value over time.