Chapter 4 - Concessions and rebates
4.1
Although the pillars of Australia's retirement income system have predominantly
involved the age pension, compulsory superannuation and private savings, the
committee notes the importance of concessions and rebates to the capacity of
older people to finance the costs of living. In particular, the Commonwealth
Government provides substantial funding for subsidies and concessions - including
for healthcare and pharmaceutical discounts - which also contribute to reducing
expenses for older people, thereby increasing their disposable incomes. Many
concessions are also provided by state and local governments.
Available concessions
4.2
There are numerous types of concessions, allowances, offsets and other
payments for which older Australians may be eligible depending on their
financial and social circumstances. Although the Pensioner Concession Card
(PCC) and the Commonwealth Seniors Health Card (CSHC) exist primarily to
provide access to the PBS and certain Medicare services at a reduced rate, they
also provide eligibility for other concessions. Approximately 85 per cent of
people over the pension age have an Australian Government concession card.[1]
4.3
The PCC is available to all recipients of the age or service pensions,
which constituted 3.15 million people in 2006. DVA also issues Gold and White
cards to eligible veterans and war widows and widowers.[2]
The Gold Card provides entitlements to the full range of health care services
including medical, dental and optical care. The average cost during 2006-07 was
$14 500 per card.[3]
The CSHC provides eligibility for a more limited range of concessions and
rebates and is available to self-funded retirees of age pension age with income
below a certain threshold, which included 300 000 people in 2006.[4]
4.4
Some of the concessions, offsets and rebates available to older people
include the senior Australians tax offset, pensioner tax offset, medical
expenses tax offset, rent assistance (up to $104 per fortnight for singles and
$98.20 each per fortnight for couples), utilities allowance ($106 in 2006-07),
a telephone allowance ($85.60 in 2006-07), council rate concessions, water and
sewage concessions, vehicle registration concessions, public transport
concessions and stamp duty concessions for property purchases, and a seniors'
concession allowance for holders of the CSHC to recognise less access to
concessions available to pensioners ($214 in 2006-07).[5]
4.5
Considering the boom in property prices over the past decade, there was
substantial interest during the inquiry regarding the value of rent assistance.
This assistance is provided by the Government to people in private rental
accommodation who receive the age pension or other income support to recognise
the potentially high costs faced. FACSIA reported that in 2006-07 the
Government provided $361 million in rent assistance for aged pensioners, with
215 081 aged pensioners receiving rent assistance as at 30 June 2007. In March 2007 only 30 per cent of age pensioners receiving rent assistance were paying
over 30 per cent of their income on rent. This figure would be 67 per cent
without the rent assistance provided.[6]
Housing costs including rental assistance are discussed in more detail in
chapter 5.
4.6
Concessions provide important improvements to living standards of older people
by decreasing out-of-pocket expenses. The Commonwealth Government provides
funding to state and territory governments to assist with providing concession
for rates, utilities, car registration and transport, and public and community
housing. However, the state and territory governments exhibit discretion about
what concessions are offered and the criteria determining their accessibility. FACSIA
submitted that the Commonwealth payment for concessions amounted to
approximately $200 million in 2006-7.[7]
4.7
Some of the submissions to the inquiry expressed concerns that
self-funded retirees were often ineligible for many concessions.[8]
In particular, the Wide Bay Women's Health Centre highlighted that the CSHC was
not necessarily accepted by medical services or other institutions. The Centre
noted that the PCC also has various rates of acceptance.[9]
Inter-state reciprocity for public
transport
4.8
At the Canberra hearing, FACSIA discussed the negotiations between the
Commonwealth and State and Territory governments regarding reciprocity of
public transport concessions. In 2002 and 2004, the Commonwealth offered
additional funding to allow State Seniors Card holders to travel on public
transport at concessional rates outside their home State and to extend concessions
to CSHC holders. The March 2004 transport offer was $5.6 million and the offer
for extending concessions to CSHC holders was $75.4 million. However, the
negotiations were unsuccessful and lapsed. Consequently the Government decided
to provide funding directly to seniors in the form of the utilities allowance
and the seniors concession allowance. The Government anticipated spending $54
million on the seniors concession allowance and $161 million on the utilities
allowance in 2008.[10]
4.9
Nevertheless, many of the submissions to the inquiry expressed concern
about the lack of reciprocity of public transport concession between the
states.[11]
This has substantial impacts on the quality of life of older people because of
the increasing dispersal of families across the country. The ability to visit
friends and families has enormous implications for quality of life and social isolation
and impacts disproportionately on low-income older people. Ms Mary Maxwell
noted that, ironically, Canada and the UK will accept a Seniors' Card issued in
one of the Australian states for eligibility for travel concessions, but such a
card would not be recognised in any of the other Australian states.[12]
The Superannuated Commonwealth Officers' Association called for the
Commonwealth to facilitate the renewal of negotiations between the states and territories
to address the situation.[13]
4.10
As noted in Appendix 3, the new Labor government has committed funding
of $50 million to establish national reciprocal transport concessions in
cooperation with the State and Territory governments.
Indexation of the Commonwealth
Seniors Health Card
4.11
Over the past ten years, the Government has increased the number of CSHC
holders from 35 000 to 318 000. The CSHC income limits were indexed
until 1999 when they were raised substantially and indexation ceased. The
limits were raised from $21 320 to $40 000 for singles and from
$35 620 to $67 000 for couples. In July 2001, the income limits were
again increased to $50 000 for singles and $80 000 for couples. FACSIA
submitted that the limits would have been substantially lower without the rises
in 1999 and 2001.[14]
4.12
However, concerns were expressed about the lack of indexation for the
eligibility thresholds of the CSHC and the absence of any rise since 2001.[15]
Submissions focused on the fact that while since 2001 incomes have increased,
so too have costs. Therefore, inflationary effects have reduced the real level
of the CSHC. The lack of rises or indexation of the threshold has meant that
some older people have lost their access to concessions, particularly PBS
prescriptions, visits to medical practitioners and hospital expenses, travel
costs, telephone allowances and other concessions. Ms Aileen Monck elaborated
on this issue:
Many self funded retirees have had small increases in their
gross income in recent years, because of upward movements in the share market
which affects share dividends, allocated pensions etc. At the same time the
cost of living has increased, as has the cost of pharmaceutical prescription
items. Failing health as a person ages often requires the expenditure of quite
large sums of money on prescriptions, and other pharmaceutical items. When this
increased expenditure is taken into account it has the effect of reducing the
net annual income of self funded retirees, but, because the gross income
exceeds $50 000 annually, they either lose their entitlement or are unable
to apply for the fore-mentioned card.[16]
4.13
The Superannuated Commonwealth Officers' Association advocated a rise in
the qualification threshold and indexation to the higher of the CPI and MTAWE
to reduce the risk of compromising the health of older people.[17]
The importance of concessions
4.14
As has already been established in this report, older people generally
have lower incomes than most other demographics and have limited capacity to
improve their financial situation following retirement. Therefore, concessions
provide an extremely important means to help counter the adverse impact of
rises in cost of living pressures. A range of submissions to the inquiry emphasised
the importance of concessions.
4.15
Estimates of the precise value of concessions to the weekly budget of
older people differed among the submissions, but there was agreement that it
was a substantial component. Also, the degree of subsidy received depends on
individual retirees' circumstances, which vary significantly. For instance,
according to the Council of Social Service of New South Wales (NCOSS) and the
Combined Pensioners & Superannuants Association (CPSA), older people in
rural and regional areas did not have the same opportunity to obtain public
transport concessions as those in metropolitan areas. This could amount to a
difference in benefits worth hundreds of dollars over the course of a year.[18]
4.16
Despite the different value of concessions being determined by different
circumstances, some of the submissions estimated the value of their
concessions. The submissions of Mr N Flannery and Virginia Boskovic maintained
that the value of pension concessions amounted to $1 000 per annum.[19]
FACSIA estimates were higher at approximately $1 600 per year for age
pensioners and $1 200 per year for holders of the CSHC. As has already
been discussed, the Commonwealth Government introduced the Seniors Concession
Allowance of $214 for CSHC holders in recognition that the CSHC does not have
the same concessional advantages as the PCC.[20]
The Brotherhood of St Laurence did not provide an estimate of the monetary
value of concessions but suggested the value could be even higher than
suggested by FACSIA. It cited ABS data to argue that the health benefits and
concessions received by older Australians equates to 25 per cent of their
average weekly income. This includes concession rates for PBS pharmaceuticals,
bulk-billed medical services, reduced threshold for the cap on non-hospital
medical costs through the Medicare Safety Net, subsidised hearing, dental and
ambulance services.[21]
4.17
It is clear to the committee that concessions are of great value to
older people in assisting them to cope with cost of living pressures. As was
argued by the CPSA:
Concession and benefits are like hard cash to pensioners.
Reducing or cancelling concession or benefits, or failing to index them, is
tantamount to reducing the pension paid through Centrelink.[22]
4.18
The Corrimal Pensioners and Superannuants Association even argued that the
availability of concessions was more important than rises in pension levels, as
it provided a greater capacity to ensure priority needs are targeted and made
affordable.[23]
Declining value of concessions
4.19
Despite the clear importance of concessions for older people in
affording the costs of living, various submissions highlighted concerns that
the concession arrangements were insufficient, too restrictive in their
eligibility criteria, or were declining in their real value - mainly as a
result of a failure to index their rates. This effectively resulted in the
undermining of the capacity of older people to meet cost of living increases.
4.20
The Brotherhood of St Laurence argued that over the past 3-4 years it has
observed increasing financial stress among older clients and has received
similar reports from other organisations that work with older people. It
indicated it was uncertain about what was responsible but noted that increasing
costs were not met by increases in concessions.[24]
CPSA submitted a similar argument but asserted more strongly that the erosion
of the standard of living of pensioners was primarily attributable to changes
in concession arrangements by the Commonwealth, state and territory, and local
governments. It argued that these benefits and concessions form an integral
component of pensioners' income packages but have been gradually reduced.[25]
4.21
Key concessions and rebates that were highlighted as being insufficient
for meeting the needs of older people or declining in their real value to
contribute to the financial stress of older people included medical fees,
pharmaceutical benefits, dental fees, rent assistance, utilities allowances,
telephone allowances, senior concession allowance, local council rates, motor
vehicle registration, and public transport fees. The submission of Bernard and Barbara
Murray outlined increases in their bills between 2001-02 and 2006-07 after the
application of concessions. Although these figures did not account for
differences in use, they demonstrated a 39.8 per cent increase in expenditure
on health insurance, 28.4 per cent increase in council rates, 16.5 per cent in
car insurance and registration, 9.5 per cent increase in house and contents
insurance, and a 5.1 per cent reduction in telephone costs.[26]
4.22
Some of the submissions highlighted the cost imposed for medications
that were not on the PBS. CPSA expressed particular concern with the gap
between Medicare refunds and medical fees. It noted that the Pharmaceutical
Allowance is only CPI-indexed if this results in an increase of 10 cents or
more, and that it has not been increased for years with its real value dropping
by 25 per cent. CPSA also noted that at the same time, the co-contribution per
prescription has continued to rise. Further, CPSA maintained that the decline in
bulkbilling for Medicare has meant that many pensioners are unable to afford
consultations and put them off as well as expensive scans. CPSA also argued
that dental access has declined with increasing unavailability of public dental
care and difficulty affording private care. Further, CPSA argued that public
podiatry programs are inadequate, forcing pensioners to use expensive private
podiatry services.[27]
4.23
Transport was another key area where submissions highlighted increases
in payments required from pensioners. For example, the Brotherhood of St
Laurence pointed to the Victorian Government's reduction of the concession on
motor vehicle registration for pensioners.[28]
During a 2004 reform of the concession system, the Victorian Government removed
the exemption for pensioners to pay registration fees and instituted a 50 per
cent fee. It argued that the full concession was out of step with other
concessions and was open to misuse.[29]
The CPSA noted that the NSW Government has recently introduced a 15 per cent
booking fee for country rail travel, which imposes a cost on a previously free
service. Consequently, the CPSA reported, patronage fell by 25 per cent in the
first 12 months of the fee introduction.[30]
4.24
Concessions related to housing are, evidence suggested, the most
responsible for causing financial stress to retirees. In particular, it was
argued that rebates on rates, electricity and water, and rental allowances have
not increased in line with inflation. This was particularly highlighted in the
submission of Mr Richard Sims.[31]
4.25
In terms of council rate subsidies Queensland, New South Wales and Victoria
were highlighted as failing to index subsidies, despite rapid and sustained
increases in property prices, which translated into higher council rates. COTA
also raised the problem of the inadequacy and declining applicability of
concessions, particularly in relation to council rates. COTA submitted:
Although these concessions are valued by older people they leave
many recipients struggling to meet necessary expenditures as costs rise faster
than the concession and new, unsubsidised elements are added to basic accounts.
For example rebates on municipal rates and utilities have not kept pace with the
rising values of properties and the increasing cost of user pays systems.[32]
4.26
Mr Peter McSpadden noted that the Queensland State Pensioner Rate
Subsidy Scheme provides a rate subsidy of 20 per cent up to a maximum of $180,
but has not been increased since 1992. Since that time, the Queensland
Government expenditure on the scheme has increased from $27.13 million in
1992-93 to $41.788 million in 2003-04, due to the increase in the number of
Queenslanders receiving the subsidy.[33]
The CPSA reported that there is no mechanism for indexing pensioner rebates on
rates at the local government level in NSW. Consequently, the rebate has not
been increased for 15 years, though rates have increased annually.[34]
Mr Thomas and Ms Barbara Sharp provided an illustrative example of rising
council rates accompanied by a fall in their rebate. In 2002 their council
rates bill was $593.24 and the concession $505, compared to $906.99 and $425
respectively in 2007.[35]
The Brotherhood of St Laurence also provided evidence that council rates in Victoria
have risen by 6–14 per cent, and concessions have failed to keep pace.[36]
4.27
The cost of utilities associated with housing was another example of a
failure of rebates to keep pace with price increases. Mr Thomas and Ms Barbara Sharp
submitted that pension rebates are inadequate and, in some cases, have declined
while charges rose. They provided figures that suggested the rebate on their
electricity bill was 8 per cent and did not even cover the GST on the bill.[37]
4.28
The Superannuated Commonwealth Officers' Association provided a possible
explanation for the rises in state and territory charges, which could also
explain the apparent declining real value of concessions. It argued:
The State and Territory shares of total revenue collected by the
Commonwealth have been declining, while the Commonwealth share has been
increasing. This has resulted in the Federal Government having large budget
surpluses, while the States and Territories have had to increase their taxes
and charges to make up the shortfall. These increases have impacted
disproportionately on the elderly, who consume more State and Territory
services than the general population.[38]
Conclusion
4.29
The rise in the real value of the age pension and other benefits for
self-funded retirees over the past ten years has highlighted the need for the
inquiry to examine other possible reasons for anecdotal reports of increasing
financial stress for older people. As was mentioned in the previous chapter,
the suitability of the current level of the aged pension needs to be
investigated, irrespective of the rise in value that has occurred, as well as
expectations of retirement.
4.30
But while much of the evidence presented to the committee focused on a
perceived inadequacy of current pension entitlements and indexations to meet
the cost of living, the committee emphasises the importance of the range of
indirect benefits such as concessions and rebates provided by all levels of
government. These benefits constitute a considerable financial investment by
governments and provide a substantial boost to the living standards of older people
that are not necessarily fully captured in analyses of income and expenditure
patterns and data.
4.31
The evidence presented to the inquiry raised the committee's concerns
about the appropriateness of concessions and their erosion as a result of
inadequate indexation. For instance, some submissions suggested that some of
the state governments have not increased or indexed council rate subsidies for
fifteen years, despite inflationary effects and the increase in council rates
that resulted from the property boom. There were limited contributions from
state and local governments to the inquiry to shed further light on the
apparent problem of the adequacy of rebates and concessions. But it appears as
though the ageing of the population and resulting increase in the number of
people eligible for concessions has led to an increase in expenditure on some
of these benefits, even though concessions to individuals have not been
increased. The failure to index any concession payment will invariably result
in an increasing widening of the gap between its value and the cost incurred by
the recipient. This particularly impacts on those on low, fixed incomes such as
pensioners, and unless addressed will contribute substantively to their financial
stress, exacerbate the deterioration in their financial well-being and have
implications for their physical and psychological health.
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