Wednesday, October 9, 2013

Sensible Australians

Someone asked me today how the age pension works in NZ.   When I told him it was paid to one and all, irrespective of financial circumstances, he was flabbergasted.

Thus far, I have seen no evidence that means testing NZ Superannuation has been seriously considered in NZ.  All our tiny minded journalists seem to be able to understand is that PM Key said he would not agree to either an increase in the age of eligibility or a decrease in the amount of the pension, relative to average wages.

Adolf has roughly half his age pension paid from NZ and roughly half from Australia.

I happen to have a four day per week casual job which brings in about $20k per annum.  For every dollar I earn over $126 per week, my Australian pension abates by $0.25. ($0.50 if you are single or your wife receives the pension.) The NZ pension remains unchanged.  The long and the short of it is that a married Australian age pensioner ceases to be eligible once his income reaches about $60k.  Seems pretty sensible to me.

There is a concurrent asset test as well.  The family home is exempt from consideration and I think the level at which abatement occurs is something like $400k.

I appears nobody in NZ has done the homework to assess just how much would be saved if a similar means test were introduced in NZ.  Does anyone reading this know how to run the numbers?  It would be nice to see the following:-
  • total number of recipients whose private income currently exceeds $60k with the estimated reduction in expenditure
  • estimated number whose incomes exceeding $30k and the associated reduction in expenditure
  • Comparison of the above expenditure reductions with that derived from moving the age  of  entitlement up by two years.
I wouldn't be terribly surprised if the last comparison was pretty close.

Anyway, I'm blowed if I know why My Key and the Gnats don't go for a means test.  It should be hellishly easy to  sell.  After all, it is really taxing the 'rich pricks' and Cunliffe would have to support it or be seen to be a dork.

Such a move would preserve Mr Key's promise to not meddle with the age of eligibility or the amount paid.

11 comments:

alwyn said...

There wasn't a means test as such during the Lange Government and the early part of the Bolger administration but there was a surtax on the income of people getting New Zealand superannuation that reclaimed the whole of the super from people on fairly high incomes. My mother hated it and never voted Labour again. The Bolger Government finally scrapped the surcharge in about 1993-1994 or so.

Adolf Fiinkensein said...

Yes and I recall it was the same surtax which eventually sunk Bolger was it not? Or his broken promise associated with same.

Anonymous said...
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Edward the Confessor said...

Massive effective marginal tax rates which would be a disincentive to save for your own retirement (why bother if the state takes it away by taxing your super?). Also an administrative nightmare needing an army of bureaucrats to implement and enforce. In short an incredibly stupid idea which would guarantee electoral oblivion. The Nats should so go for it. Do you give them advice?

Adolf Fiinkensein said...

Anon

You need a nom de plume to comment here.

Eddie the Con

Australia seems to handle the administration of their scheme with ease. It's all done on line.

You got something intelligent to say?

Edward the Confessor said...

Sure they do. How many thousands are employed to police retirees to ensure they're earning the correct amounts of money and have the right amount of assets? You must know as you think this is such a great idea.

Because the Australian government forces you to save for your own retirement the enormous EFTR's can't be completely avoided by spending all your money in advance of retirement, so in Australia this is partially workable. Otherwise it would be a disaster which punishes people for saving for their own future. A great idea for the Nats. Why don't they do it I wonder?

David said...

Not quite so simple Adolf. As with pretty much every other aspect of Australian tax practice, the Australian Tax Office has turned the application for a pension into a mammoth exercise requiring you to value almost every piece of personal property you possess and to list out every asset in which you have an interest. The forms run to some 65 pages.

Australians are accustomed to this as the annual tax return in OZ is almost as complex but woe betide any Kiwi who has worked in OZ even for only a year when they turn 65 and apply for the NZ Super. Working in NZ can be added to the Australian employment to make up the 10 years requirement for eligibility for the OZ pension.

NZMSD demand that you apply for the Australian pension and add that you can receive it in one of two ways. Either you can have your NZ pension abated by $1 for every $1 received from OZ. This is adjusted fortnightly to allow for exchange rate fluctuations or you can have the OZ pension paid into a Westpac bank account to which only NZMSD have access and they will clean it out periodically on your behalf. Neat eh?

Another reason why I continue working as it puts my income above the eligibility limit for the OZ pension and leaves my NZ Super untouched.

Adolf Fiinkensein said...

David @ 9:36

I have completed both applications nn NZ and Australia, having worked in Australia for some thirteen years.

The NZ application was as easy as a phone call followed, I think, by an email.

My NZ pension is paid directly into my bank account each month.

What could be simpler?

In Australia, I did the whole thing on line and it was not at all difficult or time consuming.

Addie the Con

Clearly you don't know. The answer is very few = I doubt if the number would run to just one of your 'many thousands.'

David said...

Adolf
Agree about the NZ super application - most painless. I am surprised that you can collect it while resident offshore. I knew there was a special exemption recently granted to retirees living in Samoa or the Cook Islands (forget which) but wasn't aware that you could live in OZ and collect NZ Super as they get all funny about the residency rules and the need to advise MSD if you travel.

Adolf Fiinkensein said...

David

I understand there is a reciprocal agreement between NZ and Australia.

Observer said...

Here's an interesting rule

Australian age pensions are income and asset tested, so any income or assets a New Zealander has will affect the amount of Australian age pension payable. In addition, the rate of New Zealand Superannuation payable in Australia cannot exceed the amount of Australian Age Pension that would be payable if the New Zealander was entitled to receive an Australian Age Pension but was not entitled to receive New Zealand Superannuation. This means that where a New Zealander cannot receive the Australian Age Pension because their income and assets exceed the limits, that person cannot receive New Zealand Superannuation in Australia.