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Thursday, 21 March 1985
Page: 581

Senator GRIMES (Minister for Community Services)(3.43) —We are debating the Social Security and Repatriation (Abolition of Assets Test) Bill 1985, a private member's Bill introduced by Senator Messner and yet another device to bring about debate on the assets test, which seems to exercise the minds of members of the Opposition almost daily. The Bill in effect is aimed at abolishing the assets test, at wiping out the related social security and repatriation legislation which was introduced and passed by this chamber and the other House last year.

The Opposition states that the Bill is based on two grounds. The first ground, it suggests, is that the assets test is designed to encourage people to become more dependent on the Government. We immediately, of course, question such an assertion. For the great majority of pensioners and the great majority of people approaching pension age, the assets test is and should not be an issue at all. This is because it has generous exemption limits which are indexed annually. For a single person the limit is $70,000 plus a home or $120,000 if no home is owned; and for a married couple the corresponding figures are $100,000 and $150,000. For those who are affected by the assets test, the facts are quite the reverse of the Opposition's assertion. The existing income test, which has been in place by itself since 1976, has been increasingly exploited by people with very considerable assets who, together with their financial advisers or who, unfortunately in a couple of cases, without their knowledge, have had their affairs arranged so that they receive little or no income from their assets and therefore qualify for a full pension.

It is the existence of this avenue of avoidance which has encouraged people to be more dependent on the Government. The assets test has brought to light a significant number of cases of people having had assets amounting in some cases to hundreds of thousands of dollars which have not been used to produce a reasonable income. In some instances capital appreciation was sought. In other cases unreal amounts were kept in cheque accounts and in all instances additional assistance was sought through the social security system. Thus, far from encouraging dependency on the Government, the assets test encourages a person with assets of, say, $300,000 to invest those funds reasonably and safely to produce, say, 10 per cent and enjoy the $30,000 income rather than a pension of $4,778.80.

The test has clearly succeeded in closing many glaring loopholes which the previous Government had permitted to flourish, loopholes which benefited the wealthy at the expense of the vast majority of pensioners on low incomes and, in fact, the vast majority of taxpayers in this country. These loopholes were not discovered by Ministers in the present Government; they were recognised by Ministers in the previous Government and we have at various times-I will not bore the Senate with it again-quoted from speeches by such people as Senator Chaney, Mr Peacock, Mr Howard and others repeatedly pointing out that these loopholes have existed and suggesting that we do something about them.

With an income test as the only measure of eligibility for pensions and fringe benefits a small number-I repeat, a small number-of pensioners clearly went to some extraordinary lengths to cheat the system, or certainly to cheat the spirit of the system, and give themselves an advantage over their brothers and sisters. In order to qualify for government assistance that they did not need, a minority of pensioners were even prepared to deprive themselves of substantial income they could otherwise have received. This income in many cases would have far exceeded what they got in pension payments. I think it is worth while giving the Senate some examples which have come to light through the assets test implementation exercise.

In one case a person disclosed that he had $400,000 divested in a non-interest bearing family trust. Under the income test that person qualified for both a pension and fringe benefits. A pensioner in Queensland revealed that apart from his home he owned several blocks of land with an unimproved value of $490,000. He was receiving a full rate of pension. A married couple received a full rate of pension because the business they ran in an outer Sydney suburb was supposedly running at a loss. The business was valued at $700,000 and their home, which they used for wedding receptions, was valued at $400,000 and its contents at $70,000. A widow was receiving a full rate pension and she disclosed that her late husband had lent $730,000 to a family company at no interest. A pensioner in Queensland who owned $800,000 worth of shares was receiving the maximum rate of pension because the interest from the shares went into a family trust. This pensioner, incidentally, had also applied to the Department for rent assistance of $15 a week, but without success. A Queenslander pensioner was receiving a full rate of pension even though he owned several farm properties. This was because the farms were not being run at a profit.

The application of an income test only induces wealthy pensioners to cheat the system by depriving themselves of income. It is important to note that it is also an inducement to some unscrupulous people to exploit the elderly. In one case which has come to light an elderly woman in a nursing home was shown to have invested with her accountant $500,000 in a non-interest bearing account. Her form, filled in by the accountant, also revealed that she had $50,000 invested in the bank. If the $500,000 had been invested on the woman's behalf at the relatively modest rate of interest of 12.5 per cent, the interest would have provided her with an annual income before tax of $62,500 a year-considerably more than the single rate of pension.

The hysterical campaign waged by members of the Opposition against the assets test over the past twelve months has been both immoral and unjust. In seeking to defend the position of a privileged few and in seeking in fact to gain political capital out of a fear campaign, they have turned their backs on the vast number of Australians-children, single parents, the sick, the disabled and the elderly-who live in or near poverty. The Opposition would by this legislation and by its opposition to the assets test prefer to see money going to the sorts of people I have been talking about, and even to millionaires, than to see a more just and equitable distribution of social welfare funds. Frankly, their selfishness is appalling. The people of Australia should bear in mind that when the Opposition attacks the assets test it speaks on behalf of people such as the Queensland Liberal ex-member of Parliament who admitted he was receiving almost a full rate pension under the income test. When it came to filling out the assets test form he self-cancelled his pension payments rather than reveal his assets. He has admitted that publicly. The assets test is ensuring that pensions go to those who need them.

It is clear from the figures that have come through since the implementation of the assets test that savings to the taxpayers of this country, and the money available therefore for redirection to more worthy people, is in excess of $100m. It is interesting that one of the complaints about the assets test was that it would not raise sufficient funds for any such purpose. We now know that it will. The amount of asset holdings is much higher than I, the Minister for Veterans' Affairs, Senator Gietzelt, or any of our departmental officers realised. The Opposition is now saying that we should abolish the assets test; that we should either raise that $100m-plus from the taxpayers of this country, particularly the pay as you earn taxpayers who cannot indulge in the sorts of schemes I have mentioned and who cannot indulge in the myriad of tax evasion schemes we have had in this country, or deprive those people who rely on social security benefits-the poor, the sick, the invalid and the destitute-of any increased benefits through, say, an increased rent allowance, in order not to annoy the 2.3 or 2.4 per cent of pensioners affected by the assets test, and in particular not to annoy those who have obviously had the ear of members of the Opposition.

It is a fair comment that the average worker in Australia readily accepts his obligation to support those in need. The fact that workers object to supporting through the taxation system a person with very considerable assets, assets considerably greater than their own, is understandable. No reasonable person believes that we should be paying a pension at the full rate and providing fringe benefits to people with assets-even cash assets in some cases-totalling more than $500,000 in some of the cases that have come to light as a result of the implementation of this assets test. It was for this reason that the Australian Council on the Ageing agreed with the implementation of the assets test. On 12 March it put out a Press statement saying that the results of the implementation of the assets test have justified its stand even though many of its members and many people in the community thought that it should come out with a knee-jerk response and oppose that assets test.

The second position on which the Opposition seems to base its opposition on the assets test is that the legislation, according to Senator Messner's second reading speech, is shot through with anomalies. This suggestion also needs to be examined both generally and in relation to the specific examples quoted by him. I remind Senator Messner and other honourable senators present that Senator Gietzelt and I, during the time we were debating the assets test in the community and in particular in this chamber, recognised that there were areas of difficulty in the implementation of such a test. We recognised at the time, as had been recognised when the previous assets test was in place before its removal in 1976, that there were particular problems with people in rural areas and with people with non-liquid assets. We also recognised at the time that we would need to monitor the assets test as it was applied and would need, on having our attention drawn to difficulties which may arise, to modify the administration of that test. We never made any pretence that that situation would be otherwise and, in fact, problems-some apparent, some real-have been brought to the attention of the Minister for Social Security, Mr Howe, and Senator Gietzelt. Those problems will be looked at, whether they come from people writing reasonable letters to the various Ministers, whether they come from organisations writing reasonable letters about problems facing people affected by the assets test or whether they come from hysterical outbursts in this or other chambers. We will proceed to deal with those problems and seek to continue that practice. The basic fact remains that the taxpayers of this country, in particular relatively low income earners with children to support, were paying taxes to support people who were far better off than themselves, who had managed to manipulate the system so that they could receive full pensions and full fringe benefits in a manner quite contrary to the spirit of a needs-based social security system, a system to which everyone in this chamber and the other chamber, on both sides, at various times gives at least lip service.

At the general level, the impartial observer might suggest that this test, even with its generous exemption limits and total disregard of income, has addressed the anomaly in the existing system-the anomaly that I have been talking about-since its immediate effect has been to reduce the annual pension bill by some $100m. As I said before, it has resulted in the situation where people with substantial assets who are able to provide for themselves have in fact been holding their assets in non-income producing, sometimes artificial non-income producing, forms and have been calling on the general community for their support. This most glaring anomaly in our pension system has been minimised and it is as a result of that minimisation that there have been so many screams from so many members of the Opposition. Some 30,000 pensioners in the social security system have lost all of their entitlement to pensions; some 20,000 others have had their pensions reduced. In order to have no entitlement to a pension a person must have assets, apart from a home, of $116,000 if he or she is single and $177,000 if married. If a person does not own a home, the figures are $166,000 for a single person and $227,000 for a married couple. Those are not ungenerous figures; those are figures beyond the dreams of most pensioners, or most non-pensioners for that matter. It is ludicrous to suggest that the figures are ungenerous.

There has been some difficulty in the introduction of this assets test. Of course there has been some confusion; we have never denied that. However, the improvement in the Government's ability to address problems in the welfare system through the savings that will be generated will make all of this worthwhile. I believe that confusion is becoming less and less and will become nil as the assets test is increasingly applied.

Senator Messner talks of anomalies-as he did in his second reading speech and as he has on matters of public importance in this place-but he is short on specifics and he is inaccurate about what he calls anomalies. Let us look at the so-called anomalies he enumerates. I take the example of the woman recently widowed. The woman and her husband would have been allowed $100,000, plus their home, before the assets test affected them. They would be unaffected by the assets test. If the $100,000 produced $8,000 in income, their combined pension would have been some $101 a week. In those circumstances, when the husband dies the effect under the existing income test is that, after the period when the pension formerly paid to the couple is continued, which I think everyone here knows about, the pension payable to the widow would drop to $30 a week. Under the assets test the pension payable to her would be $31.90 a week. It is not apparent to me how the assets test adversely affects the widow in that example. Further, she would be in a position where her private income amounts to $154 a week and her pension to almost $32 per week; a total of $186 a week. Many people in the community would question whether a single person with that level of income, plus a home, plus $100,000, requires the special consideration that Senator Messner claims.

Another example is the person who realises a considerable sum of money when he sells his home to enter a nursing home or an aged persons home. Such a person has the potential to obtain an attractive income from investing the proceeds. To preclude him from a pension, the person would require assets of $166,000. It is not necessary to have particular skills in investment, since reasonably attractive rates are now available from deposits in building societies or investment accounts with banks. Given the generous exemption limits, a person in those circumstances who qualifies for some pension is likely to be income tested rather than assets tested.

In the case of a granny flat, where a person spends an amount to construct a flat on premises owned by his or her family and does not obtain any legal title, that person has deprived himself or herself of the amount concerned. However, given the extra exemption of $50,000 allowed under the assets test to a non-home owner, few such persons will be adversely affected. In fact, that is the experience of the implementation of the assets test. It is worthwhile noting that 10 per cent of any sum held as deprivation of assets is depleted each year so that any possible adverse effect is strictly temporary. If the person obtains title to the granny flat, he would be treated as a home owner.

A person who obtains entry to an aged persons home without payment, loan or donation is treated as a non-home owner. If payment is made to obtain admission, the person is treated as a home owner, since he or she has a right or interest in the accommodation. The amount he or she pays is disregarded as an asset since it represents his or her home. Whilst there are a wide range of circumstances under which people enter aged persons homes, in practice few will be affected by this provision. Persons may have other assets of $70,000 without being affected in any way by the assets test. If a person has $70,000 invested at, say, 9 per cent, the income produced allows a pension of $46.30 to be paid. Under the assets test a person would need assets not of $70,000 but in fact of $92,800 before pension at that rate was payable. In order words, only those with very substantial assets are likely to be adversely affected.

I accept that this is a very sensitive area. I accept that people have paid varying amounts to get into aged persons homes. Mr Howe, Senator Gietzelt, the Government, and I accept that there may be people at the margin who would be affected more than they need to be, and it is for that reason that we are monitoring this area very closely. It is for that reason that a Government Party committee is monitoring this area very carefully. The Government is willing, as I have said previously, to make changes if these are seen to be necessary.

Senator Messner talked of farmers with limited income who on retirement would normally hand the property to children who have been working it for little remuneration. This is a group we hear a lot about. There are a number of instances where persons have assets in the form of a farm worth $300,000 or more but wish to receive a pension. The assets test is based on the premise that people generally should employ their assets productively. If the asset is a business requiring active participation and the person is unable to do so, the test presumes that he or she might rearrange assets holdings. In terms of claiming assistance from other members of the community who may not be fortunate enough to have an asset of equal magnitude, I suggest that this is an eminently reasonable approach. However, where it is unreasonable to expect the person to sell the asset-for example, because of the long term unpaid contribution of the son-the person may have the asset disregarded under the hardship provisions if his situation is such that he would suffer severe financial hardship. Similarly, if the son's long term commitment to the farm resulted in little recompense to him, this would be recognised if the farm was gifted.

Senator Walters —Ha, ha!

Senator GRIMES —Senator Walters may laugh, but the simple fact of the matter is that there are people whom Senator Walters and I represent who have no income, who have either nil assets or a very modest home, who are utterly reliant on the pension, who have been paying taxes all their lives, who are deprived of a more adequate pension, and who, if they had been working, would have been paying a pension to people with considerable asset holdings. Does Senator Walters seriously believe that a person on an income of less than $300 a week, with four or five children, who is paying taxes, should pay a pension to someone with assets of over $500,000, which could be providing him with an income? If she believes that sort of nonsense, she believes in absolute inequity in our society. She certainly does not believe in her own Party's policy of a needs based social security system, and there is no way that she can argue against that.

The Government has copped a lot of flak over the introduction of the assets test. I dare say we will get it over and over again until Senator Haines, Senator Gietzelt, and I, and others speaking in this debate, bore each other more than we bore most people in this place. The simple fact of the matter is that all the criticisms about this assets test have been aimed at the Government for trying to introduce a needs based system and prevent some 2.4 per cent of the whole of the pension community in this country from taking advantage of the rest of the community. We are trying to ensure that we have a social security system which enables governments of any persuasion to increase the benefits to the poorest in the community, those people with no assets, those people particularly with no assets and no home who are living in private, rented accommodation, those people who, in most cases, are reliant on the State, through no fault of their own, for public housing. We need to support and help these people. A system which is as patently unfair and shot full of loopholes as the system which existed until the introduction of the assets test is seen to be unfair and is resented by the taxpayers of this country who, I might add and I repeat, have in fact no objection to paying some of their taxes to those in need.

We reject this piece of legislation. This legislation is, in fact, an attempt to rescind the assets test. We resent it because the test, though difficult to introduce politically and socially, was introduced by a government which believed something had to be done, which knew it would get criticism for it and which knew it was easy to stir up fear, it was easy to misrepresent and it was easy in the community to paint us as doing something we were not doing. The simple thing about the assets test-I think it is a very good reflection of what happened-is that Mr Barry Cohen, who represents the electorate of Robertson in New South Wales, and who has the largest percentage of pensioners of any electorate in this country, was never under any concern about the effect of the assests test on his vote and he was right. He said that people who were on the pension, who knew what was going on and who were aware of the system, realised what it was all about; those who are not on the pension, who thought one day they might be on the pension were able to be frightened because they did not understand the system. That, if it had any electorate effect, was where it had the most effect. But once the test is introduced, once the system is seen to be fairer than it was before, once governments of the future will be able to demonstrate how they can improve the system with the introduction of such a test those people will accept it and are accepting it now.

I make one final point: If members of the Opposition seriously say that this Government, or any other future government, can forgo over $100m in payments of this type to go to the people to whom it has been going, they have got to put to the people of this country where they are going to replace the more than $100m.

The DEPUTY PRESIDENT —Order! The Minister's time has expired.