Let older Australians work, say Liberal backbenchers

Liberal Party backbenchers are pushing Treasurer Josh Frydenberg to use next week’s budget to unleash a ‘grey army’ of retired workers to boost the country’s tight jobs market, calling for an end an effective tax rate of more than 60% on their income.

In a policy strongly backed by pensioner groups and even mining billionaire Gina Rinehart, several backbenchers are pushing for Mr Frydenberg to test a system in which people on retirement pensions could work without their rights being reduced.

Liberal backbenchers are urging the government to try a system that would allow retirees to work without losing their old age benefits.Credit:Rob Homer

Businesses report difficulties in finding staff in most sectors, particularly in hospitality and sectors dependent on skilled migrants. Unemployment has fallen to 4%, its lowest level in 14 years, and the budget is expected to project the unemployment rate to be even lower by the end of the year.

This week, the Sydney Committee used its federal platform to push for changes that would allow international students who have earned a local university degree to have access to a four-year work visa and an easier path to citizenship.

But a group of coalition MPs say the government should exploit the large number of pensioners already in the country who face severe financial penalties even if they work an extra day or two every fortnight.


Under current rules, a single person can earn up to $480 per fortnight without affecting their pension rights. Above $480, the pension is reduced to 50¢ for every dollar of income or an effective marginal tax rate of 50%. This rate climbs above 60¢ to the dollar as tax thresholds begin to affect their earnings.

The high tax rate has been blamed for the low proportion of working retirees. A briefing paper circulated by those calling for change says less than 3% of Australian pensioners derive income from paid work, compared to nearly 25% in New Zealand, where people can work without losing their pension.

The briefing document, a copy of which was seen by The Sydney Morning Herald and age, argues that if Australia matched New Zealand’s participation rate, an additional 445,000 people could enter the labor market. He also claims that if married retirees earned $80,000 a year, the income tax they paid would cover the cost of their pension.

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