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Looking for a better security system
Welcome to our article (91) The Australian social security must be equal
We are looking for a better social security system, where everybody gets a minimum payment, which is equal to the minimum pension or unemployment benefit.
Dear readers, we believe that the Australian Social Security System must be equal for everybody, but it is not, as we have said in our previous articles, which had something to do with the Australian social security system, starting with, Farming Today Is Still a Risky Business, then, Australian Social Security, then, The Australian Parties, then, Australia can do better than this, and then, The Assets Test Dilemma, now in these articles we were talking about how the Australian Social Security System works and helps people. So, we have found that the Australian social security system, is good but not perfect, since some people cannot receive it for one reason or another; therefore, the social security system needs to be changed, to fix these unforeseen failures to help. Australia cannot claim to have a good social security system, when it fails to deliver help to those that need help.
Having said that, now we need to study the situation and try to come up with an answer for this social problem, because, the Australian Social Security system, must be equal for everybody. We believe that everybody in the community must be given a minimum of help, when they need help. So, we are going to write and suggest our views, hoping that somebody important reads them and does something about it.
Now, what we want to write here is not going to be popular, because it criticises the existing social security system, since it says that it is not good enough, they need to avoid what is happening to the farmers, so, they must put in place a better system, where people in need are helped. So, let us imagine and talk about a social security system that can guaranty that.
Talking about the ideal social security setup
What we are writing hereunder is an idealistic way for the social security system to adapt, if they can. I said if they can, because it is unlikely that this system can be approved now, because Australia cannot afford it today, however, it is important that something like this exists. We hope that future politicians, start working on this idealistic social security system that we are talking about.
We believe that all legal citizen that are unemployed or don’t have any income, must be granted from the government an amount of money that is at least equal to the minimum government unemployment benefit or pension, it would be like receiving a small wage from the government. Now, we believe that this is what is needed in Australia, and we believe that one day can be done, if we can organise ourselves to achieve that, after all Australia is a rich country, so, we should be able to do that. I know that it is going to cost a lot more than we can afford, but if it is well planned, it can be done. Now let us see how this will affect the community and which group of people will benefit from this change.
The people that can benefit from the change.
The people that will benefit from this change, are those people that today don’t receive any payment from the government, and those people that don’t receive enough, so, they are forced to live below the poor threshold. In this case the poor threshold is set, as equal to the minimum government pension that today is about, $900 per fortnight for a single person, or $700 each for a couple. This is the minimum of money that people need to live, and we believe that it must be equal for everyone.
As things stand today, there are people that must live with less than the minimum government pension, because of the anomalies in the system. One of those anomalies is caused from the assets test, where the pensioners receive a smaller pension, the rest of their earnings is supposed to come from their assets, which are supposed to earn about 7.8 %; but most of the rental properties, can only earn about 2.5 to 3%, as we have shown you in our previous article, The Assets Test Dilemma, where a house valued at $650,000 did only make $8500 in a year, which is about 1.3%. So, we believe that the assets test on rental properties must be set according to what they can earn, if the government believes that we need mums and dads to invest in rental properties and keep the Australian real estate market the way it is today.
You see, today people believe to invest in rental properties and it is the way to go; but soon they will become aware that to own a second house, can be a problem when they apply to receive their pension, because the assets test will reduce their pension more than what they can earn from their assets; once the people know that they cannot make any money from rental properties, when they become pensioners, they will stop investing in rental properties.
My views are that the assets test on rental properties, must be set at a level, where it is possible for the owners, to earn at least as much as they loose from the pension. Now my views are that the assets test on rental properties should be one third of what they are now, so that the pensioners will lose one dollar per thousand, instead of three dollars per thousand. But even this might not be enough, you see if you have a property valued at one million dollars, you cannot receive any pension. The question here is; will this property earn the owner about $24,000 per year net. I don’t think so. Anyhow, these are our views.
The property owners’ other problems
As we have seen in this article and our previous articles, to own a rental property is a problem and not a benefit, because people lose their pension or unemployment benefits, so, to own a second property is not the way we should plan for better retirement, since the assets test reduces the pension payments to more than what you can earn from your properties.
But there are more negative things in owning a rental property, the worst of all is the land-tax. The land-tax in Queensland is $1.7 per thousand, this means that if you have land valued it one million dollars, every year you must pay $17,000 to the government just because you own this land. They don’t give you anything at all, you just must pay, because they need the money.
Some people still believe in owning properties, because their price go up all the time, so, they think that they are better off having properties, you see, they don’t realize that there is this gain tax that will take away all their earnings and more, let me give you this example.
You own a rental house that you have bought several years ago for $250,000, which was the right market price, today you must sell the rental house, because you need to move to another town, where houses are about the same value, so, you think that it will be easy; you sell the house for $650,000 and you buy another one about the same price. But that is not going to happen, because the $400,000 dollars that you have gained is taxable. This is called the gain tax, which may well be around $100,000, it is hard to be more specific. So, in this case you may lose $100,000 dollars because of the gain tax.
The figures in this article, might not be correct, but they are close enough to what they are supposed to be for showing our views.
This is all I can say today; this setup is not fair for anybody that owns properties, because those properties in the assets test, cannot earn half the money that they will receive from the government pensions or other benefits, if they had no properties. So, for them it would have been better to have no properties; since the assets test affects the pension and other benefit adversely, starting from the farmers, as we have said in, Farming Today Is Still a Risky Business.
So, people are discouraged to own properties and to save for rainy day, because there is no benefit to own them, since they are going to lose and not to gain. Here we are asking for a chance that the scale in the assets test for properties, be set in a way that gives the property owners a chance to earn at least as much money as they lose, from the government benefit. It is not fair that people lose money because they have worked hard and saved money.
Now we are talking about money, so, if you have money instead of a property, today you are not better off, because the interest that you can receive from the bank, is not equal to the money you lose from your pension.
Anyhow, this is all what I can think about today. I believe that at least I have pointed out what in my views needs adjustment. Because we believe that, the Australian social security system must be equal for everybody.
I hope that somebody in the government reads my articles, and then thinks what can be done to make them fair for those people that have worked hard.
To see more click on this link, The Australian Social Security Must Be Equal.
Dear readers, we have written several articles about social issues in Australia, today in this article we have said what we believe needs to be done. Anyhow, we believe that it is not going to be easy to achieve that, because of what is happening around us. So, let us look at what is happening and at the same time, when we can remind our readers about our idealistic Social Security setup.
See you in next article, Australian elections 2019.