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The Institute of Public Affairs has called for the pension work bonus to be expanded with ABS figures indicating that job vacancies remain high.
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Advocacy group pushes for tax changes to improve worker shortages
12 January 2024
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9 minute read
High job vacancy figures demonstrate the need for the government to address the tax and red tape barriers preventing some groups of Australians from entering the workforce, according to the Institute of Public Affairs.
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Job vacancy figures released by the Australian Bureau of Statistics this week indicated that while job vacancies fell by around 1 per cent between August and November, there were still around 389,000 job vacancies in November 2023.
ABS head of labour statistics David Taylor said it was the sixth straight quarterly drop in job vacancies, which have now fallen by around 18 per cent from the historical peak in May 2022.
“However, this quarter saw a relatively small decline, compared with the 8 per cent fall in August,” said Mr Taylor.
“Job vacancies remain well above their pre-COVID-19 pandemic level, around 71 per cent higher than February 2020.”
IPA research fellow Saxon Davidson said the latest figures show the need for the government to explore other solutions to addressing worker shortages.
“These figures demonstrate the desperate need to finally address tax and red tape barriers currently preventing Australians who want to work from entering the workforce, specifically pensioners, veterans, and students on the Youth Allowance,” said Mr Davidson.
In November last year, the federal government made permanent minor changes to the pension work bonus.
“These reforms only allow age pensioners and veterans to earn $226 per week before being subject to an effective marginal tax rate of 69 per cent,” said Mr Davidson.
In addition, Australian students who receive welfare benefits are also subject to high effective marginal tax rates, being subject to a 79 per cent tax rate once they earn over $288 per week, the IPA said.
“These unfair tax rates mean for many willing Australians; work simply does not pay. Allowing pensioners and veterans to work provides greater connection to community and an opportunity to enjoy the dignity of work and for students the ability to gain vital experience and skills,” said Mr Davidson.
The IPA said Australia could look at adopting the New Zealand model of taxation on pensioners and veterans.
“In New Zealand, pensioners and veterans are subject to a tax rate potentially as low as 10.5 per cent on their combined benefits and earnings,” said Mr Davidson.
“The fair tax applied to pensioners in New Zealand is why over 25 per cent of this cohort are employed, compared to only three per cent in Australia.
“Pensioner participation in New Zealand’s labour force is a major reason why they are not experiencing a worker shortage crisis, while Australia’s number of job vacancies remain 71 per cent above what they were pre-pandemic. New Zealand has almost recovered entirely.”
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