The tax system has a flip side - it is called the transfer system and it is getting harder to follow
The Government has always redistributed tax revenue back to Australians in a whole range of ways. This is not a new story. The new story is the increasing complexity of this system of transfer and with governments looking for ways to balance budgets, the story is also about constant change.
Australians live with a system that is based on legacy design, overlaid with policy tinkering and occasionally largely overhauled with a barrage of new ideas that flow through the media and parliament.
The Productivity Commission report on childcare and early learning is a great example. The report weighs in at more than 1000 pages, and so it should - child care subsidies and the range of related family payments are not just an important part of family budgets, but they feed back into a complex array of government objectives for what these payments may achieve, including issues of fairness and motivation for families to become productive.
Unfortunately, this complexity bites. In all the finessing, one important aspect gets lost - and that is the ability for Australians to make informed decisions with so many factors to consider.
So if the government is changing an already complex system, how do Australians easily assess how these rule changes impact their budget?
It is time to solve this complexity.
It has to be complex
Here is the thing. Governments want to be very specific about how their programs are applied. They want to make sure people with different financial situations are treated in a consistent way.
Meanwhile, no two families are going to be the same, nor age pensioners or first home buyers. This means the number of rules multiplies and always will - just so they are comprehensive.
For the consumer there are 3 courses of action available: 1. Read all the rules and try and work out what rules apply to them, 2. Call government lines and seek information, or 3. Apply and hope for the best.
This is not good enough.
The government doesn’t have the systems anyway
Centrelink is spending more than $1bn over 7 years to upgrade their systems managing $100bn of payments to 7.3 million Australians. This is a platform that was built in the 1980’s, and currently requires 100 public servants and 6 months work, and $500k, just to change a social security letter. Do you think it is a priority for the government to help the consumer work out the lay of the land? They have bigger fish to fry.
Australians spent 867 years on hold to Centrelink in 2012
Yes - that’s right. According to the Community and Public Sector Union report on Centrelink Call Sector services in August 2012, Australians made 38 Million Calls to Centrelink with an average wait time of 12 minutes. That is 867 years on hold. This does not include time wasted searching for information on the web, and the uncertainty of making a claim with no idea of the outcome.
This is not just time wasted by Australians, but what of the cost to the Government in staffing these call centres?
Because there is no competition
Want to get a start in getting to know the system? Have a look here . Still confused? Why not call Centrelink? Prepare to wait.
Because 1000 Australians turned 65 this week, 800 of them will end up with an age pension, and there are 49 related payments and entitlements to consider
49 payments? Yes. That is what Joe Hockey, the former Treasurer of Australia, found out after he had 4 treasury officials work it out for him. And it took them weeks. 1000 Australians will turn 65 this week and not have the benefit of 4 treasury officials helping them over coming weeks to work things out for them.
Or maybe the entitlemate project could be the help they need?
Because financial services providers really couldn’t be bothered….
Have you asked your financial advisor to consider the cost and income support eligibility when planning retirement spending and investment? Have you got a satisfactory answer? Or have they been in a hurry to sign you up to a product?
22 partners from Deloitte published a report in 2013 claiming that any Australian without $330k in retirement savings at age 65 would not be able to support themselves at the level of a modest income in retirement. Did they forget to look at the maximum pension available to these Australians with low levels of savings was just under this minimum level?
Maybe more people in the financial services industry should try and understand the system that Australians have to deal with, and take this into account when providing advice?
With the help of the entitlemate project, they just may be able to have the edge in client engagement.
…..but they SHOULD be.
Retirees have a lot of money. A couple with their own house can have almost $1.175m in the bank before they lose age pension eligibility (and 49 other entitlements).
However, from Jan 1 2017 the rules change. This is going to be very tricky for many older Australians to work out.
Retirees are the fastest growing demographic. Helping these Australians understand their place in the system may be a worthy pursuit for an organisation or company trying to get their attention. Are retiree deposits, investments and service seeking dollars of any interest? We think so.
Meanwhile, families buy a lot of stuff. They take out home loans, need insurance, they are deciding which brands to be loyal to, which services to seek. Surely they would be attracted to a group or organisation that helped them make more informed decisions? With 1.3 million children in registered child care, the system of child care help is a big deal. Who is going to be the first to help?
Robo-advice + a solve to information asymmetry = ?
Imagine if you could save enormous complexity and also eliminate a bunch of margins paid to banks and other service providers. Could this be the pairing the consumer has been waiting for? It's down the track, but exciting.
Because the care industry in Australia is a big deal
More than a 1.3 million children are in registered care. 54% of this is funded by the government. There are almost 200 000 aged care beds, and this is 74% funded by the government. Yet still, nobody can easily work out the cost of these services - and they take a huge chunk out of family budgets and scare families working out aged care options for a parent. How can this still be the case?