"Essentially this a generation that is putting less into the tin than previous generations and is now taking a lot more out," Grattan chief executive John Daley said in an interview.

The call comes as Canberra continues to struggle with a federal budget badly out of sync, with revenue failing to match permanent spending commitments granted during boom times.

Credit agencies are already on high alert for a downgrade in the national AAA rating, with next month's mid-year budget update expected to show more than $100 billion in combined deficits for the next four years.

Dr Daley said the perks for older Australians who generally already own their own homes and have considerable savings may have been affordable when they were introduced, mainly by the Howard government.

"But not any more. They are costly for the budget, they exacerbate unsustainable transfers between generations, and they are unfair."

'Seniors benefit far more from spending'

Grattan's report rejects the common justification for those receiving such largess – namely that older people have spent a lifetime paying their "fair share of taxes" – saying the perks are a relatively new invention that weren't paid to previous generations of seniors.


"And the current generation of seniors benefit far more from government spending, particularly on their health."

The research has been sparked by growing calls to wind back so-called middle-class welfare, as well as Treasurer Scott Morrison's warning in August that more Australians were becoming "taxed-nots" and likely to go through their lives without paying tax.

Dr Daley says there is no doubt the federal government needs to make tough decisions to save more than it spends, but also warns that revenue is being hurt because of tax concessions to older voters.

"Fewer people paying income tax – the rise of the 'taxed nots' – is in part due to increasing aged-based tax breaks, made worse by population ageing."

He says the proportion of over 65s paying tax has halved in the last 20 years.

Calculations by the institute highlights how wide the generational divide has become.

It provides the example of a self-funded retiree couple, who don't qualify for a pension because they have $500,000 in superannuation and $1.4 million in shares outside super, as well as a house. On their earnings of $70,000 plus $24,000 drawdown from superannuation, they pay $4049 in income tax combined.

By contrast a 40-year-old couple working full-time in minimum wage jobs, earning a combined $70,000, pay $6984 in tax and Medicare levies, $2845 – or 70 per cent – more than the previous couple.


Grattan's report also highlights the challenging politics of tackling needless perks for older Australians, much of which forms the Coalition's traditional voting base.

That's likely to become even more so in coming years, with the proportion voters aged 55 and above rising to 34 per cent in 2015 from 27 per cent in 1995.

"The inevitable political pushback is a consequence of the aging of the electorate," says Dr Daley.

"This stuff is contributing to a budget that doesn't balance."