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Can single parent families survive on Newstart? It might depend on where they live

There has been considerable media coverage in recent days about the implementation of the new income support arrangements applying from 1 January for single parents whose youngest child is over 8, who are being moved from Parenting Payment Single (PPS) on to Newstart Allowance (NSA). Some of this coverage implies that these families will now be required to live on $35 a day. While this is not the case, with total entitlements being significantly higher than this, the ability of single parent households to live a reasonable lifestyle while solely dependent on income support will be heavily influenced by where they live. This FlagPost looks at the impact of different accommodation arrangements on the amount of money left over for other living costs.

How much income support will single parents receive under the new arrangements?

The figure of $35 a day or $492.60 per fortnight (pf) for NSA relates to a single person with no children and no other source of income. The allowance for single parents with dependent children and no income is a little higher, at $533.00 pf ($38 per day); however they also receive Family Tax Benefit (FTB) and Pharmaceutical Allowance. For two children, one aged between 8 and 12 and the other 13 to 15, this would amount to just under $500 pf in addition to NSA. When lump sum payments for the Schoolkids Bonus ($410 per year for primary school children and $820 for those in high school), Clean Energy Advance and the FTB annual bonus (over $1800 in this example) are included, the total social security income is around $30 000 per annum or roughly $82 per day. In addition, single parents receiving NSA are eligible for a Pensioner Concession Card, which provides access to reduced medical costs and other discounted benefits.

Homeowners and others not paying rent

Providing food and clothing for a family of three on $30 000 a year (on which no tax would generally be payable) may be reasonable if there are no accommodation costs. The background paper produced for the Pension Review (the Harmer Review) calculated that in 2007 some 10 per cent of those in receipt of PPS and 20 per cent of singles in receipt of NSA did not pay any rent. It is likely that in many cases these people were being supported by other family members.

The Pension Review paper also suggested that 18.5 per cent of PPS recipients were homeowners or purchasers. A 2009-10 ABS survey found that around a third of low income single parent homeowners did not have a mortgage and housing costs were estimated at around $40 per week. According to the ABS survey the average mortgage in 2009-10 for low income single parent households was $274 per week, however it is unlikely that single parents fully dependent on income support would be sustaining mortgages at this level from their income support payments. 

Public housing 

Public housing rents are generally set as a proportion of income (usually 25 per cent) rather than at the market rate. However many states discount FTB payments when calculating income levels, so most single parents in public housing would pay less than 25 per cent of their income in rent. For example in Victoria the total fortnightly income of a single NSA recipient with two children aged 10 and 13 would be $1030.18 pf and rent would be $208.45 pf, leaving just under $60 per day for other living expenses.

Private rent

According to the Pension Review, over half of PPS and NSA recipients were in the private rental market, for which Rent Assistance (RA) is generally available. For a single parent with two children no RA is payable if the fortnightly rent is less than $141.40, and the maximum amount of $141.82 pf is payable where rent payments are more than $330.49 pf. According to the ABS survey, 50 per cent of low income single parent households across Australia were paying more than $500 pf in rent in 2009-10. While some single parents would be in community housing which is likely to be lower than the average, it is still reasonable to expect that most single parents with two children in the private rental market are paying rents above the $175 per week threshold for the maximum payment, particularly given the increase in rents since the 2009 survey. 

For the example quoted above, and taking the 2009-10 median rent of $250 per week (which is likely to be at the low side of current private rental costs in most locations), after rental payments, there would only be $48 per day for other expenses – a very different scenario from those fortunate enough to have rent free accommodation.