Abolition of ‘saved’ Parenting Payment arrangements

Budget Review 2012–13 Index

Peter Yeend

The Government announced several changes to welfare payments that will realise savings in the 2012–13 Budget.  One of the most significant items is the Parenting Payment–changed eligibility for 1 July 2006 grandfathered recipients measure.[1]  This measure is estimated to realise savings of $685.8 million over four years.

Background

The Howard Government made substantial changes to Parenting Payment – Single (PPS) and Parenting Payment – Partnered (PPP) with the Welfare to Work reforms of 2006.[2]  From 1 July 2006 the participation requirements[3] for PPS and PPP were:

  • single people claiming PPS after 1 July 2006 could receive the payment while their youngest child was aged less than eight years.  However, they would have participation requirements once that child turned eight years of age and be required to claim another income support payment, mainly Newstart Allowance (NSA).[4]
  • partnered people claiming PPP after 1 July 2006 could receive the payment while their youngest child was aged less than six years of age and then be required to claim another income support payment, mainly NSA.

There were some PPS and PPP recipients receiving payment on or before 1 July 2006, who were ‘grandfathered’ in respect of the new participation requirements.  The ‘grandfathering’ meant that people receiving PPS or PPP before 1 July 2006 could continue to receive the payment until their youngest child reached 16 years of age, provided they did not change their relationship status or have their payment cancelled.  While they were allowed to remain on PPS/PPP, they did have participation requirements until 1 July 2007 or once their youngest child reached the age of seven years, whichever occurred later.

Amendments to grandfathering

Amendments have been made to the above PP provisions under the Social Security Amendment (Parenting Payment Transitional Arrangement) Act 2011.[5]  The effect of these amendments was that only those children who were born or came into the principal care of a parent before 1 July 2011 (being a parent who had continued to receive PP since July 2006) were exempt, under the ‘grandfathered’ provisions, from the changes introduced in 2006.  The provisions of the act, in effect, drew a line under the group covered by the ‘grandfather’ provisions.  Prior to the 2011 amendments, any new child born or coming into the care of a person, who was receiving PP prior to July 2006, would have extended that person's eligibility for PP until the new child in care turned age 16.

There are also proposed amendments to the PPP and PPS ‘grandfathered’ participation requirements currently before the Parliament in the Social Security and Other Legislation Amendment (Income Support and Other Measures) Bill 2012.  For the detail of those amendments see the Bills Digest.[6]

The effect of the changes to the ‘grandfathered’ arrangements presented in the Budget will supersede the changes made by the Social Security Amendment (Parenting Payment Transitional Arrangement) Act 2011, and by the Social Security and Other Legislation Amendment (Income Support and Other Measures) Bill 2012, should the latter be passed into legislation.

Proposed changes to ‘grandfathered’ participation requirements

The changes proposed in the Budget require all PP recipients who were on the payment prior to 1 July 2006 to be assessed under the same eligibility requirements as the new PP recipients (post 1 July 2006).  In short, they will have the same participation requirements as those who claimed PP after 1 July 2006 and will no longer be ‘grandfathered’.

Who will be disadvantaged

PPP and PPS are more advantageous payments than NSA.  The advantages PPS has over NSA are:

  • PPS is paid at a higher rate— as at May 2012 the maximum PPS rate is $648.50 per fortnight (pf) whereas the equivalent NSA single with dependent rate is $529.80pf
  • PPS provides access to the Pensioner Concession Card whereas NSA only provides access to a Health Care Card
  • PPS recipients can also gain access to the Pensioner Education Supplement (up to $62.40pf) if engaged in approved education
  • PPS has more generous income and assets testing than NSA
  • NSA has more rigorous participation requirements than PPS
  • PPS recipients also receive the Pharmaceutical Allowance ($6.20pf)

The differences between PPP and NSA are less marked.  NSA and PPP are paid at the same rate and have the same income and asset testing.  The main difference is that NSA has more rigorous participation requirements.

Proposed more generous parenting payment single income test

This proposed removal of the ‘grandfathering’ arrangements for participation requirements should be read alongside another Government initiative.  From 1 January 2013, the Government proposes to introduce a more generous income test for single principal carer parents on NSA.[7]  Currently, the NSA income test taper rate is 50 cents in the dollar for fortnightly income between $62 and $250 and 60 cents in the dollar for income above $250.  The more generous proposed income test for single parents on NSA will have a lower taper rate of 40 cents in the dollar for income above $62 a fortnight.  This will allow single principal carer parents to earn around $400 more per fortnight, before losing eligibility for payment.

Savings

The Budget papers indicate that the removal of the ‘grandfathered’ participation requirements will realise $685.8 million in savings over four years.[8]  These savings would be realised through PP recipients being paid NSA rather than PPS or PPP and also through the increased workforce participation of some recipients who have had to meet increased participation requirements.

Comment

The Australian Council of Social Service (ACOSS) has been quite critical of some measures in the Budget, especially in regards to single parents.[9]  PPS has its origins in the Supporting Mother’s Benefit introduced by the Whitlam Government in 1973 and this payment became known as the Sole Parent Pension and then PPS.  The fact that there was some ‘grandfathering’ of PP recipients, who had been on PP or PPS prior to 1 July 2006, was recognition that the imposition of any participation requirements was controversial.  Now, however, most income support payments for the working aged have participation requirements.  There are only a few older aged persons who can still access Widows Allowance (if born before 1 July 1955), which does not have participation requirements.  Other working age payments with no participation requirements like Partner Allowance, Wife Pension and Widow B Pension are no longer granted.



[1].      Australian Government, Budget measures: budget paper no. 2: 2012–13, Commonwealth of Australia, Canberra, 2012, pp. 116–117, viewed 9 May 2012.

[2].      D Daniels, P Yeend, Employment and Workplace Relations Legislation Amendment (Welfare to Work and Other Measures) Bill 2005, Bills digest, No. 70, 2005–06, Parliamentary Library, Canberra, 2005, viewed 9 May 2012.

[3].      Participation requirements could include a requirement to look for work of at least 15 hours a week and sanctions can apply for non-compliance.

[4].      NSA is more commonly referred to as the Unemployment Benefit.

[6].      M Klapdor, Social Security and Other Legislation Amendment (Income Support and Other Measures) Bill 2012, Bills digest, No. 127, 2011-12, Parliamentary Library, Canberra, 2012, viewed 9 May 2012.

[7].       Ibid.

[8].       Ibid.

[9].      A Horin, ‘Most vulnerable still fall between the cracks, says agency’, The Sydney Morning Herald, 10 May 2012, p. 7, viewed 10 May 2012.

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