Bills Digest No. 177 2001-02
Veterans' Affairs Legislation Amendment (2002 Budget
Measures) Bill 2002
WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.
CONTENTS
Passage History
Purpose
Background
Main Provisions
Concluding Comments
Endnotes
Contact Officer & Copyright Details
Passage History
Veterans' Affairs Legislation
Amendment (2002 Budget Measures) Bill 2002
Date Introduced:
20 June 2002
House: Representatives
Portfolio: Veterans' Affairs
Commencement:
Items 3 to
5 in Schedule 1 are proposed to commence
from 20 September 2002. All other Items and
Schedules in this Bill are proposed to commence
from the date the Bill receives Royal Assent.
Purpose
To provide
legislative support for the unfreezing of the rate of Income
Support Supplement (ISS), which is paid to recipients of War
Widows/ers Pension (WWP). Income Support Supplement is paid as
income support and can be paid in addition to WWP, albeit at a
lower rate than other income support pensions, recognising that WWP
is also paid.
It is proposed to increase the rate of ISS twice
yearly (20 March and 20 September) being the same times the twice
yearly indexation of the other main income support pensions occur.
These pensions are the civilian age pension, veterans service
pension, parenting payment - sole parent, carer payment etc. The
indexation factor proposed to be applied to the rate of ISS, is the
same proportional increase as is applied in the corresponding six
monthly indexation to the rate of service pension. These pensions
are indexed twice yearly (20 March and 20 September) to both the
Consumer Price Index (CPI) and to 25% of Male Total Average Weekly
Earnings (MTAWE), the factor realising the greater increase being
used.
Schedule 1 amendments relating to the indexation of
ISS
WWP is paid to compensate widowed partners and
dependants of veterans who have died as a result of war service or
eligible defence service. As at June 2002, the fortnightly rate of
WWP is $446.80. WWP, being compensation, is neither income nor
asset tested. Recognising that some WWP recipients may also require
income support, ISS may be paid in addition to WWP, with a maximum
fortnightly rate as at June 2002 of $124.90.
Many WWP recipients may not otherwise need
income support, having their own other means of support, eg. income
from employment or income from a partner. However, some WWP
recipients may not have any other source of significant income and
ISS is paid to assist them with income support. ISS, like the other
income support payments, is income and asset tested but paid at a
lower rate, recognising that WWP is also paid.
From 1 November 1986, the rate of any income
support payment, paid in addition to a WWP, was frozen at $120.10
per fortnight.(1) Prior to this, WWP recipients could
also access a full-rate income support payment, subject to the
income and assets tests. Pre-existing WWP recipients receiving a
higher rate of income support payment, in addition to their WWP,
were saved and continued to receive that rate. However, any new
grants of income support payment paid in addition to a WWP on or
after 1 November 1986, were restricted to the ceiling frozen
rate.
This decision was announced in the 1986-87
Budget.(2) The decision was made at a time of reviewing
and rationalising welfare payments provided through the social
security system, arising from the Social Security Review of the
mid-1980s. In talking to the Bill(3) that provided the
legislation for a frozen rate of income support payment, the then
Minister for Social Security the Hon. Mr Brian Howe, MP said:
This Bill will also make a number of amendments
to the Veterans' Entitlements Act 1986 to give effect to the
Government's decisions announced in the Budget. The opportunity is
also taken in this Bill to make a number of machinery amendments,
the need for which has become apparent from the experience of the
last four months since the Veterans' Entitlements Act came into
operation. The Bill will also provide that the rate of service
pension payable to a widow who is also in receipt of a war widow's
pension, currently payable at $228.20 per fortnight, will be frozen
at the rate payable on 1 November 1986. Where service pension is
granted to such a war widow at a later date the maximum rate of
pension payable will be $120.10 per fortnight.(4)
The measure was also made in the context of the
then Government looking to limit unnecessary expenditure and to
rationalise welfare assistance. In speaking to the Bill, the then
Minister for Veterans Affairs, Senator the Hon Arthur Gietzelt
said:
This Bill contains amendments to Social Security
and Veterans' Affairs legislation to implement decisions affecting
those portfolios in the 1986-87 Budget. Honourable senators will be
aware that, as a result of international economic conditions, there
have been significant reductions in Australia's national income.
The Government believes that through the Budget and other policy
changes, the problems which this creates can be faced squarely and
remedial changes put in place quickly and decisively. These changes
must be made so that our domestic economy and standard of living
can be adjusted to our current circumstances. The Budget therefore
incorporates very large reductions in spending, amongst other
measures.(5)
In short, a lower and frozen rate of income
support payment was considered appropriate, given the means test
free WWP already paid, and given that income support payments,
being means tested, are targeted at those in most need of
support.
ISS was announced in the 1994-95
Budget(6) and introduced in March 1995, replacing the
various different frozen rate income support payments previously
payable to WWP recipients. Prior to the introduction of ISS, other
income support payments that may otherwise be payable (at a frozen
ceiling rate) commonly would have been age pension, service
pension, wife pension, disability support pension and carer
payment.
ISS was basically a rationalisation and
simplification of income support arrangements paid in addition to a
WWP. Instead of a WWP recipient having to approach Social Security
and seek and qualify for one of three or four different payments
under the Social Security Act 1991, the person could claim
ISS with Veterans Affairs.
On 13 October 2001, the Government released a
policy paper on veterans assistance called Supporting Those Who
Served . The paper announced that, if elected, the Government
would abolish the frozen ceiling rate of ISS.(7) The
policy platform stated:
The Coalition Government will reverse Labor s
unfair decision and introduce twice yearly indexation of the ISS to
increases in MTAWE or the CPI, whichever is the
greater.(8)
It should be noted that the current Bill does
not restore ISS to the maximum or full rate otherwise applying to
other income support payments. Rather, it is proposed to unfreeze
the current frozen ceiling rate of ISS rate and apply increases
proportional to the MTAWE or CPI indexation increases applied to
other payments. Providing access to a full rate of income support
would have significant cost implications. As at June 2001, there
were a total of 110 656 WWP recipients of which 79 491 were also
receiving some rate of ISS and of these 69 685 were receiving the
maximum frozen rate of ISS.(9)
The Government formally announced the unfreezing
of the ceiling rate of ISS and its twice-yearly indexation in the
2002-03 Budget.(10) It is proposed the first six monthly
indexation increase is to apply from 20 September 2002 and to use
the indexation increase factor applied to the single rate of
service pension. Service pension, like age pension is indexed twice
yearly to both the CPI and to 25% of MTAWE, using the factor that
realises the greater increase.
This proposal is estimated to cost $5.8m in
2002-03, $15.7m in 2003-04, $26.9m in 2004-05 and $38.2m in
2005-06.(11)
As at June 2001, there were a total of 110 656
WWP recipients of which 79 491 were also receiving some rate of ISS
and of these 69 685 were receiving the maximum frozen rate of
ISS.(12) The Government claims this initiative will
benefit some 81 000 WWP recipients.(13)
The initial ex-servicemen repatriation scheme
was introduced shortly after the commencement of World War One
(WWI). The Government commissioned Major-General W. T. Bridges to
raise 20 000 volunteers to be sent to Europe to serve with other
Commonwealth forces. In the process of raising the force, Bridges
advised the government on 8 August 1914:
"that pensions should be guaranteed to
enlisted men, and to their dependants in case of death, and
compensation in case of disablement through
wounds."(14)
First Commonwealth war
widows pension - the War Pensions Act 1914
A proposal for a war caused injury and loss
scheme received Cabinet approval and was made public in September
1914 and subsequently the War Pensions Act 1914 was
introduced to the Parliament on 5 September 1914. There being no
Australian precedent repatriation legislation or scheme, the
War Pensions Act 1914 largely mirrored the pre-existing
United Kingdom legislation, which had previously covered
Australians serving as members of Imperial Forces overseas. Prior
to the War Pensions Act 1914, compensation for the small
contingents sent by Colonial Governments, ie. the Sudan, the Boxer
Rebellion, the Boer War, were provided for by the British
Government.
The Defence Act 1903 provided
compensation in case of death or wounds or injuries or disease
contracted while on active service or on duty. The maximum rate of
payment was for those cases where total disability prevented any
capacity to earn a livelihood. The Commonwealth Compensation
Act 1912 provided for members of Defence Forces not on active
service with the rate of payment for total or partial incapacity
for work based on worker s average weekly earnings.
The War Pensions Act 1914 provided for
payment of war pensions to a wide range of dependants of
incapacitated and deceased members of the defence force, including
wives, children, widows and in certain circumstances, other
dependants. The WWP was paid as compensation for war loss, not as
income support or income maintenance, as is the case with the
civilian Old Age and Invalids Pensions of 1908. This element of war
compensation is manifest by the fact that the WWP (and war
disability pension) have never been subject to an income or assets
test.
The use of worker s average weekly earnings as
benchmarking for payment rates was not used in the War Pensions
Act 1914, largely due to the concerns about cost.
Consequently, from the outset there was a tension created between a
payment for compensation paid at a lower rate, and a rate of
assistance sufficient to support persons, unable to support
themselves from employment. In the debate on the Bill for the
War Pensions Act 1914, there was little dispute or
disagreement between the parties as to the need for the
Commonwealth to provide for the needs of injured or disabled
soldiers, or the dependants of deceased soldiers. However, there
was considerable debate about the appropriate level and rate of
assistance for soldiers with injuries and widows of those who were
killed.
The then leader of the Opposition in the Senate,
Senator E. D. Millen, moved an unsuccessful amendment to raise the
rate of the proposed war pension to the rate of pay of lower ranked
soldiers. Millen expressed several concerns about the adequacy and
comparative relativities for the payment rates for soldiers, for
widows and for children, as proposed in the Bill. In brief these
concerns were:
-
- The rates of payment proposed to be paid to a widow, to a
totally incapacitated soldier and to the wife of a totally
incapacitated soldier. Millen not only considered the rates too low
but also the rate differentials between the proposed widow pension
and that for the incapacitated soldier were not appropriate, ie. 78
pounds a year for a widow and 50 pounds a year for the soldier.
Millen commented that a widow would be able to access other forms
of support (eg. employment), whereas this would not be the case for
the totally incapacitated soldier. Millen referred to the Imperial
Pension Scheme, in which the rate paid to a totally incapacitated
soldier was almost double that paid to a war widow.
-
- Millen did not challenge the scheme in terms of having payment
rates linked to rank but he did consider the rate proposed for the
lower ranking incapacitated soldiers too low and not a rate a
soldier could live on. He was not concerned with the rates proposed
for higher-ranking soldiers. The rate then proposed for a private,
the lowest ranking soldier, was 1 pound a week (ie. 52 pounds a
year), which was more generous than the then age pension rate,
which was then 10 shillings a week. The annual salary for a private
was then 104 pounds a year in addition to which the army provided
food, accommodation and clothing.
In the end the amendments proposed by Millen
were not accepted, largely due to concerns about the potential cost
to Government, rather than there being disagreement about the logic
and merit for the rates proposed by Millen, or that they were too
generous or were not appropriate.
The rates of payment were prescribed in a
Schedule attached to the War Pensions Act 1914, were
proportionally linked to soldier pay rates. For example, pension
for total incapacity of a private (paid 6 shillings a day) was set
at 52 per year, and for an officer paid 50 shillings a day the rate
was 156 a year. This First Schedule set the General Pension rate
payable to a totally incapacitated veteran. Those with a lesser
incapacity were paid a proportion of this total amount, eg. 50% or
10%, depending on each individual s assessed degree of total
incapacity. This linking of the rate of WWP to the rank of the
deceased soldier continued until 1952 when a very significant
amendment to Schedule One of the Repatriation Act instigated
changes to the long-standing practice of tying the rate of war
pensions to the rank of the veteran. This practice was finally
ended in 1972 with the introduction of standard rates for all
regardless of rank and in 1973 this was extended to the rates of
dependent s pension.
It is commonly thought today that the WWP
pension provides income support, like the age pension, sole parent
pension etc. However, its origins are as compensation and this is
still reflected by the fact that the WWP pension is income and
assets test free and has higher payment rates than income support
pensions. As at June 2001, the single fortnightly rate of age
pension is $402.00, whereas the WWP is $446.80 per fortnight (pf).
This $446.80pf is made up of an indexed rate of $421.80pf, plus a
non-indexed amount of $25.00pf, the latter being the vestiges of
the old Domestic Allowance (DA).
However, this confusion between the WWP and
other income support payments, also more accurately called
pensions, raises the issue of access to income support payment for
war pension recipients (both WWP and the war disability pension).
For example, currently war disability pension is disregarded as
income under the income test for service pension but is regarded as
income for the age pension.
|
PAYMENT
|
Service pension
|
Age pension
|
War disability pension
|
War widows/ers pension
|
|
Service pension
|
X
|
Cannot be paid concurrently can only be paid one OR the
other
|
Can be paid at the same time the war disability pension is not
income for service pension
|
Can be paid additional to service pension. Service pension is
paid in the form of Income Support Supplement at a frozen rate
|
|
Age pension
|
Cannot be paid concurrently can only be paid one OR the
other
|
X
|
War disability pension can be paid in addition to the age
pension but is treated as income under the income test
|
Can be paid additional to age pension. Age pension is paid in
the form of Income Support Supplement at a frozen rate
|
|
War disability pension
|
Can be paid at the same time the war disability pension is not
income for service pension
|
War disability pension can be paid in addition to the age
pension but is treated as income under the income test
|
X
|
Can be paid at the same time with no impact on either
payment
|
|
War widows/ers pension
|
Can be paid additional to service pension. Service pension is
paid in the form of Income Support Supplement at a frozen rate
|
Can be paid additional to age pension. Age pension is paid in
the form of Income Support Supplement at a frozen rate
|
Can be paid at the same time with no impact on either
payment
|
X
|
Item 2 of Schedule
1 provides for the commencement of payment of ISS to be
made from the same start date as the commencement of payment of
WWP, even where WWP is backdated. This amendment is being proposed
to amend some anomalies and unintended results of non-complimentary
legislation between the Veterans Entitlements Act 1986
(VEA) and the Social Security Act 1991 (SSA). This ensures
that there is no gap in ISS payment where WWP is backdated, which
can be up to three months and the person is transferring to ISS
from an income support payment paid under the SSA. This is a
beneficial amendment.
Item 3 proposes to amend the
VEA so that the rate of ISS paid in respect of WWP recipients is
indexed, ie. is no longer frozen.
Item 4 proposes to amend the
VEA so that the indexation factor applied to the rate of ISS is the
same percentage increase that has been applied to the indexation of
the single rate of service pension.
Item 5 specifies that the
twice-yearly indexation of the ceiling rate of ISS is to occur at
the same intervals as the indexation of service pension. Service
pension, like age pension, is indexed twice yearly (20 March and 20
September) to the CPI and 25% of MTAWE, whichever provides the
greater increase.
This Bill will see the unfreezing of the rate of
ISS (and other income support payments) paid in addition to WWP
that has been in place since 1986. It does not propose a
restoration of access to the maximum rate of income support
payments, rather indexation of the existing lower ceiling rate to
the same indexation increases to be applied to the single rate of
service pension. Service pension, like age pension, is indexed
twice yearly to the CPI and 25% of MTAWE.
The issue still remains as to appropriate access
to income support pensions for war pension recipients, both WWP
recipients and recipients of the war disability pension. Given the
rates of assistance now provided under both the WWP ($446.80pf for
WWP) and up to $730.70pf (for Totally and Permanently Incapacitated
War Pension (T&PI)), what is the appropriate level of income
support to provide in addition to these war compensation payments,
if any? These rates of war pension compensation compare to the
single age pension rate of $421.80 per fortnight.
-
- The current frozen ceiling rate of ISS being $124.90pf is
higher than the frozen ceiling rate set in 1986 ($120.10pf) as a
result of the one-off 4% increase provided as a part of the
compensation for the introduction of the Goods and Services Tax
from 1 July 2000.
- 1986-87 Budget Paper No. 1, 1986-87 Budget, p. 138.
- Social Security and Veterans Affairs (Miscellaneous Amendments)
Bill 1986.
- The Hon Mr Brian Howe, MP, House of Representatives,
Hansard, 10 October 1986, Second Reading Speech, Social
Security and Veterans Affairs (Miscellaneous Amendments) Bill 1986,
p. 1865.
- The Hon Mr Arthur Gietzelt, MP, House of Representatives,
Hansard, 17 October 1986, Second Reading Speech, Social
Security and Veterans Affairs (Miscellaneous Amendments) Bill 1986,
p. 1522.
- Portfolio Budget Measures Statements, 1994-95 Budget Paper No.
4.3B, Veterans Affairs Portfolio, p. 23 24.
- Supporting Those Who Served, Liberal Party of
Australia, 2001 Election, policy platform, 13 October 2001.
- ibid., p. 7.
- DVA Pensioner Summary - June 2001, Department of
Veterans Affairs , Tables 14 & 15.
- Portfolio Budget Statements, 2002-03 Budget Paper No. 1.4B,
Veterans Affairs Portfolio, p. 30.
- ibid.
- DVA Pensioner Summary - June 2001., op. cit.
- Budget Delivers Key Commitments to Veterans, War
Widows, Media Release, 14 May 2002, the Hon Danna Vale, MP,
Minister for Veterans Affairs.
- Official History of Australia in the War 1914-18,
Volume XI, p. 206.
Peter Yeend
26 June 2002
Bills Digest Service
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