Bills Digest no. 3, 2017–18
PDF version [724KB]
Don Arthur and Michael Klapdor
Social Policy Section
3 August 2017
Contents
The Bills Digest at a glance
Purpose of the Bill
Background
Energy supplement
History
Community concern about the effect of
the carbon price
Compensating income support
recipients for increased energy costs
Avoiding double compensation
2014—winding back compensation after
abolishing the carbon tax
2016—closing carbon tax compensation
to new recipients of Family Tax Benefit and the Commonwealth Seniors Health
Card
2017—attempt to close carbon tax
compensation to new recipients of other payments
Committee consideration
Senate Community Affairs Legislation
Committee
Senate Standing Committee for the
Scrutiny of Bills
Policy position of non-government
parties/independents
Position of major interest groups
Adequacy of payments
Worse off than if the supplement had
not been introduced
Fairness
Financial implications
Statement of Compatibility with Human
Rights
Parliamentary Joint Committee on
Human Rights
Key issues and provisions
Rationale for the measure
Administrative complexity
Adequacy of unemployment payments
Fairness
Some recipients will be worse off
than if the supplement had never been introduced
Figure 1: Newstart Allowance maximum
basic rate (single, no children), $ per fortnight, with and without the energy
supplement
Numbers affected
Key provisions
Social Security Act 1991
Farm Household Support Act 2014
Veterans’ Entitlements Act 1986
Military Rehabilitation and
Compensation Act 2004
Date introduced: 31
May 2017
House: House of
Representatives
Portfolio: Social
Services
Commencement: 20
September 2017
Links: The links to the Bill,
its Explanatory Memorandum and second reading speech can be found on the
Bill’s home page, or through the Australian
Parliament website.
When Bills have been passed and have received Royal Assent,
they become Acts, which can be found at the Federal Register of Legislation
website.
All hyperlinks in this Bills Digest are correct as
at August 2017.
The Bills Digest at a glance
- The
purpose of the Social Services Legislation Amendment (Ending Carbon Tax
Compensation) Bill 2017 (the Bill) is to cease payment of the energy supplement
to income support recipients and some veterans’ compensation payment recipients
who were not receiving a payment on 19 September 2016 (with payments to cease on
20 September 2017) and close the energy supplement to new welfare recipients
from 20 September 2017.
- The
Gillard Labor Government introduced the clean energy supplement in 2013 to
reassure pensioners and other income support recipients that they would not be
worse off as a result of the carbon price.[1]
In 2014 the Abbott Coalition Government abolished the carbon price.
- The
measure has been criticised on a number of grounds including:
– some
payments are already considered low for many recipients—removing the energy
supplement would, arguably, make them more inadequate
– some
recipients will receive a lower rate of payment than if the supplement had
never been introduced
– concerns
about fairness—many income support recipients will lose the energy supplement
but compensation given through tax cuts will remain. Some income support
recipients will keep the energy supplement while others will lose it even
though both groups have similar levels of need
– administrative
complexity—by retaining the supplement for some recipients but not others, the
measure would make the income support system more complicated.
- The
measure is opposed by a number of major interest groups including the
Australian Council of Social Service (ACOSS), the National Social Security Rights
Network (NSSRN) and the Australian Council of Trade Unions (ACTU).
- The
measure is opposed by the Australian Labor Party and the Australian Greens.
Media reports suggest that the Nick Xenophon Team also opposes the Bill.
Purpose of
the Bill
The purpose of the Bill is to cease payment of the energy
supplement to income support recipients and some veterans’ compensation payment
recipients who were not receiving a payment on 19 September 2016 (with payments
to cease on 20 September 2017) and close the energy supplement to new payment
recipients from 20 September 2017.
The Bill amends the Social Security Act
1991 (SS Act), Farm Household
Support Act 2014, Veterans’
Entitlements Act 1986 (VE Act), Military
Rehabilitation and Compensation Act 2004 (MRC Act) and Budget Savings
(Omnibus) Act 2016.
Background
Energy
supplement
The energy supplement is paid to all recipients of social
security income support payments (such as the Age Pension and Newstart
Allowance), to recipients of veterans’ payments (such as the Service Pension,
Disability Pension and War Widow/Widower’s Pension), to recipients of the Farm
Household Support Allowance and some holders of a Department of Veterans’
Affairs (DVA) Repatriation Health Card—For All Conditions (Gold Card). Those
who were Family Tax Benefit recipients or Commonwealth Seniors Health Card
holders before September 2016 and who have not lost eligibility since can also
receive the energy supplement.
Rates of the energy supplement are based on the payment to
which it is attached and range from $91.25 per annum for Family Tax Benefit
Part A (child under 13 years) to $559.00 per annum for veterans receiving the
Special Rate of Disability Pension.[2]
The energy supplement is generally paid fortnightly with the attached payment.
History
The Gillard Labor Government introduced the clean energy
supplement in 2013 to reassure pensioners and other income support recipients that
they would not be worse off as a result of the carbon price.[3]
In 2014 the Abbott Coalition Government abolished the carbon price and renamed
the clean energy supplement the ‘energy supplement’.[4]
Community
concern about the effect of the carbon price
Electricity prices increased sharply from the mid to late
2000s and the Labor Government’s plans to put a price on carbon dioxide
emissions fed into community concern about rising costs.[5]
The then Leader of the Opposition, Tony Abbott, argued that a carbon tax would further
increase electricity prices.[6]
He described the Government’s carbon price as a ‘great, big, new tax on
everything’ that would drive up the cost of living.[7]
Compensating
income support recipients for increased energy costs
From a purely economic perspective, the Government did not
need to take any action to ensure that income support payments increased in
response to rising prices. There was already an automatic indexation process in
place. As economist John Freebairn explained in 2010:
Those on social security are compensated with the automatic
indexation of pensions and allowances. In fact, indexation allows people to
purchase the old carbon intensive package of goods and services. With relative
price changes they will choose a less carbon intensive package of goods and
services, which is cheaper, and on average they will be better off.[8]
To ensure that income support payments do not lose value due
to inflation, the government automatically increases them in line with upward
movements in the Consumer Price Index (CPI). Pensions are treated differently
to other payments. They are also indexed to another measure of living costs
called the Pensioner and Beneficiary Living Cost Index (PBLCI). In addition, to
ensure that pensions do not fall behind the living standards of people in work,
they are benchmarked against Male Total Average Weekly Earnings (MTAWE).[9]
For the Gillard Government, there were two problems with
relying on automatic indexation. The first is that automatic indexation would
not make compensation for the impact of the carbon price immediately visible to
recipients. Instead the compensation would have been rolled into a routine
six-monthly indexation process that includes cost of living changes due to all
causes. The second problem was the risk of doubt and controversy about whether
the CPI and PBLCI properly accounted for the impact of carbon pricing.
To make sure the compensation was visible, the Government
decided to pay it as a separate ‘clean energy supplement’ rather than allowing
the indexation process to add it to the basic rate of the income support
payment. And to put the adequacy of compensation beyond doubt, the Government estimated
the CPI indexation increase due to the carbon price (0.7 per cent of the
recipient’s payment) and then added a ‘buffer’ of one per cent of the
recipient’s income support payment.[10]
Avoiding
double compensation
According to the Government’s 2013 Review of the Clean
Energy Future Household Assistance Package, the clean energy supplement
was:
An increase in pensions, allowances and family tax benefits
equal to a 1.7 per cent increase in the relevant annual maximum payment rate.[11]
However, this obscures an important complication in how
the compensation amount was calculated.
If the Government simply added this 1.7 per cent increase
to payments that were indexed to the CPI, then recipients would be compensated twice
for the carbon price’s impact on other prices. This is because CPI indexation
would automatically include the carbon price’s impact on prices. To prevent
this double compensation, the Government subtracted the 0.7 per cent increase
attributed to the carbon price from the automatic CPI indexation amount. As the
2011 Explanatory Memorandum for the Clean Energy (Household Assistance
Amendments) Bill 2011 explains:
The expected additional impact on the Consumer Price Index
from carbon pricing (0.7 per cent) will be permanently included in the clean
energy supplement (plus an additional one per cent increase). Part 4 contains
amendments to the Social Security Act that provide for the expected impact of
the carbon price on indexation (0.7 per cent) to be transferred from the
indexation on maximum basic rate and pension supplement of certain social
security payments to the clean energy supplement.[12]
How this method of calculating the supplement amount
affects a payment depends on how that payment is indexed. According to the
Bills Digest for the 2011 Bill:
This will mainly affect those on the allowance rates of
payments as they are indexed to the CPI alone. If current and recent trends
continue, this will probably not have as much impact on the pension rate payments
as the CPI is only one indexation factor used and it has not been the CPI that
has realised rate increases recently. More recently, it has been indexation to
movements in the PBLCI or to MTAWE that have seen pension rate increases, not
the CPI.[13]
This is why removing the energy supplement will leave some
income support recipients with a lower rate of payment than if they had never
received the supplement. A CPI-related increase in payment that would normally
have been added to the basic rate of their payment was transferred instead to
the energy supplement (this is discussed in more detail in the Key issues
and provisions section below).
2014—winding
back compensation after abolishing the carbon tax
In July 2014 the Coalition Government abolished the carbon
price.[14]
Even though this removed the original rationale for the clean energy
supplement, the Coalition had made an election commitment that it would keep
the previous Government’s compensation measures.[15]
In April 2014 the Prime Minister, Tony Abbott, repeated this commitment
stating: ‘the reassurance that I want to give to pensioners is that you will
lose the carbon tax but keep the compensation’.[16]
Although the Government did not abolish the clean energy supplement,
it did change it. When it was introduced, the clean energy supplement was
indexed in the same way as payments such as Newstart Allowance—twice yearly by
CPI.[17]
In June 2014 the Government introduced a Bill to cease indexation on the clean
energy supplement and to rename it the ‘energy supplement’.[18]
This Bill failed to pass the Senate but the measure was reintroduced in the Social
Services and Other Legislation Amendment (2014 Budget Measures No. 6) Bill
2014, which was passed in November 2014.[19]
2016—closing
carbon tax compensation to new recipients of Family Tax Benefit and the
Commonwealth Seniors Health Card
In the 2016–17 Budget, the Turnbull Coalition Government
announced that it would close ‘unnecessary carbon tax compensation to new
recipients of government welfare benefits’ with $1.4 billion of savings over
five years being credited to a National Disability Insurance Scheme Savings
Fund Special Account.[20]
This included closing the energy supplement and a separate payment, the single
income family supplement, to new recipients.[21]
In September 2016 the Government succeeded in passing legislation to close the
energy supplement to new recipients of Family Tax Benefit Part A and Family Tax
Benefit B; and to new recipients of the Commonwealth Seniors Health Card
(CSHC).[22]
The measure initially introduced in the Budget Savings
(Omnibus) Bill 2016 would have closed the energy supplement to new recipients
of a broad range of income support payments including pensions, allowances and
Family Tax Benefits, as well as some veterans’ compensation payments such as
the Disability Pension.
Under the measure, income support recipients who were
already receiving the supplement would keep it while others would lose it. A
recipient’s treatment would depend on when they started receiving payment:
- recipients
who began receiving the payment before 20 September 2016 would continue to
receive the energy supplement
- recipients
who began receiving the payment on or after 20 September 2016 would lose the
energy supplement (from 20 March 2017)
- recipients
who started receiving income support payments from 20 March 2017 would not
receive the energy supplement.[23]
During negotiations over the Bill, the measure was
restricted to new recipients of Family Tax Benefit A and Family Tax Benefit B
and new recipients of the CSHC.[24]
2017—attempt
to close carbon tax compensation to new recipients of other payments
The Government reintroduced the parts of the measure it
had removed from the 2016 Bill in the Social Services Legislation Amendment
(Omnibus Savings and Child Care Reform) Bill 2017. However, this Bill did not
pass the Parliament and was discharged from the Notice Paper on 23 March 2017.[25]
The Bill’s proposed amendments are the same as those
proposed in Schedule 9 of the Social Services Legislation Amendment (Omnibus
Savings and Child Care Reform) Bill 2017.
Committee
consideration
Senate
Community Affairs Legislation Committee
The Bill was referred to the Senate Community Affairs
Legislation Committee on 15 June 2017 for inquiry and report by 9 August 2017.
Details of the inquiry are available from the Committee website.[26]
Senate Standing
Committee for the Scrutiny of Bills
The Senate Standing Committee for the Scrutiny of Bills
has considered the Bill and has no comment.[27]
Policy
position of non-government parties/independents
Labor members argued against this measure when it was
reintroduced as part of the Social Services Legislation Amendment (Omnibus
Savings and Child Care Reform) Bill 2017. Shadow Minister for Families and
Social Services, Jenny Macklin argued that the measure would particularly
affect Newstart Allowance recipients:
Let us be clear: this cut will have a big impact on the most
vulnerable members of our community—Australians on Newstart. Labor believes
that Newstart is already too low. The Newstart payment for a single person is
equivalent to just 28 per cent of the average wage. If the energy supplement is
abolished, someone on Newstart will be $4.40 a week or $220 a year worse off.
ANU's David Plunkett estimates that new recipients of Newstart will be around
$3.60 a week worse off than had the energy supplement not been introduced in
the first place. To put it another way, the Turnbull government is actually
proposing a cut in real terms to Newstart. That is what everyone over there is
going to be voting for. If you vote this, you are cutting Newstart in real
terms.[28]
The Australian Greens also opposed the measure when it was
introduced in the Social Services Legislation Amendment (Omnibus Savings and
Child Care Reform) Bill 2017. In a dissenting report to the Senate Committee
inquiry’s report on the Bill the Greens’ Senator Rachel Siewert stated:
This measure cannot be supported by the Australian Greens. It
would see the payment drop to a rate lower than it would have been if there had
been no carbon price or compensation due to the adjustment to indexation when
the Energy Supplement was introduced. It would put people living on already
inadequate payments further into poverty.[29]
According to recent media reports, Nick Xenophon Team senators
plan to vote against the Bill.[30]
Position of
major interest groups
A number of interest groups including the Australian
Council of Social Service (ACOSS), the National Social Security Rights Network
(NSSRN—previously known as the National Welfare Rights Network) and the
Australian Council of Trade Unions (ACTU) argued against the measure when it
was introduced in earlier Bills. They had three major criticisms:
- payments
are already low for many recipients—removing the energy supplement makes them
even more inadequate
- some
recipients will receive a lower rate of payment than if the supplement had
never been introduced
- concerns
about fairness:
– many
income support recipients will lose the energy supplement but compensation
given through tax cuts will remain
– some
income support recipients will keep the energy supplement while others will
lose it even though both groups have similar levels of need.
Adequacy of
payments
A number of groups argued that current payments to
recipients of Newstart Allowance are inadequate and should not be reduced
further. For example, the ACTU commented:
This is an abhorrent, misguided and unjust source for cuts to
the budget, especially since many of the payments affected are widely viewed as
far from sufficient to provide dignity to recipients. For example, the top
level of Newstart support for a single person is $37.40 per day. Anyone
claiming that this, which is equivalent to less than half the minimum wage, is
sufficient to pay for food, accommodation, clothing, transport, let alone the
other necessities a person requires to look for and secure employment, is
either totally ignorant or being deliberately deceptive.
The ACTU finds it abhorrent that the Government thinks it is
sound or fair policy to attempt to balance its own budget on the back of the
most vulnerable members of society.[31]
Worse off
than if the supplement had not been introduced
The NSSRN noted:
... discontinuation of the Energy Supplement does not just
remove an additional top up to Newstart Allowance, it actually cuts the payment
below the level it would be had normal indexation arrangements been applied.
This is because normal indexation was included in the Supplement when it was
introduced. Despite this fact, the Government continues to argue that this
measure removes compensation no longer needed because of the repeal of the
carbon tax.[32]
Fairness
ACOSS raised two concerns about fairness. The first was
that the removal of carbon tax compensation would be limited to income support
recipients:
The Energy Supplement is being removed on the grounds of the
absence of a carbon price, but tax cuts compensating for the carbon price will
continue, which see someone on $60,000 paying $9.65 per week less in tax than
with no compensation. Continuing assistance through the tax system undermines
the Government’s argument that the Energy Supplement is no longer needed
because there is no carbon price. The Government’s inconsistency in how it
treats the carbon price compensation by targeting people on the lowest incomes
for cuts while leaving middle-income earners untouched illustrates the inequity
of [the measure].[33]
The second was that it treats income support recipients in
similar circumstances differently:
Cessation of the Energy Supplement to new income support
claimants will create two levels of payment because existing recipients will
continue to receive the supplement. This creates inequity as two people in the
same circumstances will receive different rates of payment and will add further
complexity to an already complicated income support system.[34]
Financial
implications
According to the Explanatory Memorandum, the Bill is
expected to produce savings of $933.4 million from 2016–17 to 2019–20.[35]
Statement of Compatibility with Human Rights
As required under Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the
Bill’s compatibility with the human rights and freedoms recognised or declared
in the international instruments listed in section 3 of that Act. The
Government considers that the Bill is compatible.[36]
Parliamentary
Joint Committee on Human Rights
The Parliamentary Joint Committee on Human Rights considers
that the Bill does not raise any human rights concerns.[37]
Key issues
and provisions
Rationale
for the measure
In his second reading speech for the Bill, Minister for
Social Services, Christian Porter said that the Government ‘does not consider
it appropriate to continue to compensate people for a tax that no longer exists’.[38]
However, the Bill does not remove the energy supplement
for people who have received income support payments continuously since 19
September 2016.
This rationale also runs counter to the Coalition’s 2013
Election commitment to keep the compensation measures, despite removing the
carbon price.
Administrative
complexity
Ceasing the energy supplement for some recipients but not
others makes the income support system more administratively complex.
The Report of the Reference Group on Welfare Reform (the
McClure report) argued that the income support system is unnecessarily complex.
This makes it difficult for recipients to understand and difficult for the
Government to administer.
According to the report, part of this unnecessary
complexity comes from the large number of supplements. The report argued that
the energy supplement should be rolled into the main payments.[39]
Adequacy of unemployment payments
As discussed above (under position of major interest
groups), a number of groups argued that current payments to recipients of
Newstart Allowance are inadequate and should not be reduced further.
In recent years a number of significant reports and commentators
have raised concerns about the low rate of payment for recipients of Newstart
Allowance. For example, in 2012 a Coalition-chaired Senate Committee inquiry
found that the payment rate for allowances ’does not allow people to live at an
acceptable standard in the long term’.[40]
Also in 2012, Professor Peter Whiteford of the Australian National University
argued that ‘Newstart recipients are falling into continuously deepening
poverty’.[41]
In a 2016 report on solving government budget deficits,
consulting firm KPMG recommended an increase in the Newstart Allowance rate.
The report states: ‘Due to political rhetoric, payments for those who are
unemployed have fallen behind other payments, to the point that it is commonly
recognised that Newstart is inadequate, and significantly so’.[42]
Fairness
As discussed above (under position of major interest
groups), a number of interest groups have argued that the measure is unfair. A
number of commentators have expressed similar concerns. For example, journalist
Lenore Taylor wrote:
... as well as ushering in a two-tier welfare system, with
higher payments for existing recipients, and lower ones for those getting
benefits after the supplement is cut, there also seems to be a double standard
for what counts as a windfall.
The carbon tax adjustment payment for welfare recipients is
incorrectly labelled as a windfall that must be removed, but everyone else’s
compensation came in the form of a tax cut, a real windfall, which they got to
keep. So the unemployed person loses $4.40 a week and ends up behind, but the
person earning $60,000 keeps a tax cut worth about $10 a week and stays ahead.[43]
Some
recipients will be worse off than if the supplement had never been introduced
If this Bill is passed, some income support recipients
will receive a lower rate of payment than they would have if the supplement had
never been introduced. According to policy analyst David Plunkett:
... if the removal of this compensation goes ahead as
announced, the rate of payments for new applicants will actually be less than
if compensation for carbon pricing had never been introduced.
As an example, for a person claiming the (usual) lower single
Newstart allowance rate, this will mean their payment is not just $8.80 a
fortnight less than current recipients (who get to keep the energy supplement),
but $3.60 less than it would have been had there been no carbon tinkering in
the first place. Let that sink in for a moment. In spite of seemingly endless
calls for the rate of Newstart allowance to be increased – see the current
ACOSS campaign, $36 a day is not enough! – the Government is actually proposing
to reduce Newstart to less than its pre-carbon price compensation
value.
How does this happen? The short answer is that the equivalent
of around 41% of the energy supplement has already been taken out of Newstart
and other affected payment rates. Consequently, removing the energy supplement
in full will end up taking out that 41% twice.[44]
Plunkett suggests that the measure may reflect a
misunderstanding of how carbon pricing compensation was constructed.[45]
Figure 1 tracks the maximum basic rate of Newstart
Allowance had the carbon price compensation package never been introduced and
normal CPI indexation occurred. It compares this to the actual maximum basic
rate and the actual rate combined with energy supplement.
Figure 1:
Newstart Allowance maximum basic rate (single, no children), $ per fortnight,
with and without the energy supplement
Source: Parliamentary Library estimates.
Numbers
affected
The Department of Social Services told a Senate Estimates
hearing on 2 March 2017 that, by 30 June 2020, 1.7 million income support
and Department of Veterans’ Affairs clients would not receive the energy supplement
as a result of the measures proposed in the Social Services Legislation
Amendment (Omnibus Savings and Child Care Reform) Bill 2017.[46]
At a Senate Estimates hearing on 31 May 2017, the Department
stated that around 650,000 people who have qualified for a social security
payment since 20 September 2016 will lose the energy supplement.[47]
For the Budget Savings (Omnibus) Bill 2016, the Government
expected around 6.5 million people would continue to receive the energy supplement
under the grandfathering provisions.[48]
Newstart Allowance recipients are likely to be one of the
main payment recipient categories affected as there is a large turnover in the
number of people in receipt of this payment—in the period between 1 April 2015
and 31 March 2016, there were 411,957 entries onto Newstart Allowance and 264,580
exits within 12 months.[49]
Many Newstart Allowance recipients will move on and off the payment as they
move to and from short-term employment. Under the proposed changes, those that
are currently in receipt of an eligible payment who exit income support, even
for a brief period, would no longer be eligible for the energy supplement.
The Department of Social Services provided a breakdown of
the numbers affected over the forward estimates to June 2020 by payment type:
- ABSTUDY—6,524
- Age
Pension—403,236
- Austudy—42,478
- Bereavement
Allowance—173
- Carer
Payment—105,628
- Disability
Support Pension—109,327
- Newstart
Allowance—472,962
- Parenting
Payment Partnered—66,488
- Parenting
Payment Single—138,894
- Sickness
Allowance—7,935
- Special
Benefit—12,443
- Widow
Allowance—2,637
- Youth
Allowance (Student)—199,338
- Youth
Allowance (Other)—144,053
- Department
of Veterans’ Affairs customers—18,628.[50]
Key
provisions
Social Security Act 1991
Item 4 of Part 1 of Schedule 1 to the Bill inserts proposed
section 22 into Part 1.2—Definitions of the SS Act. Proposed
section 22 defines when a person is considered to be a transitional
energy supplement person. A person is a transitional energy supplement
person if on 19 September 2016 one of the following applies:
- they
are receiving an income support payment where the energy supplement was used to
work out the rate
- energy
supplement is payable to the person (under section 1061UA)
- they
are eligible to receive the energy supplement as a result of receiving a War
Widow/War Widower pension (under section 62B of the VE Act)
- they
are eligible to receive the energy supplement as a holder of a Commonwealth
Seniors Health Card or Gold Card under the VE Act (section 118PA)
- they
are eligible to receive the energy supplement as a result of receiving a
payment under the Veterans’ Children Education Scheme or the MRC Act Education
and Training Scheme
- the
person receives an energy supplement as a result of receiving a compensation
payment for the death of their partner under section 238A of the MRC Act
or
- the
person is receiving an ABSTUDY living allowance.
A person ceases to be a transitional energy
supplement person, and may never again be one, if none of the above
criteria apply to a person on a day on or after 20 September 2016.
While War Widows/War Widowers pension recipients and
veterans’ service pensioners are included in the definition of transitional
energy supplement person (as a service pension is defined as an income support
payment[51]),
veterans’ Disability Pension recipients and the recipients of certain payments
under the MRC Act have been left out of this definition. Instead,
separate definitions of transitional energy supplement person covering
veterans’ Disability Pension recipients and certain MRC Act payments
will be inserted into the VE Act and the MRCA Act by amendments
in Parts 3 and 4, respectively.
Proposed subsections 22(3)–(7) of the SS Act
provide for certain individuals to continue to be considered as transitional
energy supplement persons, including those who have their payment rate
reduced to nil on or after 19 September 2016[52];
those who have their payment suspended on or after 19 September 2016; those who
have an absence from Australia longer than six weeks; those who move between
being a Commonwealth Seniors Health Card holder and being an income support
payment recipient; and those who make a claim or are provided with a
Commonwealth Seniors Health Card within a certain period of time after certain
income support payments are cancelled. Specific criteria apply in each
situation for persons in these situations to remain eligible for the energy supplement.
Proposed subsection 22(7), together with subsection
1061U(6) of the SS Act, which was inserted by item 37 of Schedule 21
of the Budget Savings (Omnibus) Act 2016, will ensure that those who
have their pension payment cancelled as a result of the new assets test arrangements
which commenced on 1 January 2017, and who are therefore automatically issued
with Commonwealth Seniors Health Card, will continue to be eligible for an energy
supplement paid with the Commonwealth Seniors Health Card.[53]
Items 11–34, 36–39, 41–44, 46–52 and 54–55 amend
various rate calculators for social security payments so the energy supplement
is not added to the rate calculations for these payments from 20 September 2017
unless the person is a transitional energy supplement person on that day.
The rate calculators apply to the following payments:
- Age
Pension, Disability Support Pension, Wife Pensions and Carer Payment (people
who are not blind) at section 1064
- Age
Pension and Disability Support Pension (blind people) at section 1065
- Bereavement
Allowance and Widow B Pension at section 1066
- Disability
Support Pension (people under 21 who are not blind) at section 1066A
- Disability
Support Pension (people under 21 who are blind) at section 1066B
- Youth
Allowance at section 1067G
- Austudy
Payment at section 1067L
- Widow
Allowance, Newstart Allowance, Sickness Allowance, Partner Allowance and Mature
Age Allowance at section 1068
- Parenting
Payment Single at section 1068A and
- Parenting
Payment Partnered at section 1068B.
Items 35, 40, 45 and 53 amend the partner income
free area provisions for Youth Allowance, Austudy Payment, Widow Allowance,
Newstart Allowance, Sickness Allowance, Partner Allowance, Mature Age Allowance
and Parenting Payment Partnered so the energy supplement is not included where
the person is not a transitional energy supplement person (unless their partner
is a transitional energy supplement person). The partner income free area is
the amount of income an income support recipient’s partner can have before the
recipient’s payment rate is reduced—the income free area is based on the
partner’s age, whether or not they receive a social security benefit, and the
rate of benefit that would be payable if they were in receipt a benefit.
Item 56 amends point 1071A-2A to remove the
energy supplement from the formula used to calculate the allowable income
limits for a Low Income Health Care Card.[54]
These amendments will lower the amount of allowable income a person can earn
and still qualify for the Health Care Card and will apply irrespective of
whether the person held a card prior to 20 September 2017 (the commencement
date). This will mean that some holders of a Low Income Health Care Card may
lose their eligibility due to the tighter income test.
Farm Household Support Act 2014
Items 58–61 in Part 2 of Schedule 1 to the Bill
make minor amendments and insert notes into the Farm Household Support
Act to explain that some Farm Household Support Allowance recipients will
not receive the energy supplement (that is, those who are not transitional
energy supplement persons). The rates of Farm Household Support Allowance are
tied to the payment rates of Newstart Allowance and Youth Allowance in the SS
Act and are therefore affected by the amendments in Part 1.
Veterans’ Entitlements Act 1986
Items 65–67 in Part 3 of Schedule 1 to the Bill
amend section 62A of the VE Act which currently provides for the
payment of the energy supplement to recipients of the Disability Pension under
the VE Act. Item 67 inserts proposed subsections 62A(4)–(6)
to define a transitional energy supplement person as a person who
on 19 September 2016 is in receipt of the energy supplement as a veterans’
Disability Pension recipient, or as a person eligible for permanent impairment
payment under subsection 83A(1) of the MRC Act, or as a person eligible
for the Special Rate Disability Pension under the MRC Act. Only those
who meet the definition of transitional energy supplement person under either the
VE Act or the SS Act can receive the energy supplement after 20 September
2017.
If a person ceases to meet the definition of transitional
energy supplement person they cannot regain that status.[55]
Item 70 inserts proposed subsection 62B(4) into
the VE Act so that a War Widow/War Widower pension recipient can be
eligible for the energy supplement after 20 September 2017 if they meet the
definition of transitional energy supplement person set out in proposed section
22 of the SS Act (inserted by item 4 in Part 1).
Item 76 amends section 118P of the VE Act
which sets out the eligibility for the energy supplement for holders of a
Commonwealth Seniors Health Card or a DVA Health Card All Conditions (Gold) to
prevent new Gold card holders after 20 September 2017 from receiving the energy
supplement; to stop payment of the energy supplement for people who became Gold
card holders on or after 20 September 2016 with effect from 20 September
2017; and to set out conditions where a person who claims or receives a card
after having another payment cancelled, or who moves from being a cardholder to
receiving an income support payment, can continue to receive the energy supplement.
Items 81–87 make amendments to the method statements for determining
payment rates for the Service Pension. Item 85 provides for the energy supplement
to not be included in the rate calculation process unless the person is a
transitional energy supplement person as defined under the SS Act.
Military Rehabilitation and Compensation Act 2004
Item 89 in Part 4 of Schedule 1 to the Bill inserts
proposed subsections 83A(4)–(6) into the MRC Act so that a person
in receipt of a permanent impairment payment under the MRC Act will only
be eligible for the energy supplement from 20 September 2017 if they are a transitional
energy supplement person. A transitional energy supplement person for
the purposes of this section of the MRC Act is defined in proposed
subsection 83A(5) as a person who is eligible for the energy supplement on
19 September 2016 in respect of a permanent impairment payment under the MRC
Act, a Special Rate of Disability Pension under the MRC Act or a
Disability Pension payable under the VE Act. A person who ceases to meet
the criteria to be a transitional energy supplement person after 19 September
2016 can never again become a transitional energy supplement person.[56]
Item 91 inserts proposed subsections 209A(3)–(5)
into the MRC Act so that a person in receipt of a Special Rate
Disability Pension under the MRC Act will only be eligible for the energy
supplement from 20 September 2017 if they are a transitional energy
supplement person. A transitional energy supplement person for the purposes
of this section of the MRC Act is defined in proposed subsection
209A(4) as a person eligible for the energy supplement on 19 September 2016
in respect of a Special Rate Disability Pension, a permanent impairment payment
under the MRC Act or a Disability Pension under the VE Act. A
person who ceases to meet the criteria to be a transitional energy supplement
person after 19 September 2016 can never again become a transitional energy
supplement person.[57]
Item 93 inserts proposed subsection 238A(4)
into the MRC Act so that a person in receipt of a compensation payment
as a wholly dependent partner under the MRC Act will only be eligible
for the energy supplement from 20 September 2017 if they are a transitional
energy supplement person as defined in section 22 of the SS Act
(as inserted by item 4 in Part 1 of Schedule 1 to the Bill).
Members, Senators and Parliamentary staff can obtain
further information from the Parliamentary Library on (02) 6277 2500.
[1]. J
Macklin, ‘Answer
to Question without notice: carbon pricing’, [Questioner: J Hall], House of
Representatives, Debates, 11 October 2011, p. 11401.
[2]. Department
of Human Services (DHS), ‘Payment
rates for energy supplement’, DHS website, 12 July 2017; Department of
Veterans’ Affairs (DVA), ‘Factsheet
CEP01: energy supplement’, DVA website, 1 July 2017.
[3]. The
energy supplement was part of a package of measures intended to compensate
households for the impact of the carbon price. Macklin, ‘Answer
to Question without notice: carbon pricing’, op. cit., p. 11401; P Yeend
and L Buckmaster, Clean
Energy (Household Assistance Amendments) Bill 2011, Bills digest, 58, 2011–12,
Parliamentary Library, Canberra, 2011.
[4]. Explanatory
Memorandum, Social Services and Other Legislation Amendment (2014 Budget
Measures No. 6) Bill 2014, p. 2.
[5]. G
Megalogenis, ‘Carbon
tax could send Abbott up in smoke’, The Weekend Australian, 28 May
2011, p. 18; T Wood and D Blowers, Price shock:
is the retail electricity market failing consumers?, Grattan Institute,
Melbourne, March 2017, pp. 7–8.
[6]. T
Abbott (Leader of the Opposition), Transcript
of the Hon. Tony Abbott MHR: interview with Warren Moore: Radio 2GB, Sydney,
transcript, Radio 2GB, 20 August 2010.
[7]. C
Uhlmann, ‘Opposition
Leader Tony Abbott joins 7.30’, 7.30, transcript, Australian
Broadcasting Corporation, 24 March 2011.
[8]. J
Freebairn, ‘Not
a big tax increase, just a different mix’, Australian Financial Review,
8 February 2010, p. 55.
[9]. P
Lewis, ‘Explainer:
the policy challenge of indexing welfare payments’, The Conversation,
16 March 2015; M Klapdor, ‘Pension
indexation: a brief history’, FlagPost, Parliamentary Library blog, 16
April 2014.
[10]. The
Treasury and the Department of Families, Housing, Community Services and
Indigenous Affairs (FaHCSIA), Review
of the Clean Energy Future Household Assistance Package, Treasury and
FaHCSIA, April 2013, pp. 1–2.
[11]. Ibid.,
p. 1.
[12]. Explanatory
Memorandum, Clean Energy (Household Assistance Amendments) Bill 2011.
[13]. P
Yeend and L Buckmaster, op. cit., p. 15.
[14]. T
Abbott (Prime Minister) and G Hunt (Minister for the Environment), Government
delivers on commitment to abolish the carbon tax, media release, 17
July 2014.
[15]. T
Abbott (Leader of the Opposition), Address
to the NSW Liberal Party State Council, Central Coast, speech, 1 June
2013.
[16]. T
Abbott (Prime Minister), Transcript
of doorstop interview, Tokyo, media release, 6 April 2014.
[17]. Yeend
and Buckmaster, op. cit., p. 15.
[18]. Parliament
of Australia, ‘Social
Services and Other Legislation Amendment (2014 Budget Measures No. 1) Bill 2014
homepage’, Australian Parliament website.
[19]. Parliament
of Australia, ‘Social
Services and Other Legislation Amendment (2014 Budget Measures No. 6) Bill 2014
homepage’, Australian Parliament website. The Social Services and
Other Legislation Amendment (2014 Budget Measures No. 6) Act 2014 received
Royal Assent on 26 November 2014.
[20]. Australian
Government, ‘Part
2: expense measures’, Budget measures: budget paper no. 2: 2016–17, p.
143.
[21]. N
Gupta, K Swoboda, D Weight, P Pyburne, A St John, D Arthur, A Biggs, L
Buckmaster, D Daniels, A Grove, M Harrington, M Klapdor and M Thomas, Budget
Savings (Omnibus) Bill 2016, Bills digest, 7, 2016–17, Parliamentary
Library, Canberra, 2016, pp. 68–69.
[22]. Budget Savings
(Omnibus) Act 2016.
[23]. Ibid.,
p. 69.
[24]. R
Di Natale, ‘Second
reading speech: Budget Savings (Omnibus) Bill 2016’, Senate, Debates,
15 September 2016, p. 1139; M Klapdor, ‘Omnibus
Bill compromise to find further savings from family payments’, FlagPost, Parliamentary
Library blog, 14 September 2016.
[25]. Parliament
of Australia, ‘Social
Services Legislation Amendment (Omnibus Savings and Child Care Reform) Bill 2017
homepage’, Australian Parliament website.
[26]. Senate
Community Affairs Legislation Committee, ‘Social
Services Legislation Amendment (Ending Carbon Tax Compensation) Bill 2017’,
Australian Parliament website.
[27]. Senate
Standing Committee for the Scrutiny of Bills, Scrutiny
digest, 6, 2017, 14 June 2017, p. 58.
[28]. J
Macklin, ‘Second
reading speech: Social Services Legislation Amendment (Omnibus Savings and Child
Care Reform) Bill 2017’, House of Representatives, Debates,
27 February 2017, p. 1477.
[29]. Australian
Greens Senators, ‘Australian
Greens’ dissenting report’, Dissenting report, Senate Community Affairs
Legislation Committee, Inquiry into the Social Services Legislation
Amendment (Omnibus Savings and Child Care Reform) Bill 2017, The Senate,
Canberra, March 2017, p. 50.
[30]. A
Gartrell, ‘Xenophon
Team scupper push to axe carbon compo’, Sydney Morning Herald, 15
June 2017, p. 7.
[31]. Australian
Council of Trade Unions, Submission
to Senate Economics Legislation Committee, Inquiry into the Budget Savings
(Omnibus) Bill 2016, 9 September 2016, p. 13.
[32]. National
Welfare Rights Network, Submission
to Senate Economics Legislation Committee, Inquiry into the Budget Savings
(Omnibus) Bill 2016, 7 September 2016, p. 2.
[33]. Australian
Council of Social Service, Submission
to Senate Economics Legislation Committee, Inquiry into the Budget Savings
(Omnibus) Bill 2016, September 2016, p. 3.
[34]. Ibid.
[35]. Explanatory
Memorandum, Social Services Legislation Amendment (Ending Carbon Tax
Compensation) Bill 2017, p. 2.
[36]. The
Statement of Compatibility with Human Rights can be found at pages 22–23 of the
Explanatory Memorandum to the Bill.
[37]. Parliamentary
Joint Committee on Human Rights, Scrutiny
report, 5, 2017, The Senate, Canberra, 14 June 2017, p. 49.
[38]. C
Porter, ‘Second
reading speech: Social Services Legislation Amendment (Ending Carbon Tax
Compensation) Bill 2017’, House of Representatives, Debates,
31 May 2017, p. 5744.
[39]. Reference
Group on Welfare Reform, A
new system for better employment and social outcomes: final report, Department
of Social Services (DSS), Canberra, 2015, p. 92.
[40]. Senate
Education, Employment and Workplace Relations References Committee, The adequacy of the allowance payment
system for jobseekers and others, the appropriateness of the allowance payment
system as a support into work and the impact of the changing nature of the
labour market, The Senate, Canberra, November 2012, p. 54.
[41]. P
Whiteford, ‘Paltry
Newstart Allowance is fast becoming a poverty trap’, The Conversation,
20 April 2012.
[42]. KPMG,
Solving
the structural deficit, KPMG Australia, Melbourne, April 2016, p. 14.
[43]. L
Taylor, ‘Axing
clean energy supplement has barely caused a ripple, but it should’, The
Guardian, (online edition), 13 August 2016.
[44]. D
Plunkett, ‘Malice
or misunderstanding? Government’s carbon price under-compensation’,
Austaxpolicy: Tax and Transfer Policy Institute, blog, 8 June 2016.
[45]. Ibid.
[46]. Senate
Community Affairs Legislation Committee, Official
committee Hansard, 2 March 2017, p. 114.
[47]. Senate
Community Affairs Legislation Committee, Official
committee Hansard, 31 May 2017, p. 92.
[48]. Senate Community Affairs Legislation Committee, Official committee Hansard, 6 May
2016, p. 128.
[49]. DSS,
DSS
demographics March 2017, data.gov.au, Canberra, 10 July 2017.
[50]. C
Halbert (Group Manager, Payments Policy, DSS), Evidence
to Senate Community Affairs Legislation Committee, Inquiry into the Social
Services Legislation Amendment (Omnibus Savings and Child Care Reform) Bill
2017, 9 March 2017, p. 63; Senate Community Affairs Legislation Committee, Customer
numbers affected by closure of energy supplement to new welfare recipients
excluding FTB-B customers (as at 7 March 2017), document tabled by DSS
at Canberra public hearing, 9 March 2017, Inquiry into the Social Services Legislation
Amendment (Omnibus Savings and Child Care Reform) Bill 2017, The Senate,
2017.
[51]. See
definition of ‘income support payment’ at subsection 23(1) of the SS Act.
[52]. Payment
rates for a particular payment instalment can be reduced to nil as a result of
the relevant income or assets test but the person may still remain qualified
for the payment. For example, some payment recipients who have employment
income that reduces their payment rate to nil under the income test can
continue to be considered qualified for the payment during what is known as an
‘employment income nil rate period’. DSS, ‘3.1.12 employment
income nil rate period’, Guide to social security law, version
1.234, DSS website, 3 January 2017.
[53]. For
information on the assets test changes and automatic-issue Commonwealth Seniors
Health Cards, see: M Klapdor, Social
Services Legislation Amendment (Fair and Sustainable Pensions) Bill 2015,
Bills digest, 129, 2014–15, Parliamentary Library, Canberra, 2015.
[54]. DSS,
‘3.9.1.70
low income HCC: assessment of income’, Guide to social security law,
version 1.234, DSS website, 3 July 2017.
[55]. Proposed
subsection 22(2) of the SS Act inserted by item 4 in Part 1
of the Bill and proposed subsection 62A(6) of the VE Act inserted
by item 67 in Part 3 of Schedule 1 to the Bill.
[56]. Proposed
subsection 83A(6) of the MRC Act inserted by item 89 in Part
4 of Schedule 1 to the Bill.
[57]. Proposed
subsection 209A(5) of the MRC Act inserted by item 91 in Part
4 of the Bill.
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