‘Grandfather’ arrangements for PPS – entitlement or inequity?

Since it was announced in the 2012-13 Budget that ‘grandfathering’ arrangements for single parents receiving Parenting Payment Single (PPS) would cease on 1 January 2013, there has been considerable concern expressed at the plight of these recipients who would see their weekly income support payments reduced by over $130 per fortnight for those on the maximum rate, and in some cases not be entitled to any income support and associated benefits if they had high enough earnings. However there appears to have been little recognition that these changes also mean that those who have been in receipt of PPS continuously since June 2006 are now being treated equally to the majority of single parents on income support.

‘Grandfathering’ arrangements are common in the social security system. They arise when changes to the conditions for a payment mean that some current recipients would be worse off. They are therefore allowed to continue under their existing arrangements until they move to another payment (for example, the Age Pension) or cease to be eligible through a change in their circumstances (such as getting a job or single parents who partner). For example, Partner Allowance was closed to new entrants on 20 September 2003 but there were still 17 147 recipients as at June 2011. Similarly when the work test for the Disability Support Pension (DSP) was changed in July 2006 from a threshold of those unable to work 30 hours per week being eligibile for DSP (with others placed on Newstart) to only those unable to work 15 hours per week, people already in receipt of DSP remained on the payment and were not reassessed against the new tighter work test.

The rationale for preserving the conditions of existing recipients is that it may be difficult for people to adjust to changed conditions, and in particular a reduced level of payment, when they have been used to living on the previous arrangements. However it does lead to inequity where those who have applied for a payment prior to a particular date may be significantly better off than people in the same situation who apply after the date. In the case of DSP, a single adult who was assessed as being able to work 20 hours per week and claimed DSP on 30 June 2006 would have been $89 per fortnight better off than someone in the same situation who claimed on 1 July and was placed on Newstart. If both remained on payment since then, the difference in fortnightly pay would now be nearly $300.

For PPS the situation is slightly different. While two single parents each with a youngest child aged 10 who applied for PPS on 30 June and 1 July 2006 respectively would have been treated differently at the time (the first would have received PPS but with participation requirements until their youngest child reached 16, while the second would have been placed on Newstart), for those with younger children there was no immediate impact. Two single parents each with a four year old child, one claiming before and the other after 1 July 2006 would have both received PPS initially. The difference would have been that the one who claimed before 1 July would have continued to receive PPS until their youngest child turned 16 (although with participation requirements once the child turned 8), while the other recipient would have been moved onto Newstart when their youngest child turned 8.

So for PPS recipients the argument about existing recipients having difficulty adjusting to a lower income level is not relevant as at some stage all recipients would have been moved to Newstart – the only change has been the age of their youngest child at the time this happened. Therefore the outcry about how single parents will find it difficult to live on Newstart should not be restricted to the estimated 122 630 who have been effected by the 2012-13 Budget measures. In fact, this represents only about one-third of those currently receiving PPS – the remainder would have lost eligibility for the payment once their youngest child reached 8 even without the latest changes. Of the 122 630, around a half lost eligibility for PPS on 1 January 2013, and will join the estimated 48 000 principal carer parents who were already receiving Newstart. The remainder still have a child under the age of 8 and hence will only lose eligibility once their youngest child turns 8 – that is, under the same conditions as the other 200 000 PPS recipients.


Flagpost is a blog on current issues of interest to members of the Australian Parliament

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