Peter Yeend
Change to residency requirements
Background
The Government announced a tightening of the Australian working life residency (AWLR) requirements for persons to be paid an income support payment while resident overseas in the 2012–13 Budget.[1]
Australian working life residency—strengthening requirements
Normally, to qualify for an Age Pension (AP) or a Disability Support Pension (DSP) in Australia a person must have been resident in Australia for at least 10 years. Thereafter, only some Australian income support payments are payable when a person leaves Australia to reside overseas. These are the AP, Wife Pension (WP), Widow B Pension (WidB) and some DSP recipients.
As at June 2010, there were 71 360 income support recipients residing overseas permanently. The majority (79 per cent) reside in European countries. Of those resident overseas, 62 148 (87 per cent) were receiving AP, 7572 were receiving the DSP, 575 receiving WidB and 969 receiving WP.[2] Annual expenditure as at June 2010 on Australia’s pension payments paid to people living overseas was $571.3 million and at the same time, pensions from overseas countries being paid to people residing in Australia totalled $1.2 billion.[3]
Currently, for a person resident overseas, to be paid the maximum rate of AP they would otherwise be paid if resident in Australia, they require 25 years AWLR. Recipients with less than 25 years of AWLR are paid a proportional rate based on the duration of their working life residence in Australia. For example, if a person has 16 years of working life residence, they can receive 16/25th of the rate otherwise payable when a resident in Australia. Most overseas contributory based pension systems pay their minimum overseas rate after about 15 years and their maximum rate of pension after about 40 years of contribution.
From May 1973, a pension granted in Australia could be paid in any country in which the person lived. The initial AWLR rules for AP were introduced from 1 July 1986. From 1986 to 2004, different payments had different rules as to how long they could be paid where a person was overseas. From 1988, payment of the Sole Parent Pension, where a person was overseas, was limited to 12 months and the Wife Pension, Widow B Pension and Disability Support Pension also had limited payment periods in some cases from 1991. Originally, Carer Payment was not portable for any period from 1987 but now has limited portability.[4] The Howard Government standardised the payment overseas rules for the different payments in 2004 and also provided a reduced payment period during a temporary absence overseas. Generally, payment was reduced from 26 weeks down to 13 weeks from 1 July 2004.[5]
Budget proposal
The Budget proposal is to extend the current 25 years AWLR requirement, to attract a full-rate of payment otherwise payable in Australia, out to 35 years of AWLR.[6] This is to apply from 1 January 2014 to persons who, having exceeded their 26 weeks temporary absence period, are resident overseas. Additionally, the AWRL rule is to be applied separately to a partnered pensioner. Currently, a partnered pensioner (WP) can rely on the primary pensioner’s AWLR to set their rate. This latter requirement will not involve many recipients — as at June 2010 there were only 24 655 Wife Pension recipients[7] and, of these, only 969 were resident overseas.[8]
The Budget proposal estimates savings of $50.8 million over four years.[9]
Comment
The increase in the AWLR rules from 25 to 35 years will see increased numbers of people resident overseas paid lesser amounts of pension. This is where the estimated savings will be realised. A person’s AWRL is fixed by the number of years they have been resident in Australia — this not an element a person can readily change. Changing the year requirement from 25 to 35 years will adversely affect those with an AWLR of between 26 to 34 years.
Changes to portability rules
Background
The Budget also proposed a reduction in the period a person can receive an Australian income support payment while temporarily overseas: from 13 weeks down to six weeks.[10] Portability allows most income support and supplement payments to continue being paid where a person is temporarily absent from Australia. Where a person leaves Australia permanently, and their payment is not payable overseas, payment is stopped on departure.[11] The payments affected by the proposed portability changes are listed in the Budget announcement.[12]
Savings
It is estimated the proposal will realise savings of $127.2 million over four years from 2012–13.[13] There is no statement about the numbers projected to be affected by this proposed change.
Comment
The Howard Government reduced the portability of most income support payments from 26 weeks to 13 weeks from 1 July 2004.[14] This proposed initiative is similar to the previous reductions in the portability periods.
Generally, income support and income supplement payments that are provided by the Australian Government have means testing (income and/or assets tests) to target persons with lesser means to provide for basic living costs. It could be argued that this refers to living costs incurred in Australia and therefore these payments should be targeted to persons living in Australia rather than elsewhere. It could also be argued that for those receiving government assistance, trips overseas should only be for exceptional events.
It is a requirement under both the Social Security (Administration) Act 1999[15] and the A New Tax System (Family Assistance) (Administration) Act 1999[16] that if a person intends to leave Australia they are required to notify of their intention to do so. There will be some payment recipients who have the means to take a temporary absence from Australia for a period of more than six weeks. In such cases, payment will probably be able to be made for the initial six weeks and then the person will need to reapply upon return. Currently, for a few payments, there is the capacity to allow an extension of payment beyond 13 weeks on a case-by-case basis.[17] It is probable this facility will also apply to this proposed reduced portability period.
[11]. The only payments payable while a person is permanently resident overseas are the Age Pension, Wife Pension, Widow B Pension and a Disability Support Pension in special cases.
[14]. P Yeend, Bills digest, no. 43, 2003–04, op. cit.
[15]. Social Security (Administration) Act 1999, section 68, viewed 10 May 2012; A New Tax System (Family Assistance) (Administration) Act 1999, section 25, viewed 10 May 2012.
[17]. The discretion to extend portability applies to DSP, Newstart Allowance, CP and Partner Allowance.
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