Income management

Budget Review 2015–16 Index

Don Arthur

The Budget includes funding for an extension of income management across Australia until 2017, and a trial of a new type of debit card as recommended by the Indigenous Jobs and Training Review (the Forrest Review). The Review recommended the new debit card arrangements as a simpler and cheaper alternative to current income management arrangements.[1]

Income management was first introduced in 2007 as part of the Howard Government’s Northern Territory (NT) Emergency Response and was initially restricted to Indigenous communities in the NT.[2] Subsequent governments have expanded it to include Indigenous and non-Indigenous people across the NT and at a number of other sites around Australia.[3]

Income management sets aside (or ‘quarantines’) a proportion of a recipient’s income support payment to pay for necessities such as food, clothing, housing and utilities. Recipients can spend their income-managed funds using a BasicsCard or by arranging for Centrelink to make a payment on their behalf (for example, regular rental payments).[4] Recipients can only use their BasicsCard at approved merchants and cannot use it to buy excluded goods, such as tobacco, alcohol, pornography or scratch lottery tickets.[5]

Income management does not operate uniformly across locations and target groups. Different locations target different groups for income management and different groups of recipients have different proportions of their payments set aside for necessities.[6] Income management is part of a package of measures that currently includes access to Money Management courses, a Matched Savings Scheme and an incentive payment for people who volunteer for income management.[7]

Income management is a costly measure. From 2005–06 to 2014–15, it has cost the Commonwealth around $1.0 billion.[8] The Forrest Review proposed a less costly approach that relies on bank issued debit cards. The Government is planning to trial this new approach (see below).

Income Management—two-year extension

The Government will extend income management in all current locations until 30 June 2017 under a measure providing $146.7 million over three years.[9] Income management currently operates across the NT and in discrete locations in every jurisdiction except Tasmania and the Australian Capital Territory.[10]

As part of the extension of income management, the Government will also continue funding for Financial Counselling and Capability support services in existing income management locations for another two years.

The Government is phasing out two payments associated with income management—the Voluntary Incentive Payment and the Matched Savings Payment. The Voluntary Incentive Payment is designed to encourage people to volunteer for income management. Volunteers can receive a $250 payment for every six months they participate in the scheme. The Matched Savings Payment, of up to $500 for participants, is designed to encourage people on income management to complete an approved money management course and demonstrate a record of savings. Evidence from a recent evaluation of Place-Based Income Management suggests that neither measure is effective in changing client behaviour.[11]

New debit card trial and industry consultation

In response to recommendations in the Forrest Review’s report, the Government will trial new debit card arrangements in up to three communities. The Government will decide on locations after consultations with stakeholders. Parliamentary Secretary to the Prime Minister, Alan Tudge, has indicated that trials could include both Indigenous and non-Indigenous communities.[12]

The Government will provide $2.7 million in 2015–16 for consultation and engagement of the new debit card arrangements. Funding for the trial itself is not for publication because the Government has not completed negotiations with potential commercial providers.

The Forrest Review recommended introducing new debit card arrangements as a less costly alternative to current income management arrangements.[13] Andrew Forrest argued that a new debit card would allow recipients more choice about where to shop and that, because it would look like any other bank-issued debit card, would be less stigmatising than the BasicsCard.[14] The Review’s original proposal was to completely block access to cash for people using the new debit card.[15] However, Parliamentary Secretary to the Prime Minister, Alan Tudge, has indicated that most debit card users will be able to access part of their payment as cash.[16]

The Forrest Review’s debit card proposal differs from the current income management system in a number of ways. These include:

  • The debit card will rely on existing technology: the Forrest Review argued that the new debit card would be cheaper for government because it would rely on existing technology in the mainstream banking system. The current BasicsCard requires additional infrastructure including dedicated electronic kiosks in income management areas that allow recipients to check their balances.
  • Merchants do not have to opt in: in the current income management system, merchants have to apply to the Department of Human Services (DHS) in order to accept payments through the BasicsCard.[17] Under the Forrest Review’s proposal, any merchant that accepts Visa and MasterCard with electronic and EFTPOS payment facilities would be able to accept payments made with the new debit card unless they had been excluded. The new debit card would automatically block purchases from certain merchant categories, such as alcohol and gambling outlets.
  • The range of excluded goods may be narrower: the Basicscard cannot be used to purchase alcohol (or home brew kits or concentrate), tobacco products or pornography. There are also restrictions on the kinds of businesses that DHS will approve. According to the Forrest Review’s proposal, the new debit card would allow purchases at a wider range of merchants (including online merchants) and would only prevent purchases of alcohol, gambling and ‘illicit services’. As with the BasicsCard, the proposed debit card would prevent the purchase of gift cards.

In a submission to the Forrest Review, the Australian Bankers’ Association (ABA) opposed the proposal and warned that there were a number of technical challenges involved in its implementation. The ABA also stated that it does not ‘support using the banking industry to block access to cash or prohibit the purchase of goods and services available to other Australians’.[18]

According to the ABA, one technical challenge is how to prevent income support recipients from buying alcohol at supermarkets and grocery stores that sell alcohol alongside other goods.[19] Merchants that accept payments by card are assigned a merchant category code (MCC).[20] It is relatively straightforward to block payments to all merchants in a category (for example, ‘package stores – beer, wine and liquor have an MCC of 5921). However, purchases of alcohol from supermarkets cannot be blocked using a MCC without blocking all purchases from supermarkets (‘grocery stores and supermarkets’ have an MCC of 5411). One alternative is to rely on supermarket checkout operators to identify restricted cards and refuse to allow customers to purchase alcohol.

In March 2015 Alan Tudge said that the Government had been consulting with the banks about how the technology could work.[21]

[1].          Forrest Review, Creating parity, Department of Prime Minister and Cabinet, Canberra, 2014, p. 28.

[2].          L Buckmaster, C Ey and M Klapdor, Income management: an overview, Background note, Parliamentary Library, Canberra, 21 June 2012.

[3].          L Buckmaster, ‘Does income management work?’, Parliamentary Library Briefing Book : key issues for the  44th Parliament, research paper series, 2013–14, Parliamentary Library, Canberra, 2013.

[4].          Department of Human Services (DHS), ‘About income management’, DHS website.

[5].          Australian Government, BasicsCard Merchant Approval Framework policy guidelines, August 2014.

[6].          For details on the different income management models see individual evaluation reports at: Department of Social Services (DSS), ‘Income management evaluations’, DSS website.

[7].          DHS, op. cit.

[8].          L Buckmaster, C Ey and M Klapdor, Income management: an overview, Background note, Parliamentary Library, Canberra, 21 June 2012.

[9].          The information in this article has been taken from the following document unless otherwise sourced: Australian Government, Budget paper no. 2: budget measures 2015–16.

[10].       For a full list of locations see: Department of Social Services, ‘Income management locations and map.’

[11].       Deloitte Access Economics, Place Based Income Management  – process and short term outcomes evaluation, report for the Department of Social Services, August 2014, pp. 95 and 114.

[12].       A Tudge, ‘5AA Adelaide Interview with David, Mark and Jane’, transcript, 23 March 2015.

[13].       Forrest Review, ibid, p. 102.

[14].       A Forrest, ‘Healthy welfare card will protect the vulnerable’, The Daily Telegraph, 24 March 2015.

[15].       Forest Review, op. cit., p. 28.

[16].       A Tudge (Parliamentary Secretary to the Prime Minister), Doorstop 4 Treasury Place, Melbourne, transcript, 22 March 2015.

[17].       DHS, ‘BasicsCard merchants’,DHS website.

[18].       Australian Bankers’ Association, Submission on the recommendations of Creating Parity – The Forrest Review, 19 September 2014.

[19].       Ibid.

[20].       For a list of MCCs see: ANZ, ‘Commercial Cards Merchant Category Code Controls’, [form].

[21].       A Tudge, ‘6PR Perth, interview with Gary Adshead’, transcript, 23 March 2015.


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