Welfare savings to fund the National Disability Insurance Scheme

Budget Review 2016–17 Index

Michael Klapdor

The Government will direct around $1.3 billion in net savings from social welfare payment expenditure towards the National Disability Insurance Scheme (NDIS) Savings Fund.[1] The welfare savings measures which will fund the contribution to the NDIS Savings Fund are:

  • $1.4 billion from closing the Energy Supplement to new recipients of social security and family assistance payments from 20 September 2016 and closing the Single Income Family Supplement (SIFS) to new recipients from 1 July 2017
  • $108.6 million from removing backdating provisions for new claims for Carer Allowance from 1 January 2017 and
  • $62.1 million from reviewing 30,000 Disability Support Pension (DSP) recipients each year for three years and assessing their capacity to work.

Around $270.7 million arising from these savings will not be credited to the NDIS Savings Fund (the Fund)—they will be directed towards other unspecified priorities in the Social Services Portfolio.

Further to the welfare measures, the budget papers indicate that $711.2 million in savings from within the NDIS (from reduced net costs in transition agreements signed with the states and territories) will be credited to the Fund. This will result in an estimated $2.1 billion being credited to the Fund over five years, on top of the Fund’s opening balance of $164.2 million, which was set aside in the Mid-year Economic and Fiscal Outlook.[2]

The NDIS Savings Fund is a special account which will collect underspends and identified savings to help meet the Australian Government’s contribution to the NDIS from 2019–20.[3] The budget papers state that there will be a funding shortfall of $4.4 billion in 2019–20 when the NDIS is fully operational.[4] Savings from across the Government will be directed to the NDIS Savings Fund to help meet this shortfall. The Opposition has argued that there is no funding shortfall and savings measures announced in the 2013–14 Budget, on top of an increase in the Medicare levy, would help fund the full scheme.[5]

Closing carbon price compensation to new recipients

To offset the impact of the introduction of the carbon price in July 2012 on income support recipients and those on low incomes, the Gillard Government introduced the Clean Energy Household Assistance package. A key component of the package was the Clean Energy Supplement (now called the Energy Supplement), an additional amount paid to recipients of allowances, pensions and Family Tax Benefit (FTB) recipients set at around 1.7 per cent of the basic rate of these payments (the expected price impact of the carbon price—a 0.7 per cent increase—plus an additional one per cent buffer).[6] The SIFS, worth $300 per annum, was introduced at the same time and is for single income families where the single parent or main earner has income between $68,000 and $150,000. It was intended as compensation for those families who would receive little or no assistance from the tax changes introduced as part of the Household Assistance package.

During the 2013 election, the Coalition committed to abolishing the carbon price while keeping the compensation measures that formed part of the Household Assistance package.[7] However, after winning the election and repealing the carbon price in 2014, the Government made a number of changes to the package, including renaming the Clean Energy Supplement the ‘Energy Supplement’, ceasing indexation of the payment and abolishing some minor supplementary payments.[8]

The budget measure will mean that any new recipients of pensions, allowances and FTB will no longer receive the Energy Supplement (worth $14.10 per fortnight for a single pensioner and $8.80 for a single Newstart recipient with no children). Current recipients of the Energy Supplement will be grandfathered and still receive the payment as long as they remain continuously eligible for a qualifying payment. The same applies to SIFS recipients—new claimants will be ineligible but current recipients continue to receive the payment as long as they continue to meet the eligibility criteria.

Minister for Social Services, Christian Porter, stated that compensation for higher electricity prices under the carbon price arrangements ‘is no longer necessary for new entrants to the welfare system’.[9] Arguably, the Energy Supplement and SIFS are also no longer necessary for current recipients following the removal of the carbon price. However, Treasurer Scott Morrison stated that the compensation should not be removed for those who were promised it at the time and who have come to rely on it.[10]

The abolition of these payments comes on top of the Coalition Government’s cuts to other supplementary amounts paid to certain benefit recipients. These include the Income Support Bonus and the Schoolkids Bonus (to be abolished from December 2016); the proposed phasing out of the FTB end-of-year supplement amounts; and the proposed abolition of the Pensioner Education Supplement and Education Entry Payment.[11]

Closing off the Energy Supplement will create two groups with notably different payments rates—annual differences for current and new payment recipients will range between $205 and $367 per annum depending on the payment received. Paradoxically, new payment recipients who will be ineligible for the Energy Supplement will actually have been better off had the carbon price compensation package never been introduced. At the time the Clean Energy Supplement was introduced, the basic payments the supplement is attached to were adjusted to ensure recipients would not be compensated twice (via the supplement and normal indexation to prices). This means that the basic rate for these payments is now lower than it would have been had the normal indexation process occurred.[12] For example, a single Newstart Allowance recipient would be receiving a basic rate more than $100 per annum higher than the current basic rate had the compensation package never been introduced.

Removing backdating provisions for Carer Allowance

Carer Allowance is an income supplement for people providing daily care to someone with a disability or medical condition or who is frail aged. It is a non-means tested payment and can be paid in addition to the means tested income support payment for carers—Carer Payment. The payment rate is currently $123.50 per fortnight.

Currently, payments for Carer Allowance may be backdated up to 12 weeks prior to the day of qualification or, if a claim is made more than 12 weeks after the day of qualification, the payment can be backdated up to 12 weeks prior the day the claim was made.[13] For Carer Allowance claimed in respect of an adult care-receiver, these backdating provisions only apply where the adult’s disability is due to an acute event. For Carer Allowance claimed in respect of a child care-receiver, the backdating provisions will not apply where the claimant’s qualification is based on them being qualified for Carer Payment.

The Budget proposes to align the backdating provisions for new Carer Allowance claims with other social security payments—for most other social security payments there are no backdating provisions with the start date of the payment usually being the day a claim is made or the day the person becomes qualified for a payment. Backdating provisions can apply in specific circumstances, such as where a person’s partner has made a claim for a payment at an earlier date or after childbirth.

The measure will impact on carers who delay in contacting Centrelink to claim Carer Allowance. The $108.6 million in savings arises from reduced payments to these new Carer Allowance recipients. Carers Australia has criticised the measure being linked to NDIS funding, with Chief Executive Officer Ara Cresswell stating: ‘Carers don’t receive direct services under the NDIS, and savings from changes to the Carer Allowance could be better directed to the Government’s Integrated Plan for Carer Support Services, which will provide specific carer support.’[14]

Disability Support Pension reviews

This $62.1 million savings measure will see an additional 90,000 medical reviews of DSP recipients over three years. Of these, 30,000 will include a Disability Medical Assessment conducted by a doctor contracted by the Department of Human Services (DHS).[15] The measure extends a 2014–15 Budget measure to review the work capacity of DSP recipients aged under-35 years and DHS’s regular program of entitlement reviews.[16] The measure does not require legislation and the savings will derive from some DSP recipients having their payment cancelled and either moving onto a lower rate income support payment or off income support.

The reviews assess existing recipients against the current eligibility criteria for DSP rather than the criteria under which the recipient first claimed. In 2011, new criteria for assessing DSP claimant’s work capacity were introduced and new criteria for assessing the impact of medical conditions and impairments were introduced in 2012. Some of those reviewed may not meet the new criteria, while some may have seen an improvement in their medical condition or work capacity so that they no longer qualify for DSP. The new criteria have restricted the number of new claimants and, together with reviews of existing recipients, have contributed to a decrease in the total number of DSP recipients—from around 832,000 people in December 2013 to around 797,000 people in December 2015.[17]

The reviews will be targeted at DSP recipients who ‘may have some reasonable but limited capacity to work’.[18] As at January 2016, 20,521 people had been reviewed under the previous measure targeting additional reviews at under-35s. Of these, 2,986 had had their DSP cancelled with 2,464 not meeting the medical requirements. Of those cancelled, 75 per cent moved to another income support payment.[19]


Removing carbon tax compensation from new welfare recipients will deliver significant savings and, while running against the Coalition’s 2013 election commitments, can be argued as reasonable given the abolition of the carbon price. However, the cut comes on top of a long list of benefit cuts and reductions over the last three years and will impact on those reliant on pensions and allowances. Some in this group will be the beneficiaries of the NDIS—as will those affected by the other two welfare measures. This raises the question of whether the services offered by the NDIS should be funded by the withdrawal of direct financial supports for people with disability and carers.

[1].          The budget figures in this brief have been taken from the following document unless otherwise sourced: Australian Government, Budget measures: budget paper no. 2: 2016–17, 2016.

[2].          M Cormann (Minister for Finance) and C Porter (Minister for Social Services), New NDIS account to lock in funding, media release, 16 March 2016.

[3].          See the ‘Special Accounts overview’ article in this Budget Review; and P Pyburne, National Disability Insurance Scheme Savings Fund Special Account Bill 2016 [and] National Disability Insurance Scheme Amendment Bill 2016, Bills digest, 44, 2015–16, Parliamentary Library, Canberra, 2016, p. 7.

[4].          Australian Government, Budget strategy and outlook: budget paper no. 1: 2016–17, p. 3-14.

[5].          J Macklin (Shadow Minister for Families and Payments and Shadow Minister for Disability Reform) and T Burke (Shadow Minister for Finance), Pickpocket Porter steals NDIS money, media release, 9 April 2016.

[6].          A supplement is also paid to Commonwealth Seniors Health Card holders. P Yeend and L Buckmaster, Clean Energy (Household Assistance Amendments) Bill 2011, Bills digest, 58, 2011–12, Parliamentary Library, Canberra, 2011, p. 14.

[7].          T Abbott (Leader of the Opposition), Address to the NSW Liberal Party State Council Central Coast, speech, 1 June 2013.

[9].          C Porter (Minister for Social Services), Real money for a real commitment to the NDIS, media release, 3 May 2016. 

[10].       S Morrison (Treasurer), Budget lock-up press conference, transcript, 3 May 2016.

[11].       Minerals Resource Rent Tax Repeal and Other Measures Act 2014; M Klapdor, Social Services Legislation Amendment (Family Payments Structural Reform and Participation Measures) Bill (No. 2) 2015, Bills digest, 65, 2015–16, Parliamentary Library, Canberra, 2016; D Arthur, Social Services Legislation Amendment (Budget Repair) Bill 2015, Bills digest, 78, 2015–16, Parliamentary Library, Canberra, 2016.

[12].       P Yeend and L Buckmaster, op. cit., p. 15.

[13].       Information about Carer Allowance is from: Department of Human Services (DHS), ‘Eligibility for Carer Allowance’, DHS website.

[14].       Carers Australia, Federal Budget: could be better, could be worse for carers, media release, 3 May 2016.

[15].       Department of Social Services (DSS), A sustainable disability welfare system, budget factsheet, May 2016, p. 1.

[17].       December 2013 and December 2015 data from DSS, ‘DSS payment demographic data’, data.gov.au website.

[18].       DSS, A sustainable disability welfare system, op. cit.

[19].       Senate Community Affairs Legislation Committee, Answers to Questions on Notice, Social Services Portfolio, Additional Estimates 2015–16, Question SQ16-000237. take link to the next page


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