Pensions

Budget Review 2017–18 Index

Michael Klapdor

In the 2017–18 Budget, the Government announced funding for a small, one-off Energy Assistance Payment (EAP) for pensioners; changes to the residency requirements for pension eligibility; and a measure to provide Pensioner Concession Cards to those no longer eligible as a result of asset test changes that commenced on 1 January 2017.[1] Each measure will require legislation.

Energy Assistance Payment

The EAP will be a one-off payment of $75 for single recipients and $125 for couple recipients (combined) paid to those in receipt of a qualifying payment on 20 June 2017 and resident in Australia. The qualifying payments are Age Pension, Disability Support Pension (DSP), Parenting Payment Single, Service Pension, veterans’ Income Support Supplement, veterans’ Disability Pension, War Widow(er)’s Pension and permanent impairment payments under the Military Rehabilitation and Compensation Act 2004 and the Safety, Rehabilitation and Compensation Act 1988. Recipients of other income support payments, such as Carer Payment, Newstart Allowance, Youth Allowance or Parenting Payment Partnered are ineligible.[2] The measure will cost $268.9 million over two years.

The payment was announced as part of a deal between the Government and the Nick Xenophon Team to secure passage of a company tax cut.[3] The Government agreed to the one-off payment despite pursuing a separate measure to remove the existing Energy Supplement payment to new recipients of income support payments (including all pensions and allowances).[4] The existing Energy Supplement was introduced as part of the carbon price compensation package. Per year, it is worth around four to five times the amount of the EAP for pensioners. Prior to the 2013 election, the Coalition committed to removing the carbon price but keeping the compensation package, but it has since changed this position and determined that there is no ‘need for ongoing carbon tax compensation for new welfare recipients’.[5]

The EAP will provide a small boost to some pensioners’ income but the measure runs counter to the Government’s policy of cutting energy cost related payments. Those on lower-rate allowance payments will be ineligible for the assistance. Unusually, Carer Payment recipients will also be excluded, despite normally being treated in the same way as other pension payments.

Residency requirements

A further measure will tighten the residency requirements for the Age Pension and the DSP from 1 July 2018. The current requirements are for at least ten continuous years of Australian residency, or for periods exceeding ten years with at least one period of five years duration or more. There are some exemptions for refugees or former refugees who reside in Australia and, for DSP, for those who are Australian residents at the time their disability arises. To be an Australian resident a person must reside in Australia and be an Australian citizen, the holder of a permanent visa or a New Zealander with a Special Category Visa who was in Australia on, just before, or just after 26 February 2001.

Under the proposal in the 2017–18 Budget, there will be different residency requirements depending on the pension claimant’s circumstances (current exemptions will remain). The proposed requirements are:

  • ten years continuous Australian residence with at least five years during the person’s working life (between 16 years of age and the Age Pension age) or
  • if less than five years of Australian working life residence, then ten years of continuous residence and to not have been in receipt of an activity-tested income support payment (such as Newstart Allowance) for cumulative periods greater than five years or
  • 15 years continuous Australian residence.

Residency rules are complex and have changed significantly over time. When the Age Pension was introduced in 1909, the residency requirement was for 20 years continuous residence (with absences of up to one tenth of total residency allowed). This was modified in 1952 so those with 18 years of residence could be deemed to have been resident during occasional absences totalling two years (plus six months for each year of residence exceeding 18 years). This was reduced in 1962 to ten years continuous residence or, when continuous residence was at least five years, the ten-year requirement was reduced by all periods of residence totalling in excess of ten years. The current requirements were introduced in 1985.[6]

The proposed changes are expected to provide savings of $119.1 million over five years and will primarily affect older migrants to Australia.[7] The Government estimates that around 2,390 pension claimants will be affected by the change each year—2,300 will be delayed from claiming a pension due to the ten-year continuous residence requirement, and an estimated 90 people a year on parent or partner visas who have been in receipt of an income support payment for longer than five years will have to wait an additional five years before claiming an Age Pension.[8]

While relatively few people will be affected by the changes, the measure is significant in that it makes a claimant’s history of income support receipt relevant to their eligibility for a pension for the first time. The changes could mean that some elderly people in their 70s will be reliant upon a lower-rate payment, such as Special Benefit, rather than a pension.[9] The Federation of Ethnic Communities’ Councils of Australia has raised concerns that the measure will disproportionately impact migrant Australians.[10]

Pensioner Concession Card reinstatement

The Government will reinstate the Pensioner Concession Card (PCC) to around 92,000 former pension recipients and 3,600 veterans’ payments recipients who lost eligibility for their payment following asset changes that commenced 1 January 2017.[11] The measure will cost $3.1 million.

Those who lost their pension following the asset test changes were automatically granted a Commonwealth Seniors Health Card (CSHC). While the PCC is provided to those in receipt of an eligible income support payment, the CSHC is a standalone concession card given to those who meet an income test. The PCC and CSHC are very similar in that both provide access to discounted medicines under the Pharmaceutical Benefits Scheme and access to bulk billed doctor appointments (at the discretion of the doctor). The key difference between the cards at the Commonwealth level is that CSHC holders are not eligible for subsidised Australian Government hearing services. The main difference in entitlements, however, is in regards to state and territory government concessions, with CSHC holders unable to access the same concession entitlements as PCC holders in some jurisdictions.

Another difference is that while eligibility for the CSHC is not attached to an income support payment, some CSHC cardholders receive the Energy Supplement (recently passed legislation has meant that the Energy Supplement is no longer paid to new CSHC holders from 20 March 2017).[12] PCC holders receive the Energy Supplement as part of their attached income support payment—the PCC itself does not grant eligibility to any payments. What this means is that those affected by this budget measure would lose their Energy Supplement payment if they simply had their CSHC replaced by a PCC. Instead, as part of the measure, those who have their PCC reinstated will also keep their CSHC so that they can continue to receive the Energy Supplement.



[1].          The budget figures and information in this brief have taken from the following document unless otherwise sourced: Australian Government, Budget measures: budget paper no. 2: 2017–18 .

[2].          Department of Human Services (DHS), ‘Energy Assistance Payment’, DHS website, last updated 10 May 2017.

[3].          G Chan, ‘Company tax cuts: deal struck with Xenophon in return for pension boost’, Guardian (Australia), online edition, 31 March 2017.

[4].          D Arthur, A Dunkley, M Klapdor and M Thomas, Social Services Legislation Amendment (Omnibus Savings and Child Care Reform) Bill 2017, Bills digest, 76, 2016–17, Parliamentary Library, Canberra, 2017, pp. 28–38.

[5].          T Abbott (Leader of the Opposition), Address to the NSW Liberal Party State Council, Central Coast, speech, 1 June 2013; S Morrison (Treasurer), Interview David Speers, Sky News, transcript, 3 April 2017.

[6].          D Daniels, Social security payments for the aged, people with disabilities and carers 1909 to 2010, Background note, Parliamentary Library, Canberra, 2011.

[7].          Federation of Ethnic Communities’ Councils of Australia (FECCA), FECCA concerned about impact of key budget measures on migrant Australians, media release, 9 May 2017.

[8].          Department of Social Services (DSS), Welfare—other measures, fact sheet, DSS, Canberra, May 2017, pp. 3–4.

[9].          Department of Human Services (DHS, ‘Special Benefit’, DHS website, last updated 11 May 2017.

[10].       FECCA, op. cit.

[11].       DSS, op. cit., p. 3. For background on the changes see M Klapdor, Social Services Legislation Amendment (Fair and Sustainable Pensions) Bill 2015, Bills digest, 129, 2014–15, Parliamentary Library, Canberra, 2015.

[12].       The Government has a policy of removing the Energy Supplement (see Energy Assistance Payment section above). While it has passed legislation to no longer pay the Energy Supplement to new CSHC holders from 20 March 2017, it has, to date, been unable to pass legislation to remove the supplement from new income support payment recipients.

 

All online articles accessed May 2017. 

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