On 4 June 2015, the Minister for Social Services, the Hon. Scott
Morrison MP, introduced the Social Services Legislation Amendment (Fair and
Sustainable Pensions) Bill 2015 (Bill) in the House of Representatives.
Pursuant to a Senate resolution of 13 May 2015, the provisions of the Bill were
referred to the Community Affairs Legislation Committee (committee) for inquiry
and report by 15 June 2015.
The reporting date was extended to 22 June 2015,
and subsequently to 10 August 2015.
On 18 June 2015, the Senate revised the reporting date to 22 June 2015.
This inquiry reports on the provisions of the Bill as referred to the
Senate on 4 June 2015. The committee notes amendments to the Bill were introduced
to the House of Representatives on 18 June 2015 withdrawing schedules 1, 2, 4,
5 and 6.
Conduct of the inquiry
Details of the inquiry, including a link to the Bill and associated
documents, were placed on the committee's website. The committee also wrote to
32 organisations and individuals, inviting submissions by 12 June 2015.
The committee received 18 submissions. Submissions are listed at
Appendix 1 and published on the committee's website.
The committee agreed not to hold a public hearing.
The Bill seeks to implement measures outlined by the government in the 2015–16
Federal Budget (Budget) that aim to improve the fairness of tax rules and
This included changes aimed to ensure the pension system is sustainable and
fair and targeted at those most in need.
A number of these measures were outlined in the 2014–15 Budget and previously
introduced in the Social Services and Other Legislation Amendment (2014 Budget
Measures No. 4) Bill 2014 (the No. 4 Bill) and Social Services and Other Legislation
Amendment (Seniors Supplement Cessation) Bill 2014 (Seniors Supplement
Cessation Bill). These Bills were introduced in the Senate on 28 October 2014
and 18 November 2014 respectively but have not yet been passed.
Purpose and key provisions of the Bill
The Bill proposes changes to a number of acts relating to the
administration of the pension, including the Social Security Act 1991, Social
Security (Administration) Act 1999 and Veterans' Entitlements Act 1986.
The Bill is comprised of 6 Schedules. Schedules 1 – 3 introduce 2015–16 Budget
measures. Schedules 4 – 6 reintroduce 2014–15 Budget measures previously
introduced in the Seniors Supplement Cessation Bill and the No. 4 Bill.
Schedule 1 – Defined benefit income
This schedule proposes to cap the deductible amount for a defined
benefit income stream at a maximum 10 per cent of the gross amount payable
to an individual for the year. The measure would not apply to military
The income test for determining eligibility and rate of payment for
income support payments takes into consideration payments received from a
defined benefit income stream (usually an employer superannuation fund or
government employee superannuation scheme), minus the deductible amount. The
deductible amount is currently calculated according to the tax-free component
of the defined benefit income stream payment, as determined by legislation.
During the second reading speech on the Bill, the Minister noted the
measure aims to improve 'fairness and equity' as current arrangements:
allow some defined benefit superannuants to have a large
proportion of their superannuation income excluded from the pensions income
This schedule would commence on 1 January 2016.
Schedule 2 – Proportional payment
of pensions outside Australia
This schedule proposes to reduce the period during which pensions and a small
number of other payments can be paid outside Australia at the full rate from 26
weeks to six weeks. After six weeks, payment will be adjusted according to the
length of pension recipient's Australian working life residence. Those with 35
years or more Australian working life residence will not have their payment
This schedule would commence on 1 January 2017.
Schedule 3 – Assets test and concession
Division 1 of this schedule proposes to change the assets test for the
pension by increasing the assets test free areas and increasing the taper rate
by which a pension is reduced once the free areas are exceeded.
Proposed increases to the assets test free areas include:
from $202 000 to $250 000 for a single home-owner;
from $286 500 to $375 000 for home owner couples;
from $348 500 to $450 000 for non-home owner singles; and
from $433 000 to $575 000 for non-home owner couples.
The taper rate for pensions is proposed to increase from $1.50 to $3.00
per fortnight. This means that a person’s rate of a pension is reduced by $3.00
per fortnight for every $1000 of assets above the relevant assets test free
These changes would commence on 1 January 2017.
Division 2 of this schedule proposes to automatically issue a Health Care
Card or Commonwealth Seniors Health Card (for people of pension age) to pension
recipients whose pension is cancelled as a result of changes to asset
thresholds and taper rates from 1 January 2017. Pension recipients who are
overseas when their pension is cancelled at 1 January 2017 will be
automatically issued a concession card upon their return, provided they return
within 19 weeks of leaving Australia. The income test for concession cards would
not apply in these cases. Veterans' whose service pension is cancelled will
retain their Veterans Affairs Gold Card.
This schedule also proposes to replace the measure that pauses the indexation
of the assets test free areas in the Social Services and Other Legislation
Amendment (2014 Budget Measures No. 6) Act 2014 from 1 January 2017.
During the second reading speech on the Bill, the Minister noted these
changes aim to 'rebalance the assets test to make it fairer and better targeted
and to help ensure the pension system is sustainable into the future'.
Schedule 4 – Energy supplement
replacing seniors supplement
This schedule proposes to cease payment of the seniors supplement. Cardholders
will continue to be paid the energy supplement as a free-standing payment. The
seniors supplement, including the energy supplement, is currently available to
eligible holders of the Commonwealth Seniors Health Card or the Veterans
Affairs Gold Card.
This schedule reintroduces the measure proposed by the Seniors
Supplement Cessation Bill currently before the Senate with a new proposed start
date of 20 June 2015. Cardholders will generally receive their last quarterly
seniors supplement payment on 20 June 2015.
Schedule 5 – Pensioner education
This schedule proposes ceasing payment of the pension education
supplement, and related consequential amendments.
The pensioner education supplement is currently paid to eligible income
support recipients to assist with the costs of undertaking approved study or
training at the following rates:
$62.40 per fortnight for at least 50 per cent of a full-time
study load; or
$31.20 per fortnight for a study load below 50 per cent.
This schedule reintroduces proposed Schedule 4 to the No. 4 Bill 2014 with
a new proposed start date of 1 January 2016.
Schedule 6 – Education entry
This schedule proposes ceasing education entry payments, and related
The education entry payment is a lump sum of $208 available to eligible
income support recipients annually to assist with the costs of approved study
This schedule reintroduces proposed Schedule 5 to the No. 4 Bill with a
new proposed start date of 1 January 2016.
The Explanatory Memorandum notes the following estimated savings are
expected for each of the measures over the forward estimates:
schedule 1 – $465.5 million;
schedule 2 - $168.4 million;
schedule 3 - $2.4 billion;
schedule 4 - $1 billion (includes indicative figure for 2018-19);
schedule 5 - $252.4 million; and
schedule 6 - $64.4 million.
Savings estimates for schedules 5 and 6 refer to administered funding
for affected social security payments only. These do not reflect the net amount
of implementation funding.
Consideration by other committees
The Senate Standing Committee for the Scrutiny of Bills had no comment
on the Bill.
The Parliamentary Joint Committee on Human Rights concluded the Bill did
not raise human rights concerns.
The committee thanks those individuals and organisations that made
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