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On 28 September 2022, the Social Services and Other Legislation Amendment (Workforce Incentive) Bill 2022 (bill) was introduced into the House of Representatives by the Minister for Social Services, the Hon Amanda Rishworth MP.
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On the same day, the Senate referred the provisions of the bill to the Community Affairs Legislation Committee (committee) for inquiry and report by 10 November 2022.
Purpose of the bill
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According to the explanatory memorandum, the purpose of the bill is to ‘encourage and support age pension, disability support pension, carer payment and veterans’ entitlement recipients over age pension age to engage in paid employment’. Furthermore:
The measures in this Bill are not only beneficial over the long term, but are of importance in the current economy. Specifically, the measures in this Bill will encourage workforce participation by pensioners over age pension age, which may assist in addressing current skills and labour shortages.
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The bill contains three schedules that would amend the Social Security Act 1991, the Social Security (Administration) Act 1999, and the Veterans’ Entitlements
Act 1986. These amendments propose to:
suspend, rather than cancel, an age pension and certain veterans’ entitlement recipient’s benefits and entitlements for up to two years, if their income precludes payment. Suspension will also apply to pensioner’s partners who are also receiving a social security pension;
extend the qualification for recipients of the Age Pension, Disability Support Pension and certain veterans’ entitlements to allow working pensioners, and their pensioner partners, to retain their Pensioner Concession Card for up to two years; and
apply a temporary Work Bonus increase of $4000 to the unused concession balance for each eligible recipient, and increase the maximum unused concession balance from $7800 to $11 800, until 30 June 2023.
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Further details on the key provisions of bill are outlined below.
Background
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The following section provides background information on the current workforce and skills shortages and how the age, disability and veterans’ social security systems presently operate.
Workforce and skills shortages
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Currently, Australia is facing a nation and industry-wide workforce and skills shortage that is impacting on Australia’s productivity and economic growth. Inquiry participants described the workforce shortage as ‘unprecedented’ and ‘crippling’.
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The explanatory memorandum states that the measures in this bill ‘will encourage workforce participation by pensioners over age pension age, which may assist in addressing current skills and labour shortages’.
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According to findings from the National Skills Commission’s 2022 Skills Priority List, the number of occupations with a labour and skills shortage grew by nearly 50 per cent from the previous year.
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Data provided by the Department of Social Services (DSS) indicated that the number of age pensioners with employment earnings as at 24 June 2022 was only 77 989 out of approximately 2.5 million pensioners, or 3.1 per cent.
Age, disability and veterans’ social security systems
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The Age Pension, Disability Support Pension, and certain veterans’ payments are subject to income (and other) tests. If a pension recipient earns income above a specified threshold, they receive a lower payment amount or may no longer be eligible to receive a pension.
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Generally, for a single person, the Age Pension, Disability Support Pension, and Service Pension will be reduced by 50 cents for each dollar over $190 earned per fortnight, and for a couple it will be reduced by 50 cents (or 25 cents each for a couple) for each dollar over $336 per fortnight.
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Across these payments, there are various income cut-off points. For singles, this figure is $2243.00 per fortnight; for couples living together, the cut off is $3431.20 combined; and for couples living apart due to illness, the cut off is $4442.00 combined per fortnight.
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In calculating pension payments, a ‘Work Bonus’ scheme also applies to those who are over the Age Pension age, receive a pension that is not the Parenting Payment (single), are not on the transitional rate of pension, and have income from employment or active participation in self-employment. The Work Bonus operates by increasing the amount an eligible pensioner can earn from work before it affects their pension rate.
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Under the Work Bonus, the first $300 of fortnightly income is not assessed and is not counted under the pension income test. Any unused part of the $300 fortnightly Work Bonus can be accrued up to a maximum of $7800. This accrued amount is referred to as the Work Bonus income bank.
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The income bank amount offsets future income from work that would otherwise be assessable under the pension income test. The income bank amount is not time limited; if unused, it carries forward.
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According to DSS, the Work Bonus income bank is useful for pensioners who wish to work, particularly those who undertake intermittent or occasional work.
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Currently, if an Age Pension recipient’s total ordinary income exceeds the relevant income limit, they benefit from a 12-week employment nil rate period. This means they are still eligible for the Age Pension, but they do not receive a pension payment. The payment in effect is suspended.
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If, within the same period, the pension recipient’s income falls below the threshold, the pension payment is restored without the need to reapply. Eligibility for the Pension Concession Card is also retained within this period.
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If a pension recipient has a change in income that takes them above the relevant income threshold (and they have used up their Work Bonus income bank) for a 12-week period, their pension is generally cancelled, and they lose access to the Pension Concession Card. Once a payment is cancelled, an individual needs to reapply for the pension.
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For the Disability Support Pension, similar rules apply; however, payments can be suspended for up to two years and the pension recipient may retain access to the Pension Concession Card for 12 months during the period of suspension.
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For recipients of veterans’ payments, depending on how the individual qualifies, they may receive the Age Service Pension, Invalidity Service Pension or Partner Service Pension. For the Age Service Pension, the individual can receive the pension from either Services Australia (SA) or the Department of Veterans’ Affairs (DVA).
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In addition, for the associated concession cards there are different rules for the suspension or ‘grace’ period than for the Pension Concession Card. For example, eligibility for the Veterans’ Gold Card is retained for 13 weeks if the pensioner’s income level is less than 150 per cent of the cut-off limit. This contrasts with eligibility for the Pension Concession Card, which generally ceases immediately when income exceeds the cut-off point.
Key provisions of the bill
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The bill contains three schedules that would amend the following Acts:
Social Security Act 1991;
Social Security (Administration) Act 1999; and
Veterans’ Entitlements Act 1986.
Schedule 1 – Suspension of benefits and entitlements instead of cancellation
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Presently, if an Age Pension recipient’s total ordinary income exceeds the relevant income limit, a pensioner is still able to access other payments, supplements and concessions for a 12-week period. After the 12 week ‘grace’ period, their Age Pension and access to any concessions ceases.
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The proposed amendments in Schedule 1 would enable Age Pension recipients and relevant veterans’ entitlement recipients to have their pension suspended for up to two years, instead of it being cancelled after 12 weeks. The amendments also provide the same suspension period for partners of Age Pension, Disability Support Pension and some veterans’ entitlement recipients, if they are also receiving a social security pension or veterans’ entitlement and lose payability for their pension for the same reason as the recipient.
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The explanatory memorandum states that the proposed amendments would enable a pensioner and their partner to resume their pension more easily if it becomes payable again within the two years. Instead of being required to lodge a new claim, pensioners ‘will only be required to update their details, including their income and assets information, to receive payment’.
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These amendments are similar to the current arrangements for Disability Support Pension recipients. However, the bill proposes to clarify the suspension period for a carer payment partner, as this is not currently expressly indicated. The bill makes clear that where a person’s Disability Support Pension is suspended and their partner is receiving a carer payment, the suspension of the partner’s carer payment will be for the same period as the person’s Disability Support Pension.
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Schedule 1 would also insert a residency requirement. Age Pension recipients must reside in Australia at the time the suspension of the payment is made. According to the explanatory memorandum, this is designed to reflect the intention of the bill to address workforce shortages in Australia by encouraging Age Pension recipients to reside and take up work in Australia.
Schedule 2 – Extended qualification for Pensioner Concession Cards
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Age Pension and Disability Support Pension recipients currently have their Pensioner Concession Cards cancelled after 12 weeks and 52 weeks, respectively, after they lose eligibility for the pension due to their employment hours or ordinary income from employment.
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The amendments in Schedule 2 propose to extend and align the period that Age Pension, Disability Support Pension and certain veterans’ entitlement recipients can remain qualified for a concession card to two years after their payment ceases. Partners will also be able to benefit from this amendment where the partner is themselves receiving a social security pension or veterans’ entitlement.
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As in Schedule 1, Schedule 2 would insert a residency requirement whereby the extended Pensioner Concession Card qualification only applies to a person while they are residing in Australia.
Schedule 3 – Temporary increases to the Work Bonus income bank
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For eligible social security pensioners over Age Pension age, and certain veterans’ entitlement recipients over qualifying age, Schedule 3 proposes to apply a temporary instant top-up of $4000 to their Work Bonus income bank. Additionally, the maximum concession balance that can be accrued will also be temporarily increased from $7800 to $11 800, until 30 June 2023.
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The amendments made by Schedule 3 would not affect the amount of unused income concession that can be accumulated fortnightly by working pensioners. Under the Work Bonus, the first $300 of work income each fortnight is disregarded from the pension income test and unused amounts of the $300 income concession accumulate each fortnight in the pensioner’s income bank.
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However, the amendments would enable each eligible pensioner to have access to an immediate, one-off increase of $4000 of income from work immediately disregarded from the income test, rather than having to accumulate that balance over time.
Legislative scrutiny and compatibility with human rights
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The Senate Standing Committee for the Scrutiny of Bills made no comment on the bill.
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The Parliamentary Joint Committee on Human Rights made no comment on the bill.
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The explanatory memorandum states that the bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny)
Act 2011 as ‘it provides Australians, including senior Australians, with greater pension flexibility to help improve their standard of living’.
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According to the Explanatory Memorandum, the bill engages the following human rights:
the right to social security;
the right to an adequate standard of living; and
Financial impact statement
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The explanatory memorandum states that measures in the bill are part of the 2022–23 Budget. The Budget Paper outlines that the Government will provide $61.9 million over two years from 2022–23 to provide a once off credit of $4000 to the Work Bonus income bank of aged and veteran pensioners.
Related bills
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The committee inquired into a similar bill, the Social Services Legislation Amendment (Enhancing Pensioner and Veteran Workforce Participation) Bill 2022 (Enhancing Pensioner and Veteran Workforce Participation bill), which was introduced in the Senate on 3 August 2022 by Senator Dean Smith.
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The committee received 14 submissions to that inquiry and heard evidence at a public hearing in Canberra. The committee tabled its report on 30 September 2022 and recommended that the bill not be passed, noting that the Government had announced its intention to introduce legislation to boost the Work Bonus income bank.
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The Enhancing Pensioner and Veteran Workforce Participation bill contains three schedules, two of which are similar to Schedules 1 and 2 of the bill. The amendments propose to:
suspend, rather than cancel, a pension recipient’s access to their payments for up to two years, if their income exceeds the relevant income limit;
extend access to Pensioner Concession Cards for up to two years after their payment ceases; and
increase the Work Bonus from $300 to $600 for 12 months, unless extended by the Minister.
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These amendments were also considered in the Social Services and Other Legislation Amendment (Lifting the Income Limit for the Commonwealth Seniors Health Card) Bill 2022 (Seniors Health Card bill).
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On 28 September 2022, the Senate passed amendments to the Seniors Health Card bill which included the key features of the Enhancing Pensioner and Veteran Workforce Participation bill.
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The amended Seniors Health Card bill was considered by the House of Representatives, but the Senate’s amendments were not accepted as they did not concern the Commonwealth Seniors Health Card income limits. The Senate subsequently resolved not to insist on its amendments.
Conduct of the inquiry
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The committee wrote to relevant stakeholders inviting them to make a submission to the inquiry by 13 October 2022.
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The committee received 11 submissions, as listed at Appendix 1.
Structure of the report
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This report contains two chapters. This chapter sets out:
background information on workforce and skills shortages, as well as the operation of the current age, disability and veterans’ social security systems;
an overview of the key provisions of the bill; and
information on related bills currently before parliament.
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Chapter 2 examines the key issues raised by submitters about the bill and concludes with the committee’s view and recommendation.
Acknowledgement
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The committee thanks the individuals and organisations that made submissions for their interest and contribution to the inquiry.