2.1
This chapter outlines the key issues identified in evidence to the committee in relation to the adequacy of the TPI Payment. This includes discussion of the core contention of the TPI Federation—that the Above General Rate (AGR) portion of the TPI payment should be increased by approximately $10,000 per annum for each TPI veteran. Other proposals raised with the committee are also discussed, including the DVAN's request that means-testing be removed from the service pension.
2.2
The Vietnam Veterans Association of Australia clearly articulated the ongoing concerns within the veterans' community in relation to the TPI Payment in its submission:
Despite several reviews of the TPI payment in recent years it seems that not one review has provided an analysis of this payment that has satisfied a significant section of the veterans' community in two ways:
One, a clearly defined and agreed understanding of the government's purpose and structure of this payment, i.e., what income level is being replaced; and
Two, any reasonable level of confidence amongst some veterans that the monetary value of the payment is fair and just.
Summary of the position of the TPI Federation
2.3
The TPI Federation has argued for approximately eight years that the level of the TPI compensation payment has been in relative decline for the past seven decades. The TPI Federation included a graph in its submission, shown at Figure 2.1, to support this claim that the full TPI compensation payment has declined as a percentage of Average Weekly Earnings (AWE).
2.4
The TPI Federation argued that the current 'economic loss compensation' component of the TPI Payment (that is, the Above General Rate component), is currently 'a mere 61.9% of the tax-adjusted Minimum Wage' and that:
If the total TPI Compensation payment is to be considered the full ‘economic loss’ compensation, then the consequence is that the most disabled Veterans do not receive any ‘pain and suffering’ compensation… the Minimum Wage is the lowest officially arbitrated wage standard that a TPI Veteran could have reasonably expected to have received over their working lifetime, had they not been TPI. Therefore, it is not unreasonable to expect the ‘economic loss’ compensation, for never being able to be employed, should be, at least, the tax-adjusted Minimum Wage!
2.5
The TPI Federation submitted that the General Rate (GR) disability compensation is only compensation for ‘pain and suffering’, and can be received by a Veteran even while in full employment. The Above General Rate (AGR) component of the TPI Payment is only for those who can no longer gain full employment and it is this AGR that is considered by many to be ‘economic loss’ compensation.
2.6
The TPI Federation argued that the AGR component of the TPI Payment should be increased to make it equivalent to 100 per cent of the 'tax-adjusted national minimum wage'. It contended that this would equate to an increase of approximately $10,099 per annum per TPI veteran.
2.7
In relation to the overall cost of this measure, the TPI Federation noted that the Parliamentary Budget Office costed this proposal in 2017 at 'approximately $240 million per annum with an estimate of $1bn over four years'. The TPI Federation noted that it contested this four-year estimate 'based on the age and health of the then 29,000 TPI/SRs', and commented:
Today that figure stands at approximately 28,000 TPI/SRs. The Government has ‘banked’ the costs involved with the provision of benefits and compensation for approximately 1,000 TPI/SRs but still the Government stands firm on the lack of adequate provision for a decent standard of living for those remaining TPI/SR families.
2.8
The Tune Review estimated in 2019 that the TPI Federation's proposal to increase the AGR component to the level of after-tax National Minimum Wage would cost around $280 million in the first year and $2.82 billion over 10 years.
2.9
The TPI Federation summarised its key recommendation as follows:
That the Senate consider the much-needed restoration of the TPI Compensation payment, so that the ‘economic loss’ compensation can be restored from the eroded compensation back to a level commensurate with the Parliament’s original intent, and be equal to a reaffirmed benchmark of the tax-adjusted Minimum Wage.
2.10
The TPI Federation's proposal was supported by a number of other submitters to the inquiry.
Views on the level and adequacy of the TPI Payment
2.11
The TPI Federation's core argument for a structural increase to the AGR portion of the TPI Payment was considered by the recent reviews, including the Productivity Commission (PC) inquiry, the KPMG Review and the Tune Review. Other submitters to the committee's inquiry also expressed views on the TPI Federation's proposal. This section outlines views on the TPI Federation's core recommendation.
Purpose of components within the TPI Payment
2.12
As noted above, the TPI Federation contends that the General Rate portion of the TPI Payment represents compensation for pain and suffering, while the AGR portion of the payment is considered 'economic loss' compensation as it is only available to those who can no longer gain full employment as a result of their incapacity.
2.13
There has been debate over a number of years about whether General Rate and AGR amounts within the TPI Payment serve different purposes and should be treated as such.
2.14
The TPI Federation submitted that public comments from Ministers and officials, particularly by the then DVA Secretary in 2004 and the then Minister for Veterans Affairs in 2007, endorse the concept of the TPI payment consisting of the GR component as non-economic loss compensation and the AGR component as compensating for economic loss.
2.15
The Tune Review noted that public commentary from officials and Ministers has on a number of occasions framed the AGR component of the TPI Payment as a 'notional' economic loss component.
2.16
Under the wording of the VEA, however, the TPI Payment is not separated into components for economic and non-economic loss. This contrasts with the payment schemes under the MRCA and DRCA, which explicitly provide separate compensation payments representing both economic and non-economic loss as a result of a person’s service-related conditions.
2.17
DVA commented on this distinction in its submission:
Under the [MRCA and DRCA], there are different forms of compensation, one for economic loss and another for non-economic loss. These are two separate and distinct concepts that were introduced in the modern rehabilitation and compensation schemes, notably after the introduction of the Special Rate under the VEA.
Economic loss compensation payments are paid to compensate for loss of income from employment. Accordingly, the compensation usually takes on the same characteristics as the earnings it was replacing and continues only up to the point at which the income would otherwise have ceased.
Non-economic loss compensation payments are paid to compensate for pain and suffering, functional loss or dysfunction and the effects of the injury or disease on lifestyle.
The structure of the Special Rate refers to the General Rate of Disability Payment, with the first eligibility criterion requiring an individual to meet the 70 per cent level of incapacity, and the AGR component considers further factors such as the individual’s employability.
2.18
DVA noted that although the VEA makes no mention of economic loss or non-economic loss, at one point in the TPI Payment's history, the AGR component was indexed differently to the GR component. It noted that the VEA 'sets the Special Rate payment as a single standard amount regardless of the level of lost actual or potential earnings of an individual veteran'.
KPMG Review position
2.19
The KPMG Review agreed with the TPI Federation view that:
the General Rate amount can be considered impairment compensation, as it is paid according to the level of the impairment without any consideration of the veteran's ability to work, and therefore can be considered to compensate for pain and suffering;
the AGR amount can be considered an income replacement component, noting that the TPI Pension is paid to severely incapacitated Veterans who are unable to work due to their service related impairment and have suffered a loss of income as well.
Tune Review position
2.20
The Tune Review noted that while the VEA is silent on whether the TPI Payment is non‑economic loss or economic loss compensation, the review supported the position that the TPI Payment is comprised of two components.
2.21
The review found that the split between the GR and AGR components for indexation purposes is a contributing factor to why many stakeholders consider the TPI Payment to have a 'non-economic' and 'economic loss' component in legislation, and noted 'inconsistency between public commentary on the payment structure and how the payment is treated both legislatively and in practice'.
2.22
The Tune Review recognised that the TPI Payment is currently treated in the same way as non-economic loss compensation in other legislation. It noted that the implications of treating any aspect of the TPI payment as an economic loss are substantial:
If the AGR component of the TPI payment was to be treated in the same way as Incapacity Payment [under the MRCA and DRCA] (an economic loss payment), it should, for consistency:
cease at age pension age, affecting around 85 per cent of TPI veterans with a reduction of up to $903.50 per fortnight;
be taxable, affecting all TPI veterans under age pension age;
reduce the rate of any income support payment, affecting the 20 per cent of TPI veterans under age pension age with a reduction of up to $903.50 per fortnight; and
be affected by receipt of Commonwealth funded superannuation payments, affecting potentially all TPI veterans aged below age pension age.
It is clear that language used in some instances by senior officials and former Ministers in the public domain in referring to the AGR component as a notional ‘economic loss’ component of the TPI payment does not reflect how the TPI payment operates.
On this basis, this review concludes that the TPI payment should not become equivalent to other ‘economic loss’ compensation payments, noting the detrimental impact treatment as economic loss would have on many TPI veterans.
Productivity Commission view
2.23
The Productivity Commission in its inquiry similarly concluded that the AGR component of the TPI Payment should not be formally treated as economic loss compensation:
Participants to this inquiry did not consider the SRDP [that is, the TPI Payment] to be part of a compensation ‘package’, and considered that the above general rate part of the SRDP should be considered as economic-loss compensation. The Commission does not consider that ignoring a substantial benefit of the SRDP—that it is exempt from income and assets tests for welfare payments—would lead to sensible or sound policy making. The logical extension of this approach is that the SRDP should be treated the same as other economic loss compensation payments, and included in income and assets tests for the service pension and Centrelink welfare payments. This approach would make many veterans substantially worse off, in particular those veterans most in need, and is not supported by the Commission. There is no compelling case for an increase in the SRDP.
Relative value of the TPI Payment against wage and earnings benchmarks
2.24
The TPI Federation's analysis of the value of the TPI Payment over time, when compared to earnings and wage benchmarks, is central to its argument for a structural increase to the AGR component of the TPI payment.
2.25
The core of the TPI Federation's case is that the value of the TPI payment has fallen from 80.28 per cent of Average Weekly Earnings (AWE) in 1950-51 to 43.61 per cent of AWE in 2018-19, as shown above in Figure 2.1.
Tune Review and response from the TPI Federation
2.26
The Tune Review calculated the value of the TPI Payment as a percentage of Gross Basic/Minimum Wage and Male Total Average Weekly Earnings (MTAWE) from 1950 to the present, as shown at Figure 2.2. This analysis found that the TPI payment has reduced from 51.6 per cent of gross MTAWE in 1950 to 48.7 per cent in 2019, and over the same period, it has risen from 78.5 per cent of the gross minimum wage to 96.1 per cent.
2.27
The Tune Review explained its choice to benchmark the TPI Payment against MTAWE and Gross Basic/Minimum wage as follows:
The review considers that the most appropriate benchmark against which to assess the adequacy of the TPI is Male Total Average Weekly Earnings (MTAWE), rather than AWE. There are two reasons for this. First, the ABS has advised that there is no ABS published data prior to the 1980s that is entirely comparable to its contemporary collection of data on AWE. This difficulty is recognised by the TPI Federation, which sought to construct an index from 1950 from a variety of sources. However, the ABS has advised that MTAWE is considered sufficiently comparable over the course of the period analysed by the TPI Federation. Second, it is more appropriate to use MTAWE, rather than AWE, as the benchmark, given that around 98 per cent of current TPI veterans are male.
The Fair Work Commission has also advised that NMW [National Minimum Wage] is sufficiently comparable over this time period. This comparison against NMW is also included, noting the TPI Federation compares the AGR to NMW benchmarks. However, it is important to note that there have been multiple changes over this period to the way NMW is determined and who it applies to. For example, there was a separate minimum wage for men and women up until 1975. The male minimum wage is used in the [Review's] analysis during the relevant period.
2.28
The TPI Federation disagreed with the methodology of the Tune Review and the calculations underpinning the above figure, arguing as follows:
In the report, Mr Tune summarily dismisses the Federation’s sound AWE analysis, in favour of its own questionable Basic/Minimum wage and MTAWE distributions, presumably acquired from DVA/KPMG; distributions seemly concocted and stitched together from multiple ABS source files, and that of DVA’s ‘unpublished data’.
Outrageously, the Tune Review misrepresents the Federation by stating that the Federation was unable to construct an index from reliable sources, thereby permitting Mr Tune to then favour and build upon DVA/KPMG’s flawed modelling and narrative, presumably as a means to continue to deflect attention away from the ineptitude of a Department that for decades has failed to ‘maintain and enhance’ the very legislative provisions for which it is responsible for.
The Federation’s ‘Data Sources’… have remained front and centre and ever persistent for over 7-years, and is not in dispute.
With the Federation’s AWE analysis as a firm backdrop, the Federation treats Mr Tune’s… distributions with great caution and scepticism, because Justice Toose [in his 1975 review of the repatriation system] provided official tabulated data where in 1950 the TPI Payment was $14/week, measuring at 104% of the then (Basic) ‘Wage Index’, and where visual observation between 1974 to 1980, shows unbelievably that the total TPI payment declined against the Minimum Wage, from 100% to 60%... such anomalies are not well reflected or supported against TPI payment rates as per Toose/DVA and/or the RBA’s published AWE data.
Contrary to the Tune Review’s assertion, the fact remains that any modicum of research will reveal that AWE is a mature statistic used widely in compensation literature and application, both locally and internationally. Indeed, AWE better reflects the long-term and relative nature of wages/compensation across the whole community.
2.29
Mr Peter Thornton commented further at the committee's public hearing on why the TPI Federation has used the minimum wage as a comparator for the AGR component of the TPI Payment, and AWE as an indicative benchmark for the overall value of the TPI Payment:
The minimum wage is the lowest arbitrated wage standard in the country, yet we've got all this argy-bargy and equivocation over raising the compensation for 28,000 of Australia's most disabled veterans to the absolute bare minimum. We haven't come in trying to benchmark to average weekly earnings or anything like that. The average weekly earnings are just used to show how we reside within the broader community, and it's appalling; it's truly appalling.
2.30
Noting that the TPI Federation proposal is for the value of the AGR component of the TPI Payment to be raised to the equivalent of 100 per cent of the after tax NMW, the Tune Review also analysed the value of the AGR component of the TPI Payment as a percentage of Net Basic/Minimum Wage and MTAWE from 1951 to 2019, as shown at Figure 2.3.
2.31
The Tune Review stated that its analysis 'shows that the TPI payment has reduced in value against some wage benchmarks since 1950 but has increased against others. Over different timeframes, such as since the 1980s, it has increased'.
KPMG Review approach to benchmarking
2.32
The KPMG Review considered a range of benchmarks that could be used to assess the adequacy of the TPI Payment, and undertook analysis using three benchmarking methods: direct comparison with AWE measures; erosion in the value of the TPI Payment over time; and comparison of TPI veterans' benefits with similarly incapacitated veterans under the MRCA and DRCA.
2.33
The KPMG Review chose after tax MTAWE as the most relevant earnings benchmark for assessing the income replacement component of the TPI Payment, due to 98 per cent of the TPI cohort being male and the TPI Payment being a non-taxable payment.
2.34
In assessing the current and historic value of the TPI Payment against after tax MTAWE, the KPMG Review combined the AGR component of the TPI Payment with the maximum available singles rate of the Service Pension (with the KPMG Review contending that the Service Pension represents an income replacement payment). It found that this combined amount represents approximately 80 per cent of MTAWE, and approximately 144 per cent of the national minimum wage.
2.35
The KPMG Review analysed the relative value of these two elements (AGR component of the TPI Payment plus maximum singles rate of the Service Pension) against after tax MTAWE over the period from 1972 to 2017 to evaluate erosion over time in the adequacy of TPI benefits. It found that these combined income replacement benefits rose as a percentage of after tax MTAWE from 40 per cent in 1972 to 80 per cent in 2017.
2.36
The KPMG used this analysis to find that there was 'not strong evidence for increasing the TPI Pension benefit for all TPI Pension recipients'.
Other views from submitters on benchmarking the TPI Payment
2.37
Some other submissions took a different view on necessary increases to the TPI Payment and the benchmark that should be used. The Australian Army Training Team Vietnam Association WA Branch (AATTVA WA Branch) disagreed that the TPI Federation's formulation of a proposed increase needs to be followed, and instead submitted:
We want to see a Benchmark figure [for the TPI Payment] set against MTAWE [Male Total Average Weekly Earnings] including the current indexation measures, at a level that is agreeable and acceptable to all parties concerned. The set benchmark figure to be legislated as a figure that cannot decrease below the current rate but may increase with agreement between those may be affected by such changes i.e. TPIs.
Our Association is not prepared to offer a satisfactory benchmark figure above the current level and leaves it to the Senate Inquiry to satisfy themselves that such an increase is warranted.
Current indexation arrangements for the TPI Payment
2.38
Submitters and witnesses expressed general satisfaction with the level of indexation currently applied to the TPI Payment. The TPI Federation noted increases to the AGR component in 2007 and the General Rate component in 2008, alongside the indexation changes made in 2008 meaning indexation for the General Rate and AGR components of the TPI Payment are now aligned, and submitted that 'the correct indexation has caused the steep decline [in the value of the TPI payment] prior to 2007 to be arrested, and the payment has been maintained for 14-years at the 2007 level'. The TPI Federation commented:
Negotiations with Governments over ten years – 1997-2007 – to correct the dire indexation method that was imposed on the TPI Compensation should never have taken so long for the Government to acknowledge. And yet, it is happening again. The current eight-year battle for the restoration of the ‘economic loss’ compensation is again showing a great deal of disrespect to all TPI/Special Rate (TPI/SR) Veteran recipients.
2.39
Ms Pat McCabe OAM, National President of the TPI Federation, commented further:
We'd like to see a fair assessment of just the TPI compensation payment and, hopefully, a suitable benchmark to replace the previous benchmark at the basic wage. That's how long it's been since we had a benchmark. For example, using the tax adjusted minimum wage as a benchmark, it's got a better chance of keeping value for the TPI, especially with the improved indexation that was put through in 2007. You'll notice from our chart that from 2007 it has fairly well evened out. It hasn't declined any further. The indexation has managed to keep it under some form of control. But it's getting it back to a 1972 level, where it was put back to the then minimum wage.
Consideration of other payments and support available to TPI recipients
2.40
The TPI Federation reiterated to this inquiry its firm conviction that in assessing the need for an increase to the TPI Payment, the TPI Payment should be considered in isolation as a standalone payment, rather than in the context of other payments and ancillary benefits that are available to TPI veterans in some circumstances. This approach was not taken by the recent inquiries and reviews that looked at the TPI Payment.
2.41
Whether the payment is considered in isolation, or in the context of all supports provided to TPI veterans, is a critical issue in determining the current adequacy of the payment.
View of the Productivity Commission inquiry
2.42
The PC summarised the position of the TPI Federation:
The Federation noted that the level of the SRDP has declined from 80 per cent of average weekly earnings in the 1950s to about 43 per cent of average weekly earnings in 2018. The Federation called for an increase in the SRDP of about $400 a fortnight….
2.43
In response the PC noted that such comparisons:
…ignore the other benefits that veterans on the SRDP can receive, including the Gold Card and various allowances and supplements. Veterans on the SRDP can also receive the service pension (or equivalent Centrelink payment) — the SRDP does not count towards the income test for these payments. As noted by Clarke et al. (2003), the amount that special rate pensioners were able to receive increased from about 70 per cent of male average weekly earnings to 90–120 per cent throughout the 1970s, as the SRDP was progressively excluded as income from welfare tests. It remained at this level throughout the period considered by the Clarke Review.
2.44
The PC emphasised that 'the additional payments received by special rate pensioners cannot be ignored, as most special rate pensioners are receiving some form of additional welfare payment'. Further:
When the SRDP, energy supplement and service pension are considered, a single totally and permanently incapacitated veteran would be receiving about $2350 per fortnight (not considering benefits such as access to the Gold Card). This is relatively consistent with the figure estimated in the [2003] Clarke Review of about 90 per cent of average weekly (after tax) earnings — there does not appear to have been an erosion in the adequacy of the SRDP since the Clarke Review. As noted above, prior to the 1970s, veterans on the SRDP could not access the service pension, and the changes to the service pension access increased the relative generosity of the SRDP.
View of the KPMG Review
2.45
The KPMG Review argued that 'consistent with insurance practice the full range of support provided to TPI Veterans should be identified'. It grouped the benefits paid to veterans into four different components for the purposes of assessing the TPI Federation and DVAN proposals:
Impairment compensation component: financial payments to Veterans and their families to compensate for the pain and suffering associated with an impairment (or death).
Healthcare (and other) costs resulting from an impairment due to service.
Dependent benefits: these are benefits paid following the death of a Veteran.
Income replacement component: residual benefits provided to the Veteran.
2.46
The KPMG Review identified the General Rate component of the TPI Payment as impairment compensation, and identified three elements as income replacement: the AGR component of the TPI Payment; the Service Pension; and Invalidity superannuation benefits.
2.47
It argued that the AGR component of the TPI Payment and the Service Pension 'should be assessed in aggregate for reasonableness, and not separately', in contrast to the TPI Federation's approach. KPMG argued that assessing the income replacement benefits in aggregate is consistent with common principles underlying workers' compensation schemes and insurance systems, and also 'reflects our view that the Service Pension has an element of compensation', noting the following:
Healthy Veterans are eligible for a Service Pension from the Service Pension age (60 years).
TPI Veterans are eligible for a Service Pension from the date they receive a TPI Pension (which in many cases will be before age 60).
As TPI Veterans are eligible for the Service Pension before age 60, unlike healthy Veterans, the Service Pension can be considered compensation for disability.
In addition, the means testing of the service pension does not include the TPI benefit. This is a form of compensation.
2.48
KPMG summarised this rationale as follows:
The Service Pension is also considered an income replacement benefit for TPI Veterans (i.e. compensation). This is consistent with insurance principles, and the observation that early access to a Service Pension on disability (i.e. before the Service Pension age of 60) represents compensation for lost income and is not considered welfare.
2.49
As noted above, the KPMG Review combined the AGR component of the TPI Payment and the Service Pension when assessing the relative value of TPI benefits against MTAWE, and found that this combined amount equated to around 80 per cent of MTAWE, and had increased as a percentage of MTAWE over the period since 1972.
View of the Tune Review
2.50
As well as its analysis of the TPI Payment as a whole, and the AGR component, against MTAWE and NMW, the Tune Review also undertook analysis when considering the TPI Payment combined with the Service Pension. It justified this approach as follows:
[T]he review considers that this analysis [of the TPI Payment alone] provides an incomplete picture of the resources available to TPI veterans. An analysis that examines the TPI payment in isolation does not capture any of the substantial changes to the broader veteran system, and other policy decisions to provide further payments to TPI veterans over the same period. This includes changes to the Service Pension income test during the 1970s that have seen around 70 per cent of TPI veterans receive up to an additional $926.20 per fortnight (as at 1 July 2019).
…
The TPI Federation are of the firm view that other supports available, such as income support pensions, treatment and concessions should not be factored in when assessing their views on adequacy of the payment, and whether the TPI payment ‘economic loss’ component should increase.
The TPI Federation believe that as some of this other support is available to the broader veteran community, it should not be considered as part of their proposal.
The review acknowledges that not all of the full range of support available to TPI payment recipients is compensation and that some additional supports provided to TPI recipients are available to others in the community. However…being aware of the full range of broader support available to TPI recipients is important for considering what needs may be unmet for TPI veterans and what else could be done to support this cohort.
2.51
The Tune Review considered the amount of TPI Payment and service pension available since 1950, and concluded based on its analysis:
[W]hen the TPI payment is added to the rate of Service Pension available over time under the income test prevailing at the time, the maximum level of assistance has increased from 108 per cent to nearly 160 per cent of the NMW, and from 72.3 per cent to 80.4 per cent of MTAWE.
2.52
The Tune Review also undertook a range of other indicative comparisons of the available financial resources for veterans receiving the TPI Payment and Service Pension, compared to if they were working and receiving either NMW or MTAWE over their working life. Based on this analysis, the Review concluded that TPI Veterans were on average not worse off than these comparison groups. It acknowledged, however, that 'some TPI veterans, regardless of this analysis, could still find it difficult to meet cost of living pressures due to their individuals circumstances'.
2.53
In its conclusion on the TPI Federation's proposal, the Tune Review cautioned that this proposal:
…would significantly increase payment level differences and potential inequities between TPI payment recipients and veterans with similar needs, characteristics and levels of impairment, such as [Extreme Disablement Adjustment] veterans and those veterans subject to different legislative arrangements. It would also increase the difference in income levels between TPI households and wage-earner households, particularly after age pension age for households reliant on superannuation.
TPI Federation evidence
2.54
The TPI Federation's submission to the inquiry rejected the approach taken by the PC, KPMG and Tune Reviews. The TPI Federation's core concern with these approaches is that they ignore the fact that other benefits available to TPI recipients are also available to other cohorts, as outlined in its submission:
The TPI Federation contends that such a ‘package’ is an improper artifice and unfair rationalisation due to the inclusion of so many welfare benefits that are available to the general population by way of welfare assistance. These items should not be listed as compensation benefits and not included within the ‘package’ concept which then leads to a false premise and characterisation of the ‘value’ of such compensation.
The general population welfare recipients do not have to justify utilising other welfare benefits in order that they receive their income support payments. Yet, all the Government TPI Compensation reviews make the incorrect assumption that welfare benefits are part of the Veterans’ compensation ‘package’. This supports the incorrect notion that income support payments, such as the Service Pension, DFISA and other benefits…are subsidising Veteran’s compensation benefits. A prime example of this, is the Centrelink blue Healthcare card which is similar to the Veteran’s White or Gold Healthcare card. A notional value of the Centrelink Healthcare card is not added to discussions when decisions are made on any changes to the Social Services welfare income support payments.
…
The TPI Federation respectfully requests that this Senate Inquiry investigate the TPI Federation’s contention on its own merit, and in isolation of other benefits, that some Veterans receive.
2.55
Ms Pat McCabe OAM, National President of the TPI Federation, commented further at the committee's public hearing:
Government policy over the last few years has seen the inclusion of the gold card's supposed value of $24,000 to be a part of the compensation package. The TPI Federation notes that in the DVA 'Stats at a glance' figures of September 2020 there are currently a total of 115,905 gold card holders but only 27,361 of them, or approximately 29.4 per cent, are TPIs. The government only mentions the cost of $24,000 when relating to TPIs. To the author's knowledge there has been no mention of general rate compensation or the Centrelink clients' blue healthcare card being included in any type of package concept when deciding whether, for example, JobKeeper should be improved. Yet the TPI must have welfare benefits included in the so-called compensation package.
The two components of our compensation are clearly pain and suffering and economic loss within the TPI special rate compensation payment. All other benefits are linked to welfare that is available to the eligible general population... According to the VEA stats at a glance of September 2020, there are 45,590 full- or part-service pension disability compensation recipients, of which 40.5 per cent are operational service TPIs. The majority, 58.8 per cent, of disability compensation recipients are not TPIs and still receive part or full service pension payments yet they continue to be included in the so-called compensation package, as stated in all of the most recent reviews. The TPI Federation is emphatic that welfare components—healthcare card, income support, household services, et cetera—should never be included in any form of compensation package or bundle.
DVA evidence
2.56
In evidence before the committee, Ms Kate Pope PSM, Deputy President, Repatriation Commission, reiterated the departmental view that the other payments beyond the TPI Payment available to TPI veterans need to be taken into account when considering their financial situation.
Submitter proposals regarding means-testing of the Service Pension
2.57
The Disabled Veterans of Australia Network (DVAN) submitted a proposal in relation to means testing arrangements for the Service Pension.
2.58
DVAN’s primary concern is that the Invalidity Service Pension (ISP), which 18,515 or approximately 68% of TPI veterans receive either in part or in full, is a means-tested payment, and that this can have the effect of disadvantaging partnered TPI veterans. This is because any partner income and assets reduces the amount of service pension payable to the veteran, creating a disparity in payment between partnered and single TPI veterans who receive the invalidity service pension.
2.59
Data provided by DVA in its submission to the inquiry shows that there are 5,708 TPI veterans who are currently receiving partnered Service Pension at less than the maximum rate, and 1,592 TPI veterans currently receiving the single Service Pension at less than the maximum rate.
2.60
DVAN highlighted the fact that the KPMG Review considered that the Service Pension is an income replacement payment and includes an element of compensation. DVAN argued that as such, compensation for lost income should not be means tested, and summarised its position as follows:
An unmarried TPI Veteran is compensated for their ‘loss of earnings’ at $1,208 per week. A married TPI Veteran with a spouse who is engaged in the workforce, paying income tax, Medicare levy with employer superannuation contributions, or who relies upon her own built-up superannuation or savings is compensated for their ‘loss of earnings’ at $732 per week.
Were a married TPI Veteran to divorce or separate DVA restore the compensation for ‘loss of earnings’ to the previous $1,208 per week.
NB. The medical conditions, disability, or incapacity resulting in loss of earnings of the single or married TPI Veterans for which they receive compensation…has not changed. The only change is in their financial or marital status.
This submission seeks the removal of this peculiar financial impost by the Commonwealth of ‘Means Testing’ our TPI Veterans Compensation a particular liability upon the wives and families who care for our Disabled of wars. The Commonwealth needs to do its duty to our TPI Veterans as it demanded of them while in uniform.
2.61
DVAN's concerns about the means testing of the ISP were echoed by TPI Victoria and some other submitters. TPI Victoria provided a case study from one of its members to illustrate its argument that means testing of the ISP has negatively impacted TPI veterans:
Extract from a TPI Member's life story:
I was made TPI at the age of 38, I was married with three children still at Primary School. Within a year I became a sole parent. We got by on the TPI rate plus the single ISP and with regular food vouchers from the RSL and St. Vincent de Paul's. School uniforms were always from the secondhand shop, school fees were [waived] and there were times I had to resort to pawnbrokers. Holidays were courtesy of Army Welfare and friends at the local church gave me support and courage. During the years I was responsible for my children's care and needs it was out of the question to remarry as I would have the ISP withdrawn. Thus, any new partner would not just have her own children to support but mine also.
When I did remarry some six years ago, I walked down the aisle a $56,000 a year man and walked back up a $35,000 a year man. Nothing had changed medically or disability wise. I am a burden on my now wife as she must support me financially to the tune of $24,000 a year, the withdrawn ISP.
I am also told that she will have to carry me as a burden into her retirement as her superannuation payments will also negate any entitlement to the ISP. She has had limited time in the workforce to build up superannuation as years were taken out for childbirth and rearing. She, I am sure, would rather spend her earnings and savings on her children and grandchildren, but government forces her to carry its responsibility for the care of this disabled digger.
My wife had nothing to do with me joining the forces, being sent to Vietnam, or becoming totally and permanently disabled, yet she is paying for my and the governments decisions. Without sounding alarmist, preventing me from [contributing] adequately to my own life and upkeep without being a burden on my loved one’s lives and ambitions will put me in an early grave.
2.62
The AATTVA WA Branch submitted:
There are a number of TPI veterans that only receive part payment of the Service Pension. Our Association is of the opinion that the Senate Inquiry accept that the Service Pension is Compensation and that all TPIs under VEA Act 1986 should have the full payment as part of their entitlements, that it should not be means tested and that it is non-taxable.
We believe that the acceptance of this payment alone as Compensation will go a long way to rectifying the complaints of many TPIs in relation to their payments.
The Senators should be aware that a number of TPIs in excess of 2,600 only receive part payment of the Service Pension as they have to have their partner out in the work force to try and make ends meet. The partner in reality should be at home caring for their TPI partner. A non-means tested, tax free Compensation such as the Service Pension would go a long way to assisting not only these TPIs but all TPIs.
2.63
Mr Frank O'Neill of the DVAN commented further in evidence to the committee:
I would like to first of all say that it doesn't matter what you call compensation, whether it's under general rate, over general rate, TPI, supplements or anything; what matters is what we have in our pocket when we go to the check-out at Coles. Nobody asks you at the check-out of Coles: 'Is that part of your compensation called an under general rate or an over general rate?' or anything else. It is purely what you have in your pocket for your loss of earnings.
…
The basis of our submission is that all TPIs should be compensated at the same rate. It doesn't matter whether you call it welfare, compensation or something off the back of a truck; you should all get the same amount of money. We all served—22,500 TPIs served overseas and 5,000 didn't but that makes no difference—so we should all have the same compensation for our loss of earnings.
2.64
DVAN noted that it had requested DVA to provide thorough costings for its proposal, but this request had not yet received a response. Without formal costings, DVAN provided a rough estimate that the proposal could cost a maximum of $272 million per year in theory, but it would be expected to be less than this in practice. DVAN stressed that:
…these extra costs do not disappear just because the Commonwealth avoids paying the full Compensation for loss of earnings. That Compensation underpayment is covered by the TPI Veterans savings and investments and the wives’ earnings and superannuation all to the detriment of the family in its inability to prosper to their full ability. Prosperity bought for the peoples of Australia with the deaths and disability of the members of our Armed Forces.
2.65
The TPI Federation did not support the proposal put forward by DVAN and others in relation to means testing of the Service Pension, providing a detailed rebuttal of this proposal. The TPI Federation contented that the Service Pension is intended to be an income support payment (akin to the disability pension or age pension for the general population) rather than a compensation payment. Ms McCabe commented:
The two components of our compensation are clearly pain and suffering and economic loss within the TPI special rate compensation payment. All other benefits are linked to welfare that is available to the eligible general population. The service pension is not linked to compensation. It is treated the same as the age pension and both are means-tested using the exact same formula. No amount of smoke and mirrors can change the fact that this is welfare and not compensation.
2.66
The TPI Federation submitted that the DVAN proposal would benefit a minority of TPI recipients while providing no benefit to the majority of TPI recipients, in contrast with the TPI Federation's proposal for a structural increase to the AGR component of the TPI Payment (which would apply to all TPI recipients).
Other views and proposals from submitters
2.67
The committee heard a number of other proposals and recommendations from submitters and witnesses that were divergent from or ancillary to the core proposals from the TPI Federation and other groups including the DVAN, which are outlined briefly below. A number of individual TPI recipients also made submissions, which generally supported either the TPI Federation proposal or the DVAN proposal.
2.68
The Vietnam Veterans Association of Australia expressed the view that the TPI Payment is currently insufficient, but stated that it would 'leave it to others to discuss what is a just and adequate level'. It suggested the committee recommend that the government should:
provide a "plain English language" explanation as to the objectives of the TPI payment and the policies that underpin it;
explain why the government believes the TPI payment at its present dollar value, and without being conflated or "packaged" with other payments, is adequate and just; and
state its policy as to how the government intends to maintain the purchasing value of the TPI payment if structural changes in the economy are such that adjustments due to the current indexation measures are ineffective.
TPI Federation additional recommendations
2.69
In addition to its core argument about the need for structural adjustment of the TPI Payment, the TPI Federation also made several other recommendations in its submission, including that:
DVA’s Veterans’ medical and financial benefits should be aligned so that the Operational or non-Operational Service status of a Veteran is not a criterion for those medical and financial benefits; and
DVA be utilised as a ‘front-door’ for all Government Veterans’ services and that DVA staff liaise with other Departments/Agencies on behalf of Veterans as required.
Additional recommendations from Mr Peter Thornton
2.70
Mr Peter Thornton raised several concerns in addition to the TPI Federation's core proposal, which he summarised in the following recommendations:
To restore the Spouse’s Compensation Payment to a level that should once again be commensurate with the Parliament’s original intent.
To restore, by provision of Spouse and Dependent Gold Cards, the free health care that was once a featured entitlement for all TPI spouses and dependents.
To repeal the inequitable and egregious offsetting policies of the MRCA that are levelled against Special Rate Disability Pension (SRDP) recipients, so that the SRDP provision can once again become a viable pathway in compensation for Australia’s most disabled financially vulnerable Veterans. This recommendation includes allowing once eligible Veterans the opportunity to once again, without cost recovery detriment, to elect this pathway in compensation.
To repeal and remove the divergence in MRCA Permanent Impairment compensation that exists between Veterans with Operational Service and that of Normal Military Service, so that all Veterans, no matter their status, are once again afforded equitable compensation for the same level of permanent impairment.
Proposal in relation to the Gold Card
2.71
Mr Rick Ryan, a Vietnam War veteran and TPI recipient, set forth a proposal to extend the Gold Card to partners of TPI veterans when the partner has reached the age of 65:
My main contention is that although our partners will automatically receive the Gold Card on our death, many are now suffering ill health from the many years of caring for their TPI/SR partner. This [of] course has an effect on the TPI/SR in that they see their partner ailing, yet they themselves…are well cared for under their entitlement of the Gold Card, while their partners suffer from their ailments and [are] not afforded the same care. It can also be a cost in looking after their partner’s needs in these later years that eats into their pension payments.
The number of Vietnam War veterans are diminishing, and the next 10 years should see our numbers reduced significantly. Surely, the government of the day can now assist these TPI/SR veterans by assisting their partners who have stood by them as their carers for many years.
Submission from RSL Australia and RSL Queensland
2.72
Returned & Services League of Australia (RSL Australia) and RSL Queensland lodged a submission which supported the PC's findings that the current support provided to TPI veterans is generally adequate:
When taking a holistic view of the overall support package provided to veterans in receipt of TPI payments the RSL agrees with the finding of the Productivity Commission’s A Better Way to Support Veterans Report (2019) that “changes to eligibility for the service pension and other welfare payments mean that the package of compensation received by veterans on the special rate of disability pension is reasonable. Despite strong veterans’ representation on this issue, there is no compelling case for increasing the rate of the pension”.
2.73
The submission expressed support for the Tune Review recommendations, and made recommendations to provide additional support to veterans who were disabled at a young age, veterans who received both a Service Pension and Above General Rate Disability Pension prior to 11 November 1982, and veterans with entitlements under multiple Acts. These are cohorts that were identified by the KPMG Review as potentially requiring greater assistance than the general population of TPI recipients.
Discussion of recent budget measures
2.74
The recent budget decision to bring forward the commencement of the measure to remove the disability income rent test, from September 2022 to January 2022, was discussed at the committee's hearing. When asked whether bringing forward the commencement date for the rent assistance measure to January 2022 was satisfactory, Ms McCabe from the TPI Federation responded:
Not totally, but it's definitely better that it's nine months earlier than what it would've been. But preferably we'd like it started today, obviously. There are a lot of TPIs that are renting that need that assistance.
…
It must be remembered that this is only for private rentals so state or council rentals aren't included in this. Any TPI that might pass away between now and January obviously would miss out and not get the benefit of that financial assistance. According to DVA's figures there are only 2,500, approximately, that may be eligible for rent assistance, so that's less than 10 per cent. It is a welcome budget measure but it's not going to help every veteran or every TPI overall.
Committee views
2.75
Throughout this inquiry, the committee heard strong views from the TPI community about the level and adequacy of the TPI Payment and the broader support offered to these veterans. The committee acknowledges the depth of feeling associated with these issues and the fundamental importance of ensuring that veterans who have been impacted so severely by their experience in the ADF are supported fairly.
2.76
Several recent reviews have examined the TPI Payment, including the Productivity Commission as part of its wide-ranging review into veterans' support, as well as the KPMG Review and the Tune Review, which were set up specifically to look at the TPI Payment. The committee notes that none of these reviews concluded that a structural increase in the TPI Payment is warranted.
2.77
In this inquiry, the committee has examined the arguments of the TPI Federation, other Ex-Service Organisations and individual veterans, in order to assess the merits of their evidence against the findings of the recent reviews.
2.78
The committee notes recent measures announced by the government in response to the recent reviews, including applying indexation to the TPI Payment as a whole, exempting adjusted disability pension from the social security income test and removing the disability income rent test. These measures, while welcome, will not address the primary concerns of the stakeholder groups who gave evidence to this inquiry.
Proposal to structurally increase the TPI Payment
2.79
The TPI Federation has argued for a structural increase to the Above General Rate portion of the TPI Payment for a number of years. Its proposals have been examined by each of the recent reviews that looked at TPI benefits.
2.80
The committee recognises the TPI Federation's longstanding advocacy on these issues, and its strong disagreement with aspects of the approach taken by the Tune Review and the KPMG Review (in particular, the way these reviews factored in other payments such as the Service Pension and other benefits when considering the adequacy of the support provided to TPI veterans).
2.81
The committee believes that the TPI Federation and other submitters have made a persuasive case for a fair and just structural increase in the AGR component of the TPI Payment to help restore the relative value of the payment and recognise and replace TPI veterans’ loss of income.
2.82
The committee notes that in a letter to the President of the TPI Federation of 2 April 2019, committing the government to a review of the TPI Payment to be undertaken by Mr David Tune AO PSM, the Prime Minister stated:
The TPI Federation makes a compelling case in relation to the relative value of the Above the General Rate (AGR) component of the SRDP [Special Rate of Disability Pension]. The fact that TPI veterans are not able to earn an income as a result of their service to our nation means that their loss of income during what would have been their working life should be appropriately recognised and replaced.
2.83
In addition, in a Senate Estimates hearing on 26 October 2020, the Secretary of the Department of Veterans’ Affairs (DVA), Ms Liz Cosson AM CSC, conceded that the letter from the Prime Minister had raised expectations that the government would increase the TPI Payment. Ms Cosson also admitted herself that she thought the TPI Federation made a strong argument for an increase in the TPI pension.
2.84
Further, the committee notes that in evidence before the committee, DVA official Ms Kate Pope PSM did not attempt to defend the government’s position and agreed with the view that compensation for TPI veterans was insufficient.
2.85
The committee is amenable to a modest increase in the TPI Payment, with the government to give further consideration to the exact level of increase. The TPI Federation is requesting an increase that equates to approximately $10,100 per annum per TPI veteran. Given that there is significant disagreement between the TPI Federation and the recent reviews about the relative decline in the value of the TPI Payment over time, and given the significant budgetary implication of implementing the TPI Federation's full proposal, the committee is not prepared at this stage to commit to this full level of increase.
2.86
The committee is also mindful of equity concerns, and encourages the government to ensure that the structure of any increase to the TPI Payment does not create any unfair disparities with other veteran disability payment recipients such as those currently receiving the Extreme Disablement Adjustment rate.
2.87
The committee recommends that the Australian Government consider an increase in the TPI Payment.
Proposal to scrap means testing of the Service Pension
2.88
The Disabled Veterans of Australia Network, TPI Victoria and several other submitters put forward a proposal to remove means testing requirements from the Service Pension. They provided impassioned individual case studies of TPI veterans who were struggling financially as a result of their partner's income and assets diminishing the rate of Service Pension available to them.
2.89
The committee agrees in principle that TPI veterans should not be left in financial hardship as a result of means testing of the Service Pension. The committee also recognises that scrapping means testing of the Service Pension entirely could potentially result in unfair outcomes, in situations where the pension recipient's partner has access to significant wealth.
2.90
The committee notes that this proposal has not been examined previously in as great detail as the core proposal of the TPI Federation for a structural increase to the TPI Payment. The committee considers that the government could undertake further work to examine the extent to which means testing of the service pension is creating significant financial hardship for TPI veterans, and potential remedies if this is found to be the case.
Other proposals given in evidence
2.91
The committee notes that a range of other issues and proposals were also included in submissions that were not directly related to the TPI Payment under the VEA, or were additional to the core propositions advanced by the TPI Federation and other groups. The committee has not formed a definitive view on these issues for the purposes of this inquiry, but draws the attention of the government to the evidence received on these issues for further consideration.
Senator Kimberley Kitching
Chair