BILLS DIGEST NO. 3, 2017–18              3 August 2017

Social Services Legislation Amendment (Ending Carbon Tax Compensation) Bill 2017

Don Arthur and Michael Klapdor
Social Policy Section

Date introduced: 31 May 2017

House: House of Representatives

Portfolio: Social Services

Commencement: 20 September 2017

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page, or through the Australian Parliament website.

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the Federal Register of Legislation website.

All hyperlinks in this Bills Digest are correct as at August 2017.

The Bills Digest at a glance

•       The purpose of the Social Services Legislation Amendment (Ending Carbon Tax Compensation) Bill 2017 (the Bill) is to cease payment of the energy supplement to income support recipients and some veterans’ compensation payment recipients who were not receiving a payment on 19 September 2016 (with payments to cease on 20 September 2017) and close the energy supplement to new welfare recipients from 20 September 2017.

•       The Gillard Labor Government introduced the clean energy supplement in 2013 to reassure pensioners and other income support recipients that they would not be worse off as a result of the carbon price.[1] In 2014 the Abbott Coalition Government abolished the carbon price.

•       The measure has been criticised on a number of grounds including:

–      some payments are already considered low for many recipients—removing the energy supplement would, arguably, make them more inadequate

–      some recipients will receive a lower rate of payment than if the supplement had never been introduced

–      concerns about fairness—many income support recipients will lose the energy supplement but compensation given through tax cuts will remain. Some income support recipients will keep the energy supplement while others will lose it even though both groups have similar levels of need

–      administrative complexity—by retaining the supplement for some recipients but not others, the measure would make the income support system more complicated.

•       The measure is opposed by a number of major interest groups including the Australian Council of Social Service (ACOSS), the National Social Security Rights Network (NSSRN) and the Australian Council of Trade Unions (ACTU).

•       The measure is opposed by the Australian Labor Party and the Australian Greens. Media reports suggest that the Nick Xenophon Team also opposes the Bill.

Purpose of the Bill

The purpose of the Bill is to cease payment of the energy supplement to income support recipients and some veterans’ compensation payment recipients who were not receiving a payment on 19 September 2016 (with payments to cease on 20 September 2017) and close the energy supplement to new payment recipients from 20 September 2017.

The Bill amends the Social Security Act 1991 (SS Act), Farm Household Support Act 2014, Veterans’ Entitlements Act 1986 (VE Act), Military Rehabilitation and Compensation Act 2004 (MRC Act) and Budget Savings (Omnibus) Act 2016.

Background

Energy supplement

The energy supplement is paid to all recipients of social security income support payments (such as the Age Pension and Newstart Allowance), to recipients of veterans’ payments (such as the Service Pension, Disability Pension and War Widow/Widower’s Pension), to recipients of the Farm Household Support Allowance and some holders of a Department of Veterans’ Affairs (DVA) Repatriation Health Card—For All Conditions (Gold Card). Those who were Family Tax Benefit recipients or Commonwealth Seniors Health Card holders before September 2016 and who have not lost eligibility since can also receive the energy supplement.

Rates of the energy supplement are based on the payment to which it is attached and range from $91.25 per annum for Family Tax Benefit Part A (child under 13 years) to $559.00 per annum for veterans receiving the Special Rate of Disability Pension.[2] The energy supplement is generally paid fortnightly with the attached payment.

History

The Gillard Labor Government introduced the clean energy supplement in 2013 to reassure pensioners and other income support recipients that they would not be worse off as a result of the carbon price.[3] In 2014 the Abbott Coalition Government abolished the carbon price and renamed the clean energy supplement the ‘energy supplement’.[4]

Community concern about the effect of the carbon price

Electricity prices increased sharply from the mid to late 2000s and the Labor Government’s plans to put a price on carbon dioxide emissions fed into community concern about rising costs.[5] The then Leader of the Opposition, Tony Abbott, argued that a carbon tax would further increase electricity prices.[6] He described the Government’s carbon price as a ‘great, big, new tax on everything’ that would drive up the cost of living.[7]

Compensating income support recipients for increased energy costs

From a purely economic perspective, the Government did not need to take any action to ensure that income support payments increased in response to rising prices. There was already an automatic indexation process in place. As economist John Freebairn explained in 2010:

Those on social security are compensated with the automatic indexation of pensions and allowances. In fact, indexation allows people to purchase the old carbon intensive package of goods and services. With relative price changes they will choose a less carbon intensive package of goods and services, which is cheaper, and on average they will be better off.[8]

To ensure that income support payments do not lose value due to inflation, the government automatically increases them in line with upward movements in the Consumer Price Index (CPI). Pensions are treated differently to other payments. They are also indexed to another measure of living costs called the Pensioner and Beneficiary Living Cost Index (PBLCI). In addition, to ensure that pensions do not fall behind the living standards of people in work, they are benchmarked against Male Total Average Weekly Earnings (MTAWE).[9]

For the Gillard Government, there were two problems with relying on automatic indexation. The first is that automatic indexation would not make compensation for the impact of the carbon price immediately visible to recipients. Instead the compensation would have been rolled into a routine six-monthly indexation process that includes cost of living changes due to all causes. The second problem was the risk of doubt and controversy about whether the CPI and PBLCI properly accounted for the impact of carbon pricing.

To make sure the compensation was visible, the Government decided to pay it as a separate ‘clean energy supplement’ rather than allowing the indexation process to add it to the basic rate of the income support payment. And to put the adequacy of compensation beyond doubt, the Government estimated the CPI indexation increase due to the carbon price (0.7 per cent of the recipient’s payment) and then added a ‘buffer’ of one per cent of the recipient’s income support payment.[10]

Avoiding double compensation

According to the Government’s 2013 Review of the Clean Energy Future Household Assistance Package, the clean energy supplement was:

An increase in pensions, allowances and family tax benefits equal to a 1.7 per cent increase in the relevant annual maximum payment rate.[11]

However, this obscures an important complication in how the compensation amount was calculated.

If the Government simply added this 1.7 per cent increase to payments that were indexed to the CPI, then recipients would be compensated twice for the carbon price’s impact on other prices. This is because CPI indexation would automatically include the carbon price’s impact on prices. To prevent this double compensation, the Government subtracted the 0.7 per cent increase attributed to the carbon price from the automatic CPI indexation amount. As the 2011 Explanatory Memorandum for the Clean Energy (Household Assistance Amendments) Bill 2011 explains:

The expected additional impact on the Consumer Price Index from carbon pricing (0.7 per cent) will be permanently included in the clean energy supplement (plus an additional one per cent increase). Part 4 contains amendments to the Social Security Act that provide for the expected impact of the carbon price on indexation (0.7 per cent) to be transferred from the indexation on maximum basic rate and pension supplement of certain social security payments to the clean energy supplement.[12]

How this method of calculating the supplement amount affects a payment depends on how that payment is indexed. According to the Bills Digest for the 2011 Bill:

This will mainly affect those on the allowance rates of payments as they are indexed to the CPI alone. If current and recent trends continue, this will probably not have as much impact on the pension rate payments as the CPI is only one indexation factor used and it has not been the CPI that has realised rate increases recently. More recently, it has been indexation to movements in the PBLCI or to MTAWE that have seen pension rate increases, not the CPI.[13]

This is why removing the energy supplement will leave some income support recipients with a lower rate of payment than if they had never received the supplement. A CPI-related increase in payment that would normally have been added to the basic rate of their payment was transferred instead to the energy supplement (this is discussed in more detail in the Key issues and provisions section below).

2014—winding back compensation after abolishing the carbon tax

In July 2014 the Coalition Government abolished the carbon price.[14] Even though this removed the original rationale for the clean energy supplement, the Coalition had made an election commitment that it would keep the previous Government’s compensation measures.[15] In April 2014 the Prime Minister, Tony Abbott, repeated this commitment stating: ‘the reassurance that I want to give to pensioners is that you will lose the carbon tax but keep the compensation’.[16]

Although the Government did not abolish the clean energy supplement, it did change it. When it was introduced, the clean energy supplement was indexed in the same way as payments such as Newstart Allowance—twice yearly by CPI.[17] In June 2014 the Government introduced a Bill to cease indexation on the clean energy supplement and to rename it the ‘energy supplement’.[18] This Bill failed to pass the Senate but the measure was reintroduced in the Social Services and Other Legislation Amendment (2014 Budget Measures No. 6) Bill 2014, which was passed in November 2014.[19]

2016—closing carbon tax compensation to new recipients of Family Tax Benefit and the Commonwealth Seniors Health Card

In the 2016–17 Budget, the Turnbull Coalition Government announced that it would close ‘unnecessary carbon tax compensation to new recipients of government welfare benefits’ with $1.4 billion of savings over five years being credited to a National Disability Insurance Scheme Savings Fund Special Account.[20] This included closing the energy supplement and a separate payment, the single income family supplement, to new recipients.[21] In September 2016 the Government succeeded in passing legislation to close the energy supplement to new recipients of Family Tax Benefit Part A and Family Tax Benefit B; and to new recipients of the Commonwealth Seniors Health Card (CSHC).[22]

The measure initially introduced in the Budget Savings (Omnibus) Bill 2016 would have closed the energy supplement to new recipients of a broad range of income support payments including pensions, allowances and Family Tax Benefits, as well as some veterans’ compensation payments such as the Disability Pension.

Under the measure, income support recipients who were already receiving the supplement would keep it while others would lose it. A recipient’s treatment would depend on when they started receiving payment:

•       recipients who began receiving the payment before 20 September 2016 would continue to receive the energy supplement

•       recipients who began receiving the payment on or after 20 September 2016 would lose the energy supplement (from 20 March 2017)

•       recipients who started receiving income support payments from 20 March 2017 would not receive the energy supplement.[23]

During negotiations over the Bill, the measure was restricted to new recipients of Family Tax Benefit A and Family Tax Benefit B and new recipients of the CSHC.[24]

2017—attempt to close carbon tax compensation to new recipients of other payments

The Government reintroduced the parts of the measure it had removed from the 2016 Bill in the Social Services Legislation Amendment (Omnibus Savings and Child Care Reform) Bill 2017. However, this Bill did not pass the Parliament and was discharged from the Notice Paper on 23 March 2017.[25]

The Bill’s proposed amendments are the same as those proposed in Schedule 9 of the Social Services Legislation Amendment (Omnibus Savings and Child Care Reform) Bill 2017.

Committee consideration

Senate Community Affairs Legislation Committee

The Bill was referred to the Senate Community Affairs Legislation Committee on 15 June 2017 for inquiry and report by 9 August 2017. Details of the inquiry are available from the Committee website.[26]

Senate Standing Committee for the Scrutiny of Bills

The Senate Standing Committee for the Scrutiny of Bills has considered the Bill and has no comment.[27]

Policy position of non-government parties/independents

Labor members argued against this measure when it was reintroduced as part of the Social Services Legislation Amendment (Omnibus Savings and Child Care Reform) Bill 2017. Shadow Minister for Families and Social Services, Jenny Macklin argued that the measure would particularly affect Newstart Allowance recipients:

Let us be clear: this cut will have a big impact on the most vulnerable members of our community—Australians on Newstart. Labor believes that Newstart is already too low. The Newstart payment for a single person is equivalent to just 28 per cent of the average wage. If the energy supplement is abolished, someone on Newstart will be $4.40 a week or $220 a year worse off. ANU's David Plunkett estimates that new recipients of Newstart will be around $3.60 a week worse off than had the energy supplement not been introduced in the first place. To put it another way, the Turnbull government is actually proposing a cut in real terms to Newstart. That is what everyone over there is going to be voting for. If you vote this, you are cutting Newstart in real terms.[28]

The Australian Greens also opposed the measure when it was introduced in the Social Services Legislation Amendment (Omnibus Savings and Child Care Reform) Bill 2017. In a dissenting report to the Senate Committee inquiry’s report on the Bill the Greens’ Senator Rachel Siewert stated:

This measure cannot be supported by the Australian Greens. It would see the payment drop to a rate lower than it would have been if there had been no carbon price or compensation due to the adjustment to indexation when the Energy Supplement was introduced. It would put people living on already inadequate payments further into poverty.[29]

According to recent media reports, Nick Xenophon Team senators plan to vote against the Bill.[30]

Position of major interest groups

A number of interest groups including the Australian Council of Social Service (ACOSS), the National Social Security Rights Network (NSSRN—previously known as the National Welfare Rights Network) and the Australian Council of Trade Unions (ACTU) argued against the measure when it was introduced in earlier Bills. They had three major criticisms:

•       payments are already low for many recipients—removing the energy supplement makes them even more inadequate

•       some recipients will receive a lower rate of payment than if the supplement had never been introduced

•       concerns about fairness:

–      many income support recipients will lose the energy supplement but compensation given through tax cuts will remain

–      some income support recipients will keep the energy supplement while others will lose it even though both groups have similar levels of need.

Adequacy of payments

A number of groups argued that current payments to recipients of Newstart Allowance are inadequate and should not be reduced further. For example, the ACTU commented:

This is an abhorrent, misguided and unjust source for cuts to the budget, especially since many of the payments affected are widely viewed as far from sufficient to provide dignity to recipients. For example, the top level of Newstart support for a single person is $37.40 per day. Anyone claiming that this, which is equivalent to less than half the minimum wage, is sufficient to pay for food, accommodation, clothing, transport, let alone the other necessities a person requires to look for and secure employment, is either totally ignorant or being deliberately deceptive.

The ACTU finds it abhorrent that the Government thinks it is sound or fair policy to attempt to balance its own budget on the back of the most vulnerable members of society.[31]

Worse off than if the supplement had not been introduced

The NSSRN noted:

… discontinuation of the Energy Supplement does not just remove an additional top up to Newstart Allowance, it actually cuts the payment below the level it would be had normal indexation arrangements been applied. This is because normal indexation was included in the Supplement when it was introduced. Despite this fact, the Government continues to argue that this measure removes compensation no longer needed because of the repeal of the carbon tax.[32]

Fairness

ACOSS raised two concerns about fairness. The first was that the removal of carbon tax compensation would be limited to income support recipients:

The Energy Supplement is being removed on the grounds of the absence of a carbon price, but tax cuts compensating for the carbon price will continue, which see someone on $60,000 paying $9.65 per week less in tax than with no compensation. Continuing assistance through the tax system undermines the Government’s argument that the Energy Supplement is no longer needed because there is no carbon price. The Government’s inconsistency in how it treats the carbon price compensation by targeting people on the lowest incomes for cuts while leaving middle-income earners untouched illustrates the inequity of [the measure].[33]

The second was that it treats income support recipients in similar circumstances differently:

Cessation of the Energy Supplement to new income support claimants will create two levels of payment because existing recipients will continue to receive the supplement. This creates inequity as two people in the same circumstances will receive different rates of payment and will add further complexity to an already complicated income support system.[34]

Financial implications

According to the Explanatory Memorandum, the Bill is expected to produce savings of $933.4 million from 2016–17 to 2019–20.[35]

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible.[36]

Parliamentary Joint Committee on Human Rights

The Parliamentary Joint Committee on Human Rights considers that the Bill does not raise any human rights concerns.[37]

Key issues and provisions

Rationale for the measure

In his second reading speech for the Bill, Minister for Social Services, Christian Porter said that the Government ‘does not consider it appropriate to continue to compensate people for a tax that no longer exists’.[38]

However, the Bill does not remove the energy supplement for people who have received income support payments continuously since 19 September 2016.

This rationale also runs counter to the Coalition’s 2013 Election commitment to keep the compensation measures, despite removing the carbon price.

Administrative complexity

Ceasing the energy supplement for some recipients but not others makes the income support system more administratively complex.

The Report of the Reference Group on Welfare Reform (the McClure report) argued that the income support system is unnecessarily complex. This makes it difficult for recipients to understand and difficult for the Government to administer.

According to the report, part of this unnecessary complexity comes from the large number of supplements. The report argued that the energy supplement should be rolled into the main payments.[39]

Adequacy of unemployment payments

As discussed above (under position of major interest groups), a number of groups argued that current payments to recipients of Newstart Allowance are inadequate and should not be reduced further.

In recent years a number of significant reports and commentators have raised concerns about the low rate of payment for recipients of Newstart Allowance. For example, in 2012 a Coalition-chaired Senate Committee inquiry found that the payment rate for allowances ’does not allow people to live at an acceptable standard in the long term’.[40] Also in 2012, Professor Peter Whiteford of the Australian National University argued that ‘Newstart recipients are falling into continuously deepening poverty’.[41]

In a 2016 report on solving government budget deficits, consulting firm KPMG recommended an increase in the Newstart Allowance rate. The report states: ‘Due to political rhetoric, payments for those who are unemployed have fallen behind other payments, to the point that it is commonly recognised that Newstart is inadequate, and significantly so’.[42]

Fairness

As discussed above (under position of major interest groups), a number of interest groups have argued that the measure is unfair. A number of commentators have expressed similar concerns. For example, journalist Lenore Taylor wrote:

… as well as ushering in a two-tier welfare system, with higher payments for existing recipients, and lower ones for those getting benefits after the supplement is cut, there also seems to be a double standard for what counts as a windfall.

The carbon tax adjustment payment for welfare recipients is incorrectly labelled as a windfall that must be removed, but everyone else’s compensation came in the form of a tax cut, a real windfall, which they got to keep. So the unemployed person loses $4.40 a week and ends up behind, but the person earning $60,000 keeps a tax cut worth about $10 a week and stays ahead.[43]

Some recipients will be worse off than if the supplement had never been introduced

If this Bill is passed, some income support recipients will receive a lower rate of payment than they would have if the supplement had never been introduced. According to policy analyst David Plunkett:

… if the removal of this compensation goes ahead as announced, the rate of payments for new applicants will actually be less than if compensation for carbon pricing had never been introduced.

As an example, for a person claiming the (usual) lower single Newstart allowance rate, this will mean their payment is not just $8.80 a fortnight less than current recipients (who get to keep the energy supplement), but $3.60 less than it would have been had there been no carbon tinkering in the first place. Let that sink in for a moment. In spite of seemingly endless calls for the rate of Newstart allowance to be increased – see the current ACOSS campaign, $36 a day is not enough! – the Government is actually proposing to reduce Newstart to less than its pre-carbon price compensation value.

How does this happen? The short answer is that the equivalent of around 41% of the energy supplement has already been taken out of Newstart and other affected payment rates. Consequently, removing the energy supplement in full will end up taking out that 41% twice.[44]

Plunkett suggests that the measure may reflect a misunderstanding of how carbon pricing compensation was constructed.[45]

Figure 1 tracks the maximum basic rate of Newstart Allowance had the carbon price compensation package never been introduced and normal CPI indexation occurred. It compares this to the actual maximum basic rate and the actual rate combined with energy supplement.

Figure 1: Newstart Allowance maximum basic rate (single, no children), $ per fortnight, with and without the energy supplement

Source: Parliamentary Library estimates.

Numbers affected

The Department of Social Services told a Senate Estimates hearing on 2 March 2017 that, by 30 June 2020, 1.7 million income support and Department of Veterans’ Affairs clients would not receive the energy supplement as a result of the measures proposed in the Social Services Legislation Amendment (Omnibus Savings and Child Care Reform) Bill 2017.[46]

At a Senate Estimates hearing on 31 May 2017, the Department stated that around 650,000 people who have qualified for a social security payment since 20 September 2016 will lose the energy supplement.[47]

For the Budget Savings (Omnibus) Bill 2016, the Government expected around 6.5 million people would continue to receive the energy supplement under the grandfathering provisions.[48]

Newstart Allowance recipients are likely to be one of the main payment recipient categories affected as there is a large turnover in the number of people in receipt of this payment—in the period between 1 April 2015 and 31 March 2016, there were 411,957 entries onto Newstart Allowance and 264,580 exits within 12 months.[49] Many Newstart Allowance recipients will move on and off the payment as they move to and from short-term employment. Under the proposed changes, those that are currently in receipt of an eligible payment who exit income support, even for a brief period, would no longer be eligible for the energy supplement.

The Department of Social Services provided a breakdown of the numbers affected over the forward estimates to June 2020 by payment type:

•       ABSTUDY—6,524

•       Age Pension—403,236

•       Austudy—42,478

•       Bereavement Allowance—173

•       Carer Payment—105,628

•       Disability Support Pension—109,327

•       Newstart Allowance—472,962

•       Parenting Payment Partnered—66,488

•       Parenting Payment Single—138,894

•       Sickness Allowance—7,935

•       Special Benefit—12,443

•       Widow Allowance—2,637

•       Youth Allowance (Student)—199,338

•       Youth Allowance (Other)—144,053

•       Department of Veterans’ Affairs customers—18,628.[50]

Key provisions

Social Security Act 1991

Item 4 of Part 1 of Schedule 1 to the Bill inserts proposed section 22 into Part 1.2—Definitions of the SS Act. Proposed section 22 defines when a person is considered to be a transitional energy supplement person. A person is a transitional energy supplement person if on 19 September 2016 one of the following applies:

•       they are receiving an income support payment where the energy supplement was used to work out the rate

•       energy supplement is payable to the person (under section 1061UA)

•       they are eligible to receive the energy supplement as a result of receiving a War Widow/War Widower pension (under section 62B of the VE Act)

•       they are eligible to receive the energy supplement as a holder of a Commonwealth Seniors Health Card or Gold Card under the VE Act (section 118PA)

•       they are eligible to receive the energy supplement as a result of receiving a payment under the Veterans’ Children Education Scheme or the MRC Act Education and Training Scheme

•       the person receives an energy supplement as a result of receiving a compensation payment for the death of their partner under section 238A of the MRC Act or

•       the person is receiving an ABSTUDY living allowance.

A person ceases to be a transitional energy supplement person, and may never again be one, if none of the above criteria apply to a person on a day on or after 20 September 2016.

While War Widows/War Widowers pension recipients and veterans’ service pensioners are included in the definition of transitional energy supplement person (as a service pension is defined as an income support payment[51]), veterans’ Disability Pension recipients and the recipients of certain payments under the MRC Act have been left out of this definition. Instead, separate definitions of transitional energy supplement person covering veterans’ Disability Pension recipients and certain MRC Act payments will be inserted into the VE Act and the MRCA Act by amendments in Parts 3 and 4, respectively.

Proposed subsections 22(3)–(7) of the SS Act provide for certain individuals to continue to be considered as transitional energy supplement persons, including those who have their payment rate reduced to nil on or after 19 September 2016[52]; those who have their payment suspended on or after 19 September 2016; those who have an absence from Australia longer than six weeks; those who move between being a Commonwealth Seniors Health Card holder and being an income support payment recipient; and those who make a claim or are provided with a Commonwealth Seniors Health Card within a certain period of time after certain income support payments are cancelled. Specific criteria apply in each situation for persons in these situations to remain eligible for the energy supplement.

Proposed subsection 22(7), together with subsection 1061U(6) of the SS Act, which was inserted by item 37 of Schedule 21 of the Budget Savings (Omnibus) Act 2016, will ensure that those who have their pension payment cancelled as a result of the new assets test arrangements which commenced on 1 January 2017, and who are therefore automatically issued with Commonwealth Seniors Health Card, will continue to be eligible for an energy supplement paid with the Commonwealth Seniors Health Card.[53]

Items 11–34, 36–39, 41–44, 46–52 and 54–55 amend various rate calculators for social security payments so the energy supplement is not added to the rate calculations for these payments from 20 September 2017 unless the person is a transitional energy supplement person on that day. The rate calculators apply to the following payments:

•       Age Pension, Disability Support Pension, Wife Pensions and Carer Payment (people who are not blind) at section 1064

•       Age Pension and Disability Support Pension (blind people) at section 1065

•       Bereavement Allowance and Widow B Pension at section 1066

•       Disability Support Pension (people under 21 who are not blind) at section 1066A

•       Disability Support Pension (people under 21 who are blind) at section 1066B

•       Youth Allowance at section 1067G

•       Austudy Payment at section 1067L

•       Widow Allowance, Newstart Allowance, Sickness Allowance, Partner Allowance and Mature Age Allowance at section 1068

•       Parenting Payment Single at section 1068A and

•       Parenting Payment Partnered at section 1068B.

Items 35, 40, 45 and 53 amend the partner income free area provisions for Youth Allowance, Austudy Payment, Widow Allowance, Newstart Allowance, Sickness Allowance, Partner Allowance, Mature Age Allowance and Parenting Payment Partnered so the energy supplement is not included where the person is not a transitional energy supplement person (unless their partner is a transitional energy supplement person). The partner income free area is the amount of income an income support recipient’s partner can have before the recipient’s payment rate is reduced—the income free area is based on the partner’s age, whether or not they receive a social security benefit, and the rate of benefit that would be payable if they were in receipt a benefit.

Item 56 amends point 1071A-2A to remove the energy supplement from the formula used to calculate the allowable income limits for a Low Income Health Care Card.[54] These amendments will lower the amount of allowable income a person can earn and still qualify for the Health Care Card and will apply irrespective of whether the person held a card prior to 20 September 2017 (the commencement date). This will mean that some holders of a Low Income Health Care Card may lose their eligibility due to the tighter income test.

Farm Household Support Act 2014

Items 58–61 in Part 2 of Schedule 1 to the Bill make minor amendments and insert notes into the Farm Household Support Act to explain that some Farm Household Support Allowance recipients will not receive the energy supplement (that is, those who are not transitional energy supplement persons). The rates of Farm Household Support Allowance are tied to the payment rates of Newstart Allowance and Youth Allowance in the SS Act and are therefore affected by the amendments in Part 1.

Veterans’ Entitlements Act 1986

Items 65–67 in Part 3 of Schedule 1 to the Bill amend section 62A of the VE Act which currently provides for the payment of the energy supplement to recipients of the Disability Pension under the VE Act. Item 67 inserts proposed subsections 62A(4)–(6) to define a transitional energy supplement person as a person who on 19 September 2016 is in receipt of the energy supplement as a veterans’ Disability Pension recipient, or as a person eligible for permanent impairment payment under subsection 83A(1) of the MRC Act, or as a person eligible for the Special Rate Disability Pension under the MRC Act. Only those who meet the definition of transitional energy supplement person under either the VE Act or the SS Act can receive the energy supplement after 20 September 2017.

If a person ceases to meet the definition of transitional energy supplement person they cannot regain that status.[55]

Item 70 inserts proposed subsection 62B(4) into the VE Act so that a War Widow/War Widower pension recipient can be eligible for the energy supplement after 20 September 2017 if they meet the definition of transitional energy supplement person set out in proposed section 22 of the SS Act (inserted by item 4 in Part 1).

Item 76 amends section 118P of the VE Act which sets out the eligibility for the energy supplement for holders of a Commonwealth Seniors Health Card or a DVA Health Card All Conditions (Gold) to prevent new Gold card holders after 20 September 2017 from receiving the energy supplement; to stop payment of the energy supplement for people who became Gold card holders on or after 20 September 2016 with effect from 20 September 2017; and to set out conditions where a person who claims or receives a card after having another payment cancelled, or who moves from being a cardholder to receiving an income support payment, can continue to receive the energy supplement. Items 81–87 make amendments to the method statements for determining payment rates for the Service Pension. Item 85 provides for the energy supplement to not be included in the rate calculation process unless the person is a transitional energy supplement person as defined under the SS Act.

Military Rehabilitation and Compensation Act 2004

Item 89 in Part 4 of Schedule 1 to the Bill inserts proposed subsections 83A(4)–(6) into the MRC Act so that a person in receipt of a permanent impairment payment under the MRC Act will only be eligible for the energy supplement from 20 September 2017 if they are a transitional energy supplement person. A transitional energy supplement person for the purposes of this section of the MRC Act is defined in proposed subsection 83A(5) as a person who is eligible for the energy supplement on 19 September 2016 in respect of a permanent impairment payment under the MRC Act, a Special Rate of Disability Pension under the MRC Act or a Disability Pension payable under the VE Act. A person who ceases to meet the criteria to be a transitional energy supplement person after 19 September 2016 can never again become a transitional energy supplement person.[56]

Item 91 inserts proposed subsections 209A(3)–(5) into the MRC Act so that a person in receipt of a Special Rate Disability Pension under the MRC Act will only be eligible for the energy supplement from 20 September 2017 if they are a transitional energy supplement person. A transitional energy supplement person for the purposes of this section of the MRC Act is defined in proposed subsection 209A(4) as a person eligible for the energy supplement on 19 September 2016 in respect of a Special Rate Disability Pension, a permanent impairment payment under the MRC Act or a Disability Pension under the VE Act. A person who ceases to meet the criteria to be a transitional energy supplement person after 19 September 2016 can never again become a transitional energy supplement person.[57]

Item 93 inserts proposed subsection 238A(4) into the MRC Act so that a person in receipt of a compensation payment as a wholly dependent partner under the MRC Act will only be eligible for the energy supplement from 20 September 2017 if they are a transitional energy supplement person as defined in section 22 of the SS Act (as inserted by item 4 in Part 1 of Schedule 1 to the Bill).

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[1].              J Macklin, ‘Answer to Question without notice: carbon pricing’, [Questioner: J Hall], House of Representatives, Debates, 11 October 2011, p. 11401.

[2].              Department of Human Services (DHS), ‘Payment rates for energy supplement’, DHS website, 12 July 2017; Department of Veterans’ Affairs (DVA), ‘Factsheet CEP01: energy supplement’, DVA website, 1 July 2017.

[3].              The energy supplement was part of a package of measures intended to compensate households for the impact of the carbon price. Macklin, ‘Answer to Question without notice: carbon pricing’, op. cit., p. 11401; P Yeend and L Buckmaster, Clean Energy (Household Assistance Amendments) Bill 2011, Bills digest, 58, 2011–12, Parliamentary Library, Canberra, 2011.

[4].              Explanatory Memorandum, Social Services and Other Legislation Amendment (2014 Budget Measures No. 6) Bill 2014, p. 2.

[5].              G Megalogenis, ‘Carbon tax could send Abbott up in smoke’, The Weekend Australian, 28 May 2011, p. 18; T Wood and D Blowers, Price shock: is the retail electricity market failing consumers?, Grattan Institute, Melbourne, March 2017, pp. 7–8.

[6].              T Abbott (Leader of the Opposition), Transcript of the Hon. Tony Abbott MHR: interview with Warren Moore: Radio 2GB, Sydney, transcript, Radio 2GB, 20 August 2010.

[7].              C Uhlmann, ‘Opposition Leader Tony Abbott joins 7.30’, 7.30, transcript, Australian Broadcasting Corporation, 24 March 2011.

[8].              J Freebairn, ‘Not a big tax increase, just a different mix’, Australian Financial Review, 8 February 2010, p. 55.

[9].              P Lewis, ‘Explainer: the policy challenge of indexing welfare payments’, The Conversation, 16 March 2015; M Klapdor, ‘Pension indexation: a brief history’, FlagPost, Parliamentary Library blog, 16 April 2014.

[10].              The Treasury and the Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA), Review of the Clean Energy Future Household Assistance Package, Treasury and FaHCSIA, April 2013, pp. 1–2.

[11].              Ibid., p. 1.

[12].              Explanatory Memorandum, Clean Energy (Household Assistance Amendments) Bill 2011.

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

[14].              T Abbott (Prime Minister) and G Hunt (Minister for the Environment), Government delivers on commitment to abolish the carbon tax, media release, 17 July 2014.

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

[16].              T Abbott (Prime Minister), Transcript of doorstop interview, Tokyo, media release, 6 April 2014.

[17].              Yeend and Buckmaster, op. cit., p. 15.

[18].              Parliament of Australia, ‘Social Services and Other Legislation Amendment (2014 Budget Measures No. 1) Bill 2014 homepage’, Australian Parliament website.

[19].              Parliament of Australia, ‘Social Services and Other Legislation Amendment (2014 Budget Measures No. 6) Bill 2014 homepage’, Australian Parliament website. The Social Services and Other Legislation Amendment (2014 Budget Measures No. 6) Act 2014 received Royal Assent on 26 November 2014.

[20].              Australian Government, ‘Part 2: expense measures’, Budget measures: budget paper no. 2: 2016–17, p. 143.

[21].              N Gupta, K Swoboda, D Weight, P Pyburne, A St John, D Arthur, A Biggs, L Buckmaster, D Daniels, A Grove, M Harrington, M Klapdor and M Thomas, Budget Savings (Omnibus) Bill 2016, Bills digest, 7, 2016–17, Parliamentary Library, Canberra, 2016, pp. 68–69.

[22].              Budget Savings (Omnibus) Act 2016.

[23].              Ibid., p. 69.

[24].              R Di Natale, ‘Second reading speech: Budget Savings (Omnibus) Bill 2016’, Senate, Debates, 15 September 2016, p. 1139; M Klapdor, ‘Omnibus Bill compromise to find further savings from family payments’, FlagPost, Parliamentary Library blog, 14 September 2016.

[25].              Parliament of Australia, ‘Social Services Legislation Amendment (Omnibus Savings and Child Care Reform) Bill 2017 homepage’, Australian Parliament website.

[26].              Senate Community Affairs Legislation Committee, ‘Social Services Legislation Amendment (Ending Carbon Tax Compensation) Bill 2017’, Australian Parliament website.

[27].              Senate Standing Committee for the Scrutiny of Bills, Scrutiny digest, 6, 2017, 14 June 2017, p. 58.

[28].              J Macklin, ‘Second reading speech: Social Services Legislation Amendment (Omnibus Savings and Child Care Reform) Bill 2017’, House of Representatives, Debates, 27 February 2017, p. 1477.

[29].              Australian Greens Senators, ‘Australian Greens’ dissenting report’, Dissenting report, Senate Community Affairs Legislation Committee, Inquiry into the Social Services Legislation Amendment (Omnibus Savings and Child Care Reform) Bill 2017, The Senate, Canberra, March 2017, p. 50.

[30].              A Gartrell, ‘Xenophon Team scupper push to axe carbon compo’, Sydney Morning Herald, 15 June 2017, p. 7.

[31].              Australian Council of Trade Unions, Submission to Senate Economics Legislation Committee, Inquiry into the Budget Savings (Omnibus) Bill 2016, 9 September 2016, p. 13.

[32].              National Welfare Rights Network, Submission to Senate Economics Legislation Committee, Inquiry into the Budget Savings (Omnibus) Bill 2016, 7 September 2016, p. 2.

[33].              Australian Council of Social Service, Submission to Senate Economics Legislation Committee, Inquiry into the Budget Savings (Omnibus) Bill 2016, September 2016, p. 3.

[34].              Ibid.

[35].              Explanatory Memorandum, Social Services Legislation Amendment (Ending Carbon Tax Compensation) Bill 2017, p. 2.

[36].              The Statement of Compatibility with Human Rights can be found at pages 22–23 of the Explanatory Memorandum to the Bill.

[37].              Parliamentary Joint Committee on Human Rights, Scrutiny report, 5, 2017, The Senate, Canberra, 14 June 2017, p. 49.

[38].              C Porter, ‘Second reading speech: Social Services Legislation Amendment (Ending Carbon Tax Compensation) Bill 2017’, House of Representatives, Debates, 31 May 2017, p. 5744.

[39].              Reference Group on Welfare Reform, A new system for better employment and social outcomes: final report, Department of Social Services (DSS), Canberra, 2015, p. 92.

[40].              Senate Education, Employment and Workplace Relations References Committee, The adequacy of the allowance payment system for jobseekers and others, the appropriateness of the allowance payment system as a support into work and the impact of the changing nature of the labour market, The Senate, Canberra, November 2012, p. 54.

[41].              P Whiteford, ‘Paltry Newstart Allowance is fast becoming a poverty trap’, The Conversation, 20 April 2012.

[42].              KPMG, Solving the structural deficit, KPMG Australia, Melbourne, April 2016, p. 14.

[43].              L Taylor, ‘Axing clean energy supplement has barely caused a ripple, but it should’, The Guardian, (online edition), 13 August 2016.

[44].              D Plunkett, ‘Malice or misunderstanding? Government’s carbon price under-compensation’, Austaxpolicy: Tax and Transfer Policy Institute, blog, 8 June 2016.

[45].              Ibid.

[46].              Senate Community Affairs Legislation Committee, Official committee Hansard, 2 March 2017, p. 114.

[47].              Senate Community Affairs Legislation Committee, Official committee Hansard, 31 May 2017, p. 92.

[48].              Senate Community Affairs Legislation Committee, Official committee Hansard, 6 May 2016, p. 128.

[49].              DSS, DSS demographics March 2017, data.gov.au, Canberra, 10 July 2017.

[50].              C Halbert (Group Manager, Payments Policy, DSS), Evidence to Senate Community Affairs Legislation Committee, Inquiry into the Social Services Legislation Amendment (Omnibus Savings and Child Care Reform) Bill 2017, 9 March 2017, p. 63; Senate Community Affairs Legislation Committee, Customer numbers affected by closure of energy supplement to new welfare recipients excluding FTB-B customers (as at 7 March 2017), document tabled by DSS at Canberra public hearing, 9 March 2017, Inquiry into the Social Services Legislation Amendment (Omnibus Savings and Child Care Reform) Bill 2017, The Senate, 2017.

[51].              See definition of ‘income support payment’ at subsection 23(1) of the SS Act.

[52].              Payment rates for a particular payment instalment can be reduced to nil as a result of the relevant income or assets test but the person may still remain qualified for the payment. For example, some payment recipients who have employment income that reduces their payment rate to nil under the income test can continue to be considered qualified for the payment during what is known as an ‘employment income nil rate period’. DSS, ‘3.1.12 employment income nil rate period’, Guide to social security law, version 1.234, DSS website, 3 January 2017.

[53].              For information on the assets test changes and automatic-issue Commonwealth Seniors Health Cards, see: M Klapdor, Social Services Legislation Amendment (Fair and Sustainable Pensions) Bill 2015, Bills digest, 129, 2014–15, Parliamentary Library, Canberra, 2015.

[54].              DSS, ‘3.9.1.70 low income HCC: assessment of income’, Guide to social security law, version 1.234, DSS website, 3 July 2017.

[55].              Proposed subsection 22(2) of the SS Act inserted by item 4 in Part 1 of the Bill and proposed subsection 62A(6) of the VE Act inserted by item 67 in Part 3 of Schedule 1 to the Bill.

[56].              Proposed subsection 83A(6) of the MRC Act inserted by item 89 in Part 4 of Schedule 1 to the Bill.

[57].              Proposed subsection 209A(5) of the MRC Act inserted by item 91 in Part 4 of the Bill.