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Wednesday, 22 June 1994
Page: 1846


Senator WOODLEY (12.11 p.m.) —We are considering the Social Security Legislation Amendment Bill (No. 2) 1994. In speaking to this bill today I want to restrict my comments to just three areas. My colleague Senator Meg Lees will be addressing a number of other aspects of the bill. The areas I want to address concern changes proposed to the assets test treatment of allocated pensions, changes to the provision of tax file numbers and the changes imposing new penalty or deferment periods on the unemployed.

  I will look firstly at allocated pensions. I am a member of the superannuation committee which recently looked at the issue of allocated pensions and their relation to the social security and taxation systems. One of the things our committee picked up on very quickly was that allocated pensions are widely seen by superannuants as an attractive investment option. This is because they are easy to understand and because they offer something of a compromise between lump sums and life annuities. In particular, they can not only provide a regular income stream but also allow for the withdrawal of lump sum payments by commutations, if this is required.

  The committee found that while most allocated pensioners used the product to provide a genuine income stream, there is the potential for the system to be abused. This potential arises from the ability to either partially or wholly commute these pensions and to do so an unlimited number of times. Of course, this is one of the features that make these products so attractive to superannuants. It allows them to cover various irregular expenses such as home repairs, car repairs or medical costs. It is also, however, the feature which inspired the Department of Social Security to review its treatment of allocated pensions and to suggest that they more closely resemble managed investments than other superannuation products.

  Evidence from the ACT Council of Social Service highlighted the fact that holders of allocated pensions who also draw an age pension could commute a lump sum of $10,000 in any one fortnight. That $10,000 would exclude them from the age pension for that fortnight by virtue of the income test. But they would then requalify for the age pension in the very next fortnight. While other evidence suggested that the use of this practice was not widespread, Alan Anforth from ACTCOSS submitted, `It doesn't really matter how many are doing it—if it is undesirable, then it needs to be addressed.'

  So the question is: just what arrangements do we want to put in place for this product and what sorts of safeguards do we need to ensure that the product is not manipulated in such a way as to effectively double-dip through the social security system? That is a much broader question than one we need to answer here today. It is, however, a question which is within the brief of the pension income and assets test review to answer.

  This measure is going to disadvantage about 300 allocated pension holders to the tune of around $300,000 a year. The Democrats believe, and until recently I understand the opposition also believed, that any change which will disadvantage pensioners should be considered within the context of that overall pension income and assets test review. The superannuation committee has identified a number of options in relation to the social security treatment of those pensions. The Democrats believe it is both appropriate and desirable that the income and assets test review should be given the opportunity to build on the work of the committee and to incorporate its ideas into the broader context within which that review is operating.

  While this major review is being undertaken—and it will hand down its findings in less than six months—I think the government is jumping the gun to be making a piecemeal change like this. The amount of savings to the government from this measure is not large, but the effect on the individual pensioners—those 300 that I mentioned—could be enormous. As such, the Democrats oppose this change at this time and we urge the opposition to do the same in order that the income and assets test review can further consider the issue.

  I note that when discussing the Social Security Legislation Amendment Bill earlier this year, the shadow minister said that the opposition:

. . . will not agree to any further amendments to social security legislation or veterans' affairs legislation which seek to amend, enhance, develop or modify in any way whatsoever the income and assets testing regime until the independent inquiry . . . has been undertaken, completed and its report presented to parliament.

I can understand the opposition changing its position in relation to those parts of the bill before us which are beneficial to pensioners. All I ask is that it sticks to its commitment, as espoused by the shadow minister, and delays this change which will cost allocated pensioners $300,000 a year.

  If the opposition continues to support the government on this change, then I want to signal that I will be moving the amendment which has been circulated in my name to exempt all those allocated pension holders who purchased their pension prior to the change in government policy being announced. When people make plans for their income in retirement—plans that may span 20 or 30 years—we do not believe the government should just up and change the rules on those people. The Democrats are opposed to retrospectivity, particularly in the area of pensions, and my amendment will remove any retrospective effect of these government amendments.


Senator Watson —But you can't move your amendment when the amendments haven't been moved yet.

  The ACTING DEPUTY PRESIDENT (Senator West)—Order! Senator Watson, I know you have a very valuable contribution to make. However, I would prefer it if you two would either have your conversation outside or—


Senator Crowley —Put it through the chair.


The ACTING DEPUTY PRESIDENT —Yes.


Senator WOODLEY —I must say I always value Senator Watson's contributions.


The ACTING DEPUTY PRESIDENT —Thank you, Senator Woodley.


Senator Crowley —But you are the only one party to them, Senator. We did not get to hear them.


The ACTING DEPUTY PRESIDENT —Minister, would you just let Senator Woodley continue please.


Senator WOODLEY —I turn now to the amendments contained in the bill which relate to the provision of tax file numbers. The bill seeks to close what the government refers to as a loophole in the tax file number provisions. That so-called loophole was revealed by a hearing of the Administrative Appeals Tribunal which ruled that the Department of Social Security did not have the authority to deny a payment to a person who had no tax file number and no intention of getting one.

  That particular AAT hearing involved a man from Western Australia, a Mr John Malloch, who was receiving a non-taxable disability support pension, had no need for a tax file number and did not want to get one on ideological grounds. The changes proposed will allow the Department of Social Security to deny a payment to all pensioners and beneficiaries who have no tax file number, regardless of whether that person has any need for a tax file number. The Democrats will not be supporting these changes.

  As most people in this chamber would know, the Democrats have always been opposed to the extension of the tax file number system into any kind of identification system. Back in 1988, one of our former leaders, Janine Haines, had great foresight when she warned of the potential of the extended tax file number system. She said:

The Government and the Opposition parties are both to be condemned for their failure to support an alternative system which would have caught people who were cheating the tax system and protected the privacy of Australian taxpayers and would not have laid the foundations for a national identification system.

We believe the changes the government is proposing here are the final straw in an ever progressing process of transforming the tax file number system into just such a national identification system for all Department of Social Security clients.

  The Scrutiny of Bills committee clearly recognised this is in its digest No. 6 when it commented that `it appears the tax file number is being used as a method of identification'. This totally contravenes the repeated assurances given to the Democrats and to the people of Australia back in 1988 by the then Treasurer, Mr Keating, that the tax file number system would be used solely for taxation purposes. The Australian Democrats do not intend to stand by and watch the further conversion and perversion of our tax file number system into a pseudo-Australia Card. We will be opposing these clauses.

  Finally, I make some comment on the government's proposal to increase the penalty deferment periods for unemployed people who breach their activity test. Statistics the minister's office provided to me show that of the 146,000 job search and newstart recipients who breached their obligations only 13,000 committed another breach within three years. In other words, over 90 per cent of those who had that first penalty deferment period of two weeks imposed on them did not breach again. Similarly, of those who were in breach twice, only about 10 per cent breached a third time. In the committee hearing on Friday we might want to see a further breakdown of those figures. Nevertheless, it would seem to me that these initial figures provide very convincing evidence that the current penalty regime is working. Importantly, the low level of double breaches indicates just how onerous a two-week deferment period is on people, let alone the six weeks this bill is seeking to introduce for some people.

  Let us not forget, however, what we are talking about with these penalty periods. We are talking about people having no income whatsoever for a certain number of weeks. We need to stop and consider very carefully just what we are doing to these people. Under the proposed deferment periods, a long-term unemployed person in breach for a second time would be without any income for 12 weeks. I ask us to consider how we would survive if we had no income for 12 weeks. Of course, the answer to that is that we would use whatever means we had to survive, even if that meant breaking the law, although I certainly would not imply that any honourable senators in this place would break the law.

  I remember some years ago, when I headed a committee employing a number of young unemployed people in a worker's cooperative, questioning them about this very situation. They had no hesitation in telling me that if they lost their unemployment benefit they would break into a shop. They said to me, `You don't expect us to starve, do you?' I confess that I had no answer to that question. If the only choice we give these people is to steal to survive or to starve, it really is not a choice at all.

  We are talking about a group of people who on the whole are already feeling very marginalised, if not totally alienated from society. These people, just like the rest of us, have to eat, have to pay rent and meet other expenses. I simply cannot bring myself to support these changes and I am not sure I can understand how anyone else could, particularly when the evidence is that the current penalty system is working. These penalties need to be an avenue of last resort. The low level of double breaches indicates just how onerous a penalty of two weeks is, yet we are now talking about trebling that penalty. I urge all honourable senators to think these changes through. If they do that, I am sure they will come to the conclusion that the changes need to be opposed.

  Before I conclude my comments on this bill, I briefly mention the $1 a week increase to be paid on the additional family payment. The Democrats wholeheartedly welcome this increase. In the International Year of the Family it is certainly appropriate that we look at the levels of support we are providing to families and open up for debate areas where payments to families are currently lacking. I feel, however, that I cannot let this moment pass without reminding those in the public and press galleries that it was the opposition and the government who combined late last year to cut off family payments to a massive 118,000 families.


Senator Watson —But the opposition gave an assurance. You need to add the second part of it, too.


Senator WOODLEY —We certainly need to have a number of discussions, Senator Watson. On what date were those families cut off from that payment? It was on 1 January this year, the very first day of the International Year of the Family. So I only hope that the media will pick up on this and take the opposition and government to task over that issue.