Senator STEPHENS (Parliamentary Secretary for Social Inclusion and the Voluntary Sector and Parliamentary Secretary Assisting the Prime Minister for Social Inclusion) (7:39 PM) —I thank Senator Johnston for his comments and support for these bills, the Veterans’ Affairs and Other Legislation Amendment (Pension Reform) Bill 2009 and the Veterans’ Affairs Legislation Amendment (Budget Measures) Bill 2009. As he has said, both bills taken together are very important measures. I will turn firstly to the Veterans’ Affairs and Other Legislation Amendment (Pension Reform) Bill 2009, which is the more straightforward of the two bills that we are considering today. This bill gives effect to the key elements of the government’s secure and sustainable pension reform package, particularly in relation to veterans and their dependants, because the government is committed to delivering a simpler, more responsive, more adequate and certainly a more sustainable pension system for both veterans and their dependants and for social security recipients overall. These reforms prepare Australia to meet future challenges, including an ageing population, through changes to social security, family assistance, veterans affairs and aged-care legislation. More than 320,000 Veterans’ Affairs pensioners will benefit from these reforms and from 20 September this month, so only a week or so away, the pension reform package will increase pensions for all Veterans’ Affairs income support recipients, war widows and widowers. Couples will benefit from an increase of $10.15 per week and single service pensioners on the maximum rate will benefit from a much-needed $32.50 per week increase. War widows and widowers will benefit from an increase of at least $30 per week and up to $35 a week if they receive full-rate income support supplement. As Senator Johnston said, a new pensioner and beneficiary living cost index will be introduced that actually measures the cost of living for pensioners. From 20 September 2009 the maximum basic rate of income support pensions will be adjusted in line with either the consumer price index or the new Pensioner and Beneficiary Living Cost Index, whichever is the higher. The bill increases the relativity of the single-rate pension to 66.33 per cent of the maximum rate payable to a couple, up from the current 60 per cent.

The current complex system of allowances and supplementary payments will be simplified by the introduction of a new pension supplement. A new senior supplement—for holders of the Commonwealth seniors health card or certain gold card holders over qualifying age—will replace the existing seniors concession allowance and the telephone allowance. The bill establishes two new supplements to replace pharmaceutical and telephone allowances for those veterans, members and dependants who do not receive a Veterans’ Affairs or a social security income support payment. The veterans supplement will replace the pharmaceutical and telephone allowances under the Veterans’ Entitlements Act and the MRCA supplement will replace the pharmaceutical and telephone allowances under the Military Rehabilitation and Compensation Act. These new supplements will also commence on 20 September this year. A work bonus will be established to provide an incentive for those who want to take up or continue to undertake paid work after they reach pension age. With this bonus only 50 per cent of the first $500 a fortnight of employment income will be counted in the income test. The reforms in the bill introduce greater flexibility to the pension advance arrangements from 1 July 2010 and, to secure a pension system that is sustainable into the future, the government will tighten the pension income test to ensure that the pension system is targeted at those most in need. So from 20 September 2009 the pension income test taper rate will increase from 40c to 50c for each dollar of income over the income-test-free area. In addition, to bring the veterans’ entitlements income test in line with other means tested payments, the additional income-test-free area for dependent children will be removed.

As part of the reforms, new transitional payment arrangements are being introduced so that existing part-rate pensioners who would otherwise face a reduction in their payments as a consequence of the reforms will have their current payments retained. The transitional rules will continue to apply until changes under the pension reforms result in a higher payment. It is important to recognise that the pension reforms will have no impact on veteran pension age and qualifying age under the Veterans’ Entitlements Act. There will be no increases in these ages. This is a significant reform package which will make for a more secure repatriation pension system, provide greater certainty to veterans and their dependants and ensure that the system remains both adequate and sustainable.

And in relation to the budget measures, the more convenient payment arrangements will be made for Veterans’ Affairs pension recipients who are living permanently overseas. So the first measure in this bill will enable Veterans’ Affairs payments to be made directly to bank accounts in countries which have reliable banking systems. The second measure will extend eligibility for the Defence Services Homes Insurance Scheme to persons eligible under the Defence Home Ownership Assistance Scheme Act 2008. This extension will provide eligible persons with access to cost-effective insurance designed specifically for the service and ex-service community. This final measure will cease payment of an outdated dependents pension and will pay existing pension recipients a lump-sum payment. This lump-sum payment will be the equivalent of three years of pension. The existing payment ranges from 29c to $8.42 a fortnight. Other government programs, such as the partner service pension and social security, now provide more effective financial support. Without adequate means of support, dependents pensions are not part of this measure and will continue to be paid at existing rates. It should also be made quite clear that existing war widow and war widow and orphan pensions are not affected by this measure.

This bill continues this government’s commitment to an effective and equitable repatriation system that responsibly supports Australia’s ex-service and defence communities, and I commend the bill to the Senate.

Question agreed to.

Bills read a second time.

Bills passed through their remaining stages without amendment or debate.