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Tuesday, 23 August 1983
Page: 64

Dr BLEWETT (Minister for Health) —by leave-In the Budget Speech, the Treasurer (Mr Keating) announced the Government's intention to re-introduce a means test that takes account of both income and assets for assessing entitlement for pension. This will replace the current test which only takes account of income, including income from assets. It will apply to social security pensions including age, invalid and widows pensions, sheltered employment and rehabilitation allowances, and supporting parents benefits and repatriation service pensions. The test will follow in broad terms that which applied prior to November 1976. The final details of how the new test will work in practice will be settled after the Government has consulted with pensioner organisations.

The existing arrangements are intended to concentrate assistance on those more in need, but this has not been achieved. A particular problem is the prevalence of contrived arrangements designed to exploit the pension income test by people who in fact are well able to support themselves. There has been increasing circumvention of the test by such mechanisms as converting income to capital gains. The growth in these income test avoidance schemes in recent years has been such that they now jeopardise the Government's ability to direct scarce funds to the pressing welfare needs of the disadvantaged in our society.

Attempts by the previous Government to devise legislation addressing these loopholes failed. After considering similar options the Government has decided that nothing short of re-imposition of an assets component will redress this serious drain on the welfare purse. In designing the new assets test, particular attention will be given to protecting the position of the great majority of pensioners who have only small assets, and those who are not attempting to circumvent existing rules. In addition, the new test will be structured to ensure that there is no undue disruption of or intrusion into pensioners' affairs. Accordingly, specific types of assets that we envisage would be exempt include: The pensioner's home or principal residence; a car for personal use; personal effects including furniture, household effects, and a caravan, a boat, jewellery, and the like; and other assets to the value of $1,500 for a single pensioner and $2,500 for a pensioner couple. After the exemption of assets of this type, the test would operate by taking a uniform 10 per cent of the value of other assets into account and deeming that amount to be income for pension assessment purposes. This will then be added to non-assets income, such as earnings, to arrive at a total figure of means. Pensioners' means will then determine pension entitlement in the same way that income determines it at present.

Although these arrangements will be broadly the same as those which existed in 1976, employing a notional return rate of 10 per cent is relatively more generous than was the case in 1976 when prevailing interest rates were generally lower. The great bulk of pensioners will, as at present, fall below the pension free areas, so that they will continue to receive the full rate of pension. Some could be moderately better off than under current arrangements. For example, a single pensioner without other income could have up to $17,100 in a savings account and still receive the maximum rate of pension. A married pensioner couple could jointly hold $28,500 without reduction in pension. As a result, pensioners with a modest level of assets, or who have not been avoiding the income test would not be affected to any significant degree. But those with substantial assets who have been circumventing the income test to obtain or increase their pension entitlement will experience a reduction in that entitlement.

We intend that the new arrangements will include provisions which will ensure that the test is not circumvented by pensioners depriving themselves of assets. An effect of these provisions will be to take into account assets which have been gifted or otherwise disposed of without receiving adequate financial consideration in return. From tonight, a person who disposes of assets in this way will be deemed to continue to have that property for the purpose of determining entitlement to pension or fringe benefits. The treatment of modest gifts or allowances made by pensioners to their families will be a matter for discussion with pensioner organisations. We expect that the new arrangements will be in place about 12 months after the passage of the necessary amending legislation. This allows for the major changes to administrative systems and arrangements that will be required.

I would emphasise that this change is part of the Government's ongoing examination and rationalisation of the retirement income system. It will further reduce the attraction of lump sum superannuation payments and thereby encourage take-up of superannuation pensions or annuities to secure a regular retirement income. It is therefore consistent with the Government's recent measures in relation to lump sum superannuation, although it does not in any way lessen the need for these measures which are also designed to promote greater equity in taxation arrangements. Nor will an assets test interfere with further reforms and modifications to superannuation arrangements or preclude the examination of the feasibility of a national superannuation scheme that is to be undertaken. I present the following paper:

Pensions Means Test-Ministerial Statement, 23 August 1983.

Motion (by Mr Lionel Bowen) proposed:

That the House take note of the paper.

Debate (on motion by Mr Shipton) adjourned.