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Wednesday, 21 June 2017
Page: 7196

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Mr PORTER (PearceMinister for Social Services) (11:48): I» «move» :

That this bill «be» «now» «read» «a» «second» «time .

The Social Services Legislation Amendment (Payment Integrity) Bill 2017 introduces four measures designed to improve the integrity and sustainability of the welfare payments system by reinforcing the residency based nature of Australia's welfare system and encouraging greater self-reliance where it is fair and reasonable to do so. These measures include:

enhancements to residency requirements for pensioners;

changes to the payment of the pension supplement for permanent departures overseas and temporary absences;

consistent treatment for families receiving family tax benefit part A; and

an increase to the liquid assets waiting period to increase self-reliance.

The government is committed to ensuring our welfare system is fair and sustainable so that we can continue to support those who need it the most both now and into the future. Together the measures in this bill are estimated to improve the budget bottom line by around $800 million over the forward estimates, and they will contribute to the government restricting real growth in government payments to 1.9 per cent.

While the Australian welfare system is already highly targeted, prudent and reasonable changes, such as those contained in this bill, are required to maintain the stability and sustainability of the system in the longer term. Without sensible decisions to keep spending under reasonable control, the next generation of Australians will be left with more debt to repay and higher taxes.

Enhanced Residency Requirement for Australian Pensions

From 1 July 2018, the first measure in this bill will strengthen the residency requirements for the Age Pension and Disability Support Pension (DSP).

Currently, to qualify for the age pension or DSP, a person must be an Australian resident for a total of 10 years, with at least five of those years being continuous. However, there is no requirement for those 10 years to be during a person's working life—that is, between 16 years of age and age pension age—or for a person to demonstrate any level self-sufficiency during that time.

The current residency requirements are generous when compared to the qualifying contribution periods required to receive a pension in other countries. A number of OECD countries require greater than 10-years contributions in order to receive even a part pension.

Under this measure, a person who qualifies for the age pension or DSP will be required to have 10 years continuous Australian residence and either:

five years of this residence during their working life; or

greater than five cumulative years residence while not in receipt of an activity tested income support payment.

Where a person does not meet either of these requirements, they will need to have 15 years continuous Australian residence.

Australia's social security system is based on the principles of need and residency. This measure reinforces and strengthens the residence connection required before a person can qualify for the age pension or DSP by increasing the continuous period a person must be an Australian resident.

The community reasonably expects that those choosing to migrate to Australia should be self-sufficient to the greatest extent possible.

Existing exemptions to the residency requirements will remain, such as for humanitarian entrants or, in relation to DSP, where a person incurs a continuing inability to work after arrival in Australia. Access to special benefit will also remain for people who are not eligible for another payment and who experience financial hardship.

Those people who qualify for the age pension or DSP on or after 1 July 2018 will need to meet the new residency rules. However, people granted age pension or DSP prior to 1 July 2018 who subsequently lose payment will not be affected by this measure if they later seek to return to payment. They will continue to be assessed under the pre-July 2018 residence qualification rules.

Ninety-eight per cent of people applying for the age pension or DSP will be unaffected by this measure. Most people claiming age pension will already have sufficient residency because they were born in Australia and/or lived here for many years prior to reaching age pension age.

In relation to DSP, the vast majority of recipients are eligible for an exemption from the residence requirements due to suffering their continuing inability to work after migrating to Australia.

This measure is expected to result in savings of $119.1 million over the forward estimates.

Changes to the payment of the Pension Supplement for permanent departures overseas and temporary absences

From 1 January 2018, the second measure in the bill will cease payment of the basic amount of the pension supplement for recipients outside of Australia after six weeks for temporary absences from Australia or immediately if the recipient has permanently departed Australia.

The pension supplement is designed to alleviate the cost of living pressures for income support recipients living in Australia. As part of the pension reform package in September 2009, the pension supplement combined into a single payment the value of what as then the telephone allowance, utilities allowance, pharmaceutical allowance and the GST supplement.

The basic amount of the pension supplement is equivalent to the former GST supplement which was introduced in 2000 to compensate recipients for increases in the costs of living as a result of the GST.

The basic amount of the pension supplement is currently $23.00 per fortnight for singles and $37.80 per fortnight combined for couples (as at 20 March 2017).

Currently, if a recipient goes overseas, their pension supplement is reduced to the basic amount after six weeks temporary absence from Australia, or immediately for permanent departures.

Under this measure, no pension supplement will be paid if a recipient has been overseas temporarily for six weeks or has permanently left Australia. The basic rate of pension will continue to be paid after six weeks temporary absence, or immediately on permanent departure.

Recipients of the basic amount of the pension supplement who are overseas permanently when the measure commences will cease to receive the pension supplement from that date. Recipients who are overseas temporarily will be subject to the six-week rule from date of departure.

The basic amount of the pension supplement generally represents only a small proportion of a person's full rate of income support and was designed to assist with the cost of living in Australia. There is no economic reason to continue to compensate recipients for the impact of the GST while they are overseas, for any time longer than a short-term absence.

Income support recipients who are outside of Australia for more than six weeks, or who leave Australia permanently, are not likely to be impacted by the Australian goods and services tax, and therefore it is no longer appropriate to continue to provide those people with the pension supplement basic amount.

Again, this measure reinforces the residence based nature of the Australian social security system and contributes to the ongoing sustainability of the social welfare system as a whole. It also reflects the government's view that payment of taxpayer-funded income support while people are overseas should generally be limited to short-term absences.

It is recognised that recipients who travel overseas for short periods may have ongoing financial commitments in Australia; however, six weeks is considered a reasonable period of time for these costs to be partially offset by the Australian taxpayer. This change will align the pension supplement with the portability arrangements for most other income support payments, which cease at six weeks. On 1 January 2013 portability periods for most working age payments reduced from 13 to six weeks and family tax benefit part A portability was reduced to six weeks on 1 July 2016.

This measure is expected to result in savings of $150.2 million over the forward estimates.

Consistent treatment for families receiving family tax benefit p art A

With respect to consistent treatment for families receiving family tax benefit part A, from 1 July 2018, the third measure in the bill will introduce more consistent income testing of family tax benefit part A payments for higher income families. This will help to ensure that these payments are targeted to those families most in need.

Presently, there are two different approaches to income testing for higher income families receiving family tax benefit part A, with the test that results in the higher rate paid being applied.

The first test is known as the maximum rate income test. It reduces the maximum rate by 20c for each dollar over what is known as the low income free area (currently $51,903).

The second test is known as the basic rate income test. It reduces the basic rate by 30c for each dollar over the higher income free area (currently $94,316).

From 1 July 2018, the income test taper for the first test (the maximum rate income test) would increase from 20c to 30c for each dollar beyond the higher income free area (presently at $94,316). This will bring it into line with families assessed under the base rate income test, who are presently subject to a 30c taper.

The maximum rate income test taper will remain at 20c in the dollar for the assessment of all income between the lower income free area and the higher income free area.

This change will ensure that all families, whether they are assessed under the base rate or the maximum rate, are treated equally once their income exceeds $94,316.

This change will only affect higher income families, who receive a lower rate of payment than lower income families, and are better equipped to absorb the effects of the changes.

This measure will improve the sustainability of the family payments system over the long term, while continuing to provide assistance to families in need.

The measure is expected to result in savings of $415 million over the forward estimates.

Increase to the liquid assets waiting period to increase self-reliance

Finally, with respect to increases to the liquid assets waiting period designed to increase self-reliance: the final measure in this bill will increase the maximum liquid assets waiting period from 13 to 26 weeks for new income support claimants from 20 September 2018.

The liquid assets waiting period is the period of time that a person claiming Newstart allowance, sickness allowance, youth allowance or Austudy is expected to use their own liquid assets—such as cash, bank deposits or shares—for their own self-support, before they can begin receiving a payment.

The liquid assets waiting period is a longstanding feature of the payments system. It helps to ensure that people with the means to support themselves do so for a period, before relying on the taxpayer funding for income support.

Presently, a liquid assets waiting period applies if a person's liquid assets are equal to or they exceed:

$5,500 for single people with no dependent children, or

$11,000 for couples and people with dependent children.

Presently, the liquid assets waiting period may be one to 13 weeks, depending on the amount of cash or other liquid assets the person has. The length of the waiting period increases by one week for every $500 held above the threshold for single people with no children or $1,000 for couples and people with children.

For example, a single person with no children and $5,500 in liquid assets would serve a one week liquid assets waiting period; a person with $6,000 would serve two weeks.

Presently, the maximum liquid assets waiting period is capped at 13 weeks. The maximum waiting period applies if a person's liquid assets are equal to or above $11,500 if they are single with no children, or $23,000 if they are partnered or have children.

The maximum length of the liquid assets waiting period was set at 13 weeks in 1997 and has not changed since then. By contrast, the average level of liquid assets held by claimants has risen very considerably.

In 2015-16, the liquid assets held on average by a person serving the maximum 13-week waiting period was in the order of $63,000. This indicates that many claimants have a greater capacity to support themselves than the current liquid assets waiting period recognises.

Under this measure, the maximum length of the liquid assets waiting period would be extended to a cap of 26 weeks.

This is designed to require those with greater means to support themselves for longer before receiving a taxpayer funded payment. It ensures that the liquid assets waiting period better reflects the current profile of claimants and their capacity to support themselves. It also better targets access to payment to those who have limited other means of support and are more in need of immediate assistance.

Under this change, the new maximum liquid assets waiting period will apply to:

a single person with more than $18,000 in liquid assets, and

a partnered person or a single person with dependent children with more than $36,000.

Claims lodged on or after 20 September 2018 will be subject to the new maximum length for the liquid assets waiting period. Claimants already serving a liquid assets waiting period on 20 September 2018, however, will not have their waiting period extended.

Only the maximum length of the liquid assets waiting period is changing. The thresholds at which the liquid assets waiting period applies will stay the same, at $5,500 for singles with no children and $11,000 for others. These thresholds ensure that people are able to retain an appropriate level of savings to meet the costs of finding and securing work, as well as any unexpected expenses that may arise.

The existing range of exemptions from the liquid assets waiting period will remain in place, including for people who experience severe financial hardship through having incurred reasonable or unavoidable expenditure. This ensures that people can still access income support if their financial circumstances change and they are no longer able to support themselves.

As students often work for a period before commencing study to earn money which is saved for use during the semester on major expenses, full-time students claiming youth allowance or Austudy will still be able to reduce their liquid assets by certain allowable deductions directly related to their course of study. This ensures that students are able to retain the savings they need to pay for their studies.

It is also important to note that superannuation assets are exempt from the liquid assets waiting period and therefore these changes will not impact the resources of older Australians set aside to support themselves during retirement.

This measure is expected to result in savings of $138.5 million over the forward estimates.

Conclusion

Collectively, the measures in the bill will make sensible and necessary changes to safeguard the long-term sustainability of our welfare payments system while still ensuring appropriate support for those who need it, and, on that basis, I commend the bill to the House.

Debate adjourned.