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Tuesday, 10 September 1985
Page: 371

(Question No. 171)

Senator Maguire asked the Minister representing the Minister for Social Security, upon notice, on 27 March 1985:

(1) Which social welfare payments paid by the Department of Social Security are neither income-tested nor subject to taxation.

(2) For each of the above payments, what are the reasons for the exemption from both an income test and taxation.

(3) Have such payments always been free from an income test and taxation; if so, how long have they been paid on the current basis.

Senator Grimes —The Minister for Social Security has provided the following answer to the honourable senator's question:

(1) The following social welfare payments paid by the Department of Social Security are neither income-tested nor taxed:

(a) Family allowances.

(b) Invalid pension when paid to the permanently blind below age pension age and additional pension for the first child of blind pensioners.

(c) Handicapped child's allowance paid in respect of severely handicapped children.

(d) Double orphan's pension.

(e) Mobility allowance.

(f) Incentive allowance.

(g) Remote area allowance.

Remote area allowance and incentive allowance are only available to those in receipt of an income-tested payment, but the allowances themselves are not subject to an income test or taxation.


(a) Family allowances were introduced in 1976 to replace the previous system of child endowment and tax rebates for children. Family allowances, like tax rebates, have the effect of increasing the effective tax threshold for families with eligible children. The major argument in favour of the allowances retaining their income-test free, tax-free status that is generally put is that, at any income level, families with children have a lower capacity to pay tax than individuals or similar families without children.

(b) The means test for blind invalid pensioners was abolished in 1954, primarily in order to promote work incentives. Age and invalid pensions were exempted from income tax in 1941. Most basic social security payments again became taxable in 1976, the major exception being invalid pension (including invalid pension for the permanently blind) for those below age pension age. The main reason for this appears to be the argument that any decision to tax invalid pension would create undue disincentives for the disabled and the blind to seek and retain employment, given the special difficulties they experience in this regard.

(c) to (e) Handicapped child's allowance, double orphan's pension and mobility allowance are paid in recognition of the special circumstances of recipients of these payments, and it has been the view of successive governments that income-testing and/or taxing such payments would be inappropriate.

(f) Incentive allowance is intended to eliminate any disincentive effect that the supplementary (rent) assistance income test has on earnings of sheltered workshop employees and it has therefore been considered inappropriate to income-test or tax the payment.

(g) Remote area allowance provides broadly equivalent assistance to that available to taxpayers through the income tax Zone A rebate and is neither income-tested nor taxed in order to maintain this equivalence with the zone rebate.

(3) Family allowances, handicapped child's allowance, double orphan's pension and the mobility, incentive and remote area allowances have been free of income tests and taxation since their introduction.

Invalid pension paid to the permanently blind has been exempt from tax since 1941 and free of income test since 1954.