Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
COVID-19 Economic response - social security measures part 1: temporary supplement and improved access to income support



Download PDFDownload PDF

Economic response to coronavirus—social security measures part 1: temporary supplement and improved access to income support

Gary Houston/Wikimedia Commons Posted 23/03/2020 by Michael Klapdor

This FlagPost was first published on 23 March 2020 and has been updated on 24 March 2020 to reflect Government amendments to the Coronavirus Economic Response Package Omnibus Bill 2020.

On 22 March 2020, the Australian Government announced a second package of measures as part of its economic response to the coronavirus (COVID-19) pandemic. This follows the first announcement of an economic stimulus package in response to the pandemic on 12 March 2020. This FlagPost details some of the social security measures announced as part of the second package. A separate FlagPost, Part 2, details the one-off payments for certain social security recipients announced in the Government’s first and second packages.

The legislation providing for the social security measures is the Coronavirus Economic Response Package Omnibus Bill 2020. The Bill was introduced and passed by the Parliament on 23 March 2020.

New social security measures

The following social security measures were announced on 22 March 2020:

• A $550 per fortnight Coronavirus Supplement for new and existing recipients of JobSeeker Payment (which replaced Newstart Allowance and a number of other payments from 20 March 2020), Parenting Payment, Youth Allowance for jobseekers, Farm Household Allowance and Special Benefit. The supplement will be paid for six months and almost doubles the maximum payment rate for a JobSeeker Payment recipient.

• Eligibility criteria for JobSeeker Payment and Youth Allowance will be amended to ensure access for groups who may be affected by the pandemic including those who are stood down from their jobs, sole traders, casual workers, contractors and those who need to care for someone affected by coronavirus. Generally, a person must be unemployed or temporarily unable to work due to illness or a medical condition to be eligible for these payments. There is already some discretion under social security law to treat someone as unemployed for eligibility purposes even if they would not be considered unemployed in the general sense of the term.

• The assets test for JobSeeker Payment, Parenting Payment, and Youth Allowance for jobseekers will be waived. The assets test currently restricts eligibility for those with assets such as property, vehicles and investments over a certain value from accessing social

security. For example, a single non-homeowner individual is ineligible if they have assets worth over $473,750. The assets test for Special Benefit will still apply. • A number of waiting periods will be waived including: o The one-week ordinary waiting period (this waiver was announced as part of the first

package). o The liquid assets waiting period—applies to those with assets such as cash savings worth over $5,500 for singles or $11,000 for singles with children and partnered people. o The newly arrived resident’s waiting period for new migrants—currently four years for

these payments. Claimants will still need to meet residency requirements; i.e. they will need to hold a permanent visa. Affected claimants will need to serve the remainder of this waiting period at the end of the period the Coronavirus Supplement is paid for. o The Seasonal Work Preclusion Period—applies to those who finished seasonal, contract or intermittent work in the six months prior to claiming income support. • Other waiting periods will continue to apply. This includes the Income Maintenance Period which affects those in receipt of certain lump sums from their previous employer after losing their job, and those who have been stood down but are still receiving leave payments. This period can be waived in certain circumstances including financial hardship. • Claims for payments will be made easier with online and phone processes to be used to reduce visits to Services Australia shopfronts and reduced paperwork requirements. In most cases, claimants will initially only need to make declarations of their income and residency status (rather than providing proof). • Certain claim processes will be removed such as the verification of relationship status, the Job Seeker Classification Instrument (used to determine the employment services the person may require) and the requirement to meet with employment services providers before payment can commence.

‘Intent to claim’ provisions will be extended. These provisions allow a person’s first contact with Services Australia regarding a payment to be considered the date their claim is made. Normally, the date a person is considered to start receiving their payment is the date they make their claim, including providing all relevant documentation, if they meet the eligibility conditions. Extending the intent to claim provisions to those affected by the pandemic will mean that people can receive their payments from the day they first get in touch with Services Australia rather than the day they meet all the claim requirements.

Commencement

The Coronavirus Supplement will be paid for an initial six month period commencing 27 April 2020. The Government moved amendments to the Coronavirus Economic Response Package Omnibus Bill 2020 in the House of Representatives so that the other legislated changes, including new eligibility criteria for JobSeeker Payment and Youth Allowance for jobseekers and the waiting period waivers will apply from the day after Royal Assent.

Minister given broad powers to make further changes

The Government also moved amendments to the Bill in the Senate to provide broad powers to the Minister for Families and Social Services to change any qualification criteria and any payment rate for any social security payment via a legislative instrument. These powers will expire on 31 December 2020. Minister for Finance, Mathias Cormann, explained the purpose of these powers:

The government will amend social security law to allow the Minister for Families and Social Services to make changes to the relevant legislation via a legislative instrument. This power would allow the government to act with the utmost flexibility in the unprecedented circumstances we're experiencing in respect of the coronavirus outbreak. It will allow us to alter settings associated with payment rates, means-testing arrangements, eligibility criteria, waiting periods and residency requirements to respond in a measured and timely manner where appropriate.

Minister Cormann also stated how the powers would be used initially:

Specifically, we are in a position to flag very clearly that the minister intends to use this power imminently to make student payments—for Abstudy, Austudy and youth allowance (student)— and to make changes to the partner income test to make sure that they are captured by the coronavirus supplement arrangements.

The powers provided to the Minister by the amendments are not unprecedented but are unusual in social security law. Provisions providing for the power to override the operation of primary legislation through a legislative instrument are generally known as Henry VIII clauses. The Senate Scrutiny of Bills Committee generally draws attention to such clauses as they ‘impact on the level of parliamentary scrutiny and may subvert the appropriate relationship between the Parliament and the executive’ (p. 48). In this instance, the temporary powers have been provided to allow for flexibility in the administration of social security payments during a period of uncertainty and when the Parliament may not sit in order to approve legislative amendments.

Cost of the measures

According to the Treasury, the measures initially announced are expected to cost $14.1 billion over the forward estimates period. Treasurer Josh Frydenberg was quoted as saying that the decision to provide the Coronavirus Supplement to students would cost an additional $1.7 billion. Actual costs will depend on demand for income support.

Stakeholder reaction

The Australian Council of Social Service (ACOSS) stated the increase to JobSeeker Payment and Youth Allowance for jobseekers provided by the new Coronavirus Supplement was ‘welcome and absolutely vital’. ACOSS called for a permanent increase in the rate of these payments and raised concerns for payments that would not be eligible for the supplement.. ACOSS stated that it was ‘extremely worried’ about asylum seekers and other groups not eligible for income support.

The Australian Council of Trade Unions (ACTU) stated support for the new supplement but called for further wage subsidies for workers. The ACTU also raised concerns for temporary visa holders who are not able to access income support payments.

The Business Council of Australia stated: ‘We applaud the government’s measures to double income assistance, making it more flexible’.

Key issues Payment rates

With the implementation of the measures, the maximum rate for a single JobSeeker Payment recipient with no children during the six month implementation will be $1,124.50 per fortnight (comprising the base rate, the Energy Supplement and Coronavirus Supplement). This will be $180.20 more than the maximum single pension rate (paid to Age Pension, Disability Support Pension and Carer Payment recipients) of $944.30 per fortnight (comprising the base rate, the Pension Supplement and the Energy Supplement). The new maximum rate of JobSeeker Payment for a single person with no children will be worth around 76 per cent of the minimum wage for a full-time worker: currently the equivalent of $1,481.60 per fortnight.

While the new supplement will offer a significant if temporary boost to the income of these payment recipients, those who lose work as a result the coronavirus pandemic are still likely to see a large drop in income and could face serious financial difficulties. These individuals may be able to access superannuation through a separate measure announced by the Government. Superannuation accessed through this measure will not be taxed and will not affect their rate of any income support.

State and territory governments have also implemented measures to assist those affected by the pandemic.

Groups missing out

The Coronavirus Supplement was initially targeted primarily at those currently looking for work and those who lose their job or income as a result of the pandemic. Student payment recipients and pensioners, including working age pensioners, were to be excluded but still be eligible for both one-off $750 payments (see Part 2 FlagPost). This would have created an incentive for excluded recipients, particularly students, to move to a payment that qualifies them for the Coronavirus Supplement. As noted above, the Government has since indicated that it would provide the Coronavirus Supplement to student payment recipients via a legislative instrument.

It is notable that the payment categories the new supplement was initially aimed at are the groups excluded from the 2008-09 stimulus payments made in response to the Global Financial Crisis. Both pensioners and student payment recipients received specific bonus payments as part of the Rudd Government’s stimulus packages but there were no specific payments for Newstart Allowance, Youth Allowance for jobseekers and Parenting Payment recipients (some may have still have qualified for one of the other bonuses such as that paid to Family Tax Benefit recipients).

Other groups who may miss out on the assistance provided through the supplement and the one-off payments are those not residentially qualified for social security payments including temporary visa holders, asylum seekers on bridging visas and New Zealanders on special category visas. New Zealanders who arrived in Australia from February 2001 have limited access to working age social security payments in Australia. The Migration Council of Australia raised concerns that members of these groups who have their income affected by the pandemic and economic downturn will face serious hardship without access to social security payments. They may also face difficulties returning to their home country due to travel bans put in place in response to the pandemic. Minister for Finance Mathias Cormann indicated that the Minister for Families and Social Services would use existing powers to extend Special Benefit eligibility to some additional temporary visa categories: temporary resident (other employment) and temporary resident (skilled employment) visa holders. The Minister stated that the Government was not proposing to extend eligibility other excluded visa holders such as New Zealand special category visa holders.

Income test

According to the Treasury’s factsheet on the new supplement, ‘anyone who is eligible for the Coronavirus Supplement will receive the full rate of the supplement of $550 per fortnight’. However, the factsheet also states that ‘income testing will still apply to the person’s other payments, consistent with current arrangements’. This means that those eligible for even $1 per fortnight (or even a zero rate in some circumstances) of a qualifying payment will receive the full $550 amount of the supplement in that fortnight. It also suggests that the supplement will not be added to the income tested payment rate. If the supplement were added, it would increase the level of income from employment or elsewhere that an individual could have before they were ineligible to receive any JobSeeker Payment.

Under the current income test for JobSeeker Payment, a single person with no children’s payment rate reaches zero if they have income of $1,086.50 per fortnight. If the supplement were included in the income tested rate, then this person could earn just over $2,000 per fortnight before their payment rate reached zero.

A separate issue is the impact of a claimant’s partner’s income. For couples, the social security income test assesses the income of both partners regardless of whether they are both claiming income support. For couples where only one partner’s work or income is affected by the coronavirus pandemic, the affected partner may find that they are not eligible for income support due to their partner’s income. For a couple where one partner has no income and the other partner is working,

the working partner could exclude their partner from receiving JobSeeker Payment if their earnings were over around $930 per week. As noted above, Minister Cormann has suggested that changes made be made to the partner income test to provide greater access to income support using the new powers provided to the Minister for Families and Social Services.

Temporary nature of the supplement

The new supplement will only be payable for an initial period of six months (the Minister can extend this period through a legislative instrument). . As noted above, ACOSS has called for a permanent increase in the rate of JobSeeker Payment and Youth Allowance. For over a decade, policy experts, social services sector advocates and business groups have voiced concern over the low rate of these payments. Withdrawing the Coronavirus Supplement without any ongoing increase to the base payment rates is likely to be contentious.

Some parallels can be drawn with the Coalition Government attempts to remove the Energy Supplement, a payment introduced from 2013 as part of the carbon price compensation package. The supplement continued after the carbon price was abolished by the Abbott Government in 2014. The 2016-17 Budget included a measure to remove the supplement as it was deemed unnecessary. There was significant backlash to the proposal to remove the supplement. The Coalition was successful in closing the supplement to new recipients of Family Tax Benefit and the Commonwealth Seniors Health Card in 2016. However, it was unable to pass legislation to close the supplement to other payment recipients, including pensions and allowances. In August 2018 the Turnbull Government announced it would no longer proceed with its measure to close the Energy Supplement.

The size of the Coronavirus Supplement and the fact that an expiry date is included in the legislation make this measure different to the Energy Supplement situation. However, the issue of payment adequacy is likely to re-emerge at the time the Coronavirus Supplement is withdrawn.

Mutual obligation arrangements

The Government has announced a ‘flexible’ approach to mutual obligation requirements for income support recipients as a result of the coronavirus pandemic. Those required to self-isolate or who have caring responsibilities are able to obtain an exemption from mutual obligation requirements such as job search without the need to provide medical evidence. Requirements will still be place but some appointments with employment service providers may need to be rescheduled where jobseekers are unable to attend due to the coronavirus. The default number of job search activities a payment recipient must undertake will be reduced to four per month (currently, jobseekers can be required to undertake up to 20 job search activities per month).

According to a Treasury factsheet, sole traders who become eligible for JobSeeker Payment will automatically meet their mutual obligation requirements by ‘continuing to develop and sustain their business’. It is unclear how this will be assessed.

The Australian Labor Party has previously called for mutual obligation requirements involving face-to-face contact to be suspended and for exemptions to be put in place for those required to isolate due to the pandemic. The Australian Greens have called for all mutual obligation requirements to be suspended.

Travel restrictions, shutdowns and business closures will make it increasingly difficult for payment recipients to meet activity test requirements.