Social Services and Other Legislation Amendment (Workforce Incentive) Bill 2022

Bills Digest No. 24, 2022–23

PDF Version [416KB]

Don Arthur and Carol Ey
Social Policy Section
21 October 2022

Key points

The Bill is divided into three schedules. Schedules 1 and 2 in this Bill are substantially the same as Schedules 1 and 2 of the Social Services Legislation Amendment (Workforce Incentive) Bill 2022, which was introduced to Parliament in February 2022 by the previous Government. These schedules are likely to have bipartisan support.
Schedule 3 deals with the Work Bonus. It makes changes to the Social Security Act 1991 and the Veterans’ Entitlements Act 1986 to improve financial incentives for pensioners to engage in paid work by temporarily adding $4,000 to eligible pensioners’ income bank balances.
The increase to the Work Bonus has support from groups representing older Australians and industry. However, some of these groups argue that the changes should go further.
Information provided to the Minister by the Department of Social Services (DSS) suggests the impact of the measure on work participation may be small.

Contents

Purpose of the Bill
Structure of the Bill
Committee consideration
Financial implications
Statement of Compatibility with Human Rights
Schedules 1 and 2—measures carried over from the Social Services Legislation Amendment (Workforce Incentive) Bill 2022
Schedule 3—Temporary increase to the Pensioner Work Bonus

Date introduced: 28 September 2022
House: House of Representatives
Portfolio: Social Services
Commencement: Schedules 1 and 2 commence on the later of 1 January 2023 and one month and a day after Royal Assent.
Schedule 3 commences on 1 December 2022, if the Act receives Royal Assent before 25 November 2022. However, if the Act receives Royal Assent on or after 25 November 2022, Schedule 3 will commence on the seventh day after Royal Assent.

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page, or through the Australian Parliament website.

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the Federal Register of Legislation website.

All hyperlinks in this Bills Digest are correct as at October 2022.

Purpose of the Bill

This Bill amends the Social Security Act 1991, the Social Security (Administration) Act 1999 and the Veterans’ Entitlements Act 1986 to improve incentives for recipients of Age Pension, Disability Support Pension (DSP), Carer Payment and veterans’ entitlement recipients over Age Pension age to engage in paid work.

Structure of the Bill

The Bill is divided into three schedules:

Schedule 1— Suspension of benefits and entitlements instead of cancellation
Schedule 2—Extended qualification for pensioner concession cards
Schedule 3—Pensioner work bonus temporary increase.

Schedules 1 and 2 in this Bill are substantially the same as Schedules 1 and 2 of the Social Services Legislation Amendment (Workforce Incentive) Bill 2022. That Bill was introduced into the House of Representatives on 10 February 2022 by the previous Government and lapsed when the House was dissolved ahead of the election on 21 May 2022.

Schedules 1 and 2 are likely to have bipartisan support.

Committee consideration

Senate Standing Committees on Community Affairs

The Bill has been referred to the Senate Standing Committees on Community Affair for inquiry and report by 10 November 2022. Details of the inquiry are at the inquiry home page.

Senate Standing Committee for the Scrutiny of Bills

The Scrutiny of Bills Committee has not reported on the Bill at the time of writing.

Financial implications

According to the Bill’s Explanatory Memorandum, the financial impact of the amendments is:

Amendments to increase pension flexibility: $8.4 million (indicative saving) over the forward estimates from 2022–23.
Amendments to temporarily increase the work bonus income bank: $55.1 million (indicative cost) over the forward estimates from 2022–23.[1]

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible.[2]

Parliamentary Joint Committee on Human Rights

The Parliamentary Joint Committee on Human Rights has not reported on this Bill at the time of writing.

Schedules 1 and 2—measures carried over from the Social Services Legislation Amendment (Workforce Incentive) Bill 2022

Background

The purpose of Schedules 1 and 2 is to extend the period before payment of certain social security and veterans’ income support payments is cancelled and concessions are lost where the payment rate is nil due to income as an employee.

If an Age Pension recipient has a change in income that takes them above the relevant threshold for payment and they have used up their Work Bonus, their pension is generally cancelled.[3] This means they lose access to the pensioner concession card, and if their income subsequently reduces below the threshold, they have to reapply for the pension.

However, if the recipient or their partner has employment income that reduces their payment to nil, their pension is only suspended for up to 12 weeks, meaning payment can be restored if their income reduces in this period without their having to reapply.[4] They also retain eligibility for the pensioner concession card in this period.[5]

DSP recipients who commence work of 30 or more hours per week where wages are at or above the relevant minimum wage, or have income or increased income from employment reducing their DSP payment to nil rate, can have their payment suspended for up to 2 years.[6] Their partners may also be eligible to have their payment suspended rather than cancelled if they lose payment because of this employment.[7] The DSP recipient retains their pensioner concession card for 12 months during this period of suspension, however their partner only retains their card for the period relevant to their payment.[8] For example, for a Carer Payment recipient this is 12 weeks.[9]

Continued eligibility for veterans’ fringe benefits, such as health care, vary depending on the particular circumstances, but in some cases eligibility is retained for a period even if the income thresholds are exceeded. For example, eligibility for the Gold Card is retained for 13 weeks if the income level is less than 150 per cent of the cut-off limit, while eligibility for the pensioner concession card ceases immediately when the income exceeds the cut-off.[10]

Potential impact of the changes

In June 2022, 78,000 of the 2.6 million Age Pension recipients had earnings from employment in the last fortnight.[11] For DSP, 52,400 recipients had earnings from a total of 765,000 recipients.[12] For both payments, the majority (65,500 of the Age Pensioners and 37,000 DSP recipients) had earnings over $250 in the fortnight. Some 5,500 Age Pensioners and 2,300 DSP recipients were on zero rate payment, that is, had their payment suspended.[13] Equivalent data is not available for recipients of veterans’ payments, but the total number in receipt of a service pension or income support supplement in June 2022 was less than 107,000.[14]

It is unclear how many of those not currently earning income are likely to enter the workforce as a result of these proposed changes. There may be more incentive for those earning significant income already and those with their payment currently suspended to continue in employment or increase their earnings.

In discussing the previous Government’s Bill, former Minister Ruston stated that National Seniors and COTA had been telling the government that the barrier for pensioners taking up more employment was the ‘health care card situation’.[15] The Department of Social Services noted that the modelling suggested these proposed changes would result in 1,000 pensioners a year working more.[16] Given that in August 2022 there were over 470,000 job vacancies across Australia, it appears that these measures will have limited impact on reducing workforce shortages.[17]

Schedule 1—Suspension of benefits and entitlements rather than cancellation

Item 1 of Part 1 inserts proposed section 95D in the Social Security (Administration) Act to extend the period of suspension from 3 months to 2 years for Age Pension recipients where the pension ceases to be payable because the pension rate has become nil.[18] This provision only applies where the income used to determine payability includes ‘income for remunerative work performed by the person in Australia as an employee in an employer/employee relationship’ (proposed paragraph 95D(1)(f)).

The extension will also apply to those who have had their pension cancelled under the existing provisions (that is, after the expiry of 3 months) if their income falls sufficiently to receive the Age Pension within two years of the original suspension (proposed subsection 95D(4)). Similar provisions apply where the person has failed to notify the Department of the relevant income‑related event, and the Department has subsequently become aware of the event and cancelled payment (proposed subsection 95D(5)).

As the measure is intended to address workforce issues in Australia, the decision to suspend can only be made if the person is residing in Australia at the time of the decision (proposed subsection 95D(6)).

Items 2 to 16 of Schedule 1 of the Bill propose amendments to the Social Security (Administration) Act to clarify the commencement date of suspension of DSP where the recipient ceases to qualify because they have obtained paid work for at least 30 hours per week, or DSP ceases to be payable as a result of employment income. The amendments in these items also clarify when a ‘resumption determination’ (that is, a determination that the DSP is payable) takes effect and that it can apply retrospectively.

Item 17 inserts proposed section 97C into the Social Security (Administration) Act to extend these suspension arrangements to the partners of Age Pension, DSP and certain veterans’ entitlements, who are themselves receiving Age Pension, DSP or Carer Payment, where their entitlement would otherwise have been cancelled for the same reason as their partner’s receipt has been suspended. Proposed subsection 97C(7) extends this provision to the partner even if the partner ceases to be a member of the couple following the event or change of circumstances that resulted in the partner’s service pension or income support supplement ceasing to be payable.

Application arrangements for the above items are detailed in Item 18. In particular, the suspension provisions are extended to those who have had their pension suspended in the 12 weeks prior to commencement.

Item 21 inserts proposed section 56ED in the Veterans’ Entitlements Act, so that recipients of service pension, income support supplement and veteran payment have their entitlement suspended rather than terminated, where their rate of payment is nil due to an event or change of circumstances. In these circumstances at least some of the income of the person must include income as an employee in Australia (proposed paragraph 56ED(1)(f)). Provisions consistent with those amendments in the Bill relating to the Age Pension are also inserted by item 21, namely provisions regarding recipients who have had their payment cancelled under current arrangements, and requiring that the person be resident in Australia.

Proposed subsection 56ED(8) provides that the suspension ends and the pension, supplement or payment is cancelled 2 years from the date of suspension, but notes that suspension may be ended by the Repatriation Commission if the person’s pension, supplement or payment is payable. That is, that the income has reduced to below the threshold for payment within the 2 year period.

Similar to Item 17, proposed section 56EE extends suspension to a recipient of a service pension, income support supplement or veteran payment, where their entitlement has been lost because their partner has had their payment of an Age Pension, DSP or veteran entitlement suspended due to employment income.

Item 25 extends these new arrangements to those whose payment ceased in the 12 weeks before commencement of these provisions.

Schedule 2—Extended qualification for pensioner concession cards

The pensioner concession card provides access to cheaper health services and medicines, as well as a range of other concessions, particularly through state and territory governments, such as in relation to public transport and utilities.[19]

Parts 1 and 2 of this Schedule seek to amend the Social Security Act to extend the qualification for a pensioner concession card to align with the arrangements for suspension of entitlement. In evidence provided to Senate Estimates, former Minister Ruston stated that advice from peak bodies was that the loss of the health care card was a key barrier to pensioners earning more income.[20]

Item 1 inserts proposed section 1061ZCA to extend the qualification for a pensioner concession card for up to 2 years for Age Pensioners and their partners, where the rate of pension is nil due to an event or change in circumstances, and where the income tested includes earned income in Australia. This aligns with the provisions for suspension of entitlement in Schedule 1. Proposed subsections 1061ZCA(6) and (7) ensure that the pensioner concession card is only available to those residing in Australia, or in Australia and receiving a pension under the social security agreement with New Zealand.

Item 4 specifies that this provision applies to those who have had their pension suspended within the 12 weeks prior to commencement, as well as those whose suspension is on or after commencement.

Items 5 to 16 amend section 1061ZD of the Social Security Act, which covers the eligibility of DSP recipients to a pensioner concession card when payment has been suspended due to employment. Currently, DSP recipients whose payment had been suspended for employment reasons are only eligible to receive the concession card for 52 weeks, even though their pension could be suspended for up to 2 years. Items 7 and 13 extend eligibility to 2 years, consistent with the suspension provisions.

To ensure that those who have had their pension suspended prior to commencement are not disadvantaged, Item 17 provides that those who have had their payment suspended within the 52 weeks prior to commencement will also have their eligibility for the concession card extended to 2 years from the date of suspension.

Part 3 seeks to amend the Veterans' Entitlement Act to extend the period of eligibility for fringe benefits for those receiving a service pension or income support supplement and their partners, where their payment has been suspended due to employment income. Fringe benefits can include access to medical treatment as well as concessions such as those available to pensioner concession card holders. Specific benefits are determined by the particular circumstances of the recipient (for example, see Part V of the Veterans Entitlement Act).

Item 21 adds proposed subsections (3) and (4) to section 53A of the Veterans’ Entitlements Act to extend eligibility for fringe benefits for up to 2 years for recipients of service pension or income support supplement, where payment has been suspended due to a person’s income reduced rate becoming nil and where the income tested includes employment income. Proposed subsections 53A(5) and (6) provide the same benefits for the partners of these recipients, where the partner was previously in receipt of fringe benefits or a pensioner concession card.

Items 22 and 23 add notes to clarify that those who cease to receive a service pension or income support supplement are not generally eligible for fringe benefits.

Eligibility for the extension of entitlement to fringe benefits is also provided to those whose service payment or income support payment ceases due to employment income up to 12 weeks prior to commencement (Item 26).

Part 4 covers the entitlements of those in receipt of Age Pension, DSP or Carer Payment, whose partner was receiving a veteran service pension or income support payment and payment has ceased due to employment income.

Proposed section 1061ZBD of the Social Security Act provides that where Age Pension, DSP or Carer Payment ceases to be payable because of the earned income of the recipients’ partner, they retain eligibility for the pensioner concession card for up to 2 years. As above, these provisions align with the suspension arrangements contained in Schedule 1 of the Bill. Proposed subsections 1061ZDB(4) and (5) impose the same residency requirements as apply in Item 1. Item 30 extends eligibility for these provisions to those who have had payment suspended up to 12 weeks before commencement.

Schedule 3—Temporary increase to the Pensioner Work Bonus

Background

The Work Bonus is designed to encourage pensioners to earn additional income from work. It does this by modifying the income test.

The Work Bonus provisions in the Social Security Act apply to recipients of Age Pension, Carer Payment and Disability Support Pension who have reached Age Pension age (section 1064 and subsection 1073AA(1)).

The Work Bonus provisions in the Veterans’ Entitlements Act apply to recipients of a Service Pension or Income Support Supplement who have reached qualifying age (subsection 46AA(1)).

The income test

Income support payments such as the Age Pension and Veterans service pensions are subject to a fortnightly income test. Recipients can receive a certain amount of non-pension income without it affecting their pension. However, the income test will reduce their pension by 50c for every dollar they receive above this amount.

The amount a pensioner can receive without it affecting their pension is known as the income free area. The rate at which the pension is reduced is called the taper rate. The point at which a pensioner’s payment is reduced to zero is called the cut off point.

For most single social security pensioners, the income free area is $190 for a single person and the taper rate is 50c in the dollar. This leads to a cut off point of $2,243.[21] Different amounts apply to couples.

The definition of income is broad. It includes income earned from work and income from investments.[22]

The Work Bonus

The Work Bonus allows pensioners to earn additional income from work without this income reducing their pension. It does this by moving away from a fortnight by fortnight assessment of work income.

One way to encourage pensioners to engage in paid work would be to increase the income free area. However, this would be a relatively blunt tool for raising work levels because the income test applies to income from investments and other non-work sources as well as work income.

Raising the income free area would also create stronger incentives for pensioners to engage in regular part-time work but less incentive to engage in shorter spells of full-time time work. One of the effects of applying the income test on a fortnightly basis is that pensioners who earn a relatively large amount of income over a few fortnights can lose more of their pension than those who earn the same income spread over a larger number of fortnights.

The Work Bonus scheme attempts to deal with both of these problems. The scheme gives every pensioner an ‘income bank.’ Every fortnight each pensioner is allowed $300 of work income free of the income test. The income bank is similar to the income free area but is different in three important ways.

Firstly, the income bank applies only to income from work.
Secondly, pensioners can ‘bank’ the unused portion of the fortnightly $300 and use it later.
Thirdly, the unused amounts accumulate in the income bank, but only up to a limit of $7,800 (the maximum amount of Work Bonus credit it is possible to accumulate over a year).

A single pensioner with an income balance of zero could earn up to $490 every fortnight without having their pension reduced (assuming they have no non-work income). This $490 includes the $300 credited to their income bank every fortnight and the $190 fortnightly income free area.

However, another way a pensioner can use the Work Bonus is to build up a balance in their income bank and use this balance to cover fortnights where they earn significantly more than $490. Unlike the income free area, the Work Bonus allows pensioners to ‘save’ and then ‘spend’ their fortnightly credit.[23]

The Work Bonus is designed to allow pensioners to take advantage of seasonal or temporary work. As financial planning professional Brenton Miegel explained to the Daily Telegraph:

… if you want to do seasonal work – whether that’s being a Santa Claus, fruit picking or harvesting – the Work Bonus can allow people over age pension age to work for four to six weeks (full-time) and not see any reduction in their pension.[24]

Proposals to expand the Work Bonus

In a December 2021 pre-budget submission, the Australian Chamber of Commerce and Industry (ACCI) argued there ‘is an army of older workers with the skills Australia needs who would still like to work, but don’t participate in the workforce as it reduces their pension.’ ACCI recommended a number of changes including an increase in the Work Bonus:

To entice aged pensioners back into the workforce, the income free threshold and work bonus should be raised to allow pensioners to keep more of their pension when they earn income. In addition, to address the current skill shortage, as a temporary measure until June 2023, consideration should be given to allow Australians who are already in receipt of the aged pension as at 1 January 2022 to earn at a significantly higher rate before their age pension begins to be reduced, with the aim of bringing pensioners back into the workforce for 2 to 3 days per week.[25]

In a December 2021 media release, national, state and territory chambers of commerce argued that getting older skilled workers back into the labour force would help make up for the lack of skilled migrants caused by border closures during the COVID-19 pandemic.[26]

COTA, a group representing older Australians also recommended an increase in the Work Bonus in its pre-budget submission.[27]

Coalition proposal to double the Work Bonus

In June 2022, Opposition Leader Peter Dutton proposed boosting the Work Bonus by increasing the fortnightly amount credited to each pensioner’s income bank from $300 to $600. He said the proposal was ‘designed to increase labour supply, will ease workplace shortages and put downward pressure on inflation and interest rates.’[28]

Government proposal to boost the Work Bonus

In September 2022 the Government held a Jobs and Skills Summit that brought together unions, employers, civil society and governments to discuss issues such as skills shortages.[29]

In response to discussions at the Jobs and Skills Summit the Government agreed to a ‘one-off income credit so that Age Pensioners who want to work can earn an additional $4,000 over this financial year without losing any of their pension.’[30]

Related Bills before the Parliament

In addition to this Bill, there are two other Bills currently before the Parliament that propose similar changes:

The Social Services Legislation Amendment (Enhancing Pensioner and Veteran Workforce Participation) Bill 2022 was introduced as a private Senator’s Bill by Senator Dean Smith. This Bill includes amendments for the Coalition’s proposed changes to the Work Bonus, as well as two measures (essentially the same as Schedules 1 and 2 of the current Bill) carried over from the Social Services Legislation Amendment (Workforce Incentive) Bill 2022.

The Social Services and Other Legislation Amendment (Lifting the Income Limit for the Commonwealth Seniors Health Card) Bill 2022 is a Government Bill that has been amended by the Senate to incorporate all three schedules of Senator Smith’s private Senator’s Bill. These amendments were supported by Coalition senators as well as independent Senator David Pocock, the Jacqui Lambie Network and the Australian Greens.[31]

There are substantial differences in the proposed changes to the Work Bonus in this Bill compared to those included in Senator Smith’s Bill which are discussed below.

Key issues and provisions

Effectiveness

It is not clear that a one-off increase to the Work Bonus will be effective at encouraging pensioners to increase their participation in the labour market.

The Department of Social Services (DSS) briefed Minister Rishworth on the Coalition’s proposal in August 2022 (prior to the Jobs and Skills Summit).[32] According to the briefing:

There is no evidence to suggest increasing the Work Bonus would incentivise retirees back into the workforce:

Pensioners already have the opportunity to earn a significant amount of income from work without affecting their Age Pension and currently 97 per cent of pensioners choose not to work.

The number of pensioners reporting income from employment is in long-term decline despite an increase in the value of the Work Bonus concession of $50 per fortnight (to $300 per fortnight) in 2019.

The low number of pensioners undertaking work and the lack of take-up of the Work Bonus indicates pensioners are likely not working due to other factors, such as a desire to be retired, physical impairments, and the type of work available. This is supported by the findings of the 2020 Retirement Incomes Review.[33]

During committee hearings on Senator Smith’s Bill, a Treasury officer suggested that while financial incentives may not be effective at encouraging older people back to work, they may be effective at encouraging those already working to work more hours.[34]

Explanation of the provisions

Schedule 3 of the Bill makes changes to the Social Security Act and the Veterans’ Entitlements Act.

Provisions for the Work Bonus in the Veterans’ Entitlements Act mirror those in the Social Security Act with only a few minor differences.

The Work Bonus provisions in the Veterans’ Entitlements Act 1986 apply to recipients of a Service Pension or Income Support Supplement who have reached qualifying age (subsection 46AA(1)).

Changes to the Social Security Act

Item 1 inserts proposed section 1073AC at the end of Division 1AAA of Part 3.10 of Chapter 3 of the Act.

For each person with a Work Bonus income bank, the effect of proposed section 1073AC is to temporarily add $4,000 to their income bank balance.

Currently subsection 1073AB(2) limits income bank balances to $7,800. To enable those with income bank balances above $7,800 to receive the full additional $4,000 credit, proposed subsection 1073AC(6) temporarily increases the income bank limit to $11,800.

When the temporary increase period ends on 30 June 2023, the income bank limit of $7,800 is reinstated. Proposed subsections 1073AC(7) and 1073AC(8) reinstate the $7,800 income bank limit at the end of the temporary increase period. Any person with a Work Bonus income bank bonus above $7,800 will have their balance reset to $7,800.

Changes to the Veterans’ Entitlements Act

Changes to the Veterans’ Entitlements Act mirror those to the Social Security Act and are explained in detail in the Explanatory Memorandum to the Bill.

Position of major interest groups

By increasing the Work Bonus the Government is responding to calls from two separate stakeholder groups; groups representing older Australians and groups representing employers. Both sets of groups support an increase to the Work Bonus but want the Government to do more.

For groups representing older Australians, an increase in the Work Bonus represents a partial relaxation of the Age Pension income test. Even if the policy fails to increase the number of hours pensioners work it will financially benefit pensioners who currently work and are losing some of their pension due to the income test.[35]

For groups representing employers an increase in the Work Bonus represents a potential expansion of the labour force. If more pensioners begin looking for work or seek to increase their hours of work, this might help reduce labour and skill shortages. Labour and skill shortages became a high profile issue after immigration was restricted in response to COVID-19.[36]

Think tanks

Commentators associated with the Institute of Public Affairs (IPA) have promoted reform of the Work Bonus as a policy that benefits pensioners, employers and Government.[37] IPA adjunct fellow Cian Hussey proposed an unlimited Work Bonus as a solution to the rising costs of an ageing population:

Perhaps the single best option for tackling these issues is to provide an unlimited Work Bonus which would allow pensioners to earn as much as they want from work and just pay income tax on that income like everyone else. This is not to suggest a universal pension - eligibility would still be subject to an assets test but to remove the punishing disincentives to work currently faced by pensioners.

Getting more pensioners to work is the only way of defusing the massive fiscal pressures currently building up.[38]

The IPA proposed an unlimited Work Bonus as a policy option in an August 2022 research brief.[39] IPA staff have argued that the cost of Senator Smith’s proposed doubling of the fortnightly Work Bonus credit ‘will be more than offset through higher tax revenues which result from having more Australians working and earning a wage.’[40]

Industry groups

Hancock Prospecting Pty Ltd (HPPL) has also pushed for an unlimited Work Bonus. In a submission on Senator Smith’s Bill, HPPL argued:

Increasing the Work Bonus without limit, would be a win-win-win-win policy.

It will be good for pensioners and veterans, giving them more freedom and opportunity, allowing them work without onerous paperwork, and not be punished for choosing to work.

It will be good for businesses who can fill vacancies, increase their productive capacity, and make use of the experience and knowledge of older workers who might otherwise stop working.

It will be good for the economy as it will increase economic activity and both the supply of and demand for goods and services.

And it will be good for state and federal budgets, increasing income tax, payroll tax, and GST receipts.[41]

In keeping with the position it adopted before the Jobs and Skills Summit, the Australian Chamber of Commerce and Industry (ACCI) has supported the increase to the Work Bonus.[42]

The Victorian Chamber of Commerce and Industry has argued that the Government’s changes to the Work Bonus are too limited. In a submission to the inquiry on the Bill, the Chamber argued:

At the very least, the Work Bonus should be extended to 2025, giving pension recipients and businesses more certainty, and then reviewed on a two-yearly basis to assess cost of living and skill shortage pressures, if the option for a permanent measure is unviable.

We also recommend that the Work Bonus is increased to $10,000. The Bill currently increases the Work Bonus by $4,000, equating to an approximate $150 extra per fortnight and extra seven hours of work per fortnight (at minimum wage), until a person's age pension payments are reduced. This number is conservative, significantly restricting pension recipients who want to work more and businesses who really need staff.

While the Work Bonus helps to increase workforce participation, it also increases complexity for pension recipients and employers. Another way to increase workforce participation and earnings for pension recipients is to have the option of working a number of days OR the Work Bonus and income tested cap, which ever lets the worker earn more. This reduces complexity and increases certainty for both workers.[43]

The National Farmers Federation (NFF) compared the changes to the Work Bonus in this Bill with those in Senator Smith’s private Senator’s Bill and recommended a combination of both measures:

The NFF would recommend the committee consider a one off increase to the income credit with the flexibility that it provides, at the level of $7,800, which is the accumulated value of lifting the work bonus to $600 for 12 months. This would see that pensioners benefit from the best aspects of both bills.[44]

The Housing Industry Association proposed that the Work Bonus be kept in place until at least 2024 and that the Government ensure the changes are communicated to pensioners.[45]

Groups representing older Australians

Overall, groups representing older Australians have supported an increase to the Work Bonus.

National Seniors Australia welcomed the proposal to temporarily increase the Work Bonus limit by $4,000. However, it argued that the policy is ‘suboptimal’ in some regards because it:

… perpetuates deficiencies in the existing pension rules.

The first is the size of the income exemption. Feedback received from businesses and pensioners is the $4,000 limit will be too small to make a material difference to workforce availability. This is particularly the case for those engaged in or wanting to work consistent hours.

The second is it does not remove the complexity of the current system. Income limits and reporting rules are difficult to comprehend. Retirees are naturally risk averse when it comes to their pension and are rightly concerned about employment income affecting their pension entitlement. Pensioners also find the constant reporting to Centrelink onerous and disheartening. This means many pensioners will remain discouraged from participating in the workforce or will choose to work for cash to avoid negative financial impacts.

The third issue is the policy does not give adequate time to promote the scheme, which could undermine the response, leading to limited uptake. To be effective, government will need to ensure this change is clearly communicated to pensioners and businesses. Even with this, we are concerned the ongoing complexity will discourage most from working.[46]

National Seniors has proposed ‘a 2-year trial of an economy wide opt in exemption from the income test for pensioners.’ The organisation supported its proposal with modelling commissioned from Deloitte.[47]

COTA supported an increase in the Work Bonus in its 2022–23 arguing that it should be extended until the individual earns the equivalent of the minimum adult wage.[48]

An article published on the Combined Pensioners and Superannuants Association’s website expressed scepticism about the effectiveness of an increase in the Work Bonus:

Clearly, the incentive for a pensioner to participate in Work Bonus was a powerful one even before the Government increased the cap by $4,000 over seven months. Yet only three per cent of pensioners avail themselves of this opportunity. Will an additional annual benefit of $4,000 unleash a grey army of hundreds of thousands of workers where the previous net benefit of $7,800 produced only 75,000 soldiers? Probably not.[49]

Policy position of non-government parties/independents

It is not clear what position the Coalition, minor parties and independents will take on Schedule 3 of the Bill. As noted earlier, the Senate amended the Social Services and Other Legislation Amendment (Lifting the Income Limit for the Commonwealth Seniors Health Card) Bill 2022 to include the Work Bonus measure in Senator Smith’s private Senator’s Bill.

[1]. Explanatory Memorandum, Social Services and Other Legislation Amendment (Workforce Incentive) Bill 2022, [2].

[2]. The Statement of Compatibility with Human Rights can be found at page 41 of the Explanatory Memorandum to the Bill.

[3]. Department of Social Services (DSS), ‘3.4.1.60 Continuation, Variation or Termination of Age’, Social Security Guide, version (1.299), DSS website, 4 January 2022.

[4]. DSS, 3.4.1.60 Continuation, variation or termination of Age.

[5]. DSS, ‘3.9.2.30 PCC Due to Employment’, Social Security Guide, 20 March 2020.

[6]. DSS, ‘3.6.1.100 Continuation, Variation or Termination of DSP’, Social Security Guide, version (1.299), 7 December 2020.

[7]. DSS, ‘3.1.12 Employment Income Nil Rate Period’, Social Security Guide, version (1.299), 1 July 2021.

[8]. DSS, 3.6.1.100 Continuation, variation or termination of DSP.

[9]. DSS, 3.6.1.100 Continuation, variation or termination of DSP.

[10]. ‘Service pensioners who can get a Gold Veteran Card’, Department of Veteran’s Affairs (DVA); ‘Pensioner Concession Card’, DVA.

[11]. ‘DSS Demographics - June 2022’, Australian Government, data.gov.au (see ‘Earnings’ tab).

[12]. ‘DSS Demographics - June 2022’, Australian Government, data.gov.au.

[13]. ‘DSS Demographics - June 2022’, Australian Government, data.gov.au (see ‘Payment by rate’ tab).

[14]. ‘Statistics about the veteran population’, DVA, Pensioner summary statistics—June 2022, Table 7.

[15]. Senate Community Affairs Legislation Committee, Official committee Hansard, (Canberra: The Senate, 17 February 2022), 17.

[16]. Senate Community Affairs Legislation Committee, Official committee Hansard, 24.

[17]. ‘Job Vacancies, Australia, August 2022’, Australian Bureau of Statistics.

[18]. Paragraph 23(4A)(h) of the Social Security Act 1991 provides for this 12 week nil rate period currently.

[19]. ‘Benefits of the card’, Services Australia.

[20]. Senate Community Affairs Legislation Committee, Official committee Hansard, 17.

[21]. ‘Income test for pensions’, Services Australia.

[22]. ‘Income’, Services Australia.

[23]. For an explanation of the Work Bonus see: DSS, ‘3.1.15 Work bonus’, Social Security Guide Version 1.299, 29 September 2022. ‘Work Bonus’, DSS. ‘Work Bonus’, Services Australia.

[24]. Anthony Keane, ‘Watch Finances After Retirement Backflip’, Daily Telegraph, 26 August 2019, 34.

[25]. Australian Chamber of Commerce and Industry, Pre-Budget Submission 2022–23, December 2021: 28–29.

[26]. ‘Pensioners can Address Worker Shortage’, national, state and territory chambers of commerce, joint media release, 8 December 2021.

[27]. Councils on the Aging (COTA) Australia, Pre-Budget Submission, (Canberra: COTA Australia, January 2022), 17.

[28]. Peter Dutton (Leader of the Opposition), ‘Older Australians Should Keep More of What they Earn’, media release, 26 June 2022.

[29]. ‘Jobs and Skills Summit’, Treasury.

[30]. Anthony Albanese (Prime Minister) and Jim Chalmers (Treasurer), ‘Outcomes of the Jobs and Skills Summit’, media release, 2 September 2022.

[31]. Coalition Senators, Dissenting report, Senate Community Affairs Legislation Committee, Social Services Legislation Amendment (Enhancing Pensioner and Veteran Workforce Participation ) Bill 2022, (Canberra: The Senate, 2022), 23; Social Services and Other Legislation Amendment (Lifting the Income Limit for the Commonwealth Seniors Health Card) Bill 2022, Opposition amendments, Sheet 1643, The Senate, 28 September 2022; Australia, Senate, Journals, 15, 28 September 2022, 390–401.

[32]. This briefing was supplied to the Senate as part of the Community Affairs Committee’s inquiry into the Coalition’s Bill (the Social Services Legislation Amendment (Enhancing Pensioner and Veteran Workforce Participation) Bill 2022).

[33]. Pension changes—Briefing materials and correspondence—Order of 6 September 2022 (25)—Letter to the President of the Senate from the Minister for Trade and Tourism (Senator Farrell), dated 13 September 2022, responding to the order and raising public interest immunity claims, and attachments (presented out of sitting 15 September 2022): 46–47.

[34]. Response to Senator Dean Smith by Adam Hawkins (Assistant Secretary, Tax and Transfers Branch, Department of the Treasury). Community Affairs Legislation Committee, Social Services Legislation Amendment (Enhancing Pensioner and Veteran Workforce Participation) Bill 2022, (Canberra: The Senate, 2022), 24–25.

[35]. This point was made in an article on the Combined Pensioners and Superannuants Association’s web site. The author commented: ‘the increased Work Bonus cap will benefit those pensioners currently working. In that respect, this measure is a good measure and one that will make these pensioners and a few new entrants very happy, for seven months at least and hopefully permanently.’ ‘How to recruit a grey army: jobs and skills’, Combined Pensioners and Superannuants Association.

[36]. Praveen Menon and Sam Holmes, ‘Australia needs workers but a million are stuck at the door’, Reuters, 1 September 2022.

[37]. For example, Saxon Davidson, ‘Red Tape Locks Pensioners Out of Work’, Spectator Australia, 28 September 2022. Cian Hussey, ‘Australian Notes: Why on Earth are we Stopping People Who Want to Work from Working?’, Spectator Australia, 26 February 2022.

[38]. Hussey, ‘Australian notes: Why on earth are we stopping people who want to work from working?’.

[39]. Institute of Public Affairs (IPA), Submission to Senate Standing Committees on Community Affairs, Inquiry into the Social Services Legislation Amendment (Enhancing Pensioner and Veteran Workforce Participation) Bill 2022, [Submission no. 6], August 2022.

[40]. IPA, Submission [Attachment no. 1], 5.

[41]. Hancock Prospecting Pty Ltd, Submission to Senate Standing Committees on Community Affairs, Inquiry into the Social Services Legislation Amendment (Enhancing Pensioner and Veteran Workforce Participation) Bill 2022, [Submission no. 3], 16 August 2022, 2.

[42]. Australian Chamber of Commerce and Industry, ‘Mobilising the Grey Army to Address Workforce Shortages’, media release, 5 September 2022.

[43]. Victorian Chamber of Commerce and Industry, Submission to Senate Standing Committees on Community Affairs, Inquiry into Social Services and Other Legislation Amendment (Workforce Incentive) Bill 2022 [Provisions], [Submission no. 2], 13 October 2022, 4.

[44]. National Farmers Federation, Submission to Senate Standing Committees on Community Affairs, Inquiry into Social Services and Other Legislation Amendment (Workforce Incentive) Bill 2022 [Provisions], [Submission no. 1], 13 October 2022, 4.

[45]. Housing Industry Association, Submission to Senate Standing Committees on Community Affairs, Inquiry into Social Services and Other Legislation Amendment (Workforce Incentive) Bill 2022 [Provisions], [Submission no. 5], 13 October 2022, 2.

[46]. National Senior Australia, Submission to Senate Standing Committees on Community Affairs, Inquiry into Social Services and Other Legislation Amendment (Workforce Incentive) Bill 2022 [Provisions], [Submission no. 3], 13 October 2022, 3–4.

[47]. National Seniors Australia, Submission.

[48]. COTA Australia, Pre-Budget Submission, (Canberra: COTA Australia, January 2022), 17.

[49]. ‘How to Recruit a Grey Army: Jobs and Skills’, Combined Pensioners and Superannuants Association.

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