BILLS DIGEST NO. 26, 2015–16              1 October 2015

Social Services Legislation Amendment (Cost of Living Concession) Bill 2015

Anna Dunkley and Michael Klapdor
Social Policy Section

Date introduced: 16 September 2015

House:  House of Representatives

Portfolio: Social Services

Commencement:  On 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 ComLaw website.

Purpose of the Bill

The Social Services Legislation Amendment (Cost of Living Concession) Bill 2015 (the Bill) will exempt the new South Australian (SA) Government Cost of Living Concession Payment from being counted as income under the Social Security Act 1991 (the SS Act)[1] and the Veterans’ Entitlements Act 1986 (the VE Act).[2]

Background

In its 2014–15 Budget, the Australian Government announced its decision to terminate the National Partnership Agreement on Certain Concessions for Pensioners and Seniors Card Holders (NPA) and cease the payments made to the states and territories under this agreement.[3] In response, in its 2014–15 Budget, the SA Government stated that it would stop funding the concession on local government rates it provided to pensioners and low-income earners.[4] In May 2015, following controversy around the removal of this concession and a failed campaign to convince the Australian Government to reverse its NPA decision, the SA Government announced it would introduce a Cost of Living Concession payment (COLC payment).[5]

National Partnership Agreement

The NPA had its origins in a decision by the Australian Government to extend access to the Pensioner Concession Card (PCC) to all pensioners, including part-rate pensioners, from 1993.[6] Eligibility for concessions provided by the state and territory governments is linked to the PCC. Therefore the cohort of pensioners eligible for concessions expanded. Recognising this, the Australian Government agreed to provide funds to the states and territories to cover some of their increased costs from 1993.[7] The formal 1993 agreement allocated set amounts to each state and territory, to be indexed and adjusted for growth in state pensioner populations over time.[8] The Australian Government funding would be in the form of a Specific Purpose Payment, requiring states and territories to provide an agreed set of concessions on essential services to all pensioners.[9]

The original agreement did not cover reciprocal transport concessions to Seniors Card holders. Seniors Cards are allocated by states and territories and have different conditions and entitlements, and Seniors Card holders were initially unable to access concessional travel in jurisdictions other than their own. In 2008, after a long period of campaigning and negotiations, the Labor Government agreed to provide funding of $50 million over four years to the states and territories to offer reciprocal transport concessions to Seniors Card holders and it was included in the agreement on pensioner concessions to form the NPA.[10] The 2013–14 funding allocations under the NPA for the concessions for pensioners component are set out in Table 1.

Table 1: Certain concessions for pensioners component

$million

NSW

VIC

QLD

WA

SA

TAS

ACT

NT

Total

2013–14

97.3

69.5

48.6

24.5

27.7

8.9

2.0

1.4

279.7

Source: Australian Government, ‘Part 2: payments for specific purposes’, Federal financial relations: budget paper no. 3: 2013–14, p. 50, accessed 18 September 2015.

South Australian Government concessions under the NPA

Each jurisdiction determined what concessions it provided under the NPA, however, concessions generally included reduced local council rates, utility bills, motor vehicle registration charges and public transport fares.[11] The SA Government concession most relevant to the Bill is the local government rate concession for eligible home owners, paid under the South Australian Rates and Land Tax Remission Act 1986.[12] Payments were sent directly to local councils to reduce rates paid by pensioners and low-income earners (by $190 per year) and by eligible self-funded retirees (by $100 per year).[13]

Cessation of the NPA

The Australian Government terminated the most recent NPA from 1 July 2014, indicating that it would redirect the funding to ‘repair the Budget and fund policy priorities’.[14] The budget papers indicated that ceasing to provide financial assistance to the states and territories for the provision of concessions would result in savings of $1.3 billion over four years.[15]

South Australian Government response

In response to the Australian Government’s decision to terminate the NPA, the SA Government announced in its 2014–15 Budget that it would remove the local government rate concession in 2015–16.[16] This announcement was controversial and was criticised by the state Opposition, local government associations and pensioners.[17]

Following the State Tax Review and public pressure from advocacy groups and local councils, the SA Government announced the introduction of the Cost of Living Concession Payment (COLC payment) on 14 May 2015.[18] From 1 July 2015, eligible South Australians can receive a direct payment of $200 or $100 per year. In announcing the new COLC payment, SA Premier Jay Weatherill stated that it was being introduced after a failed campaign to convince the Australian Government to reverse its decision to terminate the NPA, and would provide assistance to a greater number of households than the concession it was replacing.[19] The SA Treasurer noted on 14 May 2015 that other South Australian concessions remain unchanged, including concessions for ‘energy, medical heating and cooling, public transport, Emergency Services Levy, water and sewerage’.[20]

Eligibility for the COLC payment

Similar to the previous arrangements, the COLC payment is payable per household (rather than individual). The SA Government expects approximately 205,000 households to be eligible for the COLC payment.[21] The Cost of Living concession webpage provides full eligibility information, but generally people may be eligible if, on 1 July, they hold one of the following cards: Pensioner Concession Card, Gold Card from the Department of Veterans’ Affairs, Low Income Health Care Card, or the Commonwealth Seniors Health Card.[22] People may also be eligible if they meet low income provisions, or are in receipt of any one of a range of Centrelink and Department of Veterans’ Affairs payments on 1 July of the relevant financial year, including Newstart Allowance, Sickness Allowance, Youth Allowance or Parenting Payment Partnered.[23] The low income provisions are the same as currently apply for eligibility to concessions on water and sewerage charges—the claimant’s income from all sources (including partner’s income if in a couple) must not be over the following limits:

•       single: $16,305.07

•       single with children: $17,423.54 or

•       partnered: $29,961.29.[24]

The different eligibility criteria mean that approximately 20,000 people who received concessions under the previous arrangement will not be eligible for the COLC payment.[25]

Unlike previous arrangements, tenants may be eligible for the COLC payment in addition to homeowners. The SA Government anticipates approximately 45,000 people will be eligible for the COLC payment who were not entitled to concessions under previous arrangements.[26]

Table 2: Comparison of previous and current concessions

$ per annum

Previous Payment

New Payment

Change

Home owners (pensioners and low-income earners)

190

200

10

Home owners (self-funded retirees holding a Commonwealth Seniors Health Card)

100

100

Nil

Tenants (pensioners and low-income earners)

0

100

100

Tenants (self-funded retirees holding a Commonwealth Seniors Health Card)

0

100

100

Source: J Weatherill (South Australian Premier) and T Koutsantonis (South Australian Treasurer), New cost of living concession for pensioners, media release, 14 May 2015, accessed 21 September 2015.

Reception to the COLC payment

The COLC payment has been welcomed by major interest and advocacy groups in South Australia, including COTA South Australia, National Seniors’ South Australian policy advisory group, South Australian Council of Social Service, and the Local Government Association of South Australia, which describes it as ‘a win for pensioners’.[27] SA Opposition leader Steven Marshall said he was ‘delighted’ at the introduction of the COLC payment, though he expressed a desire to find out more information relating to the new conditions for self-funded retirees.[28]

Policy position of stakeholders and parliamentarians

At the time of writing, the Bill has not received any significant comment from major stakeholders, non-government parties or independent parliamentarians.

Committee consideration

At the time of writing, the Bill has not been referred to any committees.[29] The Senate Standing Committee for the Scrutiny of Bills had not yet considered the Bill.

Financial implications

The Explanatory Memorandum to the Bill states that the measure will have no financial impact.[30]

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Australian 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 Australian Government considers that the Bill is compatible because it supports people’s ‘human right to social security’.[31]

At the time of writing, the Parliamentary Joint Committee on Human Rights had not commented on the Bill.

Key issues and provisions

The provisions in Schedule 1 of the Bill will exempt the COLC payment from being assessed as income under the SS Act and VE Act. Item 1 adds the COLC payment to the list of ‘excluded amounts’ that are not considered income for the purposes of the SS Act, at subsection 8(8) of that Act.[32] Item 2 similarly adds the COLC payment to the list of excluded amounts that are not considered income for the purposes of the VE Act, at subsection 5H(8) of that Act.[33]

As noted, the SA Government expects 205,000 households to be eligible for the COLC payment.[34] If the Bill is not passed, South Australians who claim a payment or concession card under the SS Act or VE Act as well as a COLC payment from the SA Government will have the latter assessed as income for the purposes of the two Acts. As almost all Australian Government payments and concession cards are means tested based on an individual’s income or assets, a higher income can affect a person’s eligibility for a payment or concession card, or their rate of payment.

The Australian Government has described this as a ‘beneficial Bill’; indeed the intention and likely outcome of the Bill are positive for South Australian pensioners, low-income earners and concession card holders, because it will enable them to receive their full entitlements from both the SA and Australian Governments without penalty.[35]

Other provisions

The SA Government introduced the COLC payment from 1 July 2015 and South Australian households started to receive their cheques during the week starting 21 September 2015.[36] The final item of the Bill (the Application provision) ensures that COLC payments are not counted as income in payments made under the SS Act or VE Act, even if they are received before the Bill receives Royal Assent.

Members, Senators and Parliamentary staff can obtain further information from the Parliamentary Library on (02) 6277 2500.

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[1].              Social Security Act 1991, accessed 21 September 2015.

[2].              Veterans’ Entitlement Act 1986, accessed 21 September 2015.

[3].              Australian Government, ‘Part 2: Expense measures’, Budget measures: budget paper no. 2: 2014–15, p. 192, accessed 18 September 2015.

[4].              South Australian Government, Budget measures statement: budget paper no. 6: 2014–15, p. 4, accessed 18 September 2015.

[5].              J Weatherill (South Australian Premier) and T Koutsantonis (South Australian Treasurer), New cost of living concession for pensioners, joint media release, 14 May 2015, accessed 21 September 2015.

[6].              P Baldwin (Minister for Social Security), Pensioner concessions delivered as promised, media release, 2 April 1993, accessed 21 September 2015.
The PCC was previously known as the Pensioner Health Benefits card. A PCC entitles the holder to reduced-cost medicines under the Pharmaceutical Benefits Scheme, lower expenditure thresholds for accessing the Medicare Safety Net, access to free hearing services, discounted mail redirection services, and there are incentives for doctors to bulk-bill holders. State, territory and local governments also offer concessions to PCC holders. Pensioners, single parents on income support, and some allowance payment recipients who are aged 60 or over or have a partial capacity to work are eligible for the PCC. Department of Human Services (DHS), ‘Pensioner Concession Card’, DHS website, accessed 23 September 2015.

[7].              Council of Social Service of New South Wales, Cost of living: Are concessions doing their job?, December 2014, p. 17, accessed 21 September 2015.

[8].              B Baldwin (Minister for Social Security), Pensioners assured of Commonwealth and State concessions, media release, 6 July 1993, accessed 22 September 2015.

[9].              Ibid.

[10].              Council on Federal Financial Relations, National partnership agreement on certain concessions for pensioners and Seniors Card holders, 2008, accessed 22 September 2015; Australian Government, Budget measures: budget paper no. 2: 2008–09, accessed 22 September 2015.

[11].              House of Representatives Standing Committee on Family and Community Affairs, Concessions – who benefits?: a report on concession card availability and eligibility for concessions, House of Representatives, Canberra, November 1997, Executive Summary, accessed 21 September 2015; M Klapdor, ‘Changes to support for pensioners and retirees’, Budget review 2014–15, Parliamentary Library, Canberra, May 2014, accessed 21 September 2015.

[12].              Local Government Association of South Australia, ‘Pensioner concessions’, Local Government Association of South Australia website, accessed 21 September 2015. Rates and Land Tax Remission Act 1986 (SA), accessed 1 October 2015.

[13].              South Australian Government, Budget measures statement: budget paper no. 6: 2014–15, op. cit., p. 12; D Wills, ‘Extra payout as white flag raised on pensions’, The Advertiser, 15 May 2015, p. 1, accessed 21 September 2015.

[14].              Australian Government, ‘Part 2: expense measures’, Budget measures: budget paper no. 2: 2014–15, p. 192, accessed 18 September 2015.

[15].              Ibid.

[16].              South Australian Government, Budget measures statement: budget paper no. 6: 2014–15, op. cit., p. 4; Australian Government, ‘Part 2: expense measures’, op. cit., p. 192.

[17].              ‘Threat to rates bill concessions for pensioners sees SA Treasurer and Liberals at odds’, ABC News website, 1 May 2015, accessed 22 September 2015.

[18].              South Australian Government, Government response to the State Tax Review, Department of Treasury and Finance, 2015, accessed 21 September 2015; Local Government Association of South Australia, ‘Pensioner concessions’, op. cit.; J Weatherill (South Australian Premier) and T Koutsantonis (South Australian Treasurer), New cost of living concession for pensioners, op. cit.

[19].              J Weatherill and T Koutsantonis, New cost of living concession for pensioners, op. cit.

[20].              T Koutsantonis (South Australian Treasurer), State tax reform – new cost of living concession for pensioners, media release, 14 May 2015, accessed 21 September 2015.

[21].              J Weatherill and T Koutsantonis, New cost of living concession for pensioners, op. cit.

[22].              South Australian Government, ‘Cost of living concession’, South Australian Government website, accessed 21 September 2015.

[23].              South Australian Government, ‘Annual application for the cost of living concession’, Department for Communities and Social Inclusion website, accessed 21 September 2015.

[24].              South Australian Government, ‘Income limits – low income earners’, South Australian Government website, accessed 22 September 2015.

[25].              D Wills, ‘Extra payout as white flag raised on pensions’, op. cit.

[26].              J Weatherill and T Koutsantonis, New cost of living concession for pensioners, op. cit.

[27].              COTA SA, COTA SA welcomes new cost of living payment, media release, 14 May 2015; National Seniors Australia, SA seniors welcome new concession, media release, 19 June 2015; South Australian Council of Social Service (SACOSS), 205,000 households across South Australia to benefit from new concession, media release, 14 May 2015; Local Government Association of South Australia, ‘Pensioner Concessions’, op. cit., all accessed 21 September 2015.

[28].              D Wills, ‘Concessions for SA pensioners and low-income earners, self-funded retirees lose’, The Advertiser (online edition), 15 May 2015, accessed 21 September 2015.

[29].              Senate Selection of Bills Committee, Report, 12, 2015, The Senate, Canberra, 17 September 2015, accessed 21 September 2015.

[30].              Explanatory Memorandum, Social Services Legislation Amendment (Cost of Living Concession) Bill 2015, accessed 18 September 2015.

[31].              The Statement of Compatibility with Human Rights can be found at page 3 of the Explanatory Memorandum to the Bill. Explanatory Memorandum, Social Services Legislation Amendment (Cost of Living Concession) Bill 2015, p. 3, accessed 18 September 2015.

[32].              Social Security Act, proposed paragraph 8(8)(zac).

[33].              Veterans’ Entitlements Act, proposed paragraph 5H(8)(zec).

[34].              J Weatherill and T Koutsantonis, New cost of living concession for pensioners, op. cit.

[35].              S Morrison, ‘Second reading speech: Social Services Legislation Amendment (Cost of Living Concession) Bill 2015’, House of Representatives, Debates, (proof), 16 September 2015, p. 9, accessed 21 September 2015.

[36].              Z Bettison (South Australian Minister for Communities and Social Inclusion), New cost of living concession cheques start arriving this week, media release, 21 September 2015, accessed 21 September 2015.