Purpose of the Bill

The purpose of the Social Services Legislation Amendment (Workforce Incentive) Bill 2022 (the Bill) is to amend the Social Security Act 1991, Social Security (Administration) Act 1999 and the Veterans’ Entitlements Act 1986 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.

Structure of the Bill

The Bill has two Schedules.

Schedule 1 extends the period of suspension of benefits where the recipient has income as an employee that removes their entitlement to payment:

• Part 1 contains amendments to the Social Security (Administration) Act, to extend the period of suspension for Age Pension recipients and their pensioner partners and to clarify some of the provisions relating to the suspension of Disability Support Pension and
• Part 2 seeks to amend the Veterans’ Entitlements Act to extend this period for recipients of service pension, income support supplement and veteran payment and their partners, who are also in receipt of these or social security pensions.

Schedule 2 contains the amendments to extend eligibility for concessions to align with the period of suspension of benefits:

• Part 1 contains amendments to the Social Security Act relating to eligibility for the pensioner concession card for former recipients of the Age Pension and their partners
• Part 2 amends the Social Security Act in relation to eligibility for the pensioner concession card for former recipients of the Disability Support Pension and their partners
• Part 3 seeks to amend the Veterans’ Entitlements Act regarding the entitlement of former recipients of veterans’ entitlements to fringe benefits. This part also covers the partners of these recipients who receive veterans’ payments that entitle them to fringe benefits or the pensioner concession card and
• Part 4 amends the Social Security Act in relation to partners of former recipients of veterans’ entitlements who are receiving social security pensions that entitle them to the pensioner concession card.

Background

The amendments in the Bill are intended to provide an incentive for recipients of Age Pension to seek, or retain, paid employment, by extending the period of payment suspension and eligibility for the pensioner concession card from 12 weeks to 2 years.[1] The Bill includes similar provisions in relation to recipients of certain veterans’ income support payments, and for Disability Support Pension (DSP) recipients.[2]

This measure was announced in a press release on 7 December 2021, as part of a suite of initiatives to address workforce shortages including by encouraging older job seekers to remain engaged in the labour market.[3] Details of the broader package were provided in the Mid-Year Economic and Fiscal Outlook 2021–22.[4]

Current arrangements

Age Pension, DSP and some veterans’ payments are subject to income tests. This means that eligibility for these payments is removed for those with incomes above these levels. For Age Pension and DSP, a single recipient aged over 21 may earn up to $2,115 per fortnight before losing their entitlement, while a couple aged over 21 living together can earn up to $3,237.20 combined.[5] The same income limits apply for recipients of the service pension, while the cut-offs for income support supplement are $2,086.80 for singles and $3,194.80 for couples combined, and for veteran payment, $2,274.80 for singles and $3,285.20 for couples.[6]

For all these payments, a Work Bonus arrangement applies (but only for those aged over Age Pension age who are in receipt of DSP).[7] This means the recipient can have employment income up to $300 in a fortnight without reducing their payment, with any unused amount up to this cap accruing up to a maximum of $7,800 in a year.[8]

If an Age Pension recipient has a change in income that take them above the relevant threshold for payment and they have used up their Work Bonus, their pension is generally cancelled.[9] This means they lose access to the pensioner concession card, and if their income subsequently reduces below the threshold, they have to reapply.

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.[10] They also retain eligibility for the pensioner concession card in this period.[11]

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.[12] Their partners may also be eligible to have their payment suspended rather than cancelled if they lose payment because of this employment.[13] 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.[14] For example, for a Carer Payment recipient this is 12 weeks.[15]

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.[16]

Potential impact of the changes

In December 2021, 76,700 of the 2.6 million Age Pension recipients had earnings from employment in the last fortnight.[17] For DSP, 50,300 recipients had earnings from a total of 763,000 recipients.[18] For both payments, the majority (64,000 of the Age Pensioners and 35,000 DSP recipients) had earnings over $250 in the fortnight. Some 5,900 Age Pensioners and 2,300 DSP recipients were on zero rate payment, that is, had their payment suspended.[19] 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 September 2021 was less than 113,000.[20]

It is unclear how many of those not currently earning income are likely to enter the workforce as a result of the 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.

At Senate Estimates, 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’.[21] The Department of Social Services noted that the modelling suggested these proposed changes would result in 1,000 pensioners a year working more.[22] Given that in November 2021 there were some 400,000 job vacancies across Australia, it appears that this measure will have limited impact on reducing workforce shortages.[23]

Committee consideration

Senate Community Affairs Legislation Committee

The Bill has been referred to the Senate Community Affairs Legislation Committee for inquiry and report by 24 March 2022. Details of the inquiry are at the inquiry homepage.

Senate Standing Committee for the Scrutiny of Bills

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

Policy position of non-government parties/independents

The non-government parties and independents do not appear to have commented on this Bill at the time of writing.

Position of major interest groups

Major interest groups support this proposal, but generally do not consider that it will have a major impact.

National Seniors consider that the major disincentive to increasing workforce participation among pensioners is the current income test, together with onerous reporting requirements.[24] While they support the changes proposed in the draft Bill, they have noted ‘we strongly believe low-wealth pensioners should be given an exemption from the income test as a more effective means of encouraging workforce participation’.[25]

Alternatively, the Australian Chamber of Commerce and Industry has proposed increasing the Work Bonus to provide a greater work incentive.[26]

Carers Australia endorses the initiatives in the Bill, but also suggests a number of other measures to increase workforce participation among social security recipients. These include extending the Work Bonus arrangements to those on Carer Payment and DSP recipients under 65, and supporting National Seniors’ call for a removal of the income test on earned income for those of limited means.[27]

The Australian Council of Social Service supports the passage of the Bill but would like to see these provisions extended to other payments.[28]

Financial implications

The Government expects the proposed changes to produce savings of $5.5 million over the forward estimates from 2021–22.[29] This consists of a saving of $5.2 million from the Department of Social Services and $0.3 million from the Department of Veterans’ Affairs.[30] These savings reflect the expectation that more recipients will either commence working, or those who are working will work more, and so will receive less in pension payments.[31]

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.[32]

Parliamentary Joint Committee on Human Rights

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

Key issues and provisions

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.[33] This provision only applies where the income used to determine payability includes ‘income from 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 suspension.

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.

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.[34]

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, 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.[35]

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 and their partners 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 1986 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 the Pension Bonus Scheme benefits. This Scheme is available to those who registered before 1 July 2014, and provided that where take up of the Age Pension had been delayed, once the pension was claimed the recipient is entitled to a bonus payment. Given the eligibility criteria, it is unlikely this provision will impact many recipients.

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) imposes 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.