Agreement on Social Security between the Government of Australia and the Government of New Zealand - Signed 8 December 2016, Wellington
2.1
This chapter reviews the Agreement on Social Security between the Government of Australia and the Government of New Zealand (the proposed Agreement) which was signed in Wellington on 8 December 2016 and tabled in the Parliament on 7 February 2017.
2.2
The proposed Agreement replaces the Agreement on Social Security between the Government of Australia and the Government of New Zealand signed on 28 March 2001, as amended by an Exchange of Notes completed on 21 February 2002 (the existing Agreement). The proposed Agreement will enter into force on 1 July 2017.
2.3
This chapter will first provide an overview of Australia’s bilateral social security agreements and the specific social security agreements between Australia and New Zealand. The chapter will then examine the changes incorporated into the proposed Agreement in detail, before presenting the Committee’s conclusions and recommendation.
Background
2.4
Australia’s network of 30 bilateral social security agreements closes gaps in social security coverage for people who migrate between countries. For example, Australian legislation generally requires a person to have a minimum of 10 years Australian residence before they can claim an age pension or disability support pension. These agreements overcome such barriers to social security payments in the domestic legislation of each country, including requirements on citizenship, minimum contributions, past residence history and current country of residence.
2.5
The agreements also provide that responsibility for the payment of social security benefits is shared between the country of residence and the former country of residence. The former country of residence pays a proportion based on the period of former residence. The current country of residence tops up the payment to the maximum level of payment to which the claimant is entitled in that country. This may mean that a person may be eligible for social security payments from both countries if they meet relevant eligibility criteria. The main beneficiaries of these agreements are age pensioners.
Overview of social security arrangements between Australia and New Zealand
2.6
Australia has a long history of social security agreements with New Zealand starting in 1944. Revised agreements have been implemented in 1949, 1987, 1989, 1995 and 2001. The existing Agreement between Australia and New Zealand, signed in 2001, is one of Australia’s most significant social security agreements. The Department of Social Services (DSS) outlined how the proposed Agreement sits within the relationship between the two countries:
Australia and New Zealand continue to have a very positive and constructive bilateral relationship. We are two countries with shared interests and shared values with strong people to people links. The revised agreement will continue to provide an appropriate basis for both countries to share responsibilities for the specified income support payments for people who have spent their lives between Australia and New Zealand.
2.7
On an annual basis, the existing Agreement provides for $263 million worth of pension flows to Australia, and pays $71.5 million to New Zealand. The NIA states that Australia also provides a further $101 million per year in support payments to New Zealand citizens residing in Australia.
2.8
Importantly, the existing Agreement differs from Australia’s other social security bilateral agreements in recognition of the countries close geographic and historical ties. At June 2013, an estimated 640 770 New Zealand citizens were present in Australia, and approximately 62 712 people born in Australia were counted as usual residents of New Zealand as of March 2013. The existing Agreement also acknowledges that both countries have non‑contributory residence‑based benefit systems.
2.9
DSS advised that 25 050 people are currently being paid under the existing Agreement. DSS highlighted that numbers of beneficiaries were increasing by approximately 10 per cent per year. DSS identified the increase was due to external factors, such as an increase in the ageing population, as opposed to changes in the Agreement.
2.10
According to DSS statistics, 11 296 people are currently being paid under the existing Agreement within Australia, and 13 754 are being paid in New Zealand. This shows a change in immigration flow from 2008, where 6349 customers were being paid inside Australia, and 3530 were being paid in New Zealand. A further 1476 customers in New Zealand are being paid Australian pensions outside of the existing Agreement.
2.11
The proposed Agreement will continue to cover access to the same social security payments as the existing Agreement. In Australia, these include:
disability support pension (if they are severely disabled); and
2.12
In New Zealand, the proposed Agreement covers:
supported living payment.
2.13
However, the proposed Agreement incorporates amendments to both eligibility requirements and defined terms, to reflect changes in both countries welfare systems since 2002.
The Agreement
Changes
2.14
The proposed Agreement incorporates four central amendments to the existing Agreement:
access to the Australian disability support pension has been restricted to people who have 10 years of Working Age Residence (ages 20-65) in either country;
the qualifying age for the Australian pension and the equivalent in New Zealand have been re-defined to reflect domestic increases in both countries;
the definition of Australian residency has been broadened to include New Zealand residents in Australia on Special Category Visas; and
the length of portability of payments has been reduced to mirror Australian domestic law.
Disability support qualification
2.15
Under the existing Agreement, Australian social security payments in New Zealand are generally based on the proportion of the person’s Working Age Residence in Australia, and vice versa. Working Age Residence is defined as residence from age 20 until pension age. To qualify for the disability support pension (DSP) (or the New Zealand equivalent, the supported living payment) under the existing Agreement, a person must be:
a resident of either Australia or New Zealand when they became disabled, and
prior to the date of severe disablement, was residing in the other country for a year or more at any time.
2.16
The Committee queried the reasoning behind limiting the qualification of disability support payments to severely disabled people. DSS explained that limiting the qualification of DSP reduces the obligations on New Zealand and Australia, as well as assisting people who could not qualify for a support pension outside the Agreement to meet the qualifying requirements of DSP.
2.17
DSS also informed the Committee that the National Disability Insurance Scheme (NDIS) would not affect the agreement, as customers covered by the Agreement are not eligible for the NDIS. DSS confirmed that the only capacity for New Zealand citizens to access Australian social security payments with respect to disability is through the disability support pension outlined in the Agreement.
2.18
The proposed Agreement clarifies that only New Zealand Working Age Residence can be used to meet the 10 year qualifying residence requirement for DSP. It does so by removing Article 12(4) from the existing Agreement.
2.19
In 2013, the Full Federal Court of Australia found that, under the existing Agreement, any residence in New Zealand, including before the age of 20, could be used to qualify a person for the DSP. DSS informed the Committee that this widened access beyond what was originally intended:
Both Australia and New Zealand agree that the revised agreement reflects the original intention of both parties – that is, that only New Zealand working-age residence can be used to meet the 10-year qualifying residence requirement.
2.20
DSS explained how the 2013 ruling impacted the interpretation of the existing Agreement and the assessment of eligibility criteria for DSP:
Previously, up until Mahrous, the intent of the agreement and the way that it was interpreted was that people had to have totalised their 10 years of residence in New Zealand and Australia from the age of 20 up until, I think, 64. Then Mahrous said ‘any residence’, so you could have your 10 years totalised from ages one to 10. But that was not the original intention. People have now become eligible for disability support pension under that broader interpretation of what ‘residence’ means post-Mahrous. This agreement tightens that back to the original intention.
2.21
When questioned about the impact this would have on beneficiaries of the payment, DSS stated that current recipients would not be affected:
Anyone who has qualified for DSP under the Mahrous decision and the broader interpretation of residence qualification will be grandfathered under the agreement and will continue to be paid.
2.22
DSS confirmed that up until the implementation of the proposed Agreement on 1 July 2017, applications for the DSP will be assessed under the broadened criteria.
Pension age
2.23
Article I of the proposed Agreement inserts a new definition of ‘pension age’. The definition provides that to claim the Australian age pension or the New Zealand equivalent, a person must have reached whichever pension qualifying age is higher at the time they claim.
2.24
DSS advised the Committee that the main driver for this amendment was the incoming changes to Australia’s pension age:
The revised agreement also takes account of the increase in age pension age in Australia, which becomes 65 ½ in July 2017 and continues to increase by six months every two years until it reaches 67 in July 2023. The revised agreement provides that, to claim age pension or New Zealand Superannuation, a person must have reached whichever pension age is higher at the time they claim.
2.25
DSS highlighted that the amendment is required to ensure that the cost‑sharing basis of the proposed Agreement is not undermined:
Without such an amendment, the cost sharing basis of the Agreement may be impacted, as New Zealand would be required to pay New Zealand Superannuation (the equivalent of the Australian age pension), in Australia even though the person could not qualify for age pension under Australian domestic legislation.
Extension of access to residents on Special Category Visas
2.26
Under the Trans-Tasman Travel Arrangement (TTTA), New Zealand citizens are able to enter and remain in Australia on a Special Category Visa; a temporary visa automatically issued to New Zealand citizens on arrival in Australia. Since 2001 however, access to income support payments have been made available only to New Zealand residents who formally migrate to Australia. New Zealand residents in Australia on Special Category Visas have not had access to the social security payments covered by previous agreements.
2.27
Article 5 has been amended to define New Zealand residents in Australia on Special Category Visas as Australian residents, allowing them to claim the benefits covered by the Agreement.
Portability of payments
2.28
The existing Agreement specifies that a social security payment covered by the Agreement is payable to a third country for 26 weeks. This differs from the current arrangements under domestic social security law in Australia. A carer payment is payable outside Australia for six weeks, and a disability support payment is ‘generally payable’ outside Australia for four weeks in any 12 month period.
2.29
The proposed Agreement (Article 14) amends the existing Agreement to remove the specified period of 26 weeks portability, and ties the portability provisions to Australia’s domestic social security law.
Effect of changes and cost savings
2.30
Revision of the existing Agreement was announced as a measure of the 2016–17 Budget. According to the NIA, the proposed Agreement is expected to result in savings of $16.1 million during the first four years.
2.31
In response to questions from the Committee, DSS advised:
The savings come from preventing the use of any residence and restoring the original intent back to using Working-Age Residence, so there is the ongoing effect of the those customers no longer being eligible.
2.32
The Committee queried what impact this would have on the number of people receiving payments under the proposed Agreement, DSS stated:
There is nothing in the Agreement itself, we do not think, that would particularly advantage or disadvantage potential recipients compared with the previous Agreement.
2.33
However, DSS also estimated that in response to eligibility changes for DSP, 80 people per year would no longer be eligible to qualify to receive the DSP.
2.34
DSS did not confirm how other changes incorporated in the proposed Agreement would contribute to total savings, or how many people would be affected.
Reasons for taking the proposed treaty action
2.35
The NIA asserts that the proposed Agreement reflects changes in both countries’ welfare systems since 2002 and brings it in line with domestic legislation. DSS advised that future changes to domestic legislation would no longer render the proposed Agreement obsolete:
The Agreement now references domestic legislation in a way that it did not before. That was hardcoded into the Agreement before, and so, if domestic legislation changed, the Agreement would be out of sync with domestic legislation.
2.36
According to the NIA, the proposed Agreement reaffirms the very important role that freedom of movement and labour between Australia and New Zealand play in the development of closer economic relations between the two countries.
Implementation
2.37
Australia’s bilateral social security agreements are given effect in domestic law through the Social Security (International Agreements) Act 1999. The full text of the proposed Agreement will be inserted as a new Schedule 3 to that Act, replacing the text of the existing Agreement. The NIA states that this amendment to the Schedule will be done as a legislative instrument pursuant to regulations under sections 8 and 25.
2.38
Pursuant to Article 27, the Agreement shall enter into force on 1 July 2017.
2.39
On 15 February 2017, the Minister for Social Services, The Hon Christian Porter MP, wrote to the Chair advising that he intended to table regulations to incorporate the Agreement into the Social Security (International Agreements) Act 1999 prior to the tabling of the Committee’s report.
2.40
While the Minister acknowledged that this action would usually be taken after the Committee tabled its report, he advised that this action was necessary in order to meet the implementation date of 1 July 2017.
2.41
The Minister highlighted that the Committee’s report would be tabled prior to the expiry of the disallowance period, allowing the Government to take note of the Committee’s recommendations.
Committee comment
2.42
The Committee acknowledges the historical ties and geographical closeness of Australia and New Zealand. The Committee supports the proposed Agreement and recognises that it is an important mechanism for people who choose to split their lives between Australia and New Zealand, particularly in retirement.
2.43
However, the Committee notes the conflicting evidence provided by DSS. At a public hearing, DSS stated that that the proposed Agreement will not ’advantage or disadvantage potential recipients compared with the previous Agreement’. Yet the proposed Agreement was announced as a cost-saving measure in the 2016–17 Budget, resulting in savings of $16.1 million over the forward estimates. Further, DSS confirmed that 80 people per year will no longer be eligible for the DSP under the proposed Agreement.
2.44
DSS’ contention that no potential recipients will be disadvantaged appears to reflect comparisons made between the two agreements at the point of signature. However comparing the existing Agreement – with expanded DSP eligibility criteria after the Full Federal Court’s decision in Mahrous – to the proposed Agreement, it is clear that there are approximately 80 potential recipients per year who will no longer be able to access DSP under the new Agreement.
2.45
Nonetheless, it is reasonable that the proposed Agreement reflects the original intent of the Australian and New Zealand Governments, and the domestic eligibility criteria for payments. The Committee also notes that no community concerns were expressed to the Committee and that no submissions from affected individuals or organisations were received.
2.46
The Committee therefore supports the proposed Agreement and recommends that binding treaty action be taken.
2.47
The Committee supports the Agreement on Social Security between the Government of Australia and the Government of New Zealand and recommends that binding treaty action be taken.