1.1
The Social Services Legislation Amendment (Enhancing Pensioner and Veteran Workforce Participation) Bill 2022 (bill) was introduced into the Senate on
3 August 2022 by Senator Dean Smith.
1.2
Pursuant to the adoption of the Senate Standing Committee for Selection of Bills report on 4 August 2022, the bill was referred to the Community Affairs Legislation Committee (committee) for inquiry and report by 30 September 2022.
Conduct of the inquiry
1.3
The committee wrote to relevant stakeholders inviting them to make a submission to the inquiry by 17 August 2022.
1.4
The committee received 14 submissions and, at its earliest availability, held a public hearing in Canberra on 21 September 2022. A list of submitters and witnesses are listed in Appendix 1 and Appendix 2, respectively.
Legislative scrutiny and compatibility with human rights
1.5
The Senate Standing Committee for the Scrutiny of Bills noted that subclause 4(5) of the bill may raise scrutiny concerns in relation to an exemption from sunsetting. This provision relates to the increase to the Work Bonus and would provide the Minister with the power to cease or extend the program via a notifiable instrument. The Scrutiny of Bills committee reported that should the bill proceed to further stages of debate, it may request further information from the bill’s proponent regarding this matter.
1.6
The Parliamentary Joint Committee on Human Rights made no comment on the bill.
1.7
According to the explanatory memorandum, the bill engages the following human rights:
the right to social security;
the right to an adequate standard of living; and
1.8
The explanatory memorandum states that the bill is compatible with human rights ‘as it provides Australians, including senior Australians, with greater pension flexibility to help improve their standard of living’.
Financial impact statement
1.9
The explanatory memorandum did not contain a financial impact statement.
Acknowledgement
1.10
The committee thanks the individuals and organisations that made submissions and gave evidence at the public hearing for their interest and contributions to the inquiry.
Note on references
1.11
References to the Committee Hansard are to the proof transcript. Page numbers may vary between the proof and official transcripts.
Structure of report
1.12
This report contains two chapters. This chapter sets out:
background information on the operation of the current age, disability and veterans’ social security system; and
an overview of the key provisions of the bill.
1.13
Chapter 2 examines the key issues raised by submitters and witnesses about the bill and concludes with the committee’s view and recommendation.
Purpose of the bill
1.14
According to the explanatory memorandum, the purpose of the bill is to ‘remove possible disincentives for age pension, disability support pension and veterans’ entitlement recipients to engage in paid employment’.
1.15
The bill contains three schedules that would amend the Social Security Act 1991, the Social Security (Administration) Act 1999, and the Veterans’ Entitlements Act 1986. The amendments propose to:
suspend, rather than cancel, a pension recipient’s access to their payments for up to two years if their income exceeds the relevant income limit;
extend access to pensioner concession cards for up to two years after their payment ceases; and
increase the Work Bonus from $300 to $600 for 12 months, unless extended by the Minister.
1.16
In his second reading speech, Senator Dean Smith stated that removing potential disincentives to work within the pension system would increase the proportion of pension recipients engaging in paid employment which, in turn, would ease current workforce shortages.
1.17
Further details on the key provisions of bill are outlined below.
Background
1.18
The following section provides background information on how the current age, disability and veterans’ social security system operates.
1.19
The Age Pension, the Disability Support Pension, and certain veterans’ payments are subject to income (and other) tests. If a pension recipient earns income above a specified threshold, they receive a lower payment amount or may no longer be eligible to receive a pension.
1.20
Generally, for a single person, the Age Pension, the Disability Support Pension, and the Service Pension will be reduced by 50 cents for each dollar over $190 earned per fortnight, and for a couple it will be reduced by 50 cents (or 25 cents each for couples) for each dollar over $336 per fortnight.
1.21
Across all these payments, there are various income cut-off points. For singles, this figure is $2243.00 per fortnight; for couples living together the cut off is $3431.20 combined; and for couples living apart due to illness, the cut off is $4442.00 combined per fortnight.
1.22
In calculating pension payments, a ‘Work Bonus’ scheme also applies to those who are over the Age Pension age, receive a pension that is not the Parenting Payment (single), are not on the transitional rate of pension, and have income from employment of active participation in self-employment. The Work Bonus operates by increasing the amount an eligible pensioner can earn from work before it affects their pension rate.
1.23
Under the Work Bonus, the first $300 of fortnightly income is not assessed and is not counted under the pension income test. Any unused part of the $300 fortnightly Work Bonus can be accrued up to a maximum of $7800. This accrued amount is referred to as the Work Bonus income bank.
1.24
The income bank amount offsets future income from work that would otherwise be assessable under the pension income test. The income bank amount is not time limited; if unused, it carries forward, even across years.
1.25
According to the Department of Social Services (DSS), the Work Bonus income bank is useful for pensioners who wish to work, particularly those who undertake intermittent or occasional work.
1.26
Currently, if an age pensioner’s total ordinary income exceeds the relevant income limit, they benefit from a 12-week employment nil rate period. This means they are still eligible for the Age Pension, but they do not receive a pension payment. The payment in effect is suspended.
1.27
If, within the same period, the pension recipient’s income falls below the threshold, the pension payment is restored without the need to reapply. Eligibility for the Pension Concession Card (PCC) is also retained within this period.
1.28
If a pension recipient has a change in income that takes them above the relevant income threshold (and they have used up their Work Bonus) for a
12-week period, their pension is generally cancelled, and they lose access to the PCC. Once a payment is cancelled, an individual needs to reapply for the pension.
1.29
For the Disability Support Pension, similar rules apply; however, payments can be suspended for up to two years and the pension recipient may retain access to the PCC for 12 months during the period of suspension.
1.30
For recipients of veterans’ payments, depending on how the individual qualifies, they may receive the Age Service Pension, yjr Invalidity Service Pension or the Partner Service Pension. For the Age Service Pension, the individual can receive the pension from either Services Australia or the Department of Veterans’ Affairs.
1.31
In addition, for the associated concession cards there are different rules for the suspension or ‘grace’ period than for the PCC. For example, eligibility for the Veterans’ Gold Card is retained for 13 weeks if the pensioner’s income level is less than 150 per cent of the cut-off limit. This contrasts with eligibility for the PCC, which generally ceases immediately when income exceeds the cut-off point.
Key provisions of the bill
1.32
The bill contains three schedules that would amend the following acts:
Social Security Act 1991;
Social Security (Administration) Act 1999; and
Veterans’ Entitlements Act 1986.
1.33
If passed by the Parliament, Sections 1 to 3 would commence on the day the bill receives Royal Assent, and Schedules 1 to 3 would commence on the first 1 January, 1 April, 1 July or 1 October to occur after the day the bill receives Royal Assent.
Schedule 1 – Suspension of benefits and entitlements instead of cancellation
1.34
Schedule 1 amends the Social Security (Administration) Act 1999 and the Veterans’ Entitlements Act 1986 to enable age pensioners and certain veterans’ entitlement recipients to have their payment suspended for up to two years, instead of cancelled, if their income exceeds the relevant income limit.
1.35
The suspension mechanism is extended (in certain circumstances) to the partners of these individuals, as well as partners of disability support pensioners, where those partners are themselves receiving a social security pension or certain veterans’ entitlements.
1.36
Schedule 1 also inserts a residency requirement. Age pensioners must be residing in Australia at the time the suspension of the payment is made. According to the explanatory memorandum, this is designed to reflect the intention of the bill which is to address workforce shortages arising for employers in Australia.
Schedule 2 – Extended qualification for pensioner concession cards
1.37
Schedule 2 amends the Social Security Act 1991 and the Veterans’ Entitlements Act 1986 to provide that working age pensioners, disability support pensioners, and certain veterans’ entitlement recipients, and their pension partners, retain their pensioner concession card for up to two years after their payment ceases.
1.38
Schedule 2 also inserts a similar residency requirement as described in paragraph 1.34.
Schedule 3 – Increasing the Work Bonus for pensioners
1.39
Schedule 3 amends the Social Security Act 1991 and the Veterans’ Entitlements Act 1986 by increasing the Work Bonus from $300 to $600 per fortnight. The maximum unused concession rate that pensioners can accrue to be exempt from the pension income test (that is, the Work Bonus income bank) is unchanged and remains at $7800.
1.40
This provision will cease after 12 months unless extended by the Minister.
1.41
In addition, Clause 4 of the bill would create a requirement for ministerial review of Schedule 3. The explanatory memorandum states that without an appropriate sunset clause or clause of review, these changes would be permanent.
1.42
According to the explanatory memorandum, a review is required as the workforce shortages the bill seeks to remedy may be resolved or other changes may occur within the Australian skills and labour market which negate the need for a permanent increase to the Work Bonus.
1.43
The review is to consider the merits of continuing the increase to the Work Bonus, including consideration of the following factors:
the workforce participation rate; and
utilisation of the Work Bonus.
1.44
The review must be provided to the Minister no later than 30 days before the sunset date and the Minister must table a copy of the report in both Houses of Parliament within 15 sitting days of receiving the report. The Minister may extend the operation of this schedule by a non-disallowable notifiable instrument.
Other related initiatives
Previous bill
1.45
In the 46th Parliament, a similar bill, the Social Services Legislation Amendment (Workforce Incentive) Bill 2022 was referred to the committee for inquiry and report by 24 March 2022. The Workforce Incentive bill contained two schedules. These schedules were similar to the current bill’s Schedules 1 and 2.
1.46
The inquiry received 6 submissions and no public hearing was held. The committee recommended that the bill be passed.
1.47
The bill did not proceed past the second reading stage in the House of Representatives and lapsed at the dissolution of the 46th Parliament on 11 April 2022.
Jobs and Skills Summit
1.48
In September 2022, the Government held a Jobs and Skills Summit to engage unions, employers, civil society, and governments in a discussion on the challenges and opportunities facing the Australian labour market and economy.
1.49
Following the summit, the Government announced its intention to legislate a temporary change to the Work Bonus conditions and to the payment suspension period for pensioners to give older Australians the option to work and earn more, and immediately boost the supply of labour in the job market.
1.50
Those eligible would be credited with a one-off boost to their Work Bonus income bank, increasing the maximum income bank from $7800 to $11 800. This credit would be added to each age pensioner’s Work Bonus income bank upfront, rather than accumulating it over time. This temporary credit would be available until 30 June 2023, subject to the passage of legislation.
1.51
The one-off boost is designed to enable pensioners who want to work to immediately boost the supply of labour to help meet shortages. The measure will allow age pensioners to work more, either in short stints or over the course of a year, without losing their pension.
1.52
The Government also stated that it will expedite legislation to enable pensioners to have their payments suspended for up to two years if their employment income exceeds the income limit. Access to the PCC and associated benefits would also be retained for this two-year period. The measures will ensure that older Australians have the option to remain in the workforce without losing access to their pension and benefits.