Introductory Info

Date introduced: 25 February 2021
House: House of Representatives
Portfolio: Social Services
Commencement: 1 April 2021

The Bills Digest at a glance

The purpose of the Social Services Legislation Amendment (Strengthening Income Support) Bill 2021 (the Bill) is to amend the Social Security Act 1991 (the SS Act) to:

• increase the maximum basic rates of JobSeeker Payment, Youth Allowance, Youth Disability Support Pension, Parenting Payment and Austudy by $50 per fortnight from 1 April 2021
• increase the ordinary income free area for JobSeeker Payment, Youth Allowance (Other), Parenting Payment Partnered and Widow Allowance to $150 per fortnight from 1 April 2021 and cease indexation of the JobSeeker Payment income free area
• enable a number of temporary COVID-19 measures to be extended.

The most significant measure in the Bill is the increase in the basic rate of JobSeeker Payment and other payments. Over time the value of payments to recipients of allowances such as JobSeeker Payment has fallen relative to pensions and minimum wages.

The Government’s proposal to increase payment rates has been criticised by non-government parties and by major interest groups on the grounds that a $50 a fortnight increase is too low.

The digest explains how the Bill’s provisions operate and provides details on the COVID-19 measures to be extended and the relevant provisions.

Purpose of the Bill

The purpose of the Social Services Legislation Amendment (Strengthening Income Support) Bill 2021 (the Bill) is to amend the Social Security Act 1991 (the SS Act) to:

• increase the maximum basic rates of JobSeeker Payment, Youth Allowance, Youth Disability Support Pension, Parenting Payment and Austudy by $50 per fortnight from 1 April 2021
• increase the ordinary income free area for JobSeeker Payment, Youth Allowance (Other), Parenting Payment Partnered and Widow Allowance to $150 per fortnight from 1 April 2021 and cease indexation of the JobSeeker Payment income free area
• extend special COVID-19 qualification criteria for Youth Allowance (Other) and JobSeeker Payment until 30 June 2021—the criteria cover those in quarantine or self-isolation or caring for a family member or household member in quarantine or self-isolation due to COVID-19
• extend until 30 June 2021 the waiver of the ordinary waiting period for JobSeeker Payment and Youth Allowance (Other)—the waiver was introduced as part of the Government’s COVID-19 response, and
• give the Secretary of the Department of Social Services the discretionary power—until 30 June 2021—to extend the portability period for certain Age Pension and Disability Support Pension recipients unable to return to, or depart from, Australia within 26 weeks due to the impact of COVID-19—portability determines a person’s eligibility for a pension and payment rate when they live permanently outside Australia.

The measures were announced on 23 February 2021.[1]

Structure of the Bill and the Bills Digest

The Bill has one Schedule divided into five parts proposing discrete measures. The Bills Digest will provide background to the issue of JobSeeker Payment adequacy and COVID-19 social security measures. The ‘Key issues and provisions’ will provide detail on each of the five parts but focuses primarily on the changes to payment rates and the income free area.

Background

Over recent decades, payments such as JobSeeker Payment and Youth Allowance have fallen behind pensions, minimum wages and living standards in the broader community.

As the relative value of payments has declined, the Government has faced increasing pressure to raise the rate. Initially this came from community sector organisations like the Australian Council of Social Service (ACOSS), but eventually expanded to others such as the Business Council of Australia, the Governor of the Reserve Bank of Australia, and members of the National Party.[2]

The coronavirus (COVID-19) pandemic shifted the debate. Government actions to control the spread of the virus such as lockdowns, border closures and social distancing requirements resulted in job losses. In response the Australian Government introduced a number of measures including a temporary Coronavirus Supplement of $550 a fortnight added to payments for recipients of JobSeeker Payment, Youth Allowance and some other working age payments.[3]

On 23 February 2021, the Government announced a permanent increase in ‘the rate of working-age payments by $50 a fortnight from 1 April 2021’.[4] The rate increase will not apply to all payments those of working age can receive—for example Disability Support Pension for those aged 21 years or more and Carer Payment are excluded. Payments which will be increased include the main benefit-type payments—JobSeeker Payment, Youth Allowance, Parenting Payment, Disability Support Pension for those aged under 21 years, Austudy, Special Benefit and ABSTUDY Living Allowance.

Payment adequacy

Why the value of unemployment payments has fallen relative to pensions and minimum wages

Historically there has been a distinction between pensions and benefits. Pensions were paid to claimants who were not expected to work. This included the elderly, people with disabilities, and widows (later extended to single parents). Benefits were paid to people who were temporarily unable to work. This included people who were unemployed or sick. Over time the distinction became more complicated.

Pensions were generally paid at a higher rate than benefits. From the 1970s onwards, pensions rates began to be adjusted in a different way from benefits.[5] Pensions ended up being adjusted according to movements in the Consumer Price Index (CPI) and benchmarked to a percentage of male total average weekly earnings (MTAWE)—since 2009 pensions have been indexed to both the CPI and a living cost index, the Pensioner and Beneficiary Living Cost Index (PBLCI). Benefits have been indexed using the CPI alone.[6] This meant that as living standards in the broader community rose as wages increased, pensions also increased. Benefits, however, declined relative to community living standards when wages rose.

The gap between pensions and benefits increased further in 2009 when the Government increased the single rate of payment by $32.49 per week in response to the findings of the Pension Review led by departmental secretary Jeff Harmer.[7] The review was a response to community concerns that the rate of the pension was inadequate.[8]

The single rate of unemployment benefit fell from around 93 per cent of the single rate of the pension in 1997 to around 66 per cent in 2020.[9] According to researchers Peter Whiteford and Bruce Bradbury, unemployment benefits fell from around 50 per cent of the minimum wage in 1997 to under 40 per cent in the period before the addition of the Coronavirus Supplement.[10]

Current indexation arrangements mean that Parliament must periodically pass legislation to increase benefits if it aims to prevent them falling further behind pensions and wages (assuming wages increase).

Policy principles

The 2009 report of the Australia’s Future Tax System Review (Henry Review) found that indexing payments ‘solely to prices can reduce adequacy relative to members of the community who work’ and argued that benefit type payments should be indexed to some measure of community standards rather than CPI alone.[11]

Advocates of an increase argue that payments such as JobSeeker Payment should be maintained at a rate that is adequate for a recipient to meet basic needs.[12] Poverty lines are sometimes used as a benchmark.[13] However, the Department of Social Services (DSS) does not include reductions in poverty as a performance criterion for income support payments.[14]

Even if policymakers accept adequacy as an objective, policymakers may decide to balance it against other objectives. According to the Henry Review’s report:

The primary focus of the income support system has been and should continue to be the provision of a minimum adequate level of income to people who are unable to support themselves through work or their savings. This focus on payment adequacy, however, has to be balanced with incentives to work. And payments need to be seen as affordable, sustainable and fair by the community at large.[15]

Minister for Families and Social Services Anne Ruston has taken a similar position saying that in making the decision to increase benefit rates, the Government considered: ‘three key principles – our responsibility to support unemployed Australians, to incentivise people to take up work and to keep the welfare budget sustainable into the future’.[16]

Raise the Rate for Good campaign

For more than a decade ACOSS has been leading a campaign to raise the rate of payments. In 2009, ACOSS called on the Government to increase allowance payments for single people by $30 a week.[17] Over time ACOSS adjusted this figure. In March 2020 they called for an increase of $95 per week.[18]

In setting the most recent figure, ACOSS drew on budget standards research conducted at the Social Policy Research Centre at the University of New South Wales. According to researchers Peter Saunders and Megan Bedford:

A budget standard indicates how much a particular family living in a particular place at a particular time needs in order to achieve a particular standard of living. It is derived by specifying every item that is needed by the family and each of its members, pricing each item and summing to produce the overall budget. The items included, how much they cost and how long they last will vary according to the standard of living that the budget is designed to support. Any budget is thus only relevant to a particular standard - hence the term budget standard. The standard itself can (in principle at least) be set at any level, although budget standards have traditionally been designed to represent minimum standards by estimating how much is needed to achieve an acceptable but minimal standard of living.[19]

The campaign’s approach shifted after the Government introduced the $550 per fortnight Coronavirus Supplement in March 2020. The campaign’s ‘ask’ then became:

We can’t turn back to $40 a day. We need a permanent and adequate increase that ensures people on JobSeeker, Youth Allowance and other income support payments can cover the basics they need, including housing.[20]

A wide range of organisations have joined the Raise the Rate for Good campaign. Supporters include community organisations, church welfare organisations, unions and business groups. The campaign has also attracted financial support from philanthropic trusts.[21]

The Government’s response to COVID-19

By the end of February it was clear that measures to slow the spread of COVID-19 would result in job losses and an economic slowdown. In response, the Government initially developed two stimulus packages. In an interview for Sky News, Minister for Families and Social Services Anne Ruston did not rule out a permanent increase in unemployment payments but made it clear that it would not be part of the stimulus. As she explained to journalist Kieran Gilbert, the stimulus would be:

… a short term measured and proportionate response to the economic conditions that we are encountering right now. And any long term structural changes to anything that we're doing in this space will be the subject of a separate conversation.[22]

The first stimulus package, announced on 12 March 2020, included a one-off payment of $750 to recipients of income support payments (both pensions and benefits), Family Tax Benefit recipients and Commonwealth Senior Health Card holders.[23] The second stimulus package, announced on 22 March, included the Coronavirus Supplement and a second one-off payment of $750 to the same groups as the first payment but excluding those eligible for the Coronavirus Supplement. [24] The Government also made a number of other temporary changes to payment eligibility and conditions.

The Coronavirus Supplement

Initially set at $550 per fortnight, the Coronavirus Supplement was paid to recipients of JobSeeker Payment, Youth Allowance, Parenting Payment, Austudy, ABSTUDY Living Allowance, Farm Household Allowance and Special Benefit.[25] Unlike an increase to the base rate of payment it was not income tested; if a person was eligible for the supplement, they received the full amount.[26]

The Government announced that the supplement would be paid for six months.[27] However, the legislation implementing the payment provided that the initial period would be for around five months, from 27 April 2020 to 24 September 2020.[28] The supplement was later extended at a reduced rate of $250 per fortnight until December 2020 and then extended again at a reduced rate of $150 per fortnight until 31 March 2021.[29] The supplement is legislated to cease from that date.[30]

Income test changes

In July 2020 the Government announced changes allowing recipients of JobSeeker Payment and Youth Allowance (Other) to earn more private income before their payments were reduced by the income test.[31] The changes increased the amount of income an individual could receive before the payment was affected—the income free area—from $106 per fortnight to $300 per fortnight for JobSeeker Payment and from $143 per fortnight to $300 per fortnight for Youth Allowance (Other). The rate at which payment rates were reduced (the taper rate) was changed from 50 cents for each dollar over the free area and 60 cents for each dollar over the upper income test threshold ($256 for JobSeeker Payment and $250 for Youth Allowance (Other)), to a single taper rate of 60 cents for each dollar of income over the free area.[32]

These changes applied initially from 25 September 2020 to 31 December 2020 but were extended until 31 March 2020.[33]

Separate income test changes were made to the way a payment recipient’s partner’s income was assessed for JobSeeker Payment. Initially, from 27 April to 24 September 2020, the taper rate for partner income was reduced from 60 cents to 25 cents for each dollar of income over the partner income free area ($996 per fortnight).[34] From 25 September this was changed to a taper rate of 27 cents for each dollar of income over a partner income free area of $1,165 per fortnight. The partner income test changes were initially extended to 31 December 2020 but will now cease on 31 March 2021.[35]

Expanding eligibility

From 25 March 2020, the Government temporarily expanded eligibility for JobSeeker Payment and Youth Allowance (Other) to include:

• sole traders and self-employed people who had lost revenue due to COVID-19—enabling them to meet mutual obligation requirements by continuing to operate their businesses
• permanent employees who have been stood down or lost their job
• people in quarantine or self-isolation as a result of advice from a health professional or a requirement by a government (Commonwealth, state or territory)
• people caring for someone infected or in isolation as a result of contact with Coronavirus.[36]

From 25 March the Government also waived a number of waiting periods that usually apply to those claiming social security payments. This included the Ordinary Waiting Period for JobSeeker Payment, Youth Allowance (Other) and Parenting Payment and the Newly Arrived Residents Waiting Period for JobSeeker Payment, Youth Allowance, Austudy, Parenting Payment, Special Benefit and Farm Household Allowance.[37]

The Ordinary Waiting Period is a one-week period claimants have to wait before their payment starts. In some circumstances the waiting period can be waived.[38] The Newly Arrived Residents Waiting Period, which applies to new migrants, is usually four years for the payments listed above.[39] Some groups are exempt from this waiting period.[40]

Both the expanded eligibility criteria and the waiting period waivers were due to end on 24 September 2021 but were later extended: firstly to 31 December 2020 and then to 31 March 2021.[41]

Separate waivers of the assets test for JobSeeker Payment, Parenting Payment, Youth Allowance, Austudy and ABSTUDY Living Allowance; and the Liquid Assets Waiting Period for JobSeeker Payment, Youth Allowance and Austudy were in place for the 25 March to 24 September 2020 period but were not extended.[42]

Extending the portability period

Portability refers to the eligibility conditions for a social security payment while an individual is overseas.[43] As part of the response to COVID-19 the Government allowed Age Pension recipients and certain Disability Support Pension recipients who are temporarily overseas to apply for a portability extension if they are unable to return to Australia within 26 weeks because of COVID-19.[44] Absences outside Australia for longer than 26 weeks can affect a person’s payment rate (see ‘Key issues and provisions’ section below). Some pensioners who normally reside overseas and were unable to leave Australia and return home were also granted an extension to the period they could remain in Australia before certain grandfathering provisions protecting them from previous portability changes would no longer apply.

Changes were made to the portability provisions in the SS Act via the Social Security (Coronavirus Economic Response—2020 Measures No. 10) Determination 2020 and the Social Security (Coronavirus Economic Response—2020 Measures No. 16) Determination 2020. The changes in the latter determination will expire on 31 March 2021.

Committee consideration

The Bill was referred to the Senate Community Affairs Legislation Committee for inquiry and report by 12 March 2021. The Committee tabled its report on 12 March 2021. Details of the inquiry are available at the inquiry homepage.

Neither the Senate Standing Committee for the Scrutiny of Bills nor the Parliamentary Joint Committee on Human Rights had reported on their consideration of the bill at the time this digest was prepared.

Senate Community Affairs Legislation Committee

Committee report

The Committee recommended that the Bill be passed. Commenting on the Bill’s proposed increase to payment rates and changes to the income free threshold, the Committee’s report stated:

… the committee is of the view that the taxpayer-funded increase of $50 to income support payments balances the need to ensure payments encourage and enable workforce participation with the need for the welfare system to be fiscally sustainable for future generations. In addition, the Bill will raise the threshold before benefits start to taper off, enabling recipients to earn more before their payments are decreased. This provides the right balance of supports and encouraged people to engage in the workforce.[45]

Labor Senator’s additional comments

Drawing on evidence provided to the Committee during the inquiry, Labor Senators highlighted concerns about the adequacy of payments, the income free area, indexation, and changes to mutual obligation requirements. However, the Senators noted that if the ‘Bill does not pass the Parliament in the next sitting week, current legislative settings mean that payment rates will revert to pre-pandemic levels by the end of March’.[46]

Labour Senators recommended:

• the Senate does not stand in the way of the modest increase in payments contained in this Bill
• the Senate notes the strong concerns of the community, businesses, experts and service delivery organisations that:
• the income Free Area proposed in the Bill does not allow people to keep enough of their earnings from part-time, casual, or seasonal work, to effectively help people move into employment; and
• the Bill does not do enough to support Australians facing poverty and hardship – including in the areas of adequate payments to those who need them, housing, addressing child poverty, and better health and education services.
• the Government abandon its counterproductive and punitive plans for a hotline for employers to report people who haven’t agreed to a job – regardless of the reason – that will inevitably see the Government hound people, rather than help the 2 million Australians currently looking for work.[47]

The last recommendation refers to the Government’s announcement of a hotline that will allow employers to report income support recipients who have refused an offer of suitable employment.[48]

Dissenting report by the Australian Greens

In their dissenting report the Australian Greens argued that income support payments should be set at a level that lifts recipients above the poverty line. The report made four recommendations:

• the Bill be amended to increase all income support payments to $1,115 a fortnight, which is in line with the Henderson Poverty Line
• the Bill be amended to retain the current income free threshold of $300 a fortnight
• that compulsory income management be abolished
• that mutual obligations be abolished.[49]

The last two recommendations deal with matters outside the scope of this Bill.

Policy position of non-government parties/independents

In their public comments, non-government parties and independents have focused on the Bill’s increase to the rate of Jobseeker Payment.

Both Labor and the Australian Greens support an increase to the rate of Jobseeker Payment but argue that the increase is not enough.

Labor’s Shadow Treasurer Jim Chalmers said ‘Any increase is better than no increase’ and indicated that Labor was ‘not going to stand in the way of an increase in the JobSeeker payment’.[50] Greens Senator Rachel Siewert described the increase as ‘mean-spirited, cruel and in fact insulting to jobseekers’.[51]

Position of major interest groups

As with comments by non-government parties and independents commentary by major interest groups focused on the rate of Jobseeker Payment, however some groups have also commented on other parts of the Bill.

The adequacy of the increase to payments

ACOSS has described the increase in JobSeeker Payment as ‘measly’. According to a 23 February 2021 media release, ACOSS Chief Executive Officer Cassandra Goldie said:

This is a heartless betrayal of millions of people with the least, including hundreds of thousands of children, single parents, people with disability, older people, students, people dealing with illness and injury, and others relying on income support.

Today, the Government has turned its back on those with the least, plunging people further into poverty. It’s a cruel decision that shows a complete lack of humanity and empathy. It comes as devastating news for so many and will have serious consequences for people’s lives, including homelessness and crushing debt.[52]

Beyond the community sector, a number of other organisations have also argued for a higher rate of JobSeeker Payment. In a September 2020 budget submission the Business Council of Australia (BCA) recommended that the ‘permanent rate of JobSeeker should be set at levels more consistent with historical relativities with the Age Pension’. The submission argued:

While the rate of JobSeeker will need to return to long run levels, the longer-term rate should be reconsidered. The Newstart rate for single people that applied pre-crisis had fallen in relative terms over time, from around 90 per cent of the Age Pension to around 60 per cent, with indexation arrangements that would ensure it continued to fall in relative terms over time.

To support unemployed Australians and ensure nobody gets left behind, the rate of JobSeeker should be set at levels more consistent with historical relativities with the Age Pension (in the 75–90 per cent range). A JobSeeker rate in this range (which is around 50 per cent of the minimum wage) would address the need to preserve incentives to work while improving the adequacy of the payment.[53]

In contrast, in July 2020 Robert Carling of the Centre for Independent Studies argued that ‘Nothing has fallen apart because there have not been real increases’ in unemployment payments and that a permanent increase in the payment rate would ‘go against the government’s mantra that all extra spending in this crisis is “temporary and targeted”.’[54]

Alternative proposals

In its submission to the Senate inquiry on the Bill, ACOSS argued that income support payments should be set at at least $65 a day with supplementary payments for additional costs. These payments include JobSeeker Payment, Youth Allowance, Parenting Payment, Austudy, Abstudy, Special Benefit and Crisis Payment:

People on JobSeeker need at least $65 a day to feed and clothe themselves, as well as keep a roof over their heads. In addition, supplementary payments must be available to meet additional costs faced by people in private rental, people with an illness or disability and single parents.[55]

ACOSS propose a 50 per cent increase in Commonwealth Rent Assistance, a Disability and Illness Supplement (set at at least $50 per week) and a Single Parent Supplement (set at least $200 per week). [56]

The Grattan Institute propose an increase of $100 per week:

The Government should increase the permanent rate of JobSeeker not by $25 a week as it has announced, but by at least $100 a week for singles. An increase of $100 a week would restore the unemployment benefit to a similar level, relative to full-time wages, as 1994. It would be a little higher, relative to full-time wages, as in July 2000, when the benefit was increased as part of GST compensation.[57]

The Council for Single Mothers and their Children stressed the importance of support for parents:

If the rate of JobSeeker cannot be raised overall, we implore Senators and Members to ensure that this Bill is amended such that all JobSeeker and other payments to parents lift families well above the poverty line so both the parents and children have a chance to find a better life.[58]

Indexation

A number of submissions argued that payments such as JobSeeker needed to be indexed in a way that prevents them from falling behind community living standards in the future. For example, ACOSS argued it is ‘crucial that wage indexation is applied to working-age payments so that they do not fall so far behind community living standards again.[59] The Grattan Institute argued against the Government’s approach of indexing JobSeeker Payment to the Consumer Price Index:

The first problem with CPI indexation is that the CPI understates the change in the cost of living for allowance recipients. The second, more important, problem is that CPI indexation means that a person on the unemployment benefit falls further and further behind other members of the community, including pensioners. This also creates incentives for people to seek to claim higher-paying disability pensions.

The Government’s plan to increase JobSeeker does nothing to fix these problems. JobSeeker will still be benchmarked to inflation, rather than wages. This means that over time, people on JobSeeker will again fall further behind the living standards of other Australians.[60]

Grattan proposed setting JobSeeker Payment in the same way as the Age Pension.[61]

Incentives to work

A number of organisations took issue with claims that a significant increase to JobSeeker Payment would discourage recipients from finding employment. For example, in their submission, Mission Australia stated:

The Government … argued that higher income support rates can act as a disincentive for people to find employment. This is not the case. Economic modelling has found that increasing income support payments will not act as a disincentive to work, and did not do so even during the time the highest level of Coronavirus Supplement was applied. On the contrary, higher income support levels facilitate job seeking as they provide resources for people to pay associated costs including transport and clothing for interviews.[62]

The St Vincent de Paul Society and the Grattan Institute also rejected the argument that increasing payments would significantly reduce work incentives.[63]

The best form of welfare is a job?

Critics of increases in the rate of unemployment payments sometimes argue that a better way to improve the wellbeing of unemployed income support recipients is to help them find work. Some organisations argued that there are not enough jobs available to make this approach work. For example, the St Vincent de Paul Society argue:

The rhetoric that ‘the best form of income support is a job’ is not palatable when there remain nine people either applying or looking to increase their hours for every job advertised; when the increase in the labour market has been in casual and part-time work; and when the income of Australia’s youth has stagnated during this century.[64]

Similarly, the Financial Counselling Network argued that if ‘full employment’ means unemployment does not fall below 4 or 5 per cent, a large number of Australians will need to rely on income support. [65]

Waiting period and income taper rates

ACOSS welcomed the Government’s waiver of the one-week waiting period for JobSeeker Payment and Youth Allowance but argued that the Bill’s temporary extension of the waiver should be permanent. [66]

On changes to the income free area, ACOSS’ submission registered concern:

… many will be worse off as a result of the reduction in the current $300 a fortnight income free-area. ACOSS has previously recommended that people on JobSeeker Payment be able to earn more than $52pw before their income support tapers off, and has proposed an income bank model similar to that available for people receiving Youth Allowance (Student/Apprentice) to better support people who have some paid work. [67]

Financial implications

According to the Minister’s second reading speech, the ‘policy delivered by this bill carries a cost of approximately $9 billion to 2024–25, including approximately $700 million in 2020–21.’[68]

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.[69]

Key issues and provisions

Part 1—Increasing working age payments

Is adequacy an objective?

Much of the advocacy for an increased rate of JobSeeker Payment and other working age payments assumes that considerations such as work incentives and financial sustainability should not trump adequacy. However, official statements of program objectives suggest the Government places greater relative weight on objectives such as financial sustainability than on adequacy.

In 1998 one of the objectives listed in the Department of Social Security’s annual report was ‘unemployed people receive adequate levels of income to support themselves’.[70] This no longer appears as an objective in the most recent Department of Social Services annual reports.

The current set of objectives place more emphasis on containing the cost of payments. An objective of the payments system as a whole is ‘sustainability’ measured in terms of the future lifetime cost of payments to individuals. An objective for working age payments is the extent to which payment recipients have improved financial self-reliance.[71]

The minimum wage as a benchmark

While there is no officially recognised benchmark for measuring changes in the adequacy of income support payments, ministers have compared payments to the minimum wage. For example, the Prime Minister recently noted that the increased rate of JobSeeker Payment brings it to 41.2 per cent of the national minimum wage:

… which puts us back in the realm of where we had been previously. The indexation had been different to other payments and, as a result, it had fallen down to 37.5%. We had obviously taken advice about the level of the payment and this puts it back, comfortably, within the middle of the range that had previously been in place.[72]

However, since the Bill does not change the way payments are indexed, over time payments such as JobSeeker Payment can be expected to again fall behind minimum wages.

Figure 1 (below) shows the single rate of Newstart Allowance/JobSeeker Payment and the Age Pension as a proportion of the minimum wage. The large increase in the rate of the Age Pension as a proportion of the minimum wage in 2009 is the result of a one-off increase in the single rate of the pension by $32.49 per week in response to the findings of the Pension Review.[73]

Figure 1: single JobSeeker Payment/Newstart Allowance and Age Pension rates as a share of the National Minimum Wage

Sources: DSS, ‘5.2 Historical rates’, Social security guide, DSS website, last reviewed 9 November 2020; Fair Work Commission (FWC), ‘The Australian Minimum Wage from 1906’, FWC website, last updated 12 July 2019; R Bray, Reflections on the Evolution of the Minimum Wage in Australia: Options for the Future, Working paper, Crawford School Social Policy Institute, 1, 2013, October 2013.

Note: chart uses the base rate of the unemployment benefit/Newstart Allowance/JobSeeker Payment and Age Pension and does not include supplementary payments.

Key provisions

Items 1–10 amend payment rates set out in the SS Act rate calculators for Youth Disability Support Pension, Youth Allowance, Austudy, JobSeeker Payment (as well as Partner Allowance and Widow Allowance) and Parenting Payment. The proposed increase to all rates is $50 per fortnight.

A number of other payments have their rates linked to the JobSeeker Payment and Youth Allowance rates and will also benefit from the $50 per fortnight increase: Farm Household Allowance, Disaster Recovery Allowance and education allowances paid as part of the veterans’ education schemes.[74] The Explanatory Memorandum notes that equivalent increases will be made to the rate of ABSTUDY Living Allowance and to Special Benefit.[75] ABSTUDY payment rates are set out in the ABSTUDY Policy Manual while Special Benefit is paid at a discretionary rate but cannot be more than the rate of JobSeeker Payment, Youth Allowance or Austudy the person would otherwise receive.[76]

Table 1 sets out a selection of the current and proposed payment rates.

Table 1: current payment rate and proposed payment rates from 1 April 2021

Payment	Current per fortnight	1 April 2021 per fortnight
JobSeeker Payment, single	$565.70	$620.80
JobSeeker Payment, single with dependent child	$612.00	$667.50
JobSeeker Payment, partnered	$510.80	$565.40
Parenting Payment Single	$768.90	$825.80
Parenting Payment Partnered	$510.80	$565.40
Youth Allowance, under 18 at home	$253.20	$303.20
Youth Allowance, under 18–21 at home	$304.60	$354.60
Youth Allowance, away from home	$462.50	$512.50
Youth Allowance, single with dependent child	$606.00	$656.00
Youth Allowance, partnered	$462.50	$512.50
Youth Allowance, partnered with dependent child	$507.90	$557.90
Austudy, single	$462.50	$512.50
Austudy, single with dependent child	$606.00	$656.00
Austudy, partnered	$462.50	$512.50
Austudy, partnered with dependent child	$507.90	$557.90
Long term student: Austudy single or Youth Allowance single away from home	$561.90	$611.90
Long term student: Austudy or Youth Allowance partnered	$507.90	$557.90
Disability Support Pension, not independent, living at home, aged under 18	$385.10	$435.10
Disability Support Pension, living at home, aged 18–20	$436.50	$486.50
Disability Support Pension, under 21, independent or partnered	$594.40	$644.40

Notes: Rates are maximum basic rates excluding any supplementary amounts. JobSeeker Payment and Parenting Payment rates include indexation increase to occur on 20 March 2020. Disability Support Pension rates include the Youth Disability Supplement.

Sources: DSS, Enhanced social security safety net, DSS, Canberra, 24 February 2021; DSS, Indexation rates March 2021, DSS, Canberra, 8 March 2021.

Items 1–2 replace the tables setting out the rates of Disability Support Pension paid to those under 21 years in various circumstances at Point 1066A-B1 (table B) and Point 1066B-B1 (table B) of the SS Act.

Items 3–5 replace the tables setting out the rates of Youth Allowance paid to those in various circumstances at Point 1067G-B2 (table BA), Point 1067G-B3 (table BB) and Point 1067G-B4 (table BC).

Items 6–7 replace the tables setting out the rates of Austudy paid to those in various circumstances at Subpoint 1067L-B2(1) (table BA) and Point 1067L-B3 (table BB).

Item 8 replaces the table setting out the rates of JobSeeker Payment, Widow Allowance and Partner Allowance paid to those in various circumstances at Point 1068-B1 (table B). The new rates include the rate increase occurring on 20 March 2021 due to automatic indexation to movements in the Consumer Price Index.

Item 9 replaces the provision setting the rate of Parenting Payment Single at Point 1068A-B1. The new rates include the rate increase occurring on 20 March 2021 due to automatic indexation to movements in the Consumer Price Index.

Item 10 replaces the provision setting out the rates of Parenting Payment Partnered paid to those in various circumstances at Point 1068B-C2 (table C). The new rates include the rate increase occurring on 20 March 2021 due to automatic indexation to movements in the Consumer Price Index.

Part 2—Qualification for Youth Allowance or JobSeeker Payment—coronavirus

The amendments in Part 2 of Schedule 1 add new, temporary, COVID-19-related qualification criteria for Youth Allowance (Other) and JobSeeker Payment to the SS Act. The amendments are a more limited version of criteria introduced as part of the Government’s COVID-19 response and set out in a legislative instrument which will expire on 31 March 2021.

The Coronavirus Economic Response Package Omnibus Act 2020 gave the Minister for Families and Social Services the power to make a legislative instrument to determine eligibility requirements for Youth Allowance (Other) and JobSeeker Payment in response to circumstances relating to COVID-19.[77] The eligibility requirements could only apply for the period that the Coronavirus Supplement is paid. The instrument providing for the COVID-19-related eligibility requirements is the Social Security (Coronavirus Economic Response—2020 Measures No. 2) Determination 2020.

The Social Services and Other Legislation Amendment (Extension of Coronavirus Support) Act 2020 repeals all provisions relating to the Coronavirus Supplement from 1 April 2021, including the Minister’s power to determine eligibility criteria relating to COVID-19.[78]

The eligibility criteria for JobSeeker Payment and Youth Allowance (Other) generally require a person to be unemployed or be considered unemployed by Services Australia for the purposes of these criteria—this discretion can be used to allow someone in part-time work to qualify for the payment where they are also meeting their mutual obligation requirements to look for more work or for a full-time position.[79] The expanded eligibility criteria in response to COVID-19 were necessary to ensure those who were still ‘employed’ or were previously self-employed, but who had temporarily lost hours of work and income, could qualify for income support.

The proposed criteria to be included in the SS Act are different from those in the Social Security (Coronavirus Economic Response—2020 Measures No. 2) Determination 2020 as they do not cover those who, as a result of the adverse economic effects of COVID-19:

• were made unemployed
• were stood down but not made redundant
• lost hours of work or
• were sole traders/self employed individuals forced to suspend their business or who had a downturn in revenue.

The proposed criteria only cover those affected by a self-isolation or quarantine requirement issued by the Commonwealth, a state or territory government, or a health professional in relation to COVID-19. The previous criteria included those affected by the economic impacts of COVID-19 and those affected by health orders to self-isolate or quarantine, while the criteria from 1 April 2021 is targeted at those affected by COVID-19 health orders. Those unemployed may still qualify for JobSeeker Payment or Youth Allowance (Other) under the normal qualification criteria for these payments.

Key provisions

Item 13 inserts new section 540BA and item 14 inserts new subsection 593(5) which set out the temporary COVID-19 qualification criteria for Youth Allowance (Other) and JobSeeker Payment, respectively. The eligibility criteria apply for the period 1 April 2021 to 30 June 2021 and cover those required to self-isolate or quarantine due to COVID-19; or those caring for an immediate family member or member of their household who is required to self-isolate or quarantine where:

• the Secretary of the Department of Social Services is satisfied that the person has had their working hours reduced due to quarantining, self-isolation or caring for someone who is
• the person satisfies the activity test or is not required to satisfy the activity test
• the Secretary of the Department of Social Services is satisfied that the person:
  • is not entitled to receive a leave payment in respect of the period for which the payment is claimed
  • has taken reasonable steps to claim any leave payment
  • is receiving a leave payment but it is less that it would have otherwise been due to the economic effects of COVID-19 or
  • the total leave payment is less than the amount of Youth Allowance/JobSeeker Payment the person would receive if their claim was granted; and
• the person is an Australian resident or is exempt from the residency requirements.

Age requirements determine whether the person is eligible for Youth Allowance or JobSeeker Payment in these circumstances: those aged at least 22 years but under Age Pension age are eligible for JobSeeker Payment while those aged 16–21 years are eligible for Youth Allowance (individuals aged 15 years may be eligible in special circumstances).[80]

Part 3—Ordinary waiting period

The amendments in Part 3 of Schedule 1 extend the waiver of the ordinary waiting period for JobSeeker Payment, Youth Allowance (Other) and Parenting Payment to 30 June 2021. The ordinary waiting period delays the start date for these payments by one week (other waiting periods can also apply).[81]

The Coronavirus Economic Response Package Omnibus Act 2020 waived the one-week ‘ordinary waiting period’ that applies to JobSeeker Payment, Youth Allowance (Other) and Parenting Payment for the period that the Coronavirus Supplement is paid. The waiver of this waiting period was extended with the Coronavirus Supplement, apart from the extension that applied from 1 January 2021 to 31 March 2021. The extension of the ordinary waiting period waiver in 2021 was made using the instrument making power under section 1262 of the SS Act inserted by the Social Services and Other Legislation Amendment (Extension of Coronavirus Support) Act 2020—the instrument is the Social Security (Coronavirus Economic Response—2020 Measures No. 16) Determination 2020. Section 1262 allows the Minister for Families and Social Services to amend specific provisions of the SS Act via legislative instrument. However, any amendment made using this power ceases to have effect after 31 March 2021.

Key provisions

Items 15–20 provide for the ordinary waiting period to not apply to any claimants for Parenting Payment, Youth Allowance (Other) or JobSeeker Payment for the period 1 April 2021 to 30 June 2021.

Part 4—Income free areas and taper rates

The amendments in Part 4 of Schedule 1 permanently increase the income free area for Youth Allowance (Other), JobSeeker Payment (except principal carer parents), Parenting Payment Partnered, Partner Allowance and Widow Allowance to $150 per fortnight from 1 April 2021. The amendments also cease indexation of the free area for JobSeeker Payment, Parenting Payment Partnered, Widow Allowance and Partner Allowance.

The income free area is the amount of income an individual can receive per fortnight before their payment is reduced under the income test. Income over the free area reduces the rate of these payments by 50 cents per dollar (this rate of reduction is known as the taper rate). There is also a higher threshold over which a taper rate of 60 cents for each dollar applies.[82] The higher threshold from 1 April 2021 will be $256 per fortnight for all the listed payments except for Youth Allowance (Other) which will be $250 per fortnight.

Prior to 25 September 2020 the income free area for the payments other than Youth Allowance (Other) was $106 per fortnight. Youth Allowance (Other) had a higher free area of $143 per fortnight. On 21 July 2020, the Government announced a temporary increase in the free area for JobSeeker Payment and Youth Allowance (Other) to $300 per fortnight.[83] The increase was to apply from 25 September to 31 December 2020 but was later extended to 31 March 2021.[84]

History

The income free area for JobSeeker Payment (and related payments) has rarely changed since the unemployment benefit was introduced in 1945. When it has changed it has been with the intention of encouraging jobseekers to take up part-time work and to help recipients avoid poverty traps (where the income test combined with income tax result in very little return from work).[85] In 2014, the income free area for JobSeeker Payment’s predecessor Newstart Allowance (together with Parenting Payment Partnered, Widow Allowance and Partner Allowance) was increased from $62 to $100 per fortnight. This was the first increase since 2000, when it was increased from $60 to $62 as part of the GST compensation package.[86] The $60 free area had been in place since May 1986.

Also in 2014, the income free area began to be annually adjusted in line with movements in the Consumer Price Index. Indexation was paused for three years from 1 July 2017 as part of a savings measure included in the Social Services Legislation Amendment Act 2017.

Comparison of pre- and post-COVID-19 income test settings with proposed changes

Table 2 sets out previous income test settings, the temporary increase as part of the Government’s COVID-19 response, and the changes proposed in Part 4 of Schedule 1 to the Bill.

Table 2: income test settings for JobSeeker Payment and Youth Allowance (Other)

Payment	July–September 2020	September 2020–March 2021	From 1 April 2021
JobSeeker Payment, Parenting Payment Partnered, Partner Allowance and Widow Allowance	Free area of $106 per fortnight. Taper rate of 50 cents per dollar of income between $106 and $256 per fortnight Taper rate of 60 cents per dollar over $256 per fortnight. Free area adjusted on 1 July each year in line with movements in the CPI. Higher threshold set at $150 above the free area.	Free area of $300 per fortnight. Taper rate of 60 cents per dollar of income over $300 per fortnight.	Free area of $150 per fortnight. Taper rate of 50 cents per dollar of income between $150 and $256 per fortnight. Taper rate of 60 cents per dollar over $256 per fortnight. No annual adjustment of the free area.
JobSeeker Payment for a single principal carer	Free area of $106 per fortnight. Taper rate of 40 cents per dollar of income over $106 per fortnight. Free area adjusted on 1 July each year in line with movements in the CPI.	Free area of $106 per fortnight. Taper rate of 40 cents per dollar of income over $106 per fortnight. Free area adjusted on 1 July each year in line with movements in the CPI.	Free area of $150 per fortnight. Taper rate of 40 cents per dollar of income over $150 per fortnight. No annual adjustment of the free area.
Youth Allowance (Other)	Free area of $143 per fortnight. Taper rate of 50 cents per dollar of income between $143 and $250 per fortnight Taper rate of 60 cents per dollar over $250 per fortnight. No annual adjustment.	Free area of $300 per fortnight. Taper rate of 60 cents per dollar of income over $300 per fortnight.	Free area of $150 per fortnight. Taper rate of 50 cents per dollar of income between $150 and $250 per fortnight. Taper rate of 60 cents per dollar over $250 per fortnight. No annual adjustment.

Source: DSS, ‘4.10.2 Historical unemployment & sickness benefit income test’, Social security guide, DSS website, last reviewed 1 July 2020; SA, A guide to Australian Government payments: 1 July–19 September 2020, SA, Canberra, 2020, pp. 38–40; SA, A guide to Australian Government payments: 1 January to 19 March 2021, SA, Canberra, 2021, pp. 39–41.

Lack of indexation for the income free area

Figure 2 (below) shows how earnings affect the rate of payment under the temporary COVID-19 response measures, the proposed settings under the Bill and the situation without the COVID-19 measures.

Changes to the income free area and the increase in the maximum rate mean that recipients with earnings will be better off than under the pre-COVID-19 settings, but will receive lower levels of support compared to the COVID-19 settings.

The removal of indexation means that the increased support and work incentive offered by the higher free area will erode over time as its real value is not maintained.

Figure 2: JobSeeker Payment rate under different COVID-19 settings and proposed settings from April 2021 (single, no dependent children)

Notes: JobSeeker Payment rate includes Energy Supplement and any applicable Coronavirus Supplement rate (but excludes Rent Assistance and other supplementary payments payable in some circumstances). ‘Without COVID-19 measures’ is an estimate for the period 20 March 2020 to 19 March 2021 excluding the Coronavirus Supplement and the changes to the income test from 25 September 2020 to 31 March 2021.

Source: Parliamentary Library estimates.

Key provisions

Item 21 changes the ordinary income free area for Youth Allowance (Other) at point 1067G-H29 of the SS Act from $143 to $150.

Item 22 changes the amount of excess income allowed before the higher taper rate of 60 per cent applies to Youth Allowance (Other), at paragraph 1067G-H32(c) and 1067G-H33(c), from $107 to $100. This maintains the current upper income test threshold at $250 for Youth Allowance (Other).

Item 23 changes the ordinary income free area for JobSeeker Payment at point 1068-G12 to $150.

Item 24 repeals the note at point 1068-G12 which states that the free area is indexed in line with CPI increases.

Item 26 changes the amount of excess income allowed before the higher taper rate of 60 per cent applies to JobSeeker Payment, at points 1068-G15 and 1068-G16 to $106. This maintains the upper income test threshold at the current rate of $256.

Items 27–30 make similar amendments to the Parenting Payment Partnered free area and upper income test threshold.

Items 31 and 32 repeal the indexation provisions for the JobSeeker Payment, Parenting Payment Partnered, Widow Allowance and Partner Allowance income test free area at section 1190 (table item 20AAA) and subsection 1191(1) (table item 14AAA).

Part 5—Portability

The amendments in Part 5 of Schedule 1 provide the Secretary of the Department of Social Services with a temporary discretionary power to extend the portability period for certain Age Pension and Disability Support Pension recipients who are unable to return to, or depart from, Australia within 26 weeks because of the impact of COVID-19. The Secretary’s power will expire on 30 June 2021.

Portability refers to the eligibility conditions for a social security payment while an individual is overseas.[87] Some social security payments have limited portability and can only be receive for short periods while a person is temporarily overseas and some may only provide portability in special circumstances. Other payments, such as the Age Pension, have unlimited portability and a person can continue to receive the Age Pension while living permanently outside Australia. The Disability Support Pension has different portability conditions depending on an individual’s circumstances:

• people who are permanently and severely impaired and have no future work capacity may be eligible for unlimited portability
• people with terminal illnesses who return to their country of origin to be near or with a family member may be eligible for unlimited portability
• other DSP recipients generally have a portability period of up to four weeks in any 12-month period (four week periods separate from this general period can be granted for specific purposes such as medical treatment or family crises).[88]

While a person may be eligible for a payment under the portability rules, their pension rate can be affected after a certain period of time outside of Australia depending on the time they spent residing in Australia during their working life (between the age of 16 and Age Pension age). This period of residence in Australia is known as their Australian Working Life Residence (AWLR). Those with less than 35 years AWLR will, after 26 weeks overseas, have their payment reduced to a rate equivalent to the proportion of 35 years their AWLR represents.[89] For example, a person with 16 years of AWLR will receive around 46 per cent of the rate otherwise payable if they resided in Australia. Those with 35 years or more AWLR residence will not have their payment reduced.

Some Disability Support Pension recipients with unlimited portability may be exempt from the AWLR rate reduction.[90]

In response to COVID-19-related overseas travel restrictions, the Australian Government provided extended portability periods to those pensioners unable to return to or depart from Australia within 26 weeks. Some pensioners face issues with being unable to depart because they are part of groups grandfathered from previous changes to portability.[91] These groups only remain covered by the grandfathering provisions if they have not returned to Australia since that date for a continuous period of 26 weeks or more.[92] Changes were made to the portability provisions in the SS Act for those outside Australia unable to return and those in Australia unable to depart via the Social Security (Coronavirus Economic Response—2020 Measures No. 10) Determination 2020 and the Social Security (Coronavirus Economic Response—2020 Measures No. 16) Determination 2020. The changes in the latter determination will expire on 31 March 2021.

The amendments proposed in items 35–37 will enable the Secretary to determine a different portability period where the relevant 26-week period ends on or after 11 March 2020 and:

• the Secretary is satisfied the person’s absence from Australia is temporary and
• the Secretary is satisfied the person in unable to return to Australia before the end of the 26‑week period because of the impact of COVID-19.

The different period set by the Secretary cannot end after 30 June 2021.

Similar amendments are made for those in Australia at risk of losing their grandfathered status by items 38 and 39—the Secretary can determine a different period the person can remain in Australia before they lose their grandfathered status. The Secretary must be satisfied of the same conditions listed above and cannot set a period that ends after 30 June 2021.

Concluding comments

The end of the $150 per fortnight Coronavirus Supplement on 31 March 2021 will have an immediate impact on recipients of the affected payments. This will only be partially cushioned by the $50 per fortnight permanent increase proposed by the Bill. If the Bill passes it is likely that advocacy groups will continue to campaign for further increases in the base rate of payment.

The Bill does not address the reason payments such as JobSeeker Payment have fallen in value relative to pensions and the minimum wage—the way payments are indexed. If wages increase over time, payments indexed to the CPI are likely to fall behind pensions and the minimum wage.