Purpose of the Bill

The Social Services and Other Legislation Amendment (Strengthening the Safety Net) Bill 2023 (the Bill) amends the Social Security Act 1991 (the SS Act), the A New Tax System (Family Assistance) Act 1999 (the FA Act) and the Veterans’ Entitlements Act 1986 (the VE Act) to:

• expand eligibility for Parenting Payment Single by allowing single parents to remain eligible until their youngest child turns 14; up from the current cut-off age of 8
• provide a $40 per fortnight increase to the base rates of JobSeeker Payment, Youth Allowance, Parenting Payment Partnered, Austudy, Disability Support Pension (Youth), Special Benefit and other payments
• allow long-term, single JobSeeker Payment recipients aged 55+ to access the higher rate currently paid to those aged 60+ and
• provide a 15% increase in the maximum rate of Commonwealth Rent Assistance (CRA).

The measures were announced in the 2023–24 Budget (pp. 199–200; 202).

Structure of the Bill and the Bills Digest

The Bill has 3 Schedules:

• Schedule 1 – Parenting Payment Single eligibility changes
• Schedule 2 – working-age payment increases and
• Schedule 3 – CRA increases.

The Bills Digest will provide background and analysis for each Schedule separately.

Committee consideration

At the time of writing, the Bill had not been referred to any committees.

Senate Standing Committee for the Scrutiny of Bills

At the time of writing, the Senate Standing Committee for the Scrutiny of Bills had not considered the Bill.

Policy position of non-government parties/independents

In his Budget-in-reply speech, Opposition Leader Peter Dutton stated the Coalition supported the Parenting Payment eligibility changes, the increased payment rates for JobSeeker Payment recipients aged 55 and older and the CRA increases. Media reports on 31 May 2023 suggest the Coalition will support the proposed $40 per fortnight increase to working-age payment rates in Schedule 2. In his Budget-in-reply speech, the Opposition Leader put forward a policy to double the income free area for JobSeeker Payment – the amount of income that can be earned before the payment starts being reduced under the income test – from $150 to $300 per fortnight.

Australian Greens leader Adam Bandt criticised the proposed measures as not going far enough: ‘Cost of living measures in the budget don’t address the scale of the rental, housing and poverty crises the country is facing. Jobseekers will see only $2.85 more a day, and the increase to Commonwealth Rent Assistance is as little as $1.12 a day’. In a media release, Mr Bandt stated that when ‘Budget legislation hits the Parliament’, the party would push to ‘lift people out of poverty’.

Independent Senator David Pocock described the budget social security measures as a missed opportunity:

Safety net payments like JobSeeker, Austudy and Commonwealth Rent Assistance are further missed opportunities. Increasing the income support payments by $40 a fortnight is 80% less than the independent expert Economic Inclusion Advisory Committee recommended and not enough to lift people out of poverty. A 15% increase to the maximum rate of Commonwealth Rent Assistance - or $31 a fortnight- still puts the highest amount of that payment $568 below the average cost of a rental property in this country.

Senator Pocock also suggested that the Parenting Payment Single eligibility changes should commence earlier than 20 September 2023.

Independent MP Zoe Daniel welcomed the Parenting Payment Single changes. While Ms Daniel had advocated for making the cut-off age 16 years, she described the 14 years cut-off age as ‘a good compromise’.

Other independent MPs expressed support for the measures in the Bill including Allegra Spender and Andrew Wilkie. However, Mr Wilkie noted that ‘even with the increases announced tonight, Jobseeker is still way below the poverty line and Commonwealth Rent Assistance remains woefully inadequate’.

Position of major interest groups

The views of major interest groups on the measures proposed in the Bill are discussed in relation to each Schedule below.

Financial implications

According to the Explanatory Memorandum, the measures in the Bill will cost an estimated $9.5 billion over the forward estimates (p. 1):

• the Parenting Payment Single eligibility changes will cost $1.9 billion
• the working-age payment rate increases will cost $4.9 billion and
• the CRA increases will cost $2.7 billion.

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.[1]

Parliamentary Joint Committee on Human Rights

At the time of writing, the Parliamentary Joint Committee on Human Rights was yet to consider the Bill.

Schedule 1—Additional support for single parents

The Government will expand eligibility for Parenting Payment Single by allowing single parents to remain eligible until their youngest child turns 14; up from the current cut-off age of 8.

The Government estimates that the change will cost $1.9 billion over the 4 years to 2026–27 and will benefit at least 57,000 single principal carers. Principal carers are those caring for a dependent child under the age of 16.

Mutual obligation requirements will continue to apply to Parenting Payment Single recipients with a youngest child aged 6 or older.

The changed eligibility would commence on 20 September 2023.

Background

Parenting Payment Single and JobSeeker Payment compared

Parenting Payment is the main income support payment for the principal carer of young children. To be eligible, a person must be the principal carer of a qualifying child aged under 6 if partnered or under 8 if single. Single parents may have to meet mutual obligation requirements such as job search when their youngest child turns 6. Some parents of children under the age of 6 were also required to participate in activities under the ParentsNext program (see below). An income test and assets test applies.

Principal carers of children who have reached the Parenting Payment cut-off ages may be eligible for other income support payments such as JobSeeker Payment, which has a lower payment rate. Table 1 sets out key differences between the two payments.

Table 1  Comparison of Parenting Payment Single and JobSeeker Payment, May 2023

(1) For a single principal carer of a dependent child. Note that single principal carers granted an exemption from mutual obligation requirements for foster caring, being non-parent relatives under a court order, home-schooling, providing distance education or having a large family are paid the same rate as Parenting Payment Single.

Source: Services Australia (SA), A guide to Australian Government payments: 20 March 2023–30 June 2023, (Canberra: SA, 2023).

As at December 2022, there were 230,830 recipients of Parenting Payment Single and 85,580 single principal carers receiving JobSeeker Payment or Youth Allowance (Other). Around 95.5% of Parenting Payment Single recipients were female or identified as non-binary.

2006 and 2013 eligibility changes

The budget measure partially reverses a change made by the Howard Government in 2006 which reduced the cut-off age from 16 to 8. Those receiving Parenting Payment Single in July 2006 were protected from the change through grandfathered provisions.[2] The Gillard Government removed these grandfather provisions in January 2013.

The Howard Government changes were part of the 2005–06 Budget’s ‘Welfare to Work’ package (p. 132). The changes to Parenting Payment saw the introduction of mutual obligation requirements once a recipient’s youngest child turned 6 as well as the reduction in the cut-off age (p. 137). In 2005, then Minister for Employment and Workplace Relations Kevin Andrews stated that the Howard Government was concerned children were growing up in jobless households and, ‘Parents out of the work force for long periods of time are in danger of losing the skills and self-confidence necessary for them to return to work’. Then Minister for Employment Participation Peter Dutton stated in 2005:

We know that lone parents stay on payment for an average of 10 years.

We also know that growing up in a household where no parent is working can affect a child’s chances in life.

We must ensure that jobless households now don’t lead to intergenerational welfare dependency in the future.

Australia’s working age support arrangements are a serious structural impediment to participation and employment growth, and reduce our standard of living.

At the time, Labor opposed the changes with then Deputy Leader of the Opposition Jenny Macklin stating:

We support welfare reform that goes far beyond moving people from one welfare queue to another—the dole.

…

Real welfare reform understands that being a parent is an important job in itself and that work makes families more secure. Real welfare reform helps parents find the balance between supporting their family and raising their kids.

The government evaluation of the 2006 changes found that single parents with children aged 8–15 who claimed Newstart Allowance (the previous name for JobSeeker Payment) following the eligibility change were more likely to leave income support compared to Parenting Payment Single recipients prior to the change. However, much of this was due to Newstart Allowance’s tighter income test and the fact that some single parents claimed other payments such as Disability Support Pension or Carer Payment (pp. 21, 34–36).

In May 2012, there were 122,630 Parenting Payment Single recipients who had been grandfathered from the 2006 changes (out of 320,828 Parenting Payment Single recipients) (pp. 83–84). In the 2012–13 Budget, the Gillard Government announced an end to the grandfathering arrangements from 1 January 2013 so that all Parenting Payment Single recipients and new claimants would be subject to the age 8 cut-off (pp. 116–17). Introducing the Bill to end the grandfathering arrangements, then Minister for Employment and Workplace Relations Bill Shorten stated:

These important changes to income support payments for parents continue this government’s focus on providing greater incentives and opportunities, particularly for single parents, to re-engage in the workforce and share in the benefits that work brings.

The removal of grandfathering arrangements will provide greater equity and consistency in the Parenting Payment eligibility rules by ensuring that all parents are assessed the same, regardless of when they first claimed income support.

The changes to parenting payment will encourage parents with school age children to re-enter the workforce sooner and to ensure a fair and consistent set of parenting payment eligibility rules.

Under this government there have been better participation outcomes for individuals who have not been grandfathered under the Howard government’s Parenting Payment Single policy of 2006.

In practical terms the evidence shows us that while grandfathered Parenting Payment recipients do better than most job seekers, principal carer parents on Newstart do even better.

Campaign to reverse the age cut-off changes

There has been a long-standing campaign from community groups such as Single Mother Families Australia (previously the National Council for Single Mothers and their Children) and the Australian Council of Social Service (ACOSS) to reverse the 2006 and 2013 changes to Parenting Payment which resulted in a large reduction in the rate of income support provided to some single parents. This campaign has been backed by the Australian Greens and, more recently, by independent MPs including Zoe Daniel and Monique Ryan.

In March 2023, the Albanese Government’s Women’s Economic Equality Taskforce wrote to the Minister for Women, Katy Gallagher, listing the reinstatement of the Parenting Payment Single for women with children over 8 as a priority for urgent action.

Key issues and provisions

Why is the cut-off at age 14 and not 16?

The 2023–24 budget measure will not fully reverse the 2006 changes as it will lift the youngest child cut-off age to 14 rather than 16. According to the joint media release announcing the measure, ‘By 14, children have typically settled into high school and need less parental supervision, and single parents are in a much stronger position to take on paid work’. When asked about the age 14 cut-off in an interview, Minister for Social Services Amanda Rishworth stated:

Obviously 14 year olds are settled into high school, they're becoming more independent, which does allow a parent to do more work. I would note that as part of the broader social security system, there is still a higher rate of payment that sole parents will get when their children, their youngest child is between 14 and 16. There is a higher rate that you get with dependent children. But this is about recognising that the role of parenting does evolve and that there is more opportunity to take on more hours and more work.

No research evidence has been offered to demonstrate why age 14 is significant in terms of allowing parents to undertake more work, or how it differs from earlier ages in terms of the level of parental supervision required or the level of income support needed by single parents. Other payments for those caring for children do not stop at age 14 or even 16—Family Tax Benefit can continue to be paid until a child is aged 19 (if they are finishing secondary school).

An Impact Analysis prepared by the Department of Social Services (DSS) for this measure compared raising the cut-off age to 14 with other options including cut-off ages at 13 and 16, higher rates of JobSeeker Payment for single parents, or a lower-rate Parenting Payment Single with expanded eligibility. DSS favoured Option One (b)—raising the cut-off age to 14:

DSS considers Option One (b) strikes an appropriate balance between the need to ensure single parents are well supported to meet their cost of living, while maintaining incentives for parents with the capacity to re-engage with the workforce to do so. Option One (b) would provide higher payments to single parents who are the principal carer of primary school-aged children, in recognition of their reduced capacity to work due to their caring responsibilities. In addition, Option One (b) would provide a higher rate of payment while the family’s youngest child completes their first year of high school, in order to assist with the transition to new financial and employment arrangements. This option reduces the risk that single parents who do have capacity to re-engage with the workforce face a financial disincentive to do so. (p. 23)

The Impact Analysis asserted that there was ‘a risk that receiving a higher rate of payment and leaving the JobSeeker Payment may discourage workforce connection’ (pp. 19–20). This risk was not quantified, nor was the potential financial pressures faced by single parents moving to a lower-rate payment when their child turned 13 or 14. DSS considered that at age 14, children have started high school and require less direct supervision from their carers and that transferring single parents to the lower-rate JobSeeker Payment will provide them with a greater incentive to search for work (p. 25). The analysis also notes that there are financial obligations that come with child being in high school (p. 25). However, DSS does not state why these additional financial obligations should only be supported by a higher payment for 1 year as opposed to 3.

According to a Parliamentary Budget Office costing for MP Zoe Daniel, increasing the cut-off age to 16 would cost $1.2 billion over 3 years to 2025–26 compared to $916.6 million for the age 14 cut-off. The PBO’s estimates are lower than the Government’s budget measure ($1.3 million over 3 years to 2025–26, p. 202). The Government’s estimates are much higher than the PBO for the last 2 years of the forward estimates and forecast much less revenue from personal income tax.

Under the changes, there will still be a higher rate of JobSeeker Payment for single principal carers but only for those with a youngest child aged 14 or 15 (see the rates in column 2 of Table 1). A principal carer for JobSeeker Payment is defined as the carer of a ‘dependent child’ who has not turned 16.

Single Mother Families Australia CEO Terese Edwards stated that while ‘ecstatic’ about the budget measure, her organisation would continue to push for the cut-off age to be raised to 16.

Parenting Payment Single recipients will not receive the Schedule 2 rate increase

Parenting Payment Single rates will not be increased by the proposed amendments in Schedule 2. Parenting Payment Partnered will be increased by $40 per fortnight. When the Coalition provided a $50 per fortnight increase to non-pension payments in April 2021, Parenting Payment Single was included.

Economic Justice Australia, the peak body for community legal centres providing advice on social security issues, stated:

The rationale for excluding Parenting Payment (Single) (PPS) from the $40 a fortnight rate increase is unknown and difficult to fathom given research highlighting the poverty among single parents, and impacts on their children. The extension of eligibility is very welcome, along with the abolition of ParentsNext; however, to truly reverse the erosion of social security rights and entitlements for single parents, the PPS rate needs to increase to the pension rate, and PPS qualification extended to the youngest child turning 16. (p. 1)

Key provisions

Subsection 500D(2) of the SS Act defines PP child [Parenting Payment child] for a person who is not a member of a couple as:

• a child of the person
• the child has not turned 8 and
• the person is the principal carer of the child.

Item 1 of Schedule 1 omits 8 and substitutes 14 at paragraph 500D(2)(c).

This has the effect of raising the cut-off age for the youngest child of a Parenting Payment Single claimant to 14.

Item 2 makes a consequential amendment to subparagraph 1061PJ(2A)(b)(ii) of the SS Act. This will allow for a Parenting Payment Single recipient who was receiving the Pensioner Education Supplement, to keep receiving this supplement if they transfer to Youth Allowance because their youngest child reaches the cut-off age of 14.

Item 3 makes a consequential amendment to paragraph 1061ZDA(1)(b) of the SS Act. The amendment allows a Parenting Payment Single recipient who ceases to be qualified due to the cut-off age at 14, to retain their Pensioner Concession Card for 12 weeks.

Schedule 2—Increase to working age payments

Schedule 2 proposes amendments to provide a $40 per fortnight increase to the base rates of JobSeeker Payment, Youth Allowance, Parenting Payment Partnered, Austudy, and Disability Support Pension (Youth). ABSTUDY Living Allowance, Special Benefit and the Farm Household Allowance rates will also be increased as their rates are set with reference to Youth Allowance and JobSeeker Payment rates.[3] Schedule 2 will also extend the higher rate paid to single JobSeeker Payment recipients aged 60 years and over who have received income support for at least 9 continuous months, to those aged 55 years and over in the same circumstances.

The rate increases are estimated to cost $4.9 billion over the forward estimates (p. 1). The Minister for Social Services Amanda Rishworth stated that the $40 increase will benefit around 1.1 million payment recipients and the higher rate for certain 55 year olds will benefit 52,000 people.

Background

Over the past two decades a large gap has opened up between working age payments (such as JobSeeker Payment and Youth Allowance) and pensions. The growth in this gap is caused by differences in the way the two payment types are automatically indexed.

What are working age and student payments?

According to the Department of Social Services: ‘Working age payments assist people who are temporarily unable to support themselves through work or who have a limited capacity to work due to disability or caring responsibilities.’ These include JobSeeker Payment, Youth Allowance (Other), Parenting Payment Partnered, and Special Benefit.

While it can be classed as a working age payment, Parenting Payment Single is indexed in the same way as pensions and is not affected by this schedule.

Unlike the Disability Support Pension (DSP) for adults, DSP (youth) for those under 21 is indexed in the same way as Youth Allowance. The increases in this schedule also apply to DSP (youth).

Student payments are Youth Allowance for students and Australian Apprentices, Austudy, and ABSTUDY.

Policy rationale for a difference in payment rates

While there is an established rationale for a gap between pensions and working age payments, recent policy changes have undermined it. There is no compelling rationale for a policy that automatically increases the gap in payment rates.

The rationale for a gap between these two types of payments is about work incentives. According to a 2012 submission by 4 Commonwealth departments:

Embedded in our system is the fundamental notion that people who can work should do so, except where factors such as disability, age or caring responsibilities are recognised as relieving this obligation. This is reflected in the distinction between pensions and allowances within the payment system. Pensions provide for those whom the community does not expect to fully support themselves through workforce participation. Allowances assist those who are expected to transition to being self-supporting and who are generally required to be looking for work or undertaking activities that prepare them to transition to work. (p. 8)

Differences in the purposes of pensions and allowances underpins differences in how the two types of payment are designed. For example, because people receiving allowances are expected to move into paid work, policymakers attempt to maintain work incentives by setting rates at a lower level than pensions and making payments conditional on job search and other activities.

However, over time, policy changes have eroded the distinction between pensions and allowances. For example, a growing proportion of people receiving JobSeeker Payment have disabilities that mean they are unlikely to ever support themselves fully through work (Figure 1). The proportion of recipients with caring responsibilities and who are approaching retirement age has also increased (Figure 3 below).

Figure 1 Percentage of Newstart Allowance/JobSeeker Payment recipients with a partial capacity to work of less than 30 hours a week

Notes: Newstart Allowance was merged with Sickness Allowance and Bereavement Allowance to form JobSeeker Payment from 20 March 2020. 2020–2022 period marked by a significant increase in JobSeeker Payment recipients due to the impact of COVID-19 and temporary policy changes.

Source: Department of Social Services (DSS), DSS Income Support Recipients – Monthly Time Series April 2023, (Canberra: DSS, May 2023).

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

Pensions have generally been paid at a higher rate than allowances. From the 1970s onwards, pensions rates began to be adjusted in a different way from allowances. 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). Allowances have been indexed using the CPI alone. This meant that as living standards in the broader community rose as wages increased, pensions also increased. Allowances, 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 $30 per week in response to the findings of the Pension Review led by departmental secretary Jeff Harmer. The review was a response to community concerns that the rate of the pension was inadequate.

The single rate of Newstart Allowance (the previous name for JobSeeker Payment) fell from around 90% of the single rate of the pension in 1993 to around 66 per cent in 2023 (Figure 2). According to researchers Peter Whiteford and Bruce Bradbury, Newstart Allowance 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.

Key issues and provisions

Responding to the problem of declining adequacy

As the relative value of payments has declined, governments have 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 and members of the National Party.[4]

In December 2022 the Albanese Government established an interim Economic Inclusion Advisory Committee (EIAC) as part of an agreement with Senator David Pocock. In its first report the EIAC recommended the ‘Government commit to a substantial increase in the base rates of JobSeeker Payment and related working age payments as a first priority’ (p. 8). The EIAC’s report stated that increasing JobSeeker Payment and related working age payments ‘to 90 per cent of the Age Pension would improve adequacy and return them to payment relativities of 1999’ (p. 16). Figure 2 compares Newstart Allowance/JobSeeker Payment rates with pension rates since 1993. It also compares current payment rates with the $40 increase proposed by Schedule 2 of the Bill and the EIAC’s recommended increase.

Figure 2 Comparison of JobSeeker Payment, pension rates and proposed increases, $ per week

Notes: rates are ‘typical’ maximums and include all supplements automatically paid. Rates are as at 20 March each year (2020 data includes COVID Supplement, although it was not paid until April 2020). Rates increases are compared to current rates as indexation adjustments will also occur on 20 September 2023.

Sources: Department of Social Services (DSS), ‘5 Payment Rates’ Social Security Guide, 8 May 2023; DSS, JobSeeker, Student Payments and Commonwealth Rent Assistance, Budget Factsheet, 9 May 2023; Economic Inclusion Advisory Committee, 2023–24 Report to the Australian Government, (Canberra: DSS, 2023), 16.

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 in real terms).

In 2021, the Morrison Coalition Government introduced legislation to increase working age payments by $50 a fortnight. Parliament passed the Social Services Legislation Amendment (Strengthening Income Support) Act 2021 in March 2021.[5] This permanent increase followed the cessation of the temporary Coronavirus Supplement — an emergency response to restrictions applied during the pandemic. ACOSS described the $50 a fortnight increase as ‘a measly $3.57 a day more than the brutal old Newstart rate’.

There is an argument that a change in the way working age payments are indexed would be a better alternative to ad hoc increases. For example, the 2009 report of the Australia’s Future Tax System Review (Henry Review) recognised 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 (p. 496).

A 2020 Senate Community Affairs References Committee inquiry into the adequacy of Newstart Allowance and related payments called for more significant reform of working age payments:

Evidence to the inquiry has made clear the need for major reform of the social security system to ensure the income support system provides an adequate safety net for working-age unemployed people and becomes a strong enabler for economic participation. It is timely and critical to engage in major reform to ensure the social security system provides an adequate safety net for all Australians at all times. (p. xviii)

The EIAC also raised many issues with the design of the social security system and concluded it was ‘essential that further analysis is undertaken of the overall system of support for working age households’ (pp. 4; 47). The committee discussed issues around measuring the adequacy of payment rates, issues with supplements such as Rent Assistance, work incentives, and the changing demographics of those supported by unemployment payments. 

Higher rate for older, long-term recipients

Currently, a higher rate of JobSeeker Payment is paid to single recipients aged 60 years or older who have been on income support for 9 continuous months or more. These recipients receive a maximum basic rate of $745.20 per fortnight and a typical rate of $761.30 per fortnight (including the Energy Supplement and Pharmaceutical Allowance) (p. 23). A 59-year-old in the same circumstances can receive a maximum basic rate of $693.10 per fortnight and a typical rate of $701.90 per fortnight (these recipients are eligible for Energy Supplement of $8.80 but not the Pharmaceutical Allowance).

In January 1990, a higher payment rate was introduced for single unemployment benefit recipients aged 60+ who had been on income support for 6 continuous months or more (item 59). The rate for these recipients was increased to the equivalent pension rate. The higher rate was introduced at the same time as other measures aimed at assisting older unemployment benefit recipients: including changes to activity requirements and expanded access to training and employment services.

The requirement for being on income support for 6 continuous months was extended to 9 months from July 1996 via the Social Security and Veterans' Affairs Legislation Amendment Act 1995 (item 50 of Schedule 6). The increase was aligned to changes to eligibility for Mature Age Allowance, and the establishment of Newstart Allowance as the main unemployment benefit (with the abolition of the Job Search Allowance (pp. 391–395)). Mature Age Allowance was introduced in 1994 and closed to new claimants in 2003 (pp. 36–37). It could be claimed by those aged 60 years and over but under Age Pension age who were long-term unemployed. The Mature Age Allowance was paid at pension rates and recipients were not required to satisfy an activity test.

The higher payment rate for older, long-term Newstart Allowance/JobSeeker Payment recipients has not kept up with the pension rate since the late 1990s, primarily due to the different method of indexation (see Figure 2 above).

In her second reading speech for the Bill, Minister Rishworth set out the rationale for lowering the eligibility age for the higher rate to 55:

Over the past decade, the proportion of mature-aged recipients on JobSeeker has significantly increased. Older Australians find it harder to get back into work, often due to age discrimination or poorer health.

The evidence shows that older Australians are more likely to be long-term JobSeeker payment recipients, with 81 per cent of people aged 55 and over on the payment for more than a year.

Over half of this cohort will spend more than five years on payment, compared to less than one-third of the general JobSeeker payment population.

We also know that women over 55 are at higher risk of homelessness in Australia.

The government remains committed to tackling age based discrimination in workplaces, but this change recognises that there's still work to be done and older Australians do need more support.

Figure 3 shows the changed age and gender demographics of JobSeeker Payment (and its predecessor Newstart Allowance) over the last 2 decades. In 2001, recipients were predominantly young and male. By 2022, the number of male and female recipients were around the same but there had been a significant increase in the proportion of older recipients, particularly older women. According to the Parliamentary Budget Office, these differences are due to changes in the labour market, changes in the Australian population demographics and policy changes such as the increase in the Age Pension age for women (and later for all recipients), the closing of payments paid primarily to dependent partners, and changes to the eligibility criteria for payments such as Parenting Payment and Disability Support Pension (see pp. 9–15).

Figure 3 Newstart Allowance/JobSeeker Payment % of total recipients by age and gender

Notes: Data as at June. Newstart Allowance was merged with Sickness Allowance and Bereavement Allowance to form JobSeeker Payment from 20 March 2020.

Source: Parliamentary Library estimates using data from Parliamentary Budget Office (PBO), Indexation and the budget – long term impacts, Budget explainer, (Canberra: PBO, 2 May 2023).

It is unclear why 55 was determined as the specific age for the higher rate eligibility. Many of those in younger age groups are also long-term recipients of income support (suggesting significant barriers to finding and taking-up work). Data released in response to a Senate Estimates question on notice in 2021 indicated that out of all JobSeeker Recipients, those aged 45–54 had the longest average duration on income support (at 303 weeks) and that this age group had the largest number of recipients who had been on income support for 10 years or more.

Stakeholder reactions

Australian Council of Social Service (ACOSS) CEO Cassandra Goldie stated:

… the real increases to base rates of JobSeeker, Youth Allowance and Rent Assistance will still leave more than one million people in poverty, unable to afford three meals a day and a roof over their head. Whilst every dollar counts, the $20 a week increase to JobSeeker and related payments is well below the Economic Inclusion Advisory Committee’s finding that it needs to rise by at least $128 a week to ensure people can cover the basics.

The Antipoverty Centre, an advocacy group comprised of social security recipients, described the proposed rate increases as ‘meagre’.

Economic Justice Australia, the peak body for community legal centres providing advice on social security issues, commented on the rate changes for those aged 55 and over:

We note that people with disability who have limited capacity to work face similar challenges, and face long-term if not indefinite receipt of JobSeeker Payment if they cannot access DSP. The Government’s rationale for targeting a rate increase to older jobseekers equally applies to this cohort. (p. 1)

Key provisions

Items 1–9 of Schedule 2 repeal and substitute the tables setting out the maximum basic rates for the following payments: Disability Support Pension (under 21), Youth Allowance, Austudy, JobSeeker Payment and Parenting Payment Partnered. Table 2 sets out some of the common payment rates, the proposed increase, and the relevant table in the SS Act which will be amended.

The revised JobSeeker Payment rates, substituted by item 8, also provide for a higher rate to be paid to single recipients 55 years or over who have been on income support for 9 continuous months or more (changing the current 60 years or over criteria).

Table 2 Current payment rates and proposed rates from 20 September 2023

Notes: * the JobSeeker Payment and Parenting Payment rates will be indexed on 20 September 2023, after any rate increase is applied. The other payment categories will next be indexed on 1 January 2024.

Sources: Services Australia (SA), A guide to Australian Government payments: 20 March 2023–30 June 2023, (Canberra: SA, 2023); Schedule 2 of the Social Services and Other Legislation Amendment (Strengthening the Safety Net) Bill 2023.

Item 10 sets out the application provisions for these higher rates. The new rates will apply on and after 20 September 2023. Subitem 10(2) provides that these new rates will be used for any indexation occurring after commencement (on Royal Assent). This is significant for JobSeeker Payment and Parenting Payment Partnered rates (and payments linked to these rates) as the next indexation of these amounts will also occur on 20 September 2023. This means that the percentage increase applied as a result of CPI movements from December 2022 to June 2023 will be calculated using the higher rates set out above.

Items 11–16 make consequential amendments to the eligibility criteria for certain supplementary payments and the Pensioner Concession Card which are currently available to certain payment recipients aged 60 or over and in receipt of income support for 9 continuous months. Telephone Allowance and Pharmaceutical Allowance would become payable to Austudy, JobSeeker Payment and Parenting Payment Partnered recipients aged 55 and over who had been on income support for 9 continuous months. JobSeeker Payment, Parenting Payment Partnered and Special Benefit recipients aged 55 and over who had been on income support for 9 continuous months would be eligible for a Pensioner Concession Card.

Schedule 3— Increased support for Commonwealth Rent Assistance recipients

Schedule 3 provides a 15% increase in the maximum rate of Commonwealth Rent Assistance (CRA). The increased rates will apply from 20 September 2023 and will be increased further by one of the twice-yearly indexation adjustments that will occur on that day.

According to the Minister for Social Services Amanda Rishworth, ‘1.1 million households who are paying rent high enough to receive maximum rent assistance will be better off by up to $31 per fortnight, depending on their household type’.

Background

CRA is a non-taxable income supplement paid through Centrelink to individuals and families who rent in the private rental market. The supplement is added to the payment of eligible income support, family assistance and veterans’ payment recipients. Because the supplement is paid as a part of another payment, it may be reduced as a result of the means tests associated with that payment.

The payment aims to assist individuals and families on low incomes in meeting their basic living costs by reducing the proportion of their budget that must be spent on housing.

CRA is not designed to meet a specified benchmark for ensuring housing affordability, but rather to improve housing affordability for income support and family assistance recipients.

Qualifying criteria for receipt of CRA

Recipients of a social security pension or allowance, an eligible Department of Veterans’ Affairs (DVA) payment[6], or an amount over the base rate of Family Tax Benefit Part A, who are also paying private rent above minimum thresholds, may be eligible for CRA.

CRA is not paid to homeowners or purchasers, people living in public housing (but is paid to qualifying community housing residents), or people living in residential aged care services with government-funded beds.

Rates of CRA assistance

To qualify for CRA, a minimum amount of rent must be paid. This rent threshold is indexed to the Consumer Price Index (CPI) twice yearly (on 20 March and 20 September). Where rent is paid in excess of the threshold, the CRA amount is calculated at a rate of 75 cents for every dollar of rent paid above the specified threshold until the maximum rate of assistance payable is reached. The maximum rate—which is also indexed to the CPI twice per year—places a cap on the amount of CRA that can be paid.

The maximum rates and thresholds vary according to a person’s family situation, the number of dependent children they have, and the amount of rent paid. For single people without children, the rent threshold and maximum rate also vary according to whether they share their accommodation with others. CRA is paid to those without children under the SS Act and to people with children under the FA Act. CRA is paid to eligible DVA payment recipients under the VE Act.

Number of CRA recipients

At the end of June 2022 there were 1,398,661 income units receiving CRA (an income unit comprises a single person with or without dependent children or a couple with or without dependent children). A majority of CRA recipients (78.9%) were paying enough rent to be eligible for the maximum rate of assistance.

CRA helps to reduce the number of private renters in housing stress—that is, paying more than 30% of their income on housing costs. As at June 2022, 72% of CRA recipients would have been in housing stress had they not received the supplement, but CRA reduced the proportion to 44%. However, as the Productivity Commission notes, ‘the value of the payment has declined over time, relative to rents, reducing its effectiveness’ (p. 46).

Calls for an increase to CRA

CRA thresholds and rates have failed to keep pace with rental costs in many parts of Australia for some time. This is partly because the thresholds and rates vary according to household composition but not by location, but also because the thresholds and maximum rates are indexed to the consumer price index (CPI) and in areas where rents have increased more than the CPI the real value of CRA has not kept up (p. 20).

ACOSS and other organisations in Australia’s welfare and community services sector have recommended that maximum rates of CRA should be immediately increased to improve affordability for low-income tenants. Several reviews have similarly advocated for an increase to the maximum rate at which CRA is paid.

The amount of the increase recommended varies. In 2017, the Productivity Commission proposed that the maximum rate at which CRA is paid would need to be increased by about 15% to address the decline in the payment’s value relative to rental prices. It went on to observe that a larger increase would be necessary to restore the relative value of the maximum CRA payment to its previous levels for households on low incomes (p. 203).

At the other end of the scale, ACOSS recently called for CRA to be benchmarked to rents paid for outer Sydney, Melbourne and Brisbane, resulting in an increase of 50% to the CRA threshold (pp. 45–46).

For the most part, welfare organisations have been recommending increases to the maximum rate of around 30% to 40%.

Unsurprisingly, then, ACOSS has expressed dissatisfaction with the size of the proposed increase, arguing that ‘the 15% rise will still leave people on JobSeeker and Youth Allowance renting privately in housing stress because these payments have fallen so far behind basic costs’ (p. 5). Housing researcher, Hal Pawson has similarly argued that the increase is insufficient:

While the Government states that the prospective CRA boost represents the largest such increase in 30 years that is not saying much… Even when the new rules take effect, single person payments will remain capped at $90 per week. That in a market where the median weekly rent for advertised units has now reached $550 across the capital cities, and with a NSW lower quartile weekly value of $375 for a 1-bedroom dwelling.

Key issues and provisions

Inappropriate indexation

As noted above, the main reason for the decline in the value of CRA is that the supplement is indexed to the CPI which has been outstripped by growth in average rental prices. As might be expected, many of the abovementioned reviews have not only called for an increase in the rent caps at which maximum CRA is paid, but also for changes to be made to the way in which the payment is indexed to ensure that it maintains its purchasing power over time.

If such changes are not made, then a relatively modest increase to the maximum rate of CRA is not likely to last long. In relation to the Government’s proposed increase Pawson has observed:

In Australia’s lightly regulated and fluid rental sector, these increases will wash through the whole market fairly quickly. It is the cumulative effect of under-indexation that has produced CRA’s inadequacy today.

Typically, it has been recommended that the maximum cap threshold should be indexed to move in line with average rents paid by CRA recipients, rather than the CPI. Any alternative indexation method would need to account for regional differences in rental costs.

CRA poorly targeted

Another key problem with CRA is that it is poorly targeted, with the structure of the payment resulting in some people with relatively low rents having most of their rent covered while others with high rents only have a small proportion of their rent covered.

According to some estimates, around 246,000 or 18% of low-income private renter income units are ineligible for CRA, despite being in moderate to very severe housing stress, because they are not in receipt of income support. Conversely, around 330,000 or 23% of private renters are not in housing stress but are eligible for CRA (p. 4).

A number of proposals have been made for better targeting CRA. For example, Rachel Ong et al have suggested that CRA eligibility criteria could be changed to reflect housing need, defined as low-income private renters paying rents more than 30 per cent of their income. This would entail paying CRA to people who are not in receipt of income support but nevertheless in housing need.

Such a reform could, Ong et al argue, reduce the targeting error of CRA to zero, reduce the population of low-income private renter income units in housing stress by 371,200 or 44%, and generate annual cost savings of $1.2 billion (p. 4).

Need for review of CRA

As the above comments suggest, there are several structural problems with CRA beyond the inadequate rate at which it is paid. In the context of its recent assessment of the National Housing and Homelessness Agreement, the Productivity Commission recommended that the Government should ‘review Commonwealth Rent Assistance as a priority’ (p. 2).

Key provisions

Item 7 and 8 of Schedule 3 replace the CRA rate tables in the FA Act. Items 9–14 replace the CRA rate tables in the SS Act. Item 17 and 18 replace the CRA rate tables in the VE Act. Other amendments update the rent thresholds set out in the legislation to the current rent thresholds. The rent thresholds set the minimum fortnight rent required for a person to qualify for CRA. CRA is calculated at 75 cents for each dollar of fortnightly rent above the rent threshold, up to the maximum rate.

The current rent thresholds and maximum CRA rates compared to the proposed increases are set out in Tables 3 and 4. Table 3 sets out the CRA settings for those with dependent children who receive CRA with Family Tax Benefit Part A. Table 4 sets out the CRA settings for those without dependent children who receive CRA with their income support payment. The proposed rates will commence on 20 September 2023 but indexation will also be applied to CRA on that date (in line with Consumer Price Index movements between December 2022 and June 2023). This means that actual rates from 20 September 2023 onwards will be higher than those shown in the table.

Table 3 CRA for recipients with children – paid with Family Tax Benefit Part A

Sources: Services Australia (SA), A guide to Australian Government payments: 20 March 2023–30 June 2023, (Canberra: SA, 2023); Parliamentary Library estimates based on Schedule 3 of the Social Services and Other Legislation Amendment (Strengthening the Safety Net) Bill 2023.

Table 4 CRA for recipients without children – paid with income support

Sources: Services Australia (SA), A guide to Australian Government payments: 20 March 2023–30 June 2023, (Canberra: SA, 2023); Schedule 3 of the Social Services and Other Legislation Amendment (Strengthening the Safety Net) Bill 2023.