- Australia-Serbia Social Security
- The Agreement between Australia and the Republic of Serbia on Social Security (the Agreement), which is based on a model agreement, would allow each Party to pay a benefit that reflects a person’s association with that Party’s social security system.
- For Australia, the Agreement covers the age pension; for Serbia, it covers pension and disability insurance. The Agreement would also allow for a claim for a benefit to be lodged in either Party, and provides for the sharing of information between Parties.
Background
3.3Social security agreements potentially benefit people who move between countries. Many countries have either social insurance or social welfare-type social security schemes. Social insurance schemes, like Serbia’s, typically require compulsory contributions from the working population, and a person generally is required to make a minimum number of contributions prior to receiving a benefit. Access to social welfare schemes, such as Australia’s age pension, usually depends on residence and financial circumstances.
3.4People who move between countries may not be able to make sufficient contributions to a social insurance scheme or may not satisfy residence requirements for a benefit. Additionally, even when a person may otherwise meet the requirements for a benefit, some countries will only pay benefits to citizens or residents or will reduce the rate of payments to non-residents.
3.5In practice, social security agreements require: the payment of a benefit in the other party on a non-discriminatory basis; specified alternative means by which a person may satisfy residence and/or contribution requirements to qualify for a benefit (called totalisation); and an established method for calculating the rate of payment.
3.6Australia currently has bilateral international social security agreements with the following 31 countries: Austria (2015), Belgium (2002), Canada (2001), Chile (2003), Croatia (2003), Cyprus (1992), Czech Republic (2009), Denmark (1999), Estonia (2015), Finland (2008), Germany (2000), Greece (2007), Hungary (2011), India (2014), Ireland (2005), Italy (1993), Japan (2007), Korea (2006), Latvia (2019), Malta (2004), Republic of North Macedonia (2009), the Netherlands (2001), New Zealand (2016), Norway (2005), Poland (2009), Portugal (2001), Slovak Republic (2010), Slovenia (2002), Spain (2002), Switzerland (2006), and the United States of America (2001).
3.7While Australia’s social security agreements are based on a model agreement, these agreements are determined through negotiation between countries with different social security systems. This negotiation occurs in a context where matters beyond social security may influence negotiations which may result in different agreements.
Potential economic impacts of the Agreement
3.8For Australia, the Agreement covers the age pension. For Serbia, it covers pension and disability insurance. The Agreement also contains provisions to prevent double liability for superannuation/social insurance in cases where workers are temporarily seconded.
3.9For Australia, depending on individual circumstances, the National Interest Analysis (NIA) states the following people may be able to benefit under the Agreement:
- Australian residents who wish to move to Serbia in their retirement (including those born in Serbia or with Serbian ancestry)
- Australian residents who have previously worked in Serbia
- former Australian residents living in Serbia
- Australian employers temporarily seconding workers to Serbia who will not be subject to double liability.
- The table below summarises key statistics contained in the NIA.
Table 2.1Australia-Serbia social security agreement: key statistics
| |
Serbian-born residents in Australia | 25,000 |
People in Australia with Serbian ancestry | 94,997 |
Estimated number of new Australian age pensions to be paid in the first three years of the Agreement | 1,000 |
Estimated number of new Serbian pensions to be payable in Australia | No estimate available |
Impact on taxation revenue of the removal of double liability for superannuation contributions | Negligible |
Estimated administered cost of the Agreement | $9 million over forward estimates from 2021-22 to 2024-25 |
Departmental costs to administer two social security agreements (Serbia and Bosnia Herzegovina) | $9.8 million over forward estimates from 2021-22 to 2024-25 |
Source: National Interest Analysis
Reasons for Australia to take the treaty action
3.11According to the NIA, the Agreement would serve to reinforce Australia’s political, business and strategic interests.
3.12The Agreement, according to the NIA would also:
- help maximise the income of Australian residents, which would have a positive flow-on effect within the Australian economy
- further strengthen bilateral relations between Australia and Serbia
- provide choices in retirement for individuals who migrate between Australia and Serbia during or after their working lives
- bring economic and social benefits to Australia.
Obligations
3.13Part I (Articles 1 to 5) sets out general provisions of the Agreement including:
- legislative scope (Article 2)
- personal scope (Article 3)
- obligation for equal treatment (Article 4) and
- where benefits will be paid.
Coverage
3.14Part II (Articles 6 to 10) of the Agreement concerns coverage including provisions to avoid double liability for superannuation or insurance contributions in respect of the same work of an employee. Article 6 (Purpose and Application) sets out the purpose of this Part, which is to ensure that employers and employees are subject to the legislation of only one Contracting Party in respect of the same work.
Provisions for benefits under the legislation of Australia
3.15Part III (Articles 11 to 13) of the Agreement applies to benefits under the legislation of Australia. For the purposes of Article 11, Part III of the Agreement only applies to Australian social security law related to the age pension. Article 13 specifies how the rate of a benefit (age pension) will be calculated under the proposed Agreement and how this applies to a person who is inside or outside Australia.
Provisions for benefits under the legislation of Serbia
3.16Part IV (Articles 14 and 15) of the Agreement applies to benefits under the legislation of Serbia. Article 14 outlines that certain periods of Australian working-life residence will be taken into account by Serbia for the purpose of meeting minimum insurance periods under Serbian legislation, provided the periods do not overlap with the person’s periods of insurance accumulated in Serbia.
3.17Article 15 specifies how the amount of benefit is calculated.
Miscellaneous and administrative provisions
3.18Part V of the Agreement (Articles 16 to 22) sets out various obligations relating to the administration of the Agreement.
Transitional and final provisions
3.19Part VI (Articles 23 to 25) of the Agreement contains transitional and final provisions. Amongst other things, Article 23 does not establish a right to a benefit for any period prior to the date on which the Agreement enters into force but ensures Serbian periods of insurance, periods of Australian residence and periods of Australian working life residence completed before the Agreement enters into force will be taken into account when determining entitlements to benefits under the Agreement.
3.20Article 24 sets out the arrangements for the entry into force of the Agreement. Article 25 sets out the duration of the Agreement and arrangements for continued entitlement to benefits under the Agreement in the event of its termination.
3.21The Agreement does not contain a specific provision in relation to amendment of the Agreement or for the negotiation of future legally binding instruments. In the absence of specific procedures, the Contracting Parties may amend the Agreement by mutual agreement at any time in accordance with Article 39 of the Vienna Convention on the Law of Treaties.
3.22Article 22 of the Agreement obliges the Contracting Parties to meet to review the Agreement within six months of the request of either Contracting Party.
Withdrawal or denunciation
3.23The Agreement contains no specific provisions for withdrawal from or denunciation of the Agreement by either Party but contains instead a termination provision (Article 25).
3.24Any termination of the Agreement by Australia would be subject to Australia’s domestic treaty-making process.
Implementation
3.25According to the NIA, the Social Security (International Agreements) Act 1999 gives effect in domestic law to Australia’s bilateral social security agreements, which are set out in schedules 2 to 32. A new schedule containing the full text of the Agreement would be added as a legislative instrument pursuant to regulations made under sections 8 and 25, following consideration by the Committee.
3.26The NIA advises that pursuant to section 27(e) of the Superannuation Guarantee (Administration) Act 1992 and Regulation 12 of the Superannuation Guarantee (Administration) Regulations 2018, the provisions of Australia’s bilateral social security agreements relating to double superannuation coverage are automatically given effect in Australian domestic law once the relevant agreement is added as a separate schedule to the Social Security (International Agreements) Act 1999.
Consultation
3.27Following signature of the treaty on 20January 2023, letters were sent to various stakeholders between 1 and 7 February seeking feedback to be provided by 13 February 2023.
3.28The Department of Social Services (DSS) sent letters to a range of stakeholders in February 2023, explaining the Agreement and requesting feedback. The stakeholders and responses were:
- all state and territory governments—one responded and raised no concerns
- 12 welfare, seniors and multicultural organisations—three responded and welcomed the Agreement; one noted the Agreement would not cover the Australian disability support pension and contained no requirement for indexation of Serbian benefits paid in Australia
- 5 Serbian community groups—three responded and welcomed the Agreement, including one that noted the Agreement would not cover Serbians who were born or worked in the Republic of Montenegro, and highlighted the importance of providing appropriate information and support services for Serbian Australians to understand the Agreement
- 9 financial services organisations, business and union groups—one responded and raised no concerns.
Issues
Sharing of information
3.29The NIA provides information on the cost of the Agreement for Australia but does not provide information regarding the cost of the Agreement on the Serbian side. DSS explained that that there was no obligation on Serbia to provide this information. They did however note that once the Agreement is operational there will be an exchange of data between Australia and Serbia which will provide insight into the number of individuals accessing payments under the Agreement.
Value of social security agreements
3.30DSS explained that the overall value and numbers of social security agreements for Australia are exchanged on a yearly basis and for the 2022 estimate ‘
it's about $1.1 billion that comes into Australia, and that's approximately 229,000 Australian pensioners in Australia, and around $500 million goes to 17,600 people under agreements in Australia and about 60,500 people under agreements overseas.
Consultation
3.31The Social Security Agreement featured a period of stakeholder feedback only after the Agreement was signed and the period of time less than a fortnight, which could be seen to be a truncated period for feedback. DSS notes that this is the way these agreements have always been undertaken, with the Government signing the agreement and then consultation taking place afterwards. They said that this was because of the confidentiality of those negotiations between governments until they are finalised.
3.32DSS agreed that consultation can be undertaken in general terms without compromising the confidentiality of negotiations and that where it is practical to do so it would happen, but that it did not happen in the case of the current Agreement.
3.33DSS said that the Agreement has been broadly well received and that if significant concerns were raised, it would be a matter for the Government as to whether they wanted to discuss this with Serbia.
Waiting periods
3.34In relation to the different waiting periods that apply between Australia and Serbia for access to the age pension, DSS explained that there is a 10-year qualifying period to qualify for the Australian age pension, as either an Australian citizen, or a permanent visa holder residing in Australia for at least 10 years, with five of those years being continuous. DSS said:
The Serbian agreement … allows individuals who do not yet have 10 years residence in Australia to add periods of insurance contributions in an agreement country—in the case of this agreement, in Serbia—to meet that 10-year requirement.
Indexation
3.35Regarding indexation, DSS explained that Serbia indexes their pensions both domestically and abroad. DSS confirmed that the current Agreement does not require indexation, but that it is currently applied by Serbia as indexation policies sit within the Serbian domestic legislation and stated:
it is our expectation, consistent with that legislation—and there's been no indication otherwise—that pensions coming in from Serbia would be indexed consistent with their legislation.
Conclusion
3.36The Committee notes that ratification of the Agreement would improve Australia’s ability to provide greater access to social security benefits, particularly for people who migrate between countries. Australia will also likely receive economic and social benefits; and the Agreement expands Australia’s range of cooperative arrangements with other countries.
3.37The Agreement will improve the bilateral relationship between Australia and Serbia on social security issues and more generally. The Agreement will further enable Australia and Serbia to cooperate in providing social security to residents of both countries.
3.38As noted, Australia currently has bilateral international social security agreements with 31 other countries. While the agreements are based on a model agreement, they are each determined through negotiation between countries with different social security systems. This Agreement will add to these existing agreements.
3.39The Committee notes support for ratification from Government. At the public hearing, the Committee explored key issues relating to the Agreement, including a lack of consultation prior to signing the treaty, the sharing of information and indexation. The Committee considered that the majority of these issues have been addressed adequately by the Inquiry.
3.40In relation to the lack of consultation prior to signing the treaty, the Committee considers that some form of principle-based consultation would not compromise the confidentiality of those agreements and that as a general principle, undertaking consultation after signing an agreement is not best practice for informing agreements where input of relevant stakeholders should be sought. It is not reasonable for the responsible Department to suggest that such consultation could be the practical basis for immediately reconsidering an agreement that has only just been agreed, negotiated, and signed.
3.41The Committee supports the ratification of the treaty and recommends that binding treaty action be taken.
3.42The Committee supports the Agreement between Australia and the Republic of Serbia on Social Security and recommends that binding treaty action be taken.