Senate

Revised Explanatory Memorandum

(Circulated by the authority of the Minister for Social Services, the Hon Christian Porter MP)

Schedule 3 - Cessation of Wife Pension

Summary

This Schedule will cease Wife Pension from 20 March 2020.

Background

Wife Pension is a non-activity tested income support payment paid at Age Pension rates to female partners of Age Pensioners or disability support pensioners who are not eligible for a pension in their own right. To qualify for Wife Pension, a person must have lodged their claim prior to 1 July 1995, which is when the payment was closed to new entrants. Wife Pension was closed to new entrants on 1 July 1995 in recognition that payments based on the assumption that women are economically dependent on a male partner no longer reflect social and economic norms. Payments to women based solely on the income support status of a male partner are not consistent with contemporary community expectations.

While Wife Pension has been closed to new applicants since 1 July 1995, this Schedule will cease the payment entirely from 20 March 2020. Transitional arrangements will allow women who cease receiving Wife Pension at that date to receive an alternative payment, where available. At the proposed implementation date of 20 March 2020, there will be an estimated 7,750 Wife Pension recipients.

Transition from Wife Pension to Jobseeker Payment

Around 2,900 recipients under Age Pension age will move to the Jobseeker Payment, with these recipients being automatically transferred to the payment under section 12 of the Social Security Administration Act. Section 12 allows the Secretary to determine that a person is taken to have made a claim for an income support payment if the person became qualified for the new payment immediately after ceasing to receive another income support payment.

This Schedule also provides for a transitional rate of jobseeker payment for former recipients of wife pension to maintain their current rate of entitlement. Recipients will have their transition rate calculated based on a frozen rate of wife pension as at 19 March 2020 and continue to receive any applicable supplements payable under pension rules. All recipients will be subject to pension assets test free areas frozen as at 19 March 2020 while in receipt of a transitional rate.

Recipients will be subject to either the pension income test (frozen as at 19 March 2020) or the jobseeker payment income test based on their circumstances leading up to commencement to ensure that existing recipients do not experience a nominal reduction in their fortnightly rate.

Recipients will continually have their entitlement assessed under jobseeker payment rules, with recipients transitioning to jobseeker payment once the rate provides an equal or higher rate for at least 42 days. Transitional arrangements would also cease once they no longer satisfy the wife pension qualification rules due to a change of circumstances, such as separating from their partner.

All recipients will continue to receive the pensioner concession card while in receipt of a transitional rate.

Transition from Wife Pension to Age Pension

Approximately 2,250 recipients over Age Pension age will move to the Age Pension.

Transition from Wife Pension to Carer Payment

A further 2,400 recipients, who are also in receipt of carer allowance, will move to Carer Payment.

Explanation of the changes

This Schedule ceases Wife Pension from 20 March 2020. Item 19 repeals Part 2.4 of the Social Security Act, which provides qualification and payability for Wife Pension.

Family Assistance Act and Child Support (Assessment) Act 1989

Items 1 and 2 make necessary consequential amendments to remove references to Wife Pension from the Family Assistance Act and the Child Support (Assessment) Act 1989.

Income Tax Assessment Act 1936 and Income Tax Assessment Act 1997

Items 3 to 8 make necessary consequential amendments to remove references to Wife Pension from the Income Tax Assessment Act 1936 and the Income Tax Assessment Act 1997.

Veterans' Entitlements Act

Items 93 to 97 make necessary consequential amendments to remove references to Wife Pension from the Veterans' Entitlements Act.

Social Security Act

Items 77 to 92 make necessary consequential amendments to the Social Security Administration Act to remove references to Wife Pension, as a result of the repeal of Part 2.4 of the Social Security Act.

Items 9 to 17, 22, 26 to 37, 40 to 70 and 73 to 76 make necessary consequential amendments as a result of the repeal of Part 2.4 of the Social Security Act, to remove redundant references to Wife Pension or Wife Pension bereavement payment.

Item 18 adds new subsection 43(1A), which modifies the qualification for Age Pension provision. The new subsection provides that a woman is qualified for an Age Pension if, immediately before 20 March 2020, they were receiving a Wife Pension and they have reached Age Pension age and are not in receipt of carer allowance under Part 2.19, where they are not otherwise qualified for an Age Pension in their own right. The purpose of this provision is to allow Wife Pension recipients over Age Pension age who may not satisfy the Age Pension qualifying residence rules to automatically transfer to Age Pension upon commencement.

Item 20 adds new paragraph 197A(1)(j) to enable the addition of new section 198AD to the list of circumstances in which a person is qualified for Carer Payment. Item 21 adds new section 198AD, which provides that a woman is qualified for a Carer Payment if, immediately before 20 March 2020, they were receiving a Wife Pension and a carer allowance under Part 2.19, and they continue to receive that carer allowance, and they are not otherwise qualified for a Carer Payment in their own right. This provision enables Wife Pension recipients who are also receiving carer allowance to automatically transfer to Carer Payment.

Providing an automatic transfer is administratively simpler for affected recipients, and ensures that they continue to receive the same level of assistance. When a recipient stops receiving the carer allowance that they were receiving at the time of qualifying for Carer Payment, they will no longer be able to qualify for a Carer Payment under this section, and would need to test their qualification under the other payment provisions.

Item 23 amends section 611(1) so that the jobseeker asset test is applied subject to new section 654, which provides for the rate of Jobseeker Payment for former Wife Pension recipients. Under existing rules, a person receiving Wife Pension with assets in excess of the pension assets value limit would experience a reduction in their rate of pension. However, under Jobseeker Payment, if the value of a person's assets exceeds the assets value limit, then the payment is not payable.

This amendment allows former Wife Pension recipients with assets over the Jobseeker Payment assets value limit, as provided under section 611, to transition to the Jobseeker Payment and have their rate calculated through the new transitional rate calculator as per items 24 and 25 below. Former Wife Pension recipients will not be subject to the jobseeker assets test in section 611 until their rate is worked out in accordance with sections 643 and 644AAA (and not under section 654).

Item 24 amends section 643 so that a person's Jobseeker Payment rate will be worked out subject to Division 4 of part 2.12, which provides for the qualification and payability of Jobseeker Payment. Item 25 adds new sections 654, 655 and 656.

New subsection 654(1) provides that the section applies if a recipient was receiving Wife Pension under Part 2.4 immediately before 20 March 2020 and the Secretary makes a determination under section 12 of the Social Security Administration Act that the woman is taken to have made a claim for Jobseeker Payment because the woman became qualified for that payment immediately after ceasing to receive Wife Pension.

New subsection 654(2) provides that the Secretary must disregard section 611, which is the jobseeker assets test, when determining a claim as described in subsection 654(1). In conjunction with item 23 above, this amendment allows for former wife pension recipients who receive an assets reduced rate under pension rules to retain payability for jobseeker payment.

New subsection 654(3) sets out the method statement for working out the payment rate for former Wife Pension recipients who receive Jobseeker Payment on a day on or after 20 March 2020 (the transition day), which is subject to new subsection 654(6).

Subsection 654(6) provides that where a woman, on or after 20 March 2020, would not have qualified for a Wife Pension, then on or after that day, subject 611 will apply to that woman, and her Jobseeker Payment rate is to be worked out under sections 643 and 644AAA (and not under section 654). This provision provides that transitional arrangements would cease once a woman no longer satisfies the wife pension qualification rules due to a change of circumstances, such as separating from their partner. Paragraph 654(3)(b) provides that section 611 is to be disregarded when determining whether Jobseeker Payment is payable to a woman who would be qualified for wife pension on the relevant day.

The method statement at new subsection 654(3) provides as follows:

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Step 1 - this step directs that the jobseeker rate on the transition day is to be worked out in accordance with section 643, which is the provision for working out a person's jobseeker payment rate, and directs the reader to the Benefit Rate Calculator B at the end of section 1068 and 644AAA, which provides for the approved program of work supplement.

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Step 2 - this step requires that the woman's Wife Pension transition rate is to be worked out on the transition day and an accompanying note provides that the definition of Wife Pension transition rate is found at subsection (4).

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Step 3 - this step provides that if the rate at step 2 exceeds the rate at step 1, the woman's Jobseeker Payment rate on the transition day is the rate at step 2.

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Step 4 - this step provides that if the rate at step 2 does not exceed the rate at step 1, the woman's Jobseeker Payment rate on the transition day is the rate at step 1.

New subsection 654(4) provides that a woman's Wife Pension transition rate on a transition day is the rate worked out in accordance with new section 655 or new section 656.

New section 655 provides for the Wife Pension transition rate method 1. Pursuant to new subsection 655(1) a woman's Wife Pension transition rate will be worked out in accordance with this section if on 19 March 2020, the recipient was receiving the maximum rate of Wife Pension (i.e. no reduction in rate due to income or assets under the Pension Rate Calculator A in section 1064), and the recipient would not have experienced an income reduction for income in excess of the income free area on each day under the Benefit Rate Calculator B in section 1068 during the period commencing on 6 February 2020 and ending on 19 March 2020.

This has the effect that the Wife Pension recipient's circumstances will be considered for a six week period in the lead up to the commencement of this Schedule to ensure their transitional arrangements reflect their circumstances over a sustained period leading up to 19 March 2020.

New subsection 655(2) provides that the woman's Wife Pension transition rate on the relevant day will be the rate of Wife Pension worked out under the Pension Rate Calculator A, however new subsection 655(3) sets out the modifications that will apply to the calculation.

Paragraphs 655(3)(a), (b) and (d) provide that amounts at steps 1, 1A and 9 of the Pension Rate Calculator A will effectively freeze as at 19 March 2020, and there will be no further indexation of those amounts, for the purposes of this section. The effect of freezing these amounts is that former Wife Pension recipients will not experience a reduction in their rate of payment following their transition to Jobseeker Payment, and that they will continue to receive this transitional rate until a rate worked out in accordance with section 643 and 644AAA provides an equal or higher rate of Jobseeker Payment. Paragraph 655(3)(c) provides that the income test to be used will be the jobseeker income test, which affects both the treatment of ordinary income and income free areas.

New section 656 provides for the Wife Pension transition rate method 2. Pursuant to new subsection 656(1) a woman's Wife Pension transition rate will be worked out in accordance with this section if on any day during the period commencing 6 February 2020 and ending on 19 March 2020, the recipient was receiving the maximum rate of Wife Pension, but would have experienced an income reduction for income in excess of the income free area under the Benefit Rate Calculator B in section 1068, or they were in receipt of a part rate of Wife Pension by way of either an income or assets reduction pursuant to the Pension Rate Calculator A in section 1064. As with new subsection 655(1), this ensures that a former Wife Pension recipient's transitional arrangements reflect their circumstances over a sustained six week period ending on 19 March 2020.

New subsection 656(2) provides that the woman's Wife Pension transition rate on the relevant day will be the rate of Wife Pension worked out under the Pension Rate Calculator A, however new subsection 656(3) sets out the modifications that will apply to the calculation.

New subsection 656(3) provides that amounts at steps 1, 1A, 5 and 9 of the Pension Rate Calculator A will effectively freeze as at 19 March 2020, and there will be no further indexation of those amounts, for the purposes of this section. The effect of freezing these amounts is that former Wife Pension recipients will not experience a reduction in their rate of payment following their transition to Jobseeker Payment, and will continue to receive this transitional rate until a rate worked out in accordance with section 643 and 644AAA provides an equal or higher rate of Jobseeker Payment.

New subsection 656(4) provides that if a woman was, immediately before 20 March 2020, receiving a Wife Pension rate based on the 2009 dual rate calculation transitional arrangements, she will continue to have her Wife Pension transition rate worked out taking into account the provisions of clause 146 of Schedule 1A. New subsection 656(4) also provides that the transitional calculation amounts referred to in clause 146 will effectively freeze as at 19 March 2020, and there will be no further indexation of those amounts, for the purposes of this section.

New subsection 654(5) provides that if, for a period of 42 consecutive days, a woman's jobseeker rate is the rate at step 1 of the method statement, then section 654 will no longer apply in relation to the woman at the end of that period. After this period, the person's jobseeker payment will be worked out in accordance with sections 643 and 644AAA, and section 611 will apply, and the value of the woman's assets throughout that period did not exceed the asset value limit under section 611 if section 611 had applied, then section 654 will no longer apply in relation to the woman at the end of that period.

This amendment accounts for cases where a temporary or episodic change in circumstances would provide a higher result under step 1, and ensure that former Wife Pension recipients will retain access to a Wife Pension transition rate until the step 1 rate provides an equal or higher result over a sustained six week period.

Paragraph 654(5)(b) also specifies that during this period of 42 consecutive days, the value of the woman's assets did not exceed the asset value limit under section 611. The intention of paragraph 654(5)(b) is to ensure that recipients whose jobseeker payment rate is equal to or higher than their transitional rate would not lose transitional status until such time that the jobseeker assets value limit equals or exceeds the value of their assets. This is achieved by the hypothetical application of section 611 to the woman's circumstances on each day to ensure recipients who receive a transitional jobseeker payment rate under section 654 would not cease to be payable pursuant to section 611 immediately after 42 days.

Item 38 inserts new subsection 1061ZA(2E), which provides for a new qualification for the pensioner concession card. New subsection 1061ZA(2E) provides qualification on a day if a woman is receiving a Jobseeker Payment and new section 654 applies to that woman on that day. This provides for former Wife Pension recipients who move to the Jobseeker Payment to continue to receive their pensioner concession card as long as they continue to receive a transitional rate calculation under the new section 654. Item 39 makes a necessary consequential amendment to subsection 1061ZA(3) to list new subsection 1061ZA(2E) as requiring that a person is in Australia and an Australian resident for the new subsection to apply.

Item 71 inserts new subsection 1220A(5) into the provisions that relate to proportional portability and the Age Pension rate. The new subsection ensures that where a woman was receiving a Wife Pension and clause 128 of Schedule 1A applied to the woman, subsection 1220A(1) will not apply to the woman's rate of Age Pension, such that the rate will not be calculated using the Pension Portability Rate Calculator.

This insertion enables Wife Pension recipients who are not subject to the pension portability rate calculator through the existing savings provision provided by clause 128 of Schedule 1A, to retain this treatment when they are transitioned to Age Pension. Preserving this treatment will prevent these recipients from being subjected to lower or nil rates of payment due to proportional portability.

Item 72 inserts a new point 1221-A4 at the end of Module A of the Pension Portability Rate Calculator in section 1221. The new point provides that where a woman was receiving a Wife Pension, was a member of a couple and the rate of the woman's Wife Pension was required to be worked out having regard to her period of Australian working life residence (AWLR) and for those purposes her AWLR was taken to be equal to the period of AWLR of her partner, then, after the commencement of this Schedule, the woman's AWLR is taken to be equal to the period of AWLR of the woman's partner, if the woman is a member of that same couple and her rate of Age Pension is worked out under section 1220A.

This provision preserves the treatment of some Wife Pension recipients who are required to have their proportional portability rate calculated using their partner's AWLR. Enabling Wife Pension recipients who are transitioned to Age Pension continue to use their partner's AWLR will ensure that they are not subject to a rate reduction due to proportional portability.

Saving and transitional provisions

Item 98 is a savings provision.

Subitem 98(1) ensures that former Part 2.4 and Part 3.2 of, and clause 146 of Schedule 1A to, the Social Security Act continue to apply after commencement despite their repeal, to allow the qualification or rate of Wife Pension to be worked out for days before commencement.

Subitem 98(2) provides that if, before commencement, a person was receiving Wife Pension and the woman's partner dies, then Division 9 of Part 2.4 of the Social Security Act will continue to apply on or after commencement, as if the amendments made by this Schedule had not been made, such that a woman would continue to receive Wife Pension for the bereavement period.

Subitem 98(3) makes clear that no payment of Wife Pension is to be made in accordance with Part 4.2 of the Social Security Act, which deals with portability, including unlimited portability, of social security payments, on or after commencement in relation to a day on or after commencement.

Subitem 98(4) provides that a person is not qualified for an Age Pension under Part 2.2 of the Social Security Act in respect of a day on or after the commencement if the person receives Wife Pension in relation to that day, such as where Division 9 of Part 2.4 of the Social Security Act applies to the person.

Subitem 97(5) provides that if a woman is qualified for a Carer Payment under section 198AD of the Social Security Act, section 203 will not apply in relation to the claim for that payment, such that there will be no seasonal workers preclusion period in relation to that claim. This will enable Wife Pension recipients who also receive carer allowance, and have had seasonal employment, to automatically transfer to Carer Payment.

Item 99 is a savings provision in relation to maintaining the tax free treatment of a payment of Wife Pension in relation to adjustable taxable income, which is made before, on or after commencement, despite the repeal of the relevant provisions of the Family Assistance Act.

Item 100 is a savings provision in relation to maintaining the tax free treatment of a payment of Wife Pension, which is made before, on or after commencement, despite the repeal of the relevant provisions of the Child Support (Assessment) Act 1989.

Items 101 and 102 are savings provisions in relation to maintaining the tax treatment of a payment of Wife Pension that is made before, on or after commencement, despite the repeal of the relevant provisions of the Income Tax Assessment Act 1936 and the Income Tax Assessment Act 1997.

Item 103 is a savings provision in relation to definitions.

Subitem 101(1) provides that for the purposes of working out whether a person was in severe financial hardship pursuant to section 19D of the Social Security Act in relation to days before the commencement, Wife Pension will continue to be taken into account.

Subitem 101(2) provides that for the purposes of working out whether woman is receiving Wife Pension at a time before, on or after commencement, paragraph 23(4A) (g) of the Social Security Act will continue to apply in relation to days before, on or after the commencement.

Item 104 is a savings provision, which maintains the effect of qualification provisions in respect of days before commencement, despite the repeal of the relevant provisions.

Item 105 is a savings provision, which maintains the effect of rate provisions in respect of the days before commencement, despite the repeal of the relevant provisions.

Item 106 is a savings provision, which maintains the effect of qualification for concession card provisions in respect of days before commencement, despite the repeal of the relevant provisions.

Item 107 is a savings provision, which maintains the effect of various advance payment provisions in respect of days before commencement, despite the repeal of the relevant provisions.

Item 108 is a savings provision, which maintains the effect of the pension loans scheme in respect of days before commencement, despite the repeal of the relevant provisions.

Item 109 is a savings provision, which maintains the effect of various means testing and debt provisions in respect of days before commencement, despite the repeal of the relevant provisions.

Item 110 is a savings provision which maintains the effect of various administration provisions after commencement of this Schedule in respect of days before commencement, despite the repeal of the relevant provisions.

Item 111 is a savings provision which maintains the effect of rate provisions after the commencement of this Schedule in respect of days occurring before, on or after that commencement, despite the repeal of the relevant provisions in the Veterans' Entitlements Act.