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Media Release by The Hon Scott Morrison MP

Welfare Integrity, Fairness and Sustainability for all Australians

The 2015 Budget is part of the Commonwealth Government’s plan to build a strong, safe and prosperous future for all Australians.

In 2015-16, the Government will spend $154 billion on welfare, which is around 35 per cent of total Government expenditure.

The Government is strengthening the integrity of our welfare system to ensure it remains fair and sustainable so that we can continue to support those who need it most. These measures will return around $3.5 billion to the Budget.

Transformation programme

In this Budget, the Government will invest an initial $60 million to kick start the Welfare Payment Infrastructure Transformation to replace the existing welfare payment system and modernise government service delivery to meet the demands of today’s digital world.

The Department of Human Services (DHS) is responsible for delivering welfare payments through Centrelink to 7.3 million people annually. It does this via a large information technology system which was developed in 1983 and modified to meet government policy changes.

Changes to policy and processes over the past three decades have made the system extremely complex, inflexible, costly to main and difficult to ensure compliance.

The new welfare payment system will save customers time and effort by offering smarter and easier online end-to-end services. It will also reduce the costs of administering welfare payments and save taxpayers money in the long run.

A strong welfare cop on the beat

The Government has zero tolerance for rorting of our welfare system.

We will put a strong welfare cop on the beat focusing on deterrence, detection, investigation and prosecution to track down suspected welfare fraud and non-compliance.

From 1 July 2015, the Government will increase DHS’s capability to detect, investigate and deter suspected welfare fraud and non-compliance.

Activities will target high-risk geographic hot spots, unexplained wealth, undeclared income, and undisclosed changes of customer circumstances, which can lead to ineligibility for payments.

It will achieve net savings of around $1.5 billion.

Income test treatment of defined benefit schemes

The Government will ensure fairer treatment of defined benefit superannuation income for pensioners.

From 1 January 2016, the level of income from defined benefit superannuation that can be excluded from the pension income test will be capped at 10 per cent.

The anomaly was created unintentionally after changes were made in 2007. With the current pension rules, some people are able to exclude a percentage of their defined benefit income stream from the Age Pension means test. For example: a couple with a defined benefit scheme income of $120,000 a year with a 50% deductible amount can exclude $60,000 from the income test. Only the remaining $60,000 is assessed as income under the income test, which results in the couple receiving a part pension of $7,400 per year in addition to their defined benefit income. Under this change this couple would no longer be eligible for a part pension.

Around 65 per cent of income support recipients with payments from defined benefit schemes have deductible amounts of 10 per cent or less and will not be affected by this measure.

Department of Veterans Affairs Pensions and defined benefit income streams paid by military superannuation funds are exempt from this measure.

It will achieve net savings of $465.5 million over the forward estimates.

Better Income Management

The Government is investing $147 million to deliver more streamlined and cost-effective income management.

Around 25,000 people will continue to benefit from this programme designed to support vulnerable Australians.

Financial Wellbeing and Capability services will no longer be compulsory; however, people on income management will continue to have priority access to these services.

The Government is also investing $25.6 million to increase the financial wellbeing of up to 340,000 people, through providing financial counselling and money management skills.

The new model of Financial Wellbeing and Capability services to people across income management locations will help improve the capacity and resilience of families and individuals to manage their finances, avoid the risks of poor financial literacy and help people move out of debt.

The Government’s changes to our social security system will result in fairer, more sustainable welfare now and into the future.

Budget fact sheets