Media Release by The Hon Mal Brough MP

Howard Government $1.4 billion package for Older Australians

The 2007-08 Federal Budget has reaffirmed the Howard Government’s commitment to older Australians by providing a one-off non taxable bonus payment of $500 to each person qualified for Utilities Allowance or Seniors Concession Allowance on Budget night.

Minister for Families, Community Services and Indigenous Affairs, Mal Brough, said that more than two million senior Australians would receive the payments before the end of June 2007, at a cost of $1.3 billion.

“The bonus payment for older Australians allows them to share in the economic prosperity that they’ve helped to create.

“The bonus ensures that the people of Australia directly benefit from the Howard Government’s record budget surpluses” the Minister said.

“Utilities Allowance is paid to income support customers who are of Age or Veteran Pension age. It is also paid to people receiving Mature Age Allowance, Widow Allowance or Partner Allowance. Senior Concessions Allowance is paid to Commonwealth Seniors Health Card holders, and to Veterans’ Affairs Gold Card holders of pension age.

“This payment and the other 2007-08 Federal Budget initiatives for older Australians, including changes to the Pension Bonus Scheme (PBS), will provide greater incentives for older Australians to invest in their futures.

Changes to the PBS include:

  • Allowing the surviving partner of a deceased member of the PBS to receive the bonus their deceased partner accrued, but not claimed, before their death.
  • Allowing PBS members who take recreation leave, long service leave or unpaid leave to continue in the scheme as non-accruing members for up to 26 weeks, without failing the work test.
  • Allowing a ‘top up’ to bonuses where the rate of pension a person receives increases in the 13 weeks after it was granted, because the person’s assessed income and/or assets decrease in that time.
  • Broadening the discretion of Centrelink and Department of Veterans’ Affairs decision makers, to extend the period in which people must claim their bonus after failing the PBS work-test.

“At a cost of $46.4 million over four years, these changes, will allow more older Australians to access accrued bonuses. Members of the PBS will be able to benefit from these changes from 1 January 2008.

The Federal Budget will also provide further assistance to older Australians through a $4.3 million measure to increase the existing social security income and asset test exemption threshold for funeral bonds from $5,000 to $10,000 for each person or couple.

Mr Brough said the measures built on the great work the Howard Government has undertaken to assist older Australians in retirement.

“From 20 September 2007 the pension assets test taper rate will be halved, so pensions will only be reduced by $1.50 instead of $3 in pension every fortnight for each $1,000 of assets above the allowable asset limits.

“This means the amount of assets a person can have and qualify for the pension will increase significantly.

“Based on the current assets test cut out point of $338,500, it is expected a single homeowner could have an additional $177,000 of assessable assets before their pension cuts out.

“The Government continues to spend more on Age Pension than any other single program – this financial year the Government expects to spend around $22 billion on pension payments to around two million people, an increase from $12 billion to 1.6 million people in 1995-96,” Mr Brough said.

Seniors bonus payment

Why is this important?

  • The bonus payments allow older Australians to share in the economic prosperity that they’ve helped to create.

Who will benefit?

  • A one-off non-taxable bonus payment of $500 will be paid to each person qualified for Utilities Allowance or Seniors Concessions Allowance on budget night.
  • The person must have been eligible for the benefit because of a claim made on or before 8 May 2007.
  • Utilities Allowance is paid to income support customers who are of Age or Veteran Pension age. It is also paid to people receiving Mature Age Allowance, Widow Allowance or Partner Allowance. The person must be in Australia or temporarily absent from Australia for no more than 13 weeks.
  • Senior Concessions Allowance is paid to Commonwealth Seniors Health Card holders and to Veterans’ Affairs Gold Card holders of pension age. The person must have been qualified for the card or would have been qualified had they not been temporarily absent from Australia for a period not exceeding 13 weeks.

What funding is the Government committing to the initiative?

  • This measure will cost $1.3 billion.

What have we done in the past?

  • Payments have been made to senior Australians in the past. In 2006, older Australians eligible for Utilities Allowance received an amount equivalent to the yearly rate of Utilities Allowance (then $102.80 single and $51.40 each married). Those eligible for Senior Concessions Allowance received $102.80 each. In 2001, older Australians receiving an income support payment as well as low income earners not receiving an income support payment received a one-off payment of $300.

When will the initiative conclude?

  • Payments will automatically be made by 30 June 2007.

Pension Bonus Scheme – enhancements

Why is this important?

  • From 1 January 2008, the Australian Government will make the Pension Bonus Scheme (PBS) even better and more flexible in the following ways:
    • allowing the surviving partner of a deceased member of the PBS to receive the bonus their deceased partner had accrued, but had not claimed, before their death. A partner is defined in the Social Security Act 1991;
    • allowing PBS members who take recreation leave, long service leave or unpaid leave, to continue in the scheme as non-accruing members for up to 26 weeks without failing the scheme’s work test;
    • allowing a ‘top up’ to bonuses where the rate of pension a person receives increases in the 13 weeks after it was granted, because the person’s assessed income and / or assets decrease in that time. This will help those people whose retirement investments are not settled at the time of grant of pension and their bonus, but are settled shortly after; and
    • broadening the discretion Centrelink and Department of Veterans’ Affairs decision makers already have, to extend the period in which people must claim their bonus after failing the PBS work-test. This will allow decision makers to consider a late claim from certain PBS members who were unable to claim their bonus within the required 13 weeks because of special circumstances, for example the serious illness of a close family member.

Who will benefit?

  • The surviving partner of a deceased PBS member who had accrued a bonus but had not claimed it before their death will receive a payment equivalent to the deceased’s bonus. (Under current rules, the bonus cannot be paid to them);
  • PBS members who take recreation leave, long service leave or unpaid leave, will be able to stay in the scheme for up to 26 weeks as a non accruing member without failing the scheme’s work-test. This means they can continue to accrue a bonus after their leave if they choose to. (Under current rules they can fail the PBS work-test while they are on leave, and can lose the bonus they have accrued so far, and are unable to recommence accruing a bonus when they return to work);
  • PBS members whose pension and bonus is granted before their retirement finances are settled will be able to have their bonus topped up to the higher rate, if within 13 weeks of grant their finances are settled and their pension rate increases as a result. (Under current rules their bonus is lower because it is calculated on a lower rate of pension); and
  • some PBS members, who claim their pension and bonus late, in special circumstances such as the serious illness of a close family member, will be able receive their accrued bonus. (Under current rules they may not receive the bonus they have accrued if their claim is late.)

What funding is the Government committing to the initiative?

  • $46.4 million over four years.

What have we done in the past?

  • The Government recognises the important role people over age pension age play in the Australian workforce and is committed to supporting their choice to participate. The PBS, introduced on 1 July 1998, provides an incentive for older Australians to defer claiming Age Pension or equivalent DVA payment by remaining in the workforce. The PBS provides a one off tax free payment of up to $32,083 in the case of a single person, or $26,792 in the case of a partnered person.

When will the initiative conclude?

  • These are ongoing measures.

Funeral bonds means test exemption – increased threshold

Why is this important?

  • The Australian Government is increasing the existing social security income and asset test exemption threshold for funeral bonds from $5,000 to $10,000 per person or couple. The measure will also allow a customer or couple to have a second funeral bond exempt from the means test, subject to the exemption threshold.
  • Increasing the means test exemption threshold for funeral bonds to $10,000 should help people make better provision for their funeral arrangements without affecting their income support. The indexation of the threshold will also ensure the threshold moves in line with general price increases of funerals.

Who will benefit?

  • People receiving income support payments who take out a funeral bond from 1 January 2008, subject to the exemption threshold, will benefit from this measure. People who currently own a funeral bond purchased for above $5,000 but under the $10,000 exemption threshold will also benefit. Income support payments include Age Pension, Carer Payment, Veterans Affairs’ service pensions and income support supplement payments.
  • It is estimated that, following implementation on 1 January 2008, 4,100 social security pensioners and 3,400 Veterans’ Affairs pensioners will receive more income support.

What funding is the Government committing to the initiative?

  • $4.3 million over four years.

What have we done in the past?

  • The existing rules were introduced on 25 June 1991. One funeral bond per person or couple has been exempt from the social security means test where the value of the bond is less than the exemption threshold, currently $5,000 per person.

When will the initiative conclude?

  • This is an ongoing measure.