Jenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | Hansard source

I move:

That these bills be now read a second time.

I seek leave to have the second reading speeches incorporated in Hansard.

Leave granted.

The speeches read as follows—

NATIONAL HEALTH AMENDMENT (GENERAL CO-PAYMENT) BILL 2022

SECOND READING SPEECH

Today, I introduce the National Health Amendment (General Co-payment) Bill 2022. The amendments made by this Bill will cut the cost of medications by reducing the Pharmaceutical Benefits Scheme (PBS) general patient charge, commonly referred to as a co-payment, from the current maximum of $42.50 per script, to a maximum of $30 per script.

The Pharmaceutical Benefits Scheme, or PBS, was established (in 1948 as a limited scheme) to ensure that Australians had equal and affordable access to life saving and disease preventing' medicines when they need them.

Establishing the PBS wasn't easy. It was John Curtin and Ben Chifley who fought hard to create this essential pillar of our healthcare system. It took two high court challenges, two referendums, constitutional changes, battles with the British Medical Association, the Liberal Party, and many others over 15 years to make it what it is today, which is a genuinely universal system, and perhaps, the best medical system pound for pound, in terms of bang for buck, that we have in the world.

It was a Labor Government that first introduced the legislation to make life- saving drugs more affordable (in 1944) and the Albanese Government remains committed to ensuring that the PBS enables Australians to access affordable medicines.

The PBS, is a key component of our health system, providing significant direct assistance—$13.8 billion in 2020-21—to make medicines affordable.

As Minister I am absolutely committed to making sure the PBS works as well as it possibly can into the future.

After nine years of neglect from the former government, costs of living are soaring and many Australians are cutting back on essentials in order to make ends meet. The Bill will help ease the squeeze on household budgets for millions of Australians.

This Bill amends the National Health Act 1953 to reduce the maximum general patient co-payment under the PBS from the current maximum of $42.50 to $30.00. This reduction of $12.50 represents a saving of 29 per cent for general consumers.

From 1 January 2023, around 3.6 million Australians with current prescriptions over $30 will benefit through this Albanese Government initiative. People filling a prescription for one medication per month will save around $150 a year, while a family filling prescriptions for two or three medications per month could save $300-$450 per year.

Approximately 19 million Australians will be eligible for savings under this Bill, with total savings for consumers calculated to be around $200 million each year.

This Bill will ease the cost of living pressures that Australian households are feeling around the country.

But this Bill will also have a profound benefit for public health.

High medicines costs have meant that patients are choosing between the health care they need and providing for their families. The PBS co-payment for general patients has doubled since 2000 and according to ABS figures, more than 900,000 Australians delayed or did not get a prescription filled in 2019-20 due to the cost.

The Albanese Labor Government will keep the costs of medications down and help to ease the cost-of-living pressures that Australians are facing. All Australians should have access to universal and world class medical care. No one should have to choose between filling prescriptions for potentially lifesaving medicines or providing for their families.

No longer will general patients taking Eliquis for the prevention of stroke or Advair for asthma, or Janumet for diabetes have to choose between their script and their household expenses. This Bill will ensure they receive the essential medical care needed to prevent serious illness.

The Bill will also ensure that no patient is worse off under this change, by allowing pharmacies to continue offering optional discounts where the Commonwealth Price is between the new and current co-payment amount. The amount paid by the patient under these arrangements will still be counted towards the general safety net threshold, ensuring that no Australians are adversely impacted by the changes.

Every year, and in fact nearly every month, this government is adding new medicines to the PBS and access to existing medicines is expanded to new patient groups in line with emerging evidence about the safety and effectiveness of those medicines for treating health conditions. Treatment options for patients are ever expanding and the PBS has continued to expand with them.

Some subsidised medicines that are available through the PBS can cost thousands of dollars per prescription, however these medicines are supplied to patients at a significantly reduced cost, where general patients will only pay a maximum of $30 per prescription with the Government covering the remaining cost.

The general patient co-payment will continue to be indexed on 1 January each year in line with existing indexation arrangements. Indexing from 1 January 2024 will be calculated off the new general co-payment amount, securing savings for Australians well into the future.

Australians are paying the price for a decade of missed opportunities and through this Bill, we will make a real difference to household budgets for millions of families.

The Albanese Government is taking action. We are tackling the day-to-day concerns of Australians. We have plans to make medicines cheaper and to make it easier to see a doctor.

Millions of Australians will benefit through cheaper medicines under an Albanese Government. Just like Medicare, it was Labor that built the PBS and Labor will always protect it so that all Australians can access affordable medicines when they need them.

SOCIAL SERVICES AND OTHER LEGISLATION AMENDMENT (INCENTIVISING PENSIONERS TO DOWNSIZE) BILL 2022

SECOND READING SPEECH

This Bill delivers on an important election commitment of the Government to provide real support to older Australians confronted by the challenges of rising prices and soaring cost of living. It delivers amendments that will remove a potential barrier to pensioners downsizing their principal homes by reducing the impact this has in social security means testing.

This Bill will reduce the impact of selling and buying a new principal home on pensioners and other income support recipients, consistent with the values of the Albanese Government. It is yet another important step to ensuring that no one is left behind and no one is held back in our Government's vision for the future of this country. It works in concert with the Government's separate commitment to allow people aged 55 years or over to make one-off downsizer contributions of up to $300,000 into superannuation when they sell their principal home. It also works together with this Government's decision to freeze deeming rates for a period of two years.

These measures, working together, encourage more older Australians to downsize their homes, reducing the impact of downsizing on older Australians' access to pensions at the same time as improving housing access and affordability and enabling growing families more opportunities to find suitable housing options.

From 1 January 2023, this Bill will amend the Social Security Act 1991 and Veterans' Entitlements Act 1986 to double the period of the automatic asset test exemption for principal home sale proceeds which a person intends to use for the purchase of a new home. It also ensures the financial assets of pensioners is calculated on the lower deeming rate, recognising the high prices and values of home sales at the moment could mean that the higher deeming rates would apply and discourage downsizing.

Under existing arrangements, an income support recipient's principal home is exempt from the social security assets test. When a person sells their principal home, these sale proceeds are exempt from the assets test for up to 12 months, so long as the person still intends to use the proceeds to purchase, build, rebuild, repair or renovate a new principal home. During this exempt period, the person continues to be treated as a 'homeowner' for means testing purposes for income support payments meaning that they remain eligible for their income support payments.

The rationale here is that the assets test exemption works to protect an income support recipient who's moving between homes from the potentially significant impact the sale proceeds could have on their support payments if the house sale were to be counted in their assets.

Given the currently high values of Australian real estate, in many cases an individual or couple wouldn't continue to be eligible for any income support payment if the full value of their home were to be counted. In the past, the exemption period is considered to be a reasonable amount of time for people to find or build a new principal home.

The exempt period generally ends when the income support recipient no longer intends to use the sale proceeds for a new home, or when they move into their new home. The current situation is that there's an additional extension available of up to 12 months in truly extenuating circumstances, for examples such as when there are building delays due to a natural disaster.

The amendments in this Bill that I'm bringing forward today will extend this assets test exempt period for principal home sale proceeds from the current maximum of 12 months to a new maximum of 24 months. The additional 12 month exemption for extenuating circumstances will continue, meaning that in exceptional cases, home sale proceeds could be exempt from the social security assets test for up to 36 months from the date of the house sale.

Let me tum now to the second part of the means testing arrangements that this Bill addresses. The second limb to social security means testing considers income. In this part, the value of the home sale proceeds that are intended to be used in buying and the financial assets of the individual are 'deemed' by applying a uniform amount of assumed interest gained from people's financial assets working. This saves recipients the complexity of having to bring forward evidence of their actual income derived from their financial investments. This component of means testing can also affects a person's rate of income support based on the threshold applied.

Financial investments might include a person's bank accounts, managed investments, shares and most superannuation. Investment income is assessed by applying the deeming rates to the total market value of a person's financial investments. The actual returns from the investments aren't used and any excess returns above the assessed income do not affect a person's payment rate and generally benefit individuals if their financial investments are performing better.

From a policy perspective, taking into account some level of deemed income on principal home sale proceeds is appropriate, because if the proceeds are placed in a savings account or other financial investment, they would generally generate returns which a person can use to support themselves.

Under the current deeming rules, the lower deeming rate of 0.25 per cent per annum is applied to the value of financial assets up to a deeming threshold of $56,400 for singles and $93,600 for couples combined. The upper deeming rate, presently 2.25 per cent per annum, applies to the value of financial assets above these thresholds.

These thresholds apply to principal home sale proceeds—even when they are exempt from the assets test—in the same way as for funds placed in other financial investments such as shares or bonds.

Again, given the high value of most Australian homes, this means the bulk of home sale proceeds are often subject to the upper deeming rate. This can have a significant negative impact on a person's pension or other payment rates and works as a considerable disincentive for pensioners considering downsizing their principal homes.

This Bill will substantially reduce this barrier and disincentive for pensioners by ensuring that only the lower deeming rate is used to assess income on principal home sale proceeds which are also exempt from the assets test for between up to 24 months, with the possibility of a further 12 months for extenuating circumstances.

This legislative change will significantly reduce the amount of income deemed on assets test exempt principal home sale proceeds. It builds on the doubling of the exemption period by further reducing the impact on people's payment rates during the process of selling and purchasing a new principal home.

As I have noted earlier, the Government has separately committed to freezing the deeming rates at their current levels for two years to 30 June 2024. This means that for the next two years, principal home sale proceeds which a pensioner or other income support recipient intends to use to purchase a new principal home will generate deemed income at a rate of only 0.25 per cent per annum.

Let me share two practical examples that illustrate how this Bill helps pensioners downsizing and reduces the impact of selling and buying a new principal home on their payment rates.

The first illustrates the benefit of extending the assets test exempt period and the application of the lower deeming rate. Consider a maximum rate pensioner couple who choose to downsize by building a new, smaller home that better suits their needs.

Under the current rules, if the couple sold their existing family home for $1,000,000 and say intended to use $800,000 of that amount to purchase, build, rebuild, repair or renovate a house of equal value, then the $800,000 would be exempt from the pension assets test for up to 12 months.

Without the changes in this Bill, assuming the couple put the full sale proceeds of $1,000,000 into a savings account and had no other financial assets, the deemed income assessed on this amount would be at the upper deeming rate of 2.25 percent on the one million dollars less the couple's deeming threshold amount of $93,600, which would be deemed at the lower rate. This would have the effect of reducing this couple's payment rate by around $229 a fortnight. The other significant impact is that the sale proceeds of $800,000 which the couple intends to use for their new principal home would be set aside from the assets test for only 12 months.

On the other hand, with the changes to deeming and the assets exempt period in this Bill, in which the one million dollars less deeming threshold area of $93,600 would be deemed at only 0.25 percent, with the effect of reducing the deemed income on this couple's home sale proceeds to well below the free area of $336 per fortnight, meaning they would remain on the maximum pension rate.

And in terms of the assets test which could knock out their eligibility for the pension entirely, what if a building delay outside the couple's control prevents their new home from being completed within 12 months? Under the current arrangements, they could apply for an additional 12-month asset test exemption due to extenuating circumstances but if there are further complications such as a flood or other natural disaster preventing the couple's new home from being completed by the end of the second year, the assets test exemption would expire and their home sale proceeds of $800,000 would be subject to the assets test. Under the current arrangements, after 12 months they would no longer be treated as 'homeowners' for means testing purposes.

Assuming they had no other assets, under the assets test for a non-homeowner couple, their pension would be reduced by a very significant $1,069.50 a fortnight to a part rate of $419.30 per fortnight.

Unfortunately, some people do face such repeated setbacks to the completion of a new home. We know with the pressures on the economy, labour supply and supply chains due to the impacts of the COVID-19 pandemic have had a significant impact on the building sector across the country, and many areas of Queensland and New South Wales have experienced repeated bouts of severe flooding over the last two years.

The amendments in this Bill will allow the asset test exemption to be extended to a total of 36 months in extenuating circumstances such as these, giving people more time and certainty to complete the building or purchase of their new home and have greater peace of mind.

Let me share a second example that illustrates the benefit of the changes to the deeming rules in this Bill.

Consider the case of a single pensioner, let's call him 'Nick', who sells his home for $600,000, intending to downsize to a smaller unit of equal value. As he intends to use the full amount to purchase his new home, the assets test exemption applies, and the $600,000 is exempt from the pension assets test for up to 24 months under the changes in this Bill.

Nick then deposits his sale proceeds in a savings account. He has no other financial assets.

Without the changes to the·deeming rules in this Bill, deemed income would be calculated on Nick's home sale proceeds at the lower rate of 0.25 per cent for the first $56,400, and the higher rate of 2.25 per cent for the remaining $543,600. As a result, Nick would have assessed income of $12,372 a year, or around $476 fortnight.

Pensioners benefit from an income test free area, which for singles is currently $190 a fortnight. This means the first $190 a fortnight Nick receives from any source, including deemed income from financial investments, does not affect his rate of pension. Nick's remaining income will reduce his pension by 50 cents for each dollar over $190.

Without the changes in this Bill, Nick's pension would be reduced by around $143 a fortnight.

However, with the benefits of this Bill, the full $600,000 of Nick's home sale proceeds will be deemed at the lower rate of 0.25 per cent while they remain exempt from the assets test.

This would result in Nick having assessed income of only $1,500 a year. As he has no other income, this would not be enough to impact upon Nick's Age Pension rate.

In Nick's case, the amendments in this Bill would leave him $143 per fortnight better off during the period between selling his old principal home and moving into his new, smaller unit.

We know that people weigh up many factors in making the choice to sell a home and downsize to something smaller. One of the considerations that people make is how will this transaction impact on the income support that they receive. The changes in this Bill will assist older Australians contemplating downsizing who are concerned about impacts on their pension rate during the process of selling and buying a new family home applying the lowest deeming rate and giving them a longer period of time to finalise the purchase or construction of their new home.

The changes in this Bill will apply to all people who sell their principal home from the later of 1 January 2023, or one month and one day after the Bill receives Royal Assent.

These changes are beneficial for affected pensioners and other income support recipients, and are expected to cost $61.4 million in underlying cash terms over 4 years to 2025-26.

The changes in this Bill build on the Government's separate commitment to allow people aged 55 years or over to make one-off downsizer contributions of up to $300,000 into superannuation when they sell their principal home. By encouraging more older Australians to downsize their homes, these measures will improve housing access and affordability and allow growing families to find more suitable housing options.

The Albanese Labor Government is deeply committed to serving all Australians and ensuring that no matter what your circumstances, we do everything that can be done to leave no one behind and hold no one back in their lives. This measure is yet another building block that we are putting in place to help ordinary Australians manage in the challenging economic times that we face, ensuring that pensioners can take full advantage of choosing to downsize their homes and maximise the potential of that without negatively impact on their pensions.

Debate adjourned.

Ordered that the bills be listed on the Notice Paper as separate orders of the day.