Jan McLucas (Queensland, Australian Labor Party, Parliamentary Secretary to the Minister for Health and Ageing) Share this | Link to 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—

SOCIAL SECURITY AND VETERANS’ ENTITLEMENTS AMENDMENT (COMMONWEALTH SENIORS HEALTH CARD) BILL 2009

This bill introduces a further measure from the 2008 Budget, refining the adjusted taxable income test for the Commonwealth seniors health card to make it fairer and treat similar sources of income in a similar way.

The Commonwealth seniors health card is available to Australians over age pension age, (65 for men and 63 years and six months for women), who are not receiving an age pension, and who have adjusted taxable incomes of less than $50,000 a year for singles and $80,000 a year for couples combined. The card entitles the holder to discounts on prescription medicines through the Pharmaceutical Benefits Scheme, bulk-billing with participating doctors and reduced out-of-hospital medical expenses above the threshold through the Medicare Safety Net. In some cases, the Commonwealth seniors health card also gives access to local, state and territory government and private provider concessions, such as discounted transport, education and recreation.

At the Commonwealth level, cardholders are entitled to certain cash payments through the income support system. One of these is the seniors concession allowance, which was increased in March 2008 as part of the Government’s delivery on its election commitments, and is now $514 a year (paid quarterly). Telephone allowance is also payable to cardholders if they or their partner subscribe to a telephone service, including the higher rate that applies if they also subscribe to a home internet connection, now $138.50 a year.

Currently, income from superannuation that is not assessable and not exempt under the Income Tax Assessment Act 1997, and income that is being salary sacrificed into a superannuation fund, is not included in a person’s adjusted taxable income in determining qualification for the card.

Under this bill, the definition of a cardholder’s adjusted taxable income will be changed to include income from a superannuation income stream with a taxed source (gross superannuation) and income being salary sacrificed to superannuation.

A person in this position has already benefited from accumulating their superannuation savings in a concessional tax environment, and also benefits from the ongoing tax-free treatment of their superannuation pension payments after age 60.

This change makes sure that all income received by seniors is treated in a similar way, and contributes towards applying the income test for cardholders consistently. The change also means the seniors health card is better targeted to those in need of government assistance.

Income salary sacrificed into superannuation is already included in income definitions for age pensioners, so these changes will bring the definition of income for the Commonwealth seniors health card into line with existing rules for the age pension in this respect.

The Government understands that some cardholders may need to make a lump sum withdrawal from their superannuation fund to pay for unexpected medical expenses, or to enter an aged care facility. To facilitate these necessary expenses, cardholders who require these withdrawals will be able to request that their qualification for the Commonwealth seniors health card is assessed using an estimate of their current year income, that is, that they have their income assessed without that particular lump sum being regarded as income.

Legislation already exists to allow a cardholder to ask for their qualification for a Commonwealth seniors health card to be assessed using an estimate of their current year’s income. Where a cardholder can show that the increase in their income is not ongoing and is a ‘once only’ event, the cardholder is able to request that their qualification for the Commonwealth seniors health card is assessed without regard to that increase in income. This legislation will, of course, remain in place to assist those people who have unexpected increases in their income.

The amendments in the bill apply to both the social security and veterans’ entitlements-based seniors health card.

SOCIAL SECURITY AMENDMENT (LIQUID ASSETS WAITING PERIOD) BILL 2009

The amendments proposed by this bill will help people who lose their job and others applying for income support who have limited assets, to access income support more readily by lifting the Liquid Assets Waiting Period thresholds. The proposed changes will affect people applying for Newstart Allowance, Youth Allowance, Austudy and Sickness Allowance.

In determining whether, and when, a person can start to receive income support payments, Centrelink consider the liquid assets that person has available to them. Liquid assets are generally sources of money available to a person at relatively short notice. They include cash on hand, shares and debentures and term deposits. It does not include superannuation, or termination payments that have been, or are going to be rolled over into superannuation.

Currently single people cannot receive income support payments until they have less than $2,500 in liquid assets. Single people must wait a week for every $500 they have over $2,500, up to a maximum of 13 weeks.

Couples, or people with dependents, are not eligible to receive income support until they have less than $5,000 in liquid assets. They must wait a week for every $1,000 they have over $5,000.

These thresholds are a consequence of a savings measure taken by the previous Government in the 1996-1997 Budget to further restrict access to income support payments. This savings measure, which took effect from September 1997, halved the Liquid Assets Waiting Period thresholds from $5,000 to $2,500 for singles and from $10,000 to $5,000 for couples and people with dependents. These thresholds have not been changed in over a decade.

At the time the previous Government made this savings measure, they were roundly criticised by welfare and Church organisations and Peak representative bodies, as well as the then Labor Opposition. The measures were seen as harsh, regressive, unnecessary and without genuine foundation in policy. The previous Government ignored the concerns raised about this issue throughout their years in office.

This bill effectively reverses the decision of the previous Government taken in the 1996-97 Budget. It will restore the pre-1997 threshold amounts so that single people with liquid assets of less than $5,000 and couples or people with children with liquid assets of less than $10,000 will not have to serve a Liquid Assets Waiting Period. These thresholds will apply for a two-year period from 1 April 2009 to 31 March 2011. A review will take place in a year to consider the effectiveness of the thresholds proposed by this bill. The review will include consultations, which is in stark contrast with the approach taken by the previous Government in 1996-1997 when it decided to reduce the thresholds.

When the previous Government made their regressive changes, we told them it was unfair. It remains particularly unfair in the current economic circumstances to make people, many unemployed for the first time, jeopardise their ability to meet their ongoing financial commitments.

The Government’s decision to reverse the position of the previous Government by doubling the Liquid Assets Waiting Period thresholds is an appropriate response to the extraordinary nature of the current economic circumstances resulting from the Global Financial Crisis.

In keeping with Government’s commitment to fairness, the bill also excludes the surrender value of life insurance policies from the definition of liquid assets.

The surrender value of a life insurance policy is the amount an insurance company will pay an insured person if they cancel the policy voluntarily, that is, before they die. It is in effect, that person’s equity in that insurance policy.

Presently, people who hold life insurance policies that have a surrender value are expected to cash in their policy in order to support themselves before being able to access income support. Cashing in the surrender value of a life insurance policy disadvantages the policy owner, as the surrender value is generally well below the amount paid in premiums. The person’s family or other estate beneficiaries may be further disadvantaged in the future by no longer having life insurance cover in the event of the person’s death. In effect this penalises people who have taken responsibility for their family’s future.

It is unreasonable to expect a person to realise the surrender value of their life insurance policy in order to support themselves while they serve a Liquid Assets Waiting Period, or before being able to access the severe financial hardship provisions that enable access to income support.

The proposed amendments will exclude life insurance policy surrender values in calculating any applicable Liquid Assets Waiting Period or determining severe financial hardship for the purposes of eligibility for income support. This amendment will ensure that people applying for income support are not disadvantaged by having to cash out their life insurance policies before they can access income support.

Australians who apply for income support will still rely on their own resources before seeking assistance. The measures in this bill balance this with fair and reasonable access to income support for people facing the difficult circumstances of unemployment during the current global financial crisis.

Debate (on motion by Senator McLucas) adjourned.

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