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Changes to disability support pensioners working hours introduced into Australian Parliament
Saturday 21 July 2012
The Social Security and Other Legislation Amendment (Disability Support Pension Participation Reforms) Bill 2012 introduces new participation requirements for Disability Support Pension (DSP) recipients who have some capacity to work.
In November 2011, the Gillard Government introduced its controversial changes to the Social Security Act – which includes changes to the Impairment Tables used to determine eligibility for the Disability Support Pension - have passed through Parliament.
People who apply for the Disability Support Pension (DSP) from the 1st January 2012 are assessed under the new Impairment Tables. (The Impairment Tables are used in Disability Support Pension assessments to measure how a person's impairment affects their ability to work, and were last reviewed in 1993.)
The Government says the latest Bill introduces more generous rules to allow DSP recipients to work up to 30 hours a week and continue to receive a part-pension, subject to income and assets testing.
From 1 July this year:
The Government says that this is an important change that will give people with disability the security they need to test their ability to work more hours, without worrying about losing qualification for the disability pension.
It says this will encourage an estimated 4,000 DSP recipients to take up work, and an estimated 3,900 DSP recipients who are already employed to work extra hours.
In addition to these changes to the DSP, the Government says it is delivering extra support for people with disability, including more employment services and new financial incentives for employers to take on more people with disability.
The Government says it will also ensure the DSP continues to be an essential safety net for Australians who are unable to work.
The Bill also introduces new rules from 1 July that allow DSP recipients who have a severe and permanent disability and no future work capacity to travel overseas for more than 13 weeks while retaining access to their pension.
The above, with comments, originally appeared here.
The 2011–12 Budget introduces several significant reforms to the Disability Support Pension (DSP) program as a part of the Building Australia’s Future Workforce measures.
The DSP program currently provides income support to in excess of 800 000 recipients and it is estimated to expend $13.8 billion in the 2011–12 year. Over the past 20 years, DSP recipient numbers have grown more than recipient numbers in any other government income support program.
DSP recipient numbers 1990 to 2010
Note: Years selected track growth over last two decades and show the impact of 2006 reforms.
Source: Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA).
The DSP reforms in this Budget are in part a response to concerns about these burgeoning numbers. While of obvious concern, this increase in numbers needs to be viewed in the context of an overall decline in the proportion of working-age people receiving welfare, population growth, the demographic changes which are the result of an ageing population and the impact on the DSP of the phasing out of other income support payments.
It would therefore appear that the real underlying concern driving these reforms is that many people claiming the payment may have a greater capacity to engage in work. This fits with the Government’s ongoing emphasis on the importance of work participation in relation to broad social outcomes. As the relevant budget factsheet iterates: ‘working helps boost self-esteem, improves social contact, provides more income and leads to improved health and financial security’.
Welfare to Work DSP reforms
Governments have attempted reforms to income support for people with disability and the DSP program in the past. The most significant reforms in the last decade were the Welfare to Work (WtW) initiatives that took effect from 1 July 2006. The major DSP element in the WtW reforms was the halving of the incapacity to work test (which determines eligibility for DSP) from being unable to work for 30 hours a week to 15 hours a week. This was a radical reform which had some impact on DSP growth, as can be seen in the table above. However, the impact was short-lived and the growth rate has since accelerated.
Proposed DSP reforms
The DSP reforms in this Budget include:
These initiatives will cost more in increased administrative effort and outlays, but there are potentially some associated savings. Potential savings would arise from an increase in DSP recipients with earned income from employment, a reduction in the number of claimants eligible for the DSP, and support being provided through alternative payments that are paid at a lower rate, such as Newstart Allowance (NSA).
The potential for increased work participation
Allowing for increased work participation by DSP recipients could potentially provide an incentive for further engagement in paid work. As at June 2008, 90.2 per cent of DSP recipients had no employment earnings. Of the 9.8 per cent with some employment income, 4.4 per cent had income less than $200 a fortnight. This is not surprising as there has not been any activity test requirements attached to DSP and it is likely that for many claimants their grant of DSP is seen as a formal decision by government that they are unable to work, and are not expected to work. The other great source of inertia discouraging DSP recipients from working is the perception that work may jeopardise their DSP qualification. The incentive to remain on DSP is high as DSP is paid at a higher rate than NSA, it has more favourable income/assets tests, provides a Pensioner Concession Card (PCC) and has no work activity test requirements.
The vast majority of current DSP recipients were granted their DSP under the 30 hour a week rule that preceded the WtW DSP work test changes. Regardless of whether they have passed the 30 hours a week or the 15 hours a week test, it is hard to know what the actual capacity of individual DSP recipients for work is. Given the nature of the application process and the criteria that they must meet, it is likely that almost all DSP claimants would, when claiming (and when being reviewed), present as significantly work incapacitated, and provide supporting evidence of significant work inability. The process encourages applicants to present their work capacity in terms of what they are incapable of doing. The examination of DSP claimants to identify, encourage and promote their work capacity in a positive way has not been attempted before and it is unclear what the results of this approach might be.
Allowing claimants to work up to 30 hours a week (for those subject to the 15 hour a week work incapacity rule) will help encourage participation by removing one disincentive to work. It should be noted that DSP recipients have had the benefit of easier two year re-entry rules for some time. These allow the recipients to attempt work and go off DSP for up to two years and re-qualify without having to be re-assessed if the work attempt is not successful. Not many DSP recipients have taken advantage of this opportunity. Perhaps this has been because work participation has not been actively promoted and because participating in work has been viewed by many as a threat to their DSP qualification.
The reform that targets participation requirements to those under age 35 is also new. On the surface, targeting work participation at younger DSP recipients is understandable, but it may only reveal that a high proportion of the younger DSP population are on this benefit because they have significant congenital impairment or have acquired a significant impairment at a young age.
Significance of the reforms
Past experience suggests that measures to improve the quality of DSP and work capacity assessments are likely to have only a limited impact on DSP numbers; the impetus for a working age person to qualify for DSP, as opposed to NSA, where most DSP claimants transition from, continues to be strong. The radical WtW halving of the incapacity to work test in 2006 had a limited, short-term impact, with many new DSP claimants still managing to meet the new criteria. The concerns about the DSP program numbers are not new. Population growth and ageing and increases in the age pension age mean that DSP recipient numbers will continue to grow.Limiting the impact of this growth on government outlays will require a continued policy focus on increasing the participation and employment earnings of those on DSP. The reforms outlined in this Budget are of limited significance but are a step in the right direction. Their effectiveness in removing some of the current disincentives to work and ensuring assistance is being directed at those who need it most remains to be seen.
. Australian Government, Portfolio budget statements 2011–12: budget related paper no. 1.7: Families, Housing, Community Services and Indigenous Affairs Portfolio, Commonwealth of Australia, Canberra, 2011, p. 96, viewed 12 May 2011,
. Department of Families, Housing, Community Services and Indigenous Affairs (FaHSCIA), , Canberra, 2010, p. 9, viewed 11 May 2011, http://www.fahcsia.gov.au/about/publicationsarticles/research/statistical/Pages/stp_8.aspx ; FaHCSIA, Annual Report 2009–10, Canberra, 2010, p. 93, viewed 17 May 2011,
. P Whiteford, ‘Will the budget slow the growth of disability support pension numbers?’, Inside Story, 12 May 2011, viewed 13 May 2011,
. Australian Government, Building Australia’s future workforce: supporting Australians with disability into work, budget factsheet, Commonwealth of Australia, Canberra, 2011, viewed 16 May 2011,
. D Daniels and P Yeend, Employment and Workplace Relations Legislation Amendment (Welfare to Work and Other Measures) Bill 2005, Bills digest, no. 70, 2005–06, Parliamentary Library, Canberra, 2005, viewed 12 May 2011,
. Australian Government, Budget measures: budget paper no. 2: 2011–12, Commonwealth of Australia, 2011, pp. 179–192, viewed 12 May 2011,
. Newstart Allowance is more commonly known as the unemployment benefit.
. Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA), Characteristics of Disability Support Pension recipients, FaHCSIA, Canberra, 2008, p. 18, viewed 11 May 2011,
. As at May 2011, the single rate of DSP is $670.90 per fortnight (pf) (including pension supplement) – NSA is $474.90pf.
. Section 97B of the Social Security (Administration) Act 1999.
. Whiteford, op. cit.
The above original appeared here.
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