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1996-1997
THE PARLIAMENT
OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF
REPRESENTATIVES
SOCIAL SECURITY AND
VETERANS' AFFAIRS LEGISLATION AMENDMENT (MALE TOTAL AVERAGE WEEKLY EARNINGS
BENCHMARK) BILL 1997
EXPLANATORY
MEMORANDUM
(Circulated by
authority of the Minister for Social Security
Senator the Hon Jocelyn
Newman)
80911 Cat. No. 96 7352 0 ISBN 0644
497556
SOCIAL SECURITY AND VETERANS' AFFAIRS LEGISLATION AMENDMENT
(MALE TOTAL AVERAGE WEEKLY EARNINGS BENCHMARK) BILL
1997
OUTLINE AND FINANCIAL IMPACT
STATEMENT
This Bill will give legislative effect to a Government commitment to maintain
the single adult rate of pension at 25 per cent of Male Total Average Weekly
Earnings as well as continuing the existing relativity between the single and
married rate of pension.
The legislation involved is the Social
Security Act 1991 and the Veterans' Entitlement Act
1986.
Date of effect: 20 September
1997
Financial Impact: 1996-1997 Nil
(program
outlays) 1997-1998 $ 43.874m (costs)
1998-1999 $ 349.129m
(costs)
1999-2000 $ 652.636m (costs)
2000-2001 $1006.507m
(costs)
An allowance for these costs was made in the forward estimates of
the Contingency Reserve in the 1996-97 Budget Statements.
BACKGROUND
This amendment will implement the Government's undertaking to maintain
the maximum basic rate of the single adult rate of a social security pension
(after indexation) at a minimum rate equal to or greater than 25% of the
annualised original, all males, total average weekly earnings figure (MTAWE).
There will be a flow-on to maintain the partnered adult rate of pension at 83%
of the single adult rate of pension.
The amendment will also maintain
service pensions and income support supplements paid under the Veterans'
Entitlements Act 1986 at the same level as the adult rate of social security
pension.
If the maximum basic rate of single pension (after indexation)
is less than 25% of MTAWE, this amendment will provide that the rate is to be
increased to 25% of MTAWE. If the single rate of pension equals or exceeds the
25% MTAWE figure, then no adjustment is to be made.
If an adjustment is
made to increase the single rate of pension to 25% of MTAWE, an adjustment will
also be made to the partnered rate of pension. The partnered rate of pension,
paid to each member of a pensioner couple, is set at 83% of the single rate of
pension. Therefore, if the single rate of pension is increased to take account
of MTAWE, then the partnered rate of pension, prior to rounding up, will also be
increased by 83% of the increase in the single pension rate.
The relevant
MTAWE:
at the March and September indexation points, will be obtained
from the latest final Average Weekly Earnings, States and Australia,
which is released quarterly by the Australian Bureau of Statistics;
and
is the original, all males, total earnings figure.
These
amendments will be subject to a 5 year "sunset clause". That is, the amendments
will first apply to pensions indexed on 20 September 1997 and will cease to
apply following the indexation of pensions on 20 September 2002.
CLAUSES INVOLVED IN THE CHANGES
Clause 2 : specifies the commencement date as 20 September
1997.
Clause 3: provides that the Social Security Act 1991
and the Veterans' Entitlement Act 1986 is amended as set out in Schedule
1.
Schedule 1
Clauses 1 and 2: amend the
Social Security Act 1991 to provide that the single adult rate of pension
is maintained at 25 per cent of the male total average weekly earnings figure
and that there is a flow-on to the partnered adult rate of
pension.
Clauses 3 and 4: amend the Veterans' Entitlements Act
1986 to provide that the single adult rate of service pension and income
support supplement is maintained at 25 per cent of the male total average weekly
earnings figure and that there is a flow-on to the partnered adult rate of
pension.
EXPLANATION OF THE CHANGES
Schedule 1
Social Security Act
1991
Clause 1 amends section 1192 of the Social Security
Act to provide that an amount that has been increased following indexation under
the CPI indexation tables in section 1191, may be increased further under new
section 1195 that is being inserted by clause 2.
Clause 2
inserts a new section 1195 into the Social Security Act.
Subsection
1195(1) provides that:
a "category A amount" is defined as the
single adult rate of social security pension that is payable under the various
pension rate calculators; and
a "category B amount" is defined as the
partnered adult rate of social security pension that is payable under the
various pension rate calculators.
Paragraph 1195(2)(a) provides
that these amendments are to apply only for the period 19 September 1997 to
21 September 2002. This paragraph provides for a 5 year sunset clause by
providing that the legislation for the MTAWE benchmark will cease to apply to
pension indexation days after 21 September 2002.
Paragraph
1195(2)(b) provides that if 25% of the MTAWE figure exceeds the indexed
adult single maximum basic rate of pension, then the maximum basic rate of
pension is to be increased in accordance with section 1195.
Paragraph
1195(2)(b) also provides that the MTAWE figure is:
for indexation day 20
March - the figure published for the most recent December quarter;
and
for indexation day 20 September - the figure published for the most
recent June quarter.
Subsection 1195(6) provides a definition for
the "December quarter" and the "June quarter" that is used for determining the
MTAWE figure in paragraph 1195(2)(b).
Paragraph 1195(2)(c)
provides that, where the MTAWE figure exceeds the maximum basic rate of single
adult pension, then the maximum basic rate of pension is to be increased by the
amount of that excess.
Paragraph 1195(2)(d) provides that the
fortnightly pension amount obtained under paragraph 1195(2)(c) is to be a
multiple of 10 cents. If the amount is not a multiple of 10 cents, then
the amount is to increased to a multiple of 10 cents.
Paragraph
1195(2)(e) provides for the maintenance of the partnered adult rate of
pension at 83% of the single adult rate of pension.
This paragraph
maintains this relativity by providing that, where the single adult rate of
pension is increased under section 1195, there is to be a subsequent increase in
the partnered adult rate of pension to maintain the maximum basic adult
partnered rate of pension at 83% of the single adult maximum basic rate of
pension. That is, if the single rate of pension is increased by $1, then the
partnered rate of pension paid to each partner, subject to rounding up under
paragraph 1195(2)(f), is increased by 83 cents.
Paragraph
1195(2)(f) provides that the fortnightly pension amount obtained under
paragraph 1195(2)(e) is to be a multiple of 10 cents. If the amount is not a
multiple of 10 cents, then the amount is to be increased to a
multiple of 10 cents.
Subsection 1195(3) provides a definition of
the annualised male total average weekly earnings figure that is to be used for
the purposes of section 1195. The average weekly earnings figure for the
reference period is annualised to allow for a comparison with the indexed
maximum basic rate of pension (which is expressed in terms of "rate per
year").
Subsection 1195(4) provides for a definition of "reference
period" (used in subsection 1195(3)).
In conjunction with paragraph
1195(2)(b) and subsection 1195(6), this means that the figure for the December
quarter, generally released in February, is the basis for the March indexation
assessment, and the figure for the June quarter, generally released in August,
is the basis for the September indexation assessment.
Subsection
1195(5) provides that, if the Australian Statistician publishes an amount in
substitution for an amount that was previously published by the Australian
Statistician, the latter amount is not to be taken into account for the purposes
of section 1195. This subsection ensures that it is not necessary to adjust
pension rates, after an indexation day, if the Australian Statistician amends a
MTAWE figure that had previously been published.
Veterans'
Entitlement Act 1986
Clauses 3 and 4 amend subsection
59C(2) and inserts a new section 59EA into the Veterans' Entitlements Act
1986 to make amendments to service pensions and income support supplements
similar to those amendments made to social security pensions in
clauses 1 and 2 of the Schedule.
COMMENCEMENT
The changes will commence on 20 September 1997 (clause 2).