Government's Social Security Reforms - second time lucky?

New Bills have been introduced into Parliament to implement the Government’s previously announced social security changes – which, it seems, supersede the Bills previously introduced and which remain in the Senate.

In relation to Age Pensions the new Bill (Social Services and Other Legislation Amendment (2014 Budget Measures No 5) Bill 2014) will, if passed, implement the following changes:

• From 1 July 2017 – freeze, for three years, the current income test free areas for age pensions (and many other benefits and payments).

The income test free area – refers to the amount of income which an age pensioner can receive before there is a reduction in the age pension;

• From 20 September 2017 – ensure that the age pension (and many other benefits and payments) are indexed to only to CPI.

While this seems an innocuous change – the current indexing arrangements index pensions by reference to various indexes, which generally increase at a more significant rate than CPI.  Even a small difference in the index used – say using 2.2% instead of 2% -  can, given sufficient time and as the index is applied to many billion dollar payments – mean that it is a significant issue.

• From 20 September 2017, reset the deeming thresholds to $30,000 for singles and $50,000 for pensioner couples;

This does represent a material hardening of the deeming test, given the current thresholds are $48,000 (singles) and $79,600 (pensioner couples).