House debates

Monday, 8 February 2016

Questions without Notice


2:14 pm

Photo of Andrew WilkieAndrew Wilkie (Denison, Independent) Share this | | Hansard source

My question is to the Treasurer. The government claims the recent change to the income test for defined pension recipients will principally affect superannuants on big incomes, but the truth is that most of those affected are on modest incomes and nowhere near wealthy. Take one Tasmanian couple, for example, whose only assets are a caravan and a car but have lost $164 a fortnight from their age pension. Treasurer, will you immediately reconsider this policy?

2:15 pm

Photo of Christian PorterChristian Porter (Pearce, Liberal Party, Minister for Social Services) Share this | | Hansard source

I thank the member for his question and recognise his genuine concern with the issue. By way of explanation, obviously the member for Denison is well aware that defined benefit schemes at their heart provide a source of income. It is an income payment that comes from the rules of the scheme—the rules of the scheme vary but overwhelmingly defined benefit schemes paid income which reflected years of service and final salary. Most often they were under public sector auspices, and it is obviously important to note for present purposes that if it was one of those very rare schemes that was contributory then there are bases on which the rules that we are about to introduce can be excluded.

The fact is that we are very willing to justify this on the grounds of fairness, because there are two fundamental principles that underpin the social security system and the pension system particularly—they are, firstly, that it is means tested and that an individual's income has to be looked at before it can be determined whether or not they are a recipient appropriately of the pension or any other social security payment, and the second basic principle is that in assessing someone's income what should matter is not the source of income but the amount of the income. The member for Denison has given an example of someone who is losing an amount per fortnight. We are talking here about 140,000 in defined benefit schemes. The change in the rules we are proposing would only affect 47,938 of those, and 1,572 people would lose payments, would lose access to the part pension—but they are individuals who receive very large amounts of money from defined benefit schemes as income.

As an example, under the previous policy—and this applies to that group of roughly 1,500—there were individuals receiving in excess of $100,000 a year on defined benefit schemes who were still able to access the part pension. On any measure that is inequitable and therefore unfair. With respect to those other 46,366 individuals who will find their part pension decreased as they enter the taper rate, because their income is being assessed, perhaps I can give the member for Denison an example showing why this is equitable. If you were a couple who had an investment property and were receiving $30,000 a year in rent, then your rental income plus your part pension would allow for $51,500 a year in total. If perchance you happened to be earning $30,000 a year in income from a defined benefit scheme, given the rules we are now about to change, you would have been eligible for $59,000 per year. The only salient difference was the source of the income. The change we are making, which is applicable to the type of person the member for Denison has described, would be that if you had $30,000 per year coming in from a defined benefit scheme you would still be able to access the part pension, but, yes, the amount overall would reduce to $54,000. It is still more than the couple who receive their $30,000 income on rent, so really this is a matter of equity. (Time expired)