A new rate component is born

In an earlier series of posts I wrote about how income support payment rates are indexed, using the September 2012 indexation round as an example.  Calculations for the next round of increases will kick off on 23 January when the Australian Bureau of Statistics (the ABS) releases the CPI figure for the December 2012 quarter.  This is the starting point for working out the rates that will apply from 20 March 2013.

However, this time round the indexation process will differ from the standard arrangement described in my earlier posts.  That’s because part of the rate increase that would usually flow from increases in the CPI (and also the pensioner and beneficiary living cost index – PBLCI - for most pensioners) is going to be siphoned off to help form a new income support rate component – the clean energy supplement.

The ups and downs of Parliament 43

I was looking at the stats for this blog and was intrigued to see that the most popular post so far was one of my 4 Parliament efforts, looking at single parents.  For this blog, popular usually just means someone other than me looked at it, but that post actually does stand out.

While I like the 4 Parliament comparisons, one of the problems with them is that they become dated.  Being written at different times doesn't help either, as that can make it hard to compare the various households I've covered, particularly the results from Parliament 43 (the current period).  With that in mind I thought I'd update just the Parliament 43 results for all the households I've covered so far, plus a few extras.  That will make comparisons between household types easier and also allow gossip about which ones are in and out of favour.

Being partnered is not much of a bonus

[Warning: A commenter has suggested this post is boring enough to provoke actual self-harm]

Considering the amount of attention paid to the findings of the recent Senate enquiry into Newstart allowance (and similar) payment rates, it's perhaps surprising that the introduction next year (from 20 March) of an income support bonus has received little coverage.  The bonus provides up to $175 a year to a member of a couple and up to $210 a year to a single person.  This is in addition to the usual CPI based rate increases.

It's not a straightforward increase in rates, however, and the chosen approach seems to me to be particularly unfair to some couples.

January changes for single parents

Soon it will be 1 January 2013, with its attendant changes to some of the arrangements for single parents.  I've done quite a few posts on this over the last year but I thought it was worth updating the figures using the rates, etc, that will actually apply on that date.

The changes I'll be focusing on are:

• the removal of the "grandfathering" provisions that have so far prevented single parents who have been on parenting payment (PPS) since before 1 July 2006 from being subject to the so-called age-8 transition; and
• the relaxation of the Newstart allowance income test for single parents with the principal care of at least one child aged under 16.

Handily, both of these can be looked at in the context of the age-8 transition.

Good news for some single parents...

As 1 January 2013 approaches, the changes in the eligibility conditions for parenting payment continue to receive attention.  These changes will result in the loss of entitlement to parenting payment for existing recipients whose youngest child is aged 8 or more.  However, there's another change affecting single/sole parents that has so far had very minimal coverage - and this time it's actually a gain.

For so-called "principal carer" single parents in receipt of Newstart allowance, the income test is being relaxed.  The rate at which payment is reduced by income will change from the current 50 (or 60) cents in the dollar to 40 cents in the dollar.  For Newstart recipients whose rate is currently reduced due to their income, these changes will lead to an increase in payment.  It will also allow some sole parents who currently earn too much to get Newstart allowance to receive a part-rate.

Here's a chart that shows the gain (expressed in yearly terms) the income test change produces.

Single parents with part-care of children

Last week was anti-poverty week, and amid all the stories about reductions in the entitlements of single parents and the paucity of the Newstart allowance rate this one caught my eye. Although it didn't deal directly with the issue, the case seems to involve, among other things, a single parent who has part-care of his children.  The comments that follow the article express various levels of support and/or sympathy mixed with the usual "get a job" sentiments.  There are also some questioning the amount of assistance he received, which appears to be just single Newstart allowance - no payments in respect of his children.

Part-care of children brings with it some complicated rules around how much, if any, family assistance can be paid, with similar provisions around child support entitlements or liabilities.  At the extremes, a parent with no care of their child won't receive any child-related assistance, and will generally have to pay child support, whereas a parent with 100% of the care gets all the child-related assistance and will generally receive child support.  As care increases from zero there is a kind-of graduated sharing of family assistance entitlements.  I say "kind-of" because it's not a smooth transition - the family assistance amounts change in a lumpy way over some percentage ranges, not at all over others, and disproportionately in the rest.

A further complication is that adult income support also undergoes changes related to the level of care of the child.

There are many possible combinations of care and payment types but I'll just focus on three as they will illustrate most of the points.

Uh-oh, the kids are getting bigger

This week Parliament passed legislation removing the special arrangements ("grandfathering") for parents getting parenting payment since before 1 July 2006.  I've done a few posts on this already so I won't repeat the details (see here and here if you want the earlier raves on this subject).  The gist of it is that the grandfathered group will now have the same payment arrangements applied to them as everyone who has come on to parenting payment since 1 July 2006.  These arrangements are rather less generous for single parents, who will consequently have significant reductions in their incomes when the change takes effect on 1 January 2013.  (It's of less significance for partnered parents because they have always had lower Newstart allowance-linked payment rates.)

Parents in the income support system, partnered or single, face changes in the total assistance package provided to them when their children reach significant birthday milestones.  Sometimes it's up, sometimes it's down, but the final result is down.  By final result, I mean that eventually the parent is no longer considered to have a dependent child, and a significant age for this purpose is 22 years.  A 22 year old child becomes eligible for Newstart allowance in their own right (subject to the usual rules about being unemployed, etc) and a 22 year old student child gets a youth allowance that is no longer affected by parental income.  If the parent is single then, in the usual case, they will get the single rate of Newstart allowance.

So, under the current arrangements a single parent who still needs income support will typically end up on single Newstart allowance, simply as a consequence of the passage of time.  If we compare the assistance package for a single parent with a newborn to that of a single Newstart recipient the size of the eventual transition that must occur is stark.