Australia's Future Tax System

Architecture of Australia's tax and transfer system

2.8 Australian government transfers

Spending on the transfer payment system accounted for more than a quarter of Australian government spending in 2006‑07. The main Australian government transfers are income support payments and payments to families — including all Age and other pensions, Newstart and other allowance payments, Family Tax Benefit, supplementary payments and bonuses (Table 2.8).

In 2006‑07, the allocation of funding to the main transfers was as follows: the Age Pension ($25.5 billion, including Service Pensions); Family Tax Benefit ($16 billion); Disability Support Pension ($8.7 billion); Parenting Payment ($5.9 billion); and Newstart Allowance ($4.5 billion) (Chart 2.10).

Chart 2.10: Australian government program expenditure by
payment group in 2006‑07

Chart 2.10: Australian government program expenditure bypayment group in 2006-07

Box 2.8: What is a transfer?

A transfer is a cash payment or non‑tax concession provided by government to individuals and families that contributes to their overall income or consumption. Defined broadly, transfers include all government payments and subsidies to individuals and families, including universal subsidies such as education and health care. However, for the purposes of this paper, government‑provided services such as health and education are not included as transfers.

This paper focuses primarily on cash payments and certain concessions, as listed below.

  • income support pensions such as the Age Pension and Disability Support Pension;
  • income support allowances such as Newstart Allowance and Youth Allowance;
  • family payments, mainly Family Tax Benefit and payments to assist families with the cost of childcare;
  • supplementary payments such as Rent Assistance, Utilities Allowance, education supplements and one‑off bonus payments;
  • concession cards that provide access to lower‑cost goods and services such as public transport, household utilities and medicines (through the Pharmaceutical Benefits Scheme); and
  • housing assistance delivered through public housing provided at below market rent and through various first home owner schemes.

Tax concessions are also a means to provide transfers. They include items like the superannuation tax concessions; the medical expenses tax offset; reduced council rates; motor vehicle registration charges; and residential stamp duty for low income households. Many tax concessions are provided to recipients of Australian government concession cards.

Table 2.8: Australian government transfers in 2006‑07(a)

  Expense ($million) Payment description/aim Labour force criteria Number of recipients and payment points
Aged        
Age Pension 22,598 Income support for people who have reached age pension age. None 1,952,686
Widow B Pension 4 Income support for previously partnered women born before 1 July 1937 or a single parent at age 45 born before 1 July 1942 (closed 20 March 1997). None 732
Wife Pension (Age) 161 Income support for female partners of Age pensioners (closed 1 July 1995). None 14,045
Age pensioners — DVA (b)   Age Pension paid to eligible service pensioners and their partners. It is paid by DVA as an agent of FaHCSIA. None 6,068
Service Pension Veterans — DVA (b) 2,949 Income support for people who have reached service pension age. Similar to Age Pension paid by Centrelink. None 113,698
Service Pension (partners) — DVA (b)   Income support for wives of service pensioners. Similar to Wife Pension paid by Centrelink. None 96,864
Utilities Allowance 147 Supplementary payment available to income support recipients aged over Age Pension age. N/A 2,000,000
Seniors Concession Allowance 226 Supplementary payment available to Commonwealth Seniors Health Card holders (CSHC). N/A 302,583
Telephone Allowance 12 Supplementary payment available to CSHC holders. Also available to pensioners and selected allowance recipients and paid quarterly with income support payment. N/A 292,155
Total 26,097      
Working age        
Newstart Allowance (NSA) 4,494 Income support for people aged between 21 and Age Pension age, including those regarded as unemployed, non‑full time students available for and willing to undertake suitable work. Includes people with a disability with a partial capacity to work and principal carers of older children (aged 6 of more if partnered, or 8 or more if single). Must satisfy an activity test by seeking and accepting suitable work or participate in agreed activities designed to improve employment prospects (unless exempted).People with a partial capacity to work have requirements that match their assessed capacity to work. Principal carers must seek at least 15 hours work per week (unless exempted). 417,793
Parenting Payment (Partnered) 1,217 Income support for the principal carer of a child aged under 6 (under 16 if granted payment before 1 July 2006). Part‑time participation requirements (see NSA principal carers) if youngest child is over 6. (Over 7 if granted payment before 1 July 2006). 144,427
Parenting Payment (Single) 4,696 Income support for the principal carer of a child aged under 8 years (or under 16 if granted payment before 1 July 2006). Part‑time participation requirements (see NSA principal carers) if youngest child is over 6.(Over 7 if granted payment before 1 July 2006). 395,495
Sickness Allowance 85 Income support for people who are temporarily incapacitated for work or study as a result of illness. Must have a job or full‑time study (if aged 25 and over) to return to. 7,624
Mature Age Allowance 88 Income support for people aged 60 years to Age Pension age receiving an income support payment for 9 months or more (closed September 2003, phased out by September 2008). No recent workforce experience at time of claim. 5,032
Partner Allowance 522 Income support for partners of income support recipients (at time of claim) born on or before 1 July 1955 (closed 20 September 2003). No recent workforce experience at time of claim. 45,988
Widow Allowance 505 Income support for older women (phased out from 1 July 2005 with new grants from that date limited to women born on or before 1 July 1955) who were widowed, divorced or separated prior to turning 40. No recent workforce experience at time of claim. 40,247
Youth Allowance (Other) 482 Income support for young people aged 16 to 20 seeking or preparing for work or temporarily unable to work. Must seek and accept suitable work or participate in agreed activities (unless exempted). 68,698
Exceptional Circumstances Relief Payment 260 Income support for farmers in drought affected areas. None 28,601
Utilities Allowance 7 Supplementary payment paid to Mature Age, Partner and Widow Allowance recipients who are not of Age Pension age. (From March 2008 also paid to Carer Payment, Wife Pension, Disability Support Pension, Widow B Pension and Bereavement Allowance recipients). N/A 2,000,000
Pensioner Education Supplement 73 Supplementary payment for certain pensioners (and former pensioners) undertaking study. Must be undertaking an approved course. 44,802
Education Entry Payment 16 Supplementary lump sum payment to assist with the cost of commencing an approved study course (available annually if continuing study and receiving Pensioner Education Supplement). Must be commencing or continuing (PES recipients) an approved course. 76,394
Mobility Allowance 106 Supplementary payment for people with a disability who are aged 16 or over and who are unable to use public transport without substantial assistance. None 54,492
Total 12,551      
People with a disability
Disability Support Pension 8,651 Income support payment for people aged 16 and over (new entrants must be under Age Pension age) with a serious physical, intellectual or psychiatric impairment. Special rules apply for the blind. Because of their impairment, unable to work or be re‑skilled to work at least 15 hours a week (or 30 hours if on payment at 10 May 2005) at or above the minimum wage for at least the next two years. 714,156
Total 8,651      
Carers of people with a disability
Carer Payment 1,408 Income support for a person providing constant care for an adult or child with a disability, medical condition or who is frail‑aged. None 116,614
Wife Pension (DSP) 234 Income support for female partners of DSP recipients (closed 1 July 1995). None 21,228
Carer Allowance 1,349 Supplementary payment for people who provide daily care and attention at home to an adult or child with disability or medical condition. None 393,263
Total 2,291      
Students
Youth Allowance (Student) 1,591 Income support for full‑time students aged 16‑24 years in secondary or tertiary education or training and apprentices aged 16‑24. Must be undertaking an approved course of study. 263,257
Austudy 218 Income support for people aged 25 and over who are studying or training full‑time.  Must be undertaking an approved course of study. 28,269
ABSTUDY 156 Income support for full‑time secondary and tertiary students and apprentices who are Aboriginal or Torres Strait Islander. Must be undertaking an approved course of study. 34,134
Total 1,965      
Special
Special Benefit 67 Income support for people who are not eligible for any other type of payment and who are in financial hardship. As for NSA. 6,244
Bereavement Allowance 1 Income support for a recently widowed person following the death of their partner. Paid for up to 14 weeks. None 553
Total 68      
Families and children
Family Tax Benefit Part A (c)(d) 18,823 Per child payment for dependent children aged under 16; and dependent young people aged 16‑20 and 21‑24 year old full‑time students not in receipt of an income support payment. Includes Rent Assistance (children aged under 16), Large Family Supplement and Multiple Birth Allowance. N/A 1,769,091
Family Tax Benefit Part B (c)(d) Per family payment to single income families including single parents, subject to a primary earner income limit ($150,000) from 1 July 2008. N/A 1,376,917
Child Care Benefit 1,478 Payment to help with the costs of child care. Work/study/training test applies depending on hours claimed. 560,300
Child Care Tax Rebate (CCTR) 450 CCTR meets 50 per cent of the out-of-pocket child care expenses for approved care, up to a limit of $7,500 per child per annum. Must be eligible for Child Care Benefit. 586,674
Baby Bonus 1,162 Lump sum payment on the birth of a newborn or adopted child. Subject to family income test and paid by instalments from 1 January 2009. None 286,770
Families and children
Maternity Immunisation Allowance 56 One‑off lump sum payment for children who are aged 18‑24 months and fully immunised (unless exempted). From 1 January 2009, payment will be made as two instalments. The first instalment will be made to children aged 18 months and 2 years. The second will be made to children aged between 4 years one month and 5 years. N/A 242,518
Double Orphan Pension 3 Payment for guardian or approved care organisation with the care and control of a child where both parents have died or one parent has died and the other parent is unable or unavailable to care for specific reasons. N/A 1,330
Total 19,273      
  1. Expenditure on income support payments also includes expenditure on supplements paid as part of the income support entitlement (Rent Assistance and Pharmaceutical Allowance) and other supplements paid in addition to an ongoing income support entitlement (for example, Telephone Allowance and Remote Area Allowance). Table includes DVA pension expenditure but not other supplements.
  2. Expenditure for these DVA programs has been combined.
  3. Expenditure for FTB Part A and FTB Part B has been combined.
  4. FTB expenditure includes both Centrelink fortnightly instalments and end‑of‑year payments made through the ATO. The number of recipients includes those paid fortnightly instalments by Centrelink but excludes those paid through the ATO.

Direct cash transfers

Cash transfers fall into several categories. Income support payments provide for the basic living costs of adults, and are paid on a fortnightly basis. These payments are paid at a flat rate (that is, unrelated to prior earnings or employee or employer contributions) and on an indefinite basis, provided a person continues to meet the means test and payment requirements. A range of family assistance and other payments are also available to assist people with other specific costs such as those associated with raising children.

Income support payments are the primary form of financial assistance for individuals who are unable, or not expected, to fully support themselves. These include payments for people no longer expected to work (Age Pension); unable to undertake significant part‑time work (Disability Support Pension); not currently expected to work due to caring responsibilities (Parenting and Carer Payments) or full‑time study (student payments); and for people with a capacity to work and generally expected to work (Newstart Allowance).

There are two main categories of income support payment — pensions and allowances (which are also referred to as 'benefits'). Pensions are paid at higher rates and have more generous income and assets tests than allowances. Student payments, a sub‑category of allowances, have more generous personal income testing than pensions and less generous rates than other allowances. Special Benefit is a safety net payment for people in hardship who are ineligible for other payments.

Family assistance is paid in addition to income support, and is also paid to a large proportion of families with children where the parents are working and do not receive income support. Family assistance includes per child assistance to assist with the costs of raising children; additional assistance for single‑income families, including single parents; assistance on the birth or adoption of a child; and assistance with the costs of child care.

Income support and family assistance recipients who are private renters may also receive Rent Assistance.

Means testing

Support provided through the tax‑transfer system is generally targeted to lower income families and individuals through the use of means tests.

Means testing operates on a couple or family basis, on the principle that targeting support should take into account other sources of financial support, including from close family members (spouse, parents of dependent children).

The means test generally has two components: an income test and an assets test. Income support is tested on the basis of both income and assets, whereas family assistance is tested on income only, in a similar manner to tax programs. Entitlement to most supplementary payments relies upon entitlement to a primary income support payment, concession card or family assistance payment.

Pension rates are separately calculated under both the income and the assets test and the lower of these two rates is paid. This means that people paid the same rate under the income test can have very different asset holdings. Allowances are only available if assets do not exceed specified limits, with rates calculated under the income test. Both arrangements are more generous for pensioners than for allowees.

Under the income tests, allowances reduce more quickly with private income than pensions, as they have higher taper rates, and pensions allow more private income before they start to reduce (or have a higher 'free area') than most allowances. Pensions are reduced by private income at a rate of 40 cents for each dollar over the free area (or 20 cents for each member of a couple), whereas Newstart Allowance is reduced by 50 cents between $62 and $250 per fortnight and then 60 cents for amounts over $250. For allowee couples (that is, where neither partner receives a pension), one person's private income generally only reduces their partner's payment once it has reduced their own payment to zero, whereas a pensioner's income reduces their own and their partner's payment simultaneously. Chart 2.11 shows the impact of the different rates and income tests for single people without children.

Chart 2.11: Comparison of single pension, allowance and student rates,
by private income(a)

Chart 2.11: Comparison of single pension, allowance and student rates, by private income(a)

  1. Rates and income test parameters for the period 1 July 2008 — 19 September 2008.

Source: FaHCSIA estimates.

Under the assets test, different thresholds apply depending on whether the individual or couple is a homeowner. The way the assets test applies is more generous for pensioners than for allowees. Assets over the threshold immediately cancel allowances, whereas they phase out pensions gradually by $1.50 per fortnight per $1,000 of assets over the threshold.

While the majority of means tested assistance is provided through the transfer system, a range of targeted payments are also delivered through the tax system. Eligibility for support (or means tested liabilities) delivered through the tax system is determined by income. This can be either based on the individual's income (for example, the low income tax offset), family income (for example, the exemption from the Medicare levy and the Medicare levy surcharge and the senior Australians tax offset) or another person's income (for example, the dependent spouse offset, and the spouse superannuation contributions offset).

Income support payments are paid on a fortnightly basis. Eligibility for pensions and allowances is assessed on a fortnightly basis using 'ordinary' income, making them responsive to short—term changes in an individual's or family's circumstances. Most family assistance is assessed on the basis of current financial year 'adjusted taxable income' but for the majority of recipients is paid on a fortnightly basis using an estimate of adjusted taxable income.

Pensions

Pensions are one class of income support payment, and cover Age Pension, Disability Support Pension, Carer Payment, Parenting Payment (Single), Bereavement Allowance and Wife and Widow B Pensions (the latter two of which are closed to new claimants). Payments to veterans and their dependants have most of the characteristics of other pension payments.

Parenting Payment for single parents is classed as a pension, but has some elements of an allowance (for example, the assets test). Parenting Payment is discussed in more detail under 'Allowances'.

Although income support is generally taxable, Disability Support Pension, Carer Payment and Wife Pension are non‑taxable if their recipient is below Age Pension age2 (Box 2.9).

The maximum basic rates and dependants payments made to veterans are indexed twice a year in line with increases in the higher of male total average weekly earnings (MTAWE) and the CPI. Pension supplements are also indexed to CPI twice yearly. The income test free areas and assets test limits are indexed on 1 July each year.

Box 2.9: How are Australian government transfers taxed?

Transfers (including allowances, pensions, family assistance and supplementary payments) are taxed differently, depending on the specific payment.

  • Some payments are taxed as income, such as the Age Pension, Carer Payment and Disability Support Pension for people of Age Pension age, Newstart Allowance and Parenting Payment. Whilst these payments are included as income for tax purposes, there are specific tax offsets (see Table 2.10) that are designed to ensure the tax liability for maximum rate full‑year recipients is zero (and in some cases additional income can be earned without incurring tax).
    • For example, in 2007‑08 a person receiving Parenting Payment (Single) of $13,990 pays no tax on their pension or on additional income they may earn if their total income is less than $22,921, due to their entitlement to the pensioner tax offset and the low income tax offset.
  • Some payments are non‑taxable — that is, they are not included as income for tax purposes — including Family Tax Benefit, childcare assistance payments, Carer Payment and Disability Support Pension for recipients and care receivers under Age Pension age, and most supplementary payments (for example, Rent Assistance).

Age Pension

The Age Pension is available to men and women who have reached Age Pension age of 65 for men or 63 ½ for women. The Age Pension age will increase to 65 for women by 2013.

Generally, a claimant needs to be an Australian resident and in Australia at the time of claim, unless claiming under an international social security agreement. To receive the Age Pension, a person must generally have lived in Australia for 10 years or more, with at least five years in a continuous block, although recipients of certain other payments may transfer to the pension on reaching pension age.

Payments to veterans and their dependants

A Service Pension is paid to veterans on the grounds of age or invalidity, and to eligible partners, widows and widowers. The Age Service Pension is paid to veterans who have qualifying service, and the Partner Service Pension is paid to eligible partners and widows. These service pensions are paid five years earlier than the Age Pension would be paid. The Invalidity Service Pension may be granted at any age up to 65 years.

Disability Pension is available to compensate veterans for injuries or diseases caused or aggravated by war service or certain defence service rendered on behalf of Australia before 1 July 2004. It is a non‑taxable pension.

The War Widow's/Widower's and Orphan's Pension is paid to compensate widowed partners and dependants of veterans who have died as a result of war service or eligible defence service. War Widow's/Widower's Pension is not affected by other income except from other compensation payments.

Disability Support Pension

The Disability Support Pension is for people aged 16 and over (new entrants must be under Age Pension age), with a serious physical, intellectual or psychiatric impairment that prevents them from working or being re‑skilled for work for at least 15 hours a week at or above the minimum wage for at least the next two years. Recipients of the payment at 10 May 2005 are required to be unable to work at least 30 hours a week.

Special provisions allow recipients who begin work or increase their earnings on a long‑term basis to have their eligibility 'suspended' for up to two years, rather than 'cancelled'. This allows them to return to payment if they cease work or reduce their hours.

Similar prior residence requirements to those for the Age Pension apply unless the person became unable to work while in Australia.

Carer Payment

Carer Payment is a pension for a person providing constant care for: a person with a physical, intellectual or psychiatric disability; a child with a profound disability; two or more children with disabilities; or an adult and their dependent child who needs care permanently or for an extended period. The person being cared for must generally receive an income support or Service Pension or meet the Special Care Receiver income and assets limits. A Carer Payment recipient can participate in employment, education, training or unpaid voluntary work for up to 25 hours a week without affecting their eligibility.

Allowances

Allowances are the other class of income support, of which the main ones are Parenting Payment (Partnered), Newstart Allowance, and Youth Allowance. Other allowances are: Sickness, Partner, Mature Age and Widow allowances; Special Benefit; Crisis Payment; Exceptional Circumstances Relief Payment; Farm Family Restart; and the student payments of Austudy and ABSTUDY.

Allowance payments are taxable, although their receipt establishes eligibility for the beneficiary tax offset. They are subject to income testing on personal and partner income and not available if assets exceed the allowance assets limits. Rates are adjusted in line with upward movements in the CPI. In most cases, this occurs in March and September.

Parenting Payment

Parenting Payment has the main characteristics of a pension if it is paid to a sole parent, and of an allowance if the recipient is partnered. These characteristics include the rate of payment, the indexation arrangements, and the income test. Parenting Payment is not available if assets exceed the relevant allowance assets limits.

Parenting Payment claimants must have a qualifying child aged under age six if the carer is partnered, or under age eight if the carer is single. The carer must enter into an activity agreement to seek and accept suitable part‑time work if the youngest child is aged six or more. There are special provisions for individuals on Parenting Payment at 30 June 2006. In this case, their youngest child must be aged under 16 and they must enter into an activity agreement with part‑time work requirements when their youngest child turns seven or more.

Newstart Allowance

Newstart Allowance is for people aged between 21 and Age Pension age who are regarded as unemployed and who satisfy the requirements of an activity test (or who are exempt from activity testing). Activity requirements are tailored to the individual's capacity to work. For example, reduced requirements apply to people with a disability, with a partial capacity to work and principal carers of older children (aged 6‑15 if partnered or aged 8‑15 if single). The most common activity requirement is to seek and accept suitable work. Other agreed activities are designed to improve employment prospects.

Youth Allowance

Youth Allowance (Student) is for full‑time students in secondary or tertiary education or training and full‑time Australian apprentices aged 16 to 24 years. The student must be undertaking an approved course of study. Youth Allowance (Other) is for young people aged 16 to 20 not in full‑time study who are seeking or preparing for work or temporarily unable to work.

While rates for people with children are similar to equivalent Newstart Allowance rates, lower rates are paid to partnered young people without children or living away from home, and young people living at home. Youth Allowance for non‑independent young people is paid subject to parental means testing.

Family assistance

Family assistance covers payments made to assist families with the costs of raising dependent children, subsidies for child care, and maternity‑related payments. Payments are income tested but not assets tested. The period of assessment of income testing is the current financial year for the major payments, although most families receive Family Tax Benefit payments on a fortnightly basis, their Child Care Tax Rebate on a quarterly basis, or have their Child Care Benefit paid direct to their child care provider. Family assistance payments are not taxable.

Family Tax Benefit

Family Tax Benefit (FTB) is paid as a fortnightly payment to most families based on an estimate of total family adjusted taxable income. Families can elect to wait until their adjusted taxable income is known and claim their payment as a lump sum. FTB supplements are available at the end of the tax year and can be used to offset any debt arising from an incorrect estimate of income. Where two adults substantially share the care of a child, FTB can be shared.

FTB Part A is a per child payment to assist families with the direct costs of raising children. It has a 'maximum' rate and a 'base' rate that is income tested on family income. Children aged 13‑15 have a higher maximum rate than those aged under 13. Lower rates of payment are available for children aged 16‑24, as Youth Allowance becomes available to children in low income families once a child turns 16. FTB Part A rates are increased in line with upward movements in the CPI each July. The maximum rates for children aged under 16 are also benchmarked against pension rates, which provides an indirect link to MTAWE.

FTB Part B is a per family payment, paid to single parents and couples with one main income earner and a dependent child aged under 16 or a qualifying full‑time student aged 16‑18. FTB Part B for couple families is paid subject to an income test on the second earner. FTB Part B has a higher rate for families with a child aged under five. FTB Part B rates are increased in line with upward movements in the CPI each July.

Child care and other family assistance

In addition to FTB, the family assistance system includes: assistance on the birth or adoption of a child (Baby Bonus); a payment to reward and encourage age‑appropriate immunisation (Maternity Immunisation Allowance); and assistance with the costs of child care (Child Care Benefit and Child Care Tax Rebate).

Families using child care provided by an approved service or registered carer may receive Child Care Benefit (CCB). Approved services can include long day care, family day care, outside school hours care, vacation care and some occasional and in‑home care. Registered care includes nannies, relatives or friends registered as carers. Families who are eligible for CCB for approved care can get up to 24 hours of CCB per child per week regardless of their work status. Families where both parents or a single parent are working, studying, training or looking for work for at least 15 hours a week (unless exempt) are eligible for up to 50 hours of CCB per child per week for approved care. CCB for registered care is paid only where both parents or a single parent are working, studying, training or looking for work at any time in the week. There is a weekly limit of 50 hours of CCB for registered care.

CCB for approved care is subject to a family income test. The maximum rate is payable if a parent is on income support, or if their family income is below the relevant income threshold. Most families using approved care choose to receive their CCB as a reduction in fees. The other option is as a lump sum after the end of the year. There is no income test for CCB for registered care.

Child Care Tax Rebate (CCTR) meets 50 per cent of the out‑of‑pocket child care expenses for approved care up to a limit of $7,500 per child per annum. It can be paid quarterly or annually. To receive payment, the claimant must have been assessed as eligible for CCB and be working, studying, training or looking for work.

Supplementary payments including Rent Assistance

In addition to pensions, allowances and family payments, the Australian government also provides a broad range of supplementary payments and assistance. These include Pharmaceutical Allowance, a supplement for people living in remote areas, and assistance for specific costs (such as Utilities Allowance). A number of supplementary payments are also available for additional assistance with the cost of education and training.

Rent Assistance is one of the major supplementary forms of assistance. Australians receiving more than the base rate of FTB Part A, pensions or allowances are eligible if they are renting in the private market at rates above a threshold level (the threshold and payments depend on family size). Different taper rates of pensions, allowances and family payments mean that Rent Assistance is reduced by a lower level of private income, and at a faster rate, if it is received with an allowance payment, than if it is received with a pension or FTB Part A.

While a person can only receive one income support payment at any point in time, they can receive multiple supplements. Most supplementary payments are non‑taxable.

Since 2000 there has been an increased use of 'one‑off' lump sum payments. For example, carers have received lump sum payments of up to $1,600 in each of the past five budgets. Seniors have received lump sum payments of up to $500 in each of the past three budgets.

Superannuation co‑contribution

Under the government superannuation co‑contribution scheme, post‑tax contributions by low‑income and middle‑income earners are matched at $1.50 for every dollar contributed, up to a maximum contribution of $1,500. The maximum contribution is available for individuals on incomes below $30,342 and phases out at the upper threshold of $60,342 (2008‑09).

Private health insurance rebate

Families and individuals who pay private health insurance premiums are eligible for a rebate of at least 30 per cent of the cost of a complying private health insurance policy. For people aged between 65 and 69 years, the rebate is 35 per cent and for people aged 70 years and over, the rebate is 40 per cent. The rebate can be claimed as a premium reduction, as a direct payment through Medicare Australia, or at the end of the year as part of a tax return. It is paid for both hospital and/or ancillary cover, for people who are eligible for Medicare. The rebate is not means tested.

Concession cards

Pensioners and specified allowance recipients are issued a Pensioner Concession Card. Allowance recipients (excluding student payment recipients) and eligible FTB families are issued with a Health Care Card. A low‑income Health Care Card can also be claimed subject to an income test. Self‑funded retirees can claim a Commonwealth Seniors Health Card subject to a more generous income test.

Concession card holders have access to a range of reduced cost services — particularly through state governments (Section 2.9) and some concessions on private sector goods and services. The most notable concession available to card holders relates to lower cost pharmaceuticals through the Pharmaceutical Benefits Scheme and a lower Medicare Safety Net threshold.

Recent 'one‑off' lump sum payments to seniors and carers have also been made to recipients of income support payments such as Widow Allowance and Partner Allowance, and to holders of the Commonwealth Seniors Health Card.

The Community Development Employment Projects (CDEP) program

The Community Development Employment Projects (CDEP) program is an Australian government funded initiative for unemployed Indigenous people. The program provides participation opportunities through activities which develop skills to improve employability of participants, in order to assist them to move into employment outside the CDEP program. CDEP activities can also lead to the development of business enterprises. Candidates must meet certain eligibility requirements to allow them to participate in CDEP.

Tax expenditures

The Australian government also provides significant tax concessions, which can be a form of transfer. Some relevant examples are the superannuation tax concessions and the 20 per cent medical expenses tax offset.


2 The person being cared for, and the partner of a Wife pensioner, must also be below Age Pension age.