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History of Pensions
and Other Benefits in Australia |
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Article reproduced from Year Book Australia,
1971 (ABS Catalogue No.
1301.0)
(This special article has been contributed by
the Department of Social Security - Australia)
At the turn of the century there was no
social security system in Australia. Charitable relief was
provided to needy persons by voluntary organisations, in some
cases with the assistance of government grants.
The main areas of need which attracted
charitable assistance were the 'sick poor', neglected children,
old people who were destitute and women who had been deserted or
who had 'fallen' pregnant. The unemployed were assisted by
grants of wages, or rations, in return for relief work provided
by the government.
The beginnings
The Commonwealth of Australia was formed on I
January 1901 by federation of the six States under a written
constitution which, among other things, authorised the new
Commonwealth Parliament to legislate in respect of age and
invalid Pensions. In the event, the Commonwealth did not
exercise this power until June 1908 when legislation providing
for the introduction of means-tested 'flat-rate' age and invalid
Pensions was passed. The new Pensions, which were financed from
general revenue, came into operation in July 1909 and December
1910 respectively, superseding State age pension schemes which
had been introduced in New South Wales (1900), Victoria (1900)
and Queensland (1908) and an invalid pension scheme introduced
in New South Wales (1908).
The new pension was paid to men from age 65.
It was paid to women at age 60, but not until December 1910. The
age pension was also subject to a residence qualification of 25
years which was reduced to 20 years shortly after introduction.
A residence qualification of five years applied to the invalid
pension.
In 1912 the Commonwealth introduced a
maternity allowance. This allowance was a lump sum cash grant
payable to a mother on the birth of a child.
1914-1940
No new Commonwealth social security payments
were introduced until World War II. There were, however, several
notable developments in the States, including: in New South
Wales, the introduction of widows' Pensions in 1926 and child
endowment in 1927; and in Queensland the introduction of an
unemployment insurance scheme in 1923.
The principal changes in age and invalid
Pensions during this period were in the rates and the means
test. A provision for automatic increases in pension rates on
the basis of changes in the cost of living was introduced in
1933, repealed in 1937 and reintroduced in 1940. Measures which
would have placed Pensions on a social insurance basis and
introduced a number of new cash payments were proposed in 1928
and 1938 but were not implemented.
The Commonwealth Department of Social
Services was created in 1939 and became fully operative in 1941.
Pensions had previously been administered within the Department
of the Treasury.
1941-1949
Child endowment was introduced in 1941. This
provided a regular flat-rate cash payment, free of means test,
to parents (usually the mother) for children after the first
child. The New South Wales child endowment scheme was abolished
at the same time.
Widows' Pensions were introduced in 1942. As
in the case of age and invalid Pensions they were flat-rate
means-tested payments financed from general revenue. Those
eligible included deserted wives, divorced women, and women
whose husbands were in prison or a mental hospital. A residence
qualification of five years applied. The new scheme superseded
the New South Wales widows' pension.
There were several developments in 1943.
Funeral benefits were introduced; these were lump sum grants
payable for the funeral costs or a pensioner. Wife's allowance
was introduced for an incapacitated male pensioner with a
dependent spouse. A reciprocal agreement on social security was
concluded with New Zealand. In addition, automatic
cost-of-living adjustments to pension rates were repealed when
their application would have resulted in a rate reduction.
There was a major extension of the social
security system in 1945 with the introduction or Commonwealth
unemployment and sickness benefits in the form of flat-rate
payments financed from general revenue and subject to an income
test. The Queensland scheme of unemployment insurance was
superseded by the new benefits. The introduction of these new
benefits took place against a background of major changes in the
revenue-raising functions of the Commonwealth and the States.
The Commonwealth took sole responsibility for income tax in
1942, and thus expanded substantially its capacity to raise
revenue. While the exigencies of World War II had much to do
with this change, its broader effect was to facilitate an
expansion of the Commonwealth's role in social security as in
other areas.
There was a further development of specific
relevance to social security in 1945. The Commonwealth split the
personal income tax into two components. One, the social
services contribution, was to be used exclusively to finance
social security cash payments. Revenue from the contribution was
paid into the National Welfare Fund, from which all such cash
payments were to be made, but there was no link between personal
contributions and entitlements. The fund was supplemented by
subventions from payroll tax and general revenue. In the event,
the social services contribution was again merged into a single
personal income tax in 1950. All cash payments are now made
direct from general revenue.
Doubts had arisen during the early forties
about the constitutional validity of the Commonwealth
legislation in respect of cash payments other than age and
invalid Pensions, which were specifically within the powers of
the Commonwealth. Accordingly, a referendum was held in 1946
under which the Commonwealth sought an extension of its powers
in the areas of social security and health. The referendum was
carried. In 1947 the various social security cash payments were
consolidated into a single Social Services Act.
1950-1969
In 1950 child endowment was extended to cover
the first child. It was further extended in 1964 to cover
children who, after reaching the normal disqualifying age of 16,
continued as full-time students but were aged under 21.
The Pensioner Medical Service was established
in 1951. In effect, it provided free medical treatment to
pensioners through participating doctors who were paid a fee for
treating pensioners free of direct charge. The service also made
free hospital treatment available to pensioners.
In 1952 the means test on age and invalid
pension eligibility was largely removed for permanently blind
people. !t was completely removed in 1954.
A reciprocal agreement on social security was
concluded with the United Kingdom in 1953.
In 1956 pensioners with more than one child
became entitled to additional pension for each child after the
first. Previously, an allowance had been payable only for the
first child.
Supplementary assistance (now known as rent
assistance) was introduced in 1958 for a single pensioner paying
rent, and wholly or substantially dependent on his or her
pension. A married pensioner whose spouse was not a pensioner
was also eligible.
A major change took place in the pension
means test in 1961. The separate property and income tests,
which previously had formed the means test, were combined into a
composite whole called the merged means test under which means
were calculated by adding personal earnings to 10 per cent of
the value of property.
In 1962 there was a reduction from 20 to 10
years in the residence qualification for age pension.
A standard rate of pension was introduced in
1963. Before that, the maximum rate of pension for a single
person was the same as for a married person. The new standard
rate gave single pensioners a higher payment in recognition of
the economies available to a married couple from sharing living
expenses. Also in 1963 a payment known as mother's allowance was
added to the rate of widow's pension. In 1965 an equivalent
payment was extended to single age and invalid pensioners with
children.
In 1965 wife's allowance was extended to
cover any pensioner wife not herself entitled to a pension.
Previously it was payable only if the pensioner was
incapacitated.
Sheltered employment allowance was introduced
in 1967 for persons employed in sheltered workshops and
qualified to receive invalid pension. The allowance was payable
as a supplement to the sheltered employee's workshop earnings in
lieu of invalid pension, but at the same rate. A more liberal
means test applied to the allowance than to invalid pension but
was superseded by the tapered means test in 1969.
A concession commonly called 'special
temporary allowance' was introduced in 1968 to assist pensioners
on the death of a spouse. In effect, the allowance provided for
the continuing payment, for 12 weeks after the death of the
spouse, of the total pension payable to the couple.
Also in 1968 the residence qualification of
five years for widow's pension was abolished in respect of women
becoming widows while living in Australia. In the same year the
Commonwealth agreed to subsidise the States to assist mothers
with the sole care or children and not eligible for widow's
pension.
A major liberalisation of the pension means
test took place in 1969. The rate of reduction in pension was
changed From 100 per cent to 50 per cent of the amount by which
pensioner's means exceeded the maximum level not affecting the
pension rate. The new arrangement became known as the 'tapered
means test'. It was accompanied by a measure, to restrict the
availability of the Pensioner Medical Service. Under this
measure, people who qualified for Pensions only because of the
tapered means test did not become entitled to Pensioner Medical
Service benefits as well.
1970 onwards
The earlier part of this period saw an
expansion of existing provisions. The latter part has been one
of consolidation and rationalisation. The major events are
described below.
Introduction and abolition of benefits
In 1970 a 'long-term rate' of sickness benefit became payable
after six weeks in receipt of benefit. At the same time such
beneficiaries paying rent became eligible to receive
supplementary allowance (now known as rent assistance). The long
term rate was absorbed in 1973.
The wife's allowance was replaced by wife's
pension in 1972. The new pension was payable to an age, invalid
or repatriation service pensioner's wife who was not entitled to
a pension herself.
In 1973 supporting mother's benefit was
introduced for single mothers not entitled to widow's pension.
The new benefit was payable after a six-month waiting period,
during which time the States remained responsible for the single
mother's income support under the Commonwealth-State
cost-sharing arrangements introduced in 1968. The supporting
mother's benefit was extended in 1977 to single fathers,
including widowers and divorcees, and renamed supporting
parent's benefit. The six-month waiting period for this benefit
was abolished in 1980 when the States withdrew from the
Commonwealth-State cost-sharing arrangements. The six-month
waiting period still applying to certain categories of widow's
pension was also abolished in 1980.
Also in 1973 a double orphan's pension was
introduced for the guardian of a child who's parents are both
dead. The pension is a flat-rate non-income-tested payment.
In 1974 a free-of-income-test, fiat-rate
payment called handicapped child's allowance was introduced.
This was for parents of severely handicapped children requiring
constant care and attention at home. The allowance was extended
to cover less severely handicapped children in low-income
families in 1977.
Family allowances were introduced in 1976.
This was effected by substantially increasing child endowment
rates, extending eligibility for students to include those aged
21 to 24 years (inclusive), and abolishing tax rebates for
children and students. Low-income families gained substantially
from these changes.
The spouse carer's pension was introduced in
1983. It was payable to a man caring for his severely
handicapped or invalid wife who required constant care and
attention in the matrimonial home. In 1985 it was .subsumed by
the carer's pension which provides income support to a person
with limited means who is providing constant and long-term care
to severely disabled spouse or near relative receiving an age or
invalid pension.
Also in 1983, Family Income Supplement (FIS)
was introduced in the form of an income-tested, non-taxable
allowance payable in respect of children to the main breadwinner
in low-income families not receiving a pension or benefit.
Payment was transferred to the family allowance recipient
(usually the mother) in 1984.
Two other new payments were introduced in
1983. Mobility allowance became payable to severely handicapped
persons unable to use public transport, and rehabilitation
allowance (broadly equivalent to an invalid pension) became
payable to persons assisted through the Commonwealth
Rehabilitation Service.
Remote area allowance was introduced in 1984.
This allowance is payable to pensioners and beneficiaries who
reside in specified areas of Tax Zone A.
In 1985 payment of family allowance in
respect of student children who have attained the age of 18 was
discontinued, except in the case of certain low-income families.
An income test was introduced in 1987 on family allowance for
students aged 16 and 17. A special addition to family allowances
became payable in 1985 to certain families with multiple births
(three children or more) until the children reach six years of
age .
Rent assistance was extended to unemployment
beneficiaries in 1986.
Young homeless allowance was introduced in
1986 to provide additional assistance to unemployment and
sickness beneficiaries under 18 years who are homeless and
without parental or custodial support.
Fringe benefits changes
In 1973, the conditions of eligibility for access to the
Pensioner Medical Service (now Pensioner Health Benefits) were
tightened by freezing the disqualifying levels of income. These
limits remained frozen until 1979. Further increases in the
limits took place in 1979 and 1982. Automatic indexation was
introduced in 1983.
Eligibility for Pensioner Health Benefits,
and all associated Commonwealth fringe benefits, was extended to
recipients of supporting parents' benefits in 1979 and sickness
benefits in 1980. Entitlement to only a limited range of fringe
benefits had been originally granted to supporting mothers and
later, supporting fathers.
In 1983, the basic income limits applicable
to persons eligible for 'fringe benefits' became indexed in line
with movements in prices. Also in 1983, people who gave up an
invalid pension or sheltered employment allowance to take up
open employment became eligible for Health Care Cards free of
income test for a period of 12 months. The aim was to improve
incentives for invalid pensioners to re-enter the open
workforce. In 1985 fringe benefits were made subject to an
assets test as well as the income test. The assets test limits
are indexed annually in line with price movements.
Means tests
The pension means test has undergone several significant changes
since 1970. It was abolished for pensioners aged 75 and over in
1973 and for pensioners aged 70 and over in 1975. The means test
was replaced by an income test in 1976. In 1978 the rate of the
free- of-income-test age pension for those aged 70 years and
over was frozen. In 1983 this frozen rate became subject to a
special income test which will eventually be overtaken by the
normal income test.
An assets test on Pensions was introduced in
1985. It operates alongside the income test. Assets test limits
are increased in line with price movements.
The income test for unemployment and sickness
benefits was liberalised several times between 1980 and 1986.
Indexation and rates
In 1973 the single and married rates of unemployment and
sickness benefits were increased for all age groups to bring
them up to an appropriate standard equivalent to the married
rates of pension. The long-term sickness benefit rate was
superseded by this measure.
The pension and benefit rates were increased
in 1975 in line with price movements, except in the case of
unemployment and sickness benefits for single people aged under
18. In 1977, this link became automatic.
Indexation was withdrawn from the rate of
unemployment benefit for single persons 18 years and over in
1978. It was restored in 1983 but again withdrawn for those aged
18, 19 and 20 years in 1985. Ad hoc increases have been granted
for those beneficiaries since, and further steps announced are
designed to integrate unemployment benefits for persons under 21
with education allowances.
Portability and residence
In 1972 reciprocal (pension portability) agreements were
concluded with Italy, Greece, Turkey and Malta. These were
superseded in 1973 by the introduction of general portability of
Australian Pensions.
In 1974 the residence test applying to
invalid pension was abolished for persons whose permanent
incapacity or blindness occurred in Australia.
Pensions granted after I July 1986 are now
subject to a residence proportion formula for portability
purposes.
Other benefits
In conclusion, it should perhaps be added
that the private sector continues to play an important role in
the provision of financial support to people in major
contingencies. Private employers are required by State
government legislation (and equivalent measures in the
Commonwealth Territories) to insure their employees against work
injuries and specified occupational diseases; industrial awards
usually provide for a measure of paid sick leave; and
occupational pension schemes are becoming increasingly available
to employees.
Employees in the public sector are also
entitled to work injury benefits and paid sick leave, which are
financed from general revenue. They are also covered by
occupational pension schemes to which the government (as the
employer) and employees both contribute.
Coverage against the financial consequences
of road injuries is provided through insurance (third party
insurance is compulsory for motorists). A large volume of life
insurance is also written.
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History
of Pensions 
