15 November 2012

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.

There are a few bits and pieces at work here, but the final result is shown by the white line.  The coloured areas show which bits of the overall payment package are changing. 

The orange shows how much Newstart allowance changes as private income increases.  You can see that the maximum gain - a little over $4,000 a year - occurs at a private income of around $25,700.  This increase in income comes at a price though - tax payable rises in response to the higher taxable income, which is why the white line showing the net change is less than the gain in Newstart allowance over some income ranges.

Note that at incomes above approximately $25,700, telephone allowance and clean energy payment make an appearance.  This reflects that fact that at these incomes single parents are not currently eligible for Newstart allowance, but will become entitled under the new income test.  In turn, the newly acquired Newstart allowance brings with it those two supplementary payments.

These newly eligible single parents will also qualify for a pensioner concession card.

A few days ago, Maree O'Halloran of the National Welfare Rights Network raised concerns about single parents who will lose entitlement to parenting payment being unaware of the need to claim alternative income support.  Similar concerns apply to the newly eligible sole parents I've described above.  However, unlike the parenting payment cases, who will be contacted by Centrelink , there's no simple mechanism for advising these potentially eligible Newstart cases.  Perhaps the income estimates used for Family Tax Benefit purposes could be used to identity likely candidates?  Or maybe, given the Government's desire to attain a surplus this year, no effort at all will be the more attractive (aka cheaper) option!

1 comment:

  1. I guess forfeiting 40 cents in the dollar is better than losing 50 cents in the dollar, but it still represents an effective marginal tax rate of 40% being borne by people who are amongst the poorest in society. Single mothers who are already working low-income earners stand to lose considerable amounts of disposable income under these changes. I can't imagine any other group in society being vulnerable to a drop in income of $6000 a year plus without there being a thing they can do about it. They're just kicking people who are already down. It's disgusting, and it's little kids who will suffer for it.