9.10 Carer payments

Background

The Commonwealth provides income support to carers in the form of Carer Payment and Carer Allowance. An annual Carer Supplement is also available to recipients of these payments. There are also special one-off payments for carers of children with a disability.

These payments are large (nearly $7 billion in 2013-14) and beyond the forward estimates are projected to grow at a rate of around 7 per cent per year out to 2023-24 in real terms.

Payments to carers from the Commonwealth are a relatively recent phenomenon, with the payments in their current form only in existence since the mid 1980s.

Rationale for government intervention

The Commonwealth recognises that people who choose (or have no choice but) to care for a relative or friend and forego the ability to earn an income should receive some form of general income support.

It is often argued that, if this form of care was not provided, it would need to be provided formally (mostly by government) at a much higher cost.

Current structure of the programme

There are a number of different payments made by the Commonwealth for carers (see Chart 9.10.1) as described below.

Carer Payment

Carer Payment is provided to people providing constant care at home to a person with a disability. There are currently 220,000 recipients of Carer Payment with an average age of 50 (Department of Social Services, 2013).

The maximum rate of Carer Payment is $827.10 per fortnight for singles (around $21,500 per year) and $1,246.80 (around $32,500 per year) for a couple combined. For singles, $751.70 of this payment represents the maximum base rate with the remaining $75.40 made up of various supplements. These are the same rates as for the Age Pension and Disability Support Pension.

It is an income support payment, which is subject to the same income and means test as the Age Pension for the carer as well as a separate (but much higher) income and assets test for the person receiving care.

The Carer Payment maximum base rate is indexed every six months to the higher of growth in the Consumer Price Index (CPI) or the Pensioner and Beneficiary Living Cost Index (PBLCI). The PBLCI is similar to the CPI but adjusted for the basket of goods typically purchased by people on pensions or allowances. The maximum base rate is also ‘benchmarked’ to Male Total Average Weekly Earnings (MTAWE) (27.7 per cent for the single rate) which effectively drives the indexation of the payment. The rate of supplements is indexed to CPI only.

Chart 9.10.1: Expenditure on payments to carers, 2013-14

This is a pie chart showing the break down of expenditure on payments to carers. Carer Payment accounts for 61 per cent, Carer Allowance (Adult) 21 per cent, Carer Allowance (Child) 8 per cent, Carer Supplement 8 per cent and Other 2 per cent.

Source: Department of Finance, 2013.

Carer Allowance

An income supplement – the Carer Allowance – is paid to someone who provides daily care and attention to someone in their own home. Someone who receives Carer Payment for looking after a child automatically qualifies for Carer Allowance. There are 563,000 recipients of the Carer Allowance, with an average age of 54 (Department of Social Services, 2013).

There is no income or assets test for Carer Allowance. It is paid at a flat rate of $118.20 per fortnight (around $3,000 per year). There is provision for a Health Care Card as well.

There are separate arrangements for Carer Allowance, depending on whether the care recipient is an adult or a child.

Carer Supplement

This is an annual payment of $600 to eligible carers for each person in their care. Carer Supplement was introduced in 2009, as part of other reforms of pension arrangements. It effectively formalised a series of one-off payment bonuses to carers which were made annually in the Budget from 2004.

Child Disability Assistance Payment

This is an annual payment of $1,000 to recipients of Carer Allowance in respect of a child with a disability. The purpose of the payment is to help purchase appropriate assistance.

Carer Adjustment Payment

Carer Adjustment Payment, introduced in 2007, is a lump-sum, one-off payment of up to $10,000 to families who are ineligible for income support, after a catastrophic event for a child under seven years of age. Its purpose is to help the family adjust to their changed circumstances.

Drivers

According to Australian Bureau of Statistics data (ABS, 2013), there are 4.2 million people in Australia with a disability.

Over the five years to 2013, the number of Carer Payment recipients has grown by around 70 per cent (Department of Social Services, 2013). These growth rates are forecast to continue over the medium term (see Chart 9.10.2).

There is no clear reason why numbers of recipients are growing at such a strong rate. Ageing of the population is a factor in explaining some of the growth but, nonetheless, this issue warrants further attention.

  • As the Parliamentary Budget Office noted in its recent report on Commonwealth spending (2013), the number of Carer Payment recipients has been growing at 12 per cent per year over the past decade, while population growth over the same period has been 1.5 per cent per year. If similar growth rates continue, there will be close to 700,000 people receiving the Carer Payment by 2023-24.

Chart 9.10.2: Income support for carers

This chart shows the projected expenditure on income support for carers increasing from $6.8 billion in 2013-14 to $17.1 billion in 2023-24.

Source: National Commission of Audit.

Issues

There have been very few systematic reviews of carer payments.

There are potentially issues with some of the key definitions used to determine payments. For example, to receive Carer Payment a recipient must demonstrate that they are providing ‘constant care’, which is generally if care is provided on a daily basis for a ‘significant period’ during each day. The definition of disability is also open to interpretation at the margin – it must cause a ‘substantial functional impairment’.

Anecdotal evidence suggests that Carer Payment is not always well targeted – for instance, students receiving Carer Payment rather than Youth Allowance. So long as the young person is not studying for more than 25 hours per week, it is possible for them to meet the relevant requirements.

Young carers face particular disadvantage in terms of educational and employment prospects. Support could be better tailored to meet their particular needs. There is also an issue about the pathways to and from Carer Payment. Roughly 40 per cent of new recipients have come from receipt of Newstart or Parenting Payment and a similar proportion go to Newstart and the Age Pension when they move off Carer Payment (Department of Social Services, 2013).

The Department of Social Services has advised the Commission that the majority of recipients are female (roughly 70 per cent) and aged 55 and over (around 40-50 per cent). Given the relatively low workforce participation rates of this group more generally, it may be that Carer Payment is being used by some people as a way of maintaining an income until they reach Age Pension age. The alternative for these people would be to otherwise have to look for a job in order to claim Newstart Allowance.

The introduction of the National Disability Insurance Scheme (NDIS) and its interactions with carer payments have not been fully scoped. As the NDIS provides a higher level of formal care than under existing arrangements, it could be assumed that there would be an impact on the provision of care.

Complexity of the payment arrangements and differing eligibility requirements suggest that there could also be gains from streamlining arrangements.

Potential areas for reform

In keeping with the Commission’s principles, it is important that assistance to carers is well targeted. A number of reforms could be considered in this regard.

Changes to payment parameters

The payment parameters for Carer Payment are currently equal to those for the Age Pension. The pension class of payments represents the social living wage paid to those who are not expected to support themselves through paid employment.

Recommendations relating to changes in the Age Pension benchmark will flow through to the Carer Payment. Transitioning the Carer Payment to the new benchmark of 28 per cent of Average Weekly Earnings should apply at the same time as implementation of those changes to the Age Pension benchmark.

Limit Carer Supplement to one payment per carer

Introduced in 2009, the Carer Supplement transformed the annual bonuses paid to carers from 2004 into a permanent payment delivered in July each year. Conceptually, increasing the adequacy of payments to carers could have been achieved by changing fortnightly payment levels for Carer Payment/Allowance or altering indexation arrangements.

Under the provisions for Carer Supplement, a carer may receive more than one payment per year – this can occur where they receive both Carer Payment and Carer Allowance or Carer Allowance and a Department of Veterans’ Affairs pension (there are also other combinations). As Carer Allowance is paid for each person in care, it is also possible to receive more than two Carer Supplements per year.

The potential for multiple payments was explicitly recognised in the legislation which gave effect to the Supplement in 2009. However, the case for allowing multiple payments was not explained.

As an annual additional payment, it could be argued that the Carer Supplement should only be paid once to each carer, in recognition of their circumstances.

Introduce an income test for Carer Allowance

There is currently no income test for Carer Allowance. This means that carers with substantial incomes can receive a payment of around $118 per fortnight.

In keeping with the Commission’s focus on targeting payments to those most in need, an income test could be introduced for Carer Allowance. Setting an income limit of $150,000 per year would mean that around 6 per cent of recipients would no longer be eligible. It is anticipated that around 35,000 carers would lose access to Carer Allowance under this arrangement.

An income limit of $150,000 per year is around three times Average Weekly Earnings. By way of example, an individual with an income of $150,000 would have an after tax income of around $3,900 per fortnight. Payment of Carer Allowance adds around 3 per cent to after tax income.

The introduction of an income test would introduce some additional complexity, for example, definitional issues around income.

Tighten eligibility arrangements for Carer Payment

With annual growth in Carer Payment recipients of over 10 per cent per year, there is a need to ensure that the eligibility for the payments remains well targeted.

Rules applying to carers

As noted previously, to be eligible for Carer Payment, a carer must provide ‘constant care’. A carer is said to provide constant care if they personally provide care on a daily basis for a ‘significant period’ during each day. The care may be active, supervisory or monitoring.

To provide care on a daily basis for a significant period, a carer should reasonably be expected to provide at least the equivalent of a normal working day in personal care, as the policy intent of providing Carer Payment is to recognise that the carer is not able to undertake substantial employment because of their caring responsibilities. This would include circumstances where the carer or care receiver are absent from the care situation for part of the day, but the intensity of the care required and provided during the remainder of any 24 hour period is such that it roughly equates to a normal working day.

The definition of constant care could be reviewed to ensure that it is applied as rigorously as possible. This could include putting greater onus on carers to substantiate the nature of the caring activities, with greater emphasis on ‘active’ rather than ‘supervisory or monitoring’ responsibilities.

Rules applying to those adults receiving care

The adult care receiver must be assessed as having a high level of physical, intellectual or psychiatric disability under the Adult Disability Assessment Tool (ADAT).

The ADAT relies on a self-assessment scoring system, coupled with an assessment by a health professional. A scoring system is used to determine the need for care. While the ADAT provides an objective basis for determining eligibility, it applies subjective judgements at the margin (such as ‘some assistance’ or ‘a lot of help’).

The ADAT could be reviewed, to ensure that the assessment of need for care is subject to rigorous analysis, including ensuring that health professionals are applying the criteria in the correct fashion.

References

Australian Bureau of Statistics (ABS) 2013, Survey of Disability, Ageing and Carers, Australia: Summary of Findings 2012, cat. no. 4430.0, ABS, Canberra.

Parliamentary Budget Office 2013, Australian Government Spending Part 1: Historical trends from 2002-03 to 2012-13, Canberra.