7.10 Carer payments

Many Australians choose to, or have no choice but to, care for their family members and friends who are unable to care for themselves. The Commission recognises that if this type of informal care was not provided, it would need to be provided formally and mostly by government at a much higher cost.

There are approximately 220,000 people receiving Carer Payment in Australia. Around 90 per cent of these people have no private earnings – because of the demands of their caring role they are unable to earn a wage through paid employment.

The government provides income support to carers in the form of Carer Payment in recognition of the sacrifices that carers make including the foregone income that they would otherwise be able to earn.

As well as Carer Payment a Carer Allowance is available to someone who provides daily care and attention to someone in their own home. Around 560,000 people receive the Carer Allowance which is not means tested. There is also an annual Carer Supplement payable to eligible carers for each person in their care.

Payments to carers are significant, totalling nearly $7 billion in 2013-14 and growing in excess of 6 per cent over the forward estimates in real terms. See Chart 7.14.

The number of Carer Payment recipients has been growing at 12 per cent each year over the last decade. This growth greatly outstrips growth in the population. The number of recipients of Carer Allowance has also grown rapidly, more than doubling over the last decade.

Consistent with its principles, the Commission supports the continuation of payments to carers. However, certain payments made to carers could be better targeted and it would also be appropriate to re-examine the eligibility criteria for the Carer Payment given the rapid growth in the number of recipients.

Currently, a carer may receive more than one payment of Carer Supplement each year. This can occur where the carer receives certain combinations of government payments. Additionally, as the Carer Allowance is paid for each person in care it is also possible to receive more than two Carer Supplements per year.

Chart 7.14: Projected spending on income support for carers

Chart 7.14 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.

The introduction of the National Disability Insurance Scheme and its interactions with carer payments have not been fully scoped. As the NDIS is fully rolled out, these interactions need to be properly analysed.

Complexity of the payment arrangements and differing eligibility requirements suggest that there could be gains from streamlining arrangements. This could include examining the case for retaining a series of one-off payments, rather than integrating these into the Carer Payment and/or Carer Allowance.

As the Carer Supplement is an annual lump-sum payment, it should only be paid once to each carer in recognition of their caring efforts. The number of people receiving the Supplement would be unaffected by this change.

There is currently no means test for the Carer Allowance. As such, 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 should be introduced for Carer Allowance. Setting an income limit of $150,000 per year would affect the payment of the Allowance for a small number of existing recipients.

Eligibility criteria should be reviewed to ensure that the Carer Payment is going to those in genuine need and the principles of equity are maintained.

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.

It would be a matter for Government to decide how and when the eligibility changes apply to Carer Payment recipients (recognising that for the Age Pension these eligibility requirements apply prospectively to new recipients from 2027-28). These include a more comprehensive means test; and an increase in the income test taper rate from 50 per cent to 75 per cent. The Commission notes however that only a small number of recipients of Carer Payment (less than 10 per cent) would likely be affected by changes to the means test.

Recommendation 26: Carer payments

Many Australians care for a family member or friend who is unable to care for themselves. The Commission recommends payments to carers be maintained, but recommends changes to improve targeting including:

  1. limiting the annual Carer Supplement to only one payment per carer;
  2. introducing an income test for the Carer Allowance, set at $150,000 per year;
  3. reviewing eligibility criteria applying to the type of care provided and to the needs of the adult receiving care. This should ensure that Carer Payment is targeted to those whose caring responsibilities limit their capacity to work; and
  4. aligning Carer Payment arrangements with the Commission's recommended changes to the Age Pension benchmark by transitioning to a new benchmark of 28 per cent of Average Weekly Earnings at the same time as implementation of the Age Pension benchmark changes.