Post by Banjo on Aug 16, 2013 15:19:45 GMT 7
Change to residency requirements
Background
The Government announced a tightening of the Australian working life residency (AWLR) requirements for persons to be paid an income support payment while resident overseas in the 2012–13 Budget.[1]
Australian working life residency—strengthening requirements
Normally, to qualify for an Age Pension (AP) or a Disability Support Pension (DSP) in Australia a person must have been resident in Australia for at least 10 years. Thereafter, only some Australian income support payments are payable when a person leaves Australia to reside overseas. These are the AP, Wife Pension (WP), Widow B Pension (WidB) and some DSP recipients.
As at June 2010, there were 71 360 income support recipients residing overseas permanently. The majority (79 per cent) reside in European countries. Of those resident overseas, 62 148 (87 per cent) were receiving AP, 7572 were receiving the DSP, 575 receiving WidB and 969 receiving WP.[2] Annual expenditure as at June 2010 on Australia’s pension payments paid to people living overseas was $571.3 million and at the same time, pensions from overseas countries being paid to people residing in Australia totalled $1.2 billion.[3]
Currently, for a person resident overseas, to be paid the maximum rate of AP they would otherwise be paid if resident in Australia, they require 25 years AWLR. Recipients with less than 25 years of AWLR are paid a proportional rate based on the duration of their working life residence in Australia. For example, if a person has 16 years of working life residence, they can receive 16/25th of the rate otherwise payable when a resident in Australia. Most overseas contributory based pension systems pay their minimum overseas rate after about 15 years and their maximum rate of pension after about 40 years of contribution.
From May 1973, a pension granted in Australia could be paid in any country in which the person lived. The initial AWLR rules for AP were introduced from 1 July 1986. From 1986 to 2004, different payments had different rules as to how long they could be paid where a person was overseas. From 1988, payment of the Sole Parent Pension, where a person was overseas, was limited to 12 months and the Wife Pension, Widow B Pension and Disability Support Pension also had limited payment periods in some cases from 1991. Originally, Carer Payment was not portable for any period from 1987 but now has limited portability.[4] The Howard Government standardised the payment overseas rules for the different payments in 2004 and also provided a reduced payment period during a temporary absence overseas. Generally, payment was reduced from 26 weeks down to 13 weeks from 1 July 2004.[5]
Budget proposal
The Budget proposal is to extend the current 25 years AWLR requirement, to attract a full-rate of payment otherwise payable in Australia, out to 35 years of AWLR.[6] This is to apply from 1 January 2014 to persons who, having exceeded their 26 weeks temporary absence period, are resident overseas. Additionally, the AWRL rule is to be applied separately to a partnered pensioner. Currently, a partnered pensioner (WP) can rely on the primary pensioner’s AWLR to set their rate. This latter requirement will not involve many recipients — as at June 2010 there were only 24 655 Wife Pension recipients[7] and, of these, only 969 were resident overseas.[8]
The Budget proposal estimates savings of $50.8 million over four years.[9]
Comment
The increase in the AWLR rules from 25 to 35 years will see increased numbers of people resident overseas paid lesser amounts of pension. This is where the estimated savings will be realised. A person’s AWRL is fixed by the number of years they have been resident in Australia — this not an element a person can readily change. Changing the year requirement from 25 to 35 years will adversely affect those with an AWLR of between 26 to 34 years.
7.2.2.40 Australian Working Life Residence
Accrual during absences from Australia (1.1.A.320)
AWLR (1.1.A.340) is the number of months that a recipient has resided in Australia between the ages of 16 years and age pension age. Recipients may continue to accrue AWLR during an absence from Australia, PROVIDED THAT they are considered to be an Australian resident (section 7(2)) during the absence and they have not yet reached age pension age (section 23(5A) to section 23(5D)). This means that their proportional rate of pension must be reviewed annually while they are overseas. The term 'AWLR' represents residence during this period only - the person does not have to be in paid employment.
Act reference: SSAct section 7(2) An Australian resident is a person who..., section 23(5A) to section 23(5D) Pension age
Calculating Australian working life residence
When calculating AWLR:
include the first and last days, for example:
3 March to 2 April = 1 month exactly, and
17/7/88 - 16/7/89 = 1 year exactly.
Add all periods of Australian residence (which may include periods of temporary absence).
When adding, divide excess days by 30 to make up months.
After final addition, round up zero - 29 days to one month.
The following are 2 examples of what happens with age pension applications from two countries – Switzerland and Thailand.
Briefly:
Switzerland
Switzerland has an agreement with Australia that covers age pensions.
Joe has been living and working there since 1977.
Joe and his wife are entitled to a Swiss pension of $AUD42,000 - $24,000 for Joe and $18,000 for his wife.
Joe lived and worked for 6 years in Australia and he wants to work out if he is entitled to an Australian pension, on top of the Swiss pension.
For simplicity sakes, we will assume that he has no other income, or accessible assets, over and above the Swiss pension. This means he may be entitled to a pension of say $246 per fortnight.
This amount needs to be adjusted based on the period of residency - the Australian Working Life Residency (AWLR). The calculation is based on a pro-rata monthly calculation as follows:
6 years of Australian working life residency, plus one month = 73.
If he lived in Australia he would be entitled to $246pf age pension.
the AWLR calculation is = 73 * $246 / 300
the AU pension is therefore approx. $60 pf Australia pension to supplement the Swiss pension.
Joe’s wife was not an Australian citizen and had not worked in Australia so she did not receive any payment.
This is a very simplistic statement and is only meant to provide a guide to the process.
For reference the Centrelink web page is:
guidesacts.fahcsia.gov.au/guides_acts/ssg/ssguide-10/ssguide-10.1/ssguide-10.1.9/ssguide-10.1.9.40.html
Thailand
Thailand has no agreement with Australia for the age pension.
Peter went through a personal bankruptcy and lost all his savings and home. He had been a frequent traveller and as he was entitled to the age pension in 2 years he went to stay with a friend in Thailand and avoid claiming the Newstart allowance.
He returned to Australia 2 weeks before his 65 birthday to make the claim for the age pension – as you need to be in Australia to make a claim.
After submitting his claim Peter went back to Thailand to get his things in order in preparation for receiving the age pension. He travelled before the pension was granted!
Centrelink deemed him to be a non-resident and as he had left Australia his claim was rejected.
Peter returned to Australia and re-submitted his claim on his birthday – 2 weeks later - and was then granted the age pension.
If he leaves Australia within 2 years of being granted, he will lose the age pension and will then need to re-apply upon returning!
(http://www.yourpension.com.au/blog/australians-applying-for.html)
Background
The Government announced a tightening of the Australian working life residency (AWLR) requirements for persons to be paid an income support payment while resident overseas in the 2012–13 Budget.[1]
Australian working life residency—strengthening requirements
Normally, to qualify for an Age Pension (AP) or a Disability Support Pension (DSP) in Australia a person must have been resident in Australia for at least 10 years. Thereafter, only some Australian income support payments are payable when a person leaves Australia to reside overseas. These are the AP, Wife Pension (WP), Widow B Pension (WidB) and some DSP recipients.
As at June 2010, there were 71 360 income support recipients residing overseas permanently. The majority (79 per cent) reside in European countries. Of those resident overseas, 62 148 (87 per cent) were receiving AP, 7572 were receiving the DSP, 575 receiving WidB and 969 receiving WP.[2] Annual expenditure as at June 2010 on Australia’s pension payments paid to people living overseas was $571.3 million and at the same time, pensions from overseas countries being paid to people residing in Australia totalled $1.2 billion.[3]
Currently, for a person resident overseas, to be paid the maximum rate of AP they would otherwise be paid if resident in Australia, they require 25 years AWLR. Recipients with less than 25 years of AWLR are paid a proportional rate based on the duration of their working life residence in Australia. For example, if a person has 16 years of working life residence, they can receive 16/25th of the rate otherwise payable when a resident in Australia. Most overseas contributory based pension systems pay their minimum overseas rate after about 15 years and their maximum rate of pension after about 40 years of contribution.
From May 1973, a pension granted in Australia could be paid in any country in which the person lived. The initial AWLR rules for AP were introduced from 1 July 1986. From 1986 to 2004, different payments had different rules as to how long they could be paid where a person was overseas. From 1988, payment of the Sole Parent Pension, where a person was overseas, was limited to 12 months and the Wife Pension, Widow B Pension and Disability Support Pension also had limited payment periods in some cases from 1991. Originally, Carer Payment was not portable for any period from 1987 but now has limited portability.[4] The Howard Government standardised the payment overseas rules for the different payments in 2004 and also provided a reduced payment period during a temporary absence overseas. Generally, payment was reduced from 26 weeks down to 13 weeks from 1 July 2004.[5]
Budget proposal
The Budget proposal is to extend the current 25 years AWLR requirement, to attract a full-rate of payment otherwise payable in Australia, out to 35 years of AWLR.[6] This is to apply from 1 January 2014 to persons who, having exceeded their 26 weeks temporary absence period, are resident overseas. Additionally, the AWRL rule is to be applied separately to a partnered pensioner. Currently, a partnered pensioner (WP) can rely on the primary pensioner’s AWLR to set their rate. This latter requirement will not involve many recipients — as at June 2010 there were only 24 655 Wife Pension recipients[7] and, of these, only 969 were resident overseas.[8]
The Budget proposal estimates savings of $50.8 million over four years.[9]
Comment
The increase in the AWLR rules from 25 to 35 years will see increased numbers of people resident overseas paid lesser amounts of pension. This is where the estimated savings will be realised. A person’s AWRL is fixed by the number of years they have been resident in Australia — this not an element a person can readily change. Changing the year requirement from 25 to 35 years will adversely affect those with an AWLR of between 26 to 34 years.
7.2.2.40 Australian Working Life Residence
Accrual during absences from Australia (1.1.A.320)
AWLR (1.1.A.340) is the number of months that a recipient has resided in Australia between the ages of 16 years and age pension age. Recipients may continue to accrue AWLR during an absence from Australia, PROVIDED THAT they are considered to be an Australian resident (section 7(2)) during the absence and they have not yet reached age pension age (section 23(5A) to section 23(5D)). This means that their proportional rate of pension must be reviewed annually while they are overseas. The term 'AWLR' represents residence during this period only - the person does not have to be in paid employment.
Act reference: SSAct section 7(2) An Australian resident is a person who..., section 23(5A) to section 23(5D) Pension age
Calculating Australian working life residence
When calculating AWLR:
include the first and last days, for example:
3 March to 2 April = 1 month exactly, and
17/7/88 - 16/7/89 = 1 year exactly.
Add all periods of Australian residence (which may include periods of temporary absence).
When adding, divide excess days by 30 to make up months.
After final addition, round up zero - 29 days to one month.
The following are 2 examples of what happens with age pension applications from two countries – Switzerland and Thailand.
Briefly:
Switzerland
Switzerland has an agreement with Australia that covers age pensions.
Joe has been living and working there since 1977.
Joe and his wife are entitled to a Swiss pension of $AUD42,000 - $24,000 for Joe and $18,000 for his wife.
Joe lived and worked for 6 years in Australia and he wants to work out if he is entitled to an Australian pension, on top of the Swiss pension.
For simplicity sakes, we will assume that he has no other income, or accessible assets, over and above the Swiss pension. This means he may be entitled to a pension of say $246 per fortnight.
This amount needs to be adjusted based on the period of residency - the Australian Working Life Residency (AWLR). The calculation is based on a pro-rata monthly calculation as follows:
6 years of Australian working life residency, plus one month = 73.
If he lived in Australia he would be entitled to $246pf age pension.
the AWLR calculation is = 73 * $246 / 300
the AU pension is therefore approx. $60 pf Australia pension to supplement the Swiss pension.
Joe’s wife was not an Australian citizen and had not worked in Australia so she did not receive any payment.
This is a very simplistic statement and is only meant to provide a guide to the process.
For reference the Centrelink web page is:
guidesacts.fahcsia.gov.au/guides_acts/ssg/ssguide-10/ssguide-10.1/ssguide-10.1.9/ssguide-10.1.9.40.html
Thailand
Thailand has no agreement with Australia for the age pension.
Peter went through a personal bankruptcy and lost all his savings and home. He had been a frequent traveller and as he was entitled to the age pension in 2 years he went to stay with a friend in Thailand and avoid claiming the Newstart allowance.
He returned to Australia 2 weeks before his 65 birthday to make the claim for the age pension – as you need to be in Australia to make a claim.
After submitting his claim Peter went back to Thailand to get his things in order in preparation for receiving the age pension. He travelled before the pension was granted!
Centrelink deemed him to be a non-resident and as he had left Australia his claim was rejected.
Peter returned to Australia and re-submitted his claim on his birthday – 2 weeks later - and was then granted the age pension.
If he leaves Australia within 2 years of being granted, he will lose the age pension and will then need to re-apply upon returning!
(http://www.yourpension.com.au/blog/australians-applying-for.html)