Government must support lifting how much welfare recipients can earn before payment cuts

People on JobSeeker currently lose up to 79 cents in the dollar from paid work

CORRECTION: This update said people earning more than $250 per fortnight lose 69 cents in the dollar from reduced income support and tax when first published. The correct amount is 79 cents in the dollar.

The Albanese government must support the Coalition amendment to its social security bill that would increase the amount welfare recipients can earn in paid work before their income support payment is cut. ¹

Included below: background statistics and information about the interaction between welfare policy and income tax, comments from Antipoverty Centre spokesperson, letters and submissions related to income free area policies.

Today the prime minister has rejected the proposal to allow people on unemployment payments to earn up to $300 per fortnight before their income support is reduced. The proposal matches the rules in place between May 2020 and April 2021.

Albanese called the idea a “shocker” and described the change – which would allow welfare recipients to earn more money from working – a “disincentive to work”.

Currently, people on JobSeeker can earn $150 per fortnight from paid work before their payment is reduced. By way of comparison, students on Youth Allowance and Austudy can earn $480 per fortnight.

The Antipoverty Centre has called for the income free area to be increased in several parliamentary submissions and called for the threshold of $480 per fortnight to be applied to all payments in a letter to the treasurer and social services minister in May this year urging them to adopt this change.

Quotes attributable to Antipoverty Centre spokesperson and DSP recipient Kristin O’Connell

The real “shocker” is that the prime minister thinks it’s ok to kick people off income support when they aren’t earning enough to live.

We are in a cost of living crisis. More and more people are doing insecure and underpaid jobs. The RBA is actively increasing unemployment.

If the prime minister is worried about a “disincentive to work” he should be worried that people in low paid work are currently losing up to 79 cents in the dollar after they earn $150 in a fortnight.

Welfare recipients have been calling for the income free area to be returned to at least $300 per fortnight for all payments since the Coalition first cut it back from that level to $150 per fortnight in 2021.

The government should be adopting every proposal that would help ensure welfare recipients and low income workers are not living in poverty.

They must urgently increase the income free area to provide better support to the 1 in 5 people on unemployment payments who are employed, and ensure sure the lowest income workers are better connected to the safety net.

This proposal would cost little and the government is banking a windfall of $20 billion while millions of people on Centrelink payments can’t afford to live.

The government must lift every welfare payment to at least the Henderson poverty line and ensure low income workers aren’t cut off from support before they are at the minimum wage.

Media contact: email media at antipovertycentre.org or call/message 0413 261 362 via Signal

Background

The interaction between the income free area, taper rates and income tax means many welfare recipients are losing 79 cents in the dollar when they earn an average of more than $125 in a week.

• About 1 in 5 people on an unemployment payment are employed. This has been consistent for more than 2 years, after COVID restrictions were mostly removed. ²
• The tax free threshold is $18,200. Each dollar earned over this amount is taxed at 19 cents in the dollar. ³
• A person on JobSeeker for a full year has an income of $18,020 from the base welfare payment. ⁴
• Income earned between $150 and $250 per fortnight reduces the JobSeeker payment by $50 (50 cents in the dollar). Income above $250 per fortnight reduces the payment by 60 cents in the dollar. ⁵
• A person earning $600 per week in wages ($280 per week below the minimum wage ⁶) receives a welfare payment of about $35 per week.
• 10,355 people on the JobSeeker payment earn more than $150 a fortnight. ⁷ People with regular income at this level lose 69 cents in the dollar from reduced income support and tax.
• 162,835 people on the JobSeeker payment earn more than $250 a fortnight. ⁸ People with regular income at this level lose 79 cents in the dollar from reduced income support and tax.

Read the below Antipoverty Centre submissions for more information on our proposals and rationale for increasing the income free area:

• Letter to the treasurer and social services minister regarding the income free area, May 2023
• Submission to the senate inquiry into the nature and extent of poverty, February 2023
• Submission to the Treasury consultation on the employment white paper, December 2022
• Submission to the inquiry into the bill to increase the amount age pensioners can earn before their payment is cut, August 2022