Presentation at the COTA national meeting, Wednesday 16 May 2012. Professor Rosalind Croucher,*President, Australian Law Reform Commission.
The initiation of the ALRC Inquiry forms part of the Australian Government response to population ageing. The Productivity Commission described it as ‘the quiet transformation, because it is gradual, but also unremitting and ultimately pervasive’. The Commission estimated that by 2044–45, almost one in four Australians will be aged 65 years and over; and in every year between 2012–2028, ‘the aged share of the Australian population is projected to increase by more than 0.35 percentage points—an increase around 4 times the long-term average’. In a report of December 2011 prepared for the Consultative Forum on Mature Age Participation, Ageing and the Barriers to Labour Force Participation in Australia, it was commented that the demographic shift in Australia’s population ‘implies a greater role for mature age Australians both economically and in society more generally’.
On 7 March 2012, the Attorney-General of Australia, the Hon Nicola Roxon MP, asked the Australian Law Reform Commission to inquire into and report on Commonwealth legal barriers to older persons participating in the workforce or other productive work. The ALRC was asked to consider all relevant Commonwealth legislation and related legal frameworks that directly, or indirectly, impose limitations or barriers that could discourage older persons from participating, or continuing to participate, in the workforce or other productive work and to provide its final Report by 31 March 2013.
Law reform work needs to be anchored in a framework of principle and a crucial early step in any inquiry is identifying the key principles that will inform our thinking and the law reform proposals that eventually develop. Given that COTA Australia’s focus is on national policy issues, it is particularly timely that you have invited me to talk about the inquiry with you today.
In the context of Australia’s ageing population, the Government’s overarching objective is to keep people in work, and paying taxes, longer—rather than being in receipt of old age pensions—and to support people into self-funded retirement.
In defining new policy settings in the form of specific framing principles for the Inquiry, assistance may be derived from both the international and domestic arenas. The ALRC considers that six interlinking principles are strongly evident: participation; independence; self-agency; system stability; system coherence; and fairness.
‘Participation’ reflects the Australian Government’s ‘Social Inclusion Agenda’:
The Australian Government’s vision of a socially inclusive society is one in which all Australians feel valued and have the opportunity to participate fully in the life of our society.
The principle of ‘participation’ has a number of elements. First, it involves having the opportunity to work. Secondly, participation involves the ability to contribute towards the formulation and implementation of policies affecting older people. Thirdly, older persons should be able to serve the community by working in a voluntary or philanthropic capacity.
The Social Inclusion Agenda emphasises the opportunity of all Australians to
- Learn by participating in education and training;
- Work by participating in employment, in voluntary work and in family and caring;
- Engage by connecting with people and using their local community’s resources; and
- Have a voice so that they can influence decisions that affect them.
The ‘Social Inclusion Principles’ emphasise that ‘maximum participation in economic, social and community life is a defining characteristic of an inclusive society’:
Achieving this outcome for all Australians means delivering policies and programs which support people to learn and strengthen their ability to participate actively in the labour market and in their communities.
The principle of ‘independence’ includes the aspects of participation above, recognising that ‘supporting people to take independent decisions and to negotiate priorities through participation’ is critical to ‘capacity building’. It also embodies the idea of being able to determine when and at what pace withdrawal from work takes place. Independence also involves having access to appropriate training to support work participation.
The principle of ‘self-agency’ was a key principle identified in the ALRC’s inquiry into family violence and Commonwealth laws—that an individual needed to be respected in the right to make decisions about matters affecting him or her. The principle of self-agency is one that underpins the idea of ‘independence’ and of ‘participation’. It also embodies the importance of being treated with dignity and respect, as reflected in the National Statement on Social Inclusion.
The principle of ‘system stability’ is particularly relevant in areas like superannuation. The Super System Review identified as a key principle that:
Superannuation is a large and complex system with an increasingly important social and macroeconomic dimension. It must be regulated and administered coherently and rule changes, including to taxation rules, should be made sparingly and in a way that engenders member confidence.
Concerns about the pace of change in the area of superannuation were also noted in the Tax Review.
Other key principles are ‘fairness’ and ‘coherence’, which may be seen as aspects of a stable system, but also go further—concerning how it operates in terms of impact on those affected and more broadly within the Australian community.
The Tax Review identified ‘system coherence’ as a priority for targeted assistance, by which was meant system consistency, simplicity and transparency for individuals. ‘Fairness’ can be a consequence of coherence, consistency and the stability of the relevant systems involved. It can also reflect a commitment to a fair distribution of national resources and a balancing of responsibility between individuals and government. In reflecting upon the ‘three-pillar architecture’ of Australia’s retirement income system, consisting of the means-tested Age Pension, compulsory saving through mandatory superannuation contributions (‘Superannuation Guarantee’) and voluntary saving for retirement, the Tax Revuew panel advocated that:
The three-pillar architecture should be founded on the presumption that the responsibility for providing for retirement is shared between government and individuals.
Governments should provide for minimum and essential needs and facilitate self-provision. Each of these goals should be pursued in an equitable and targeted way.
Individuals should save or insure during their working lives to provide resources in their retirement. Inevitably under this approach, retirement outcomes will differ for different people, depending on the extent to which they can and do make self-provision.
Have we identified the right principles relevant for the Terms of Reference? Do you think there are others that we should identify to assist us in our deliberations? This is the first question that we have put in the Issues Paper, Grey Areas—Age Barriers to Work in Commonwealth Laws (IP 41), released at the end of April. The responses will help inform our thinking for the rest of the Inquiry.
Specific focus of the inquiry
The Terms of Reference focus on Commonwealth law and age-based limitations on, or disincentives to, participation in the workforce or other productive work. We have interpreted this as requiring the identification of:
- limitations on participation;
- disincentives to participation (and incentives to leave); and
- incentives to remain in the workforce.
As a preliminary note, I should mention the work in relation to the consolidation of Commonwealth anti-discrimination laws. This is happening at the same time as our Inquiry.
An exposure draft bill is expected over the coming months. There is a range of possible amendments to the age discrimination component of any consolidated Act that were raised in the Government’s Discussion Paper and submissions to the process. The ALRC is monitoring these and will be considering them in due course. In particular, there is an exemption with respect to insurance under the current Age Discrimination Act 2004 (Cth) and changes to anti-discrimination law may have a flow-on effect on the general protections provisions (or the use of those provisions) under the Fair Work Act 2009 (Cth).
Limitations may be relatively easy to identify—specific ages acting as a limitation. Here is a sampling of examples uncovered by the team already.
This is a matter on which Commissioner Susan Ryan has spoken often.
Each state and territory has its own workers’ compensation scheme and the Commonwealth has three schemes. Most jurisdictions have retirement provisions that restrict access to workers’ compensation, in particular income replacement payments, when a worker reaches the age of 65. At the Commonwealth level, benefits can be paid until age 65 or in certain cases for up to two years afterwards. There is no limit, however, to total incapacity or medical payments.
The original rationale for such provisions was that once injured workers reach the retirement age of 65, they have access to their superannuation or other forms of income support—they are no longer a ‘worker’ or ‘in the workforce’ to attract workers’ compensation. However, a number of issues arise.
Where an older person wishes to remain in the workforce (or to volunteer) after 65 and the person is injured, he or she may not be eligible to receive workers’ compensation—this is a disincentive to ‘participation’, a key theme. Instead the person has to rely upon any private support, such as superannuation or sickness benefits, or the age pension. But when the age is increased for the latter to 67, it will only be private resources in the main that a person can call upon.
A service pension under the Veterans’ Entitlements Act 1986 (Cth) is essentially an income support payment payable subject to a means test, yet available five years earlier than the Age Pension. It is currently available to male veterans who are 60 years or older, and to women who are 55 years or older. The payment of a service pension was originally premised on the notion that armed service led to premature ageing and earlier susceptibility to diseases which affected the aged. In order to retain consistency with the incremental increase to Age Pension age to 67 (by 2023)—and to create incentives to remain in paid employment—it may be argued that the ages for eligibility for the service pension under the Veterans’ Entitlement Act should also be increased incrementally.
Income protection insurance protects the insured in the event that he or she is unable to work due to sickness or injury. However income protection insurance is generally unavailable to persons aged over 65 years. This leaves those people who choose to continue their economic participation after this age unable to cover themselves in the event of illness or injury. This may necessitate reliance upon retirement savings and/or the Age Pension and consequently can act as a ‘push factor’ out of paid employment.
The difficulty the ALRC faces here is that such age limits in insurance policies are determined by private insurance companies. That insurance companies are able to set such age limits is because of the exemption in s 37 of the Age Discrimination Act 2004 (Cth). Section 37 contains an exemption in relation to age-based discrimination in the terms and conditions on which an insurance policy is offered or refused where the discrimination is based upon actuarial or statistical data on which it is reasonable for the discriminator to rely or in a case where no such actuarial or statistical data is available, and cannot reasonably be obtained—the discrimination is reasonable having regard to any other relevant factors.
This is an active policy space—as we have seen again in the Federal Budget announced on 8 May. There are a number of age-based rules in superannuation laws which limit superannuation contributions for older persons. The Australian Government has recently passed legislation to remove one such limitation: the upper age limit for the applicability of the superannuation guarantee (i.e. mandatory employer contributions), which is currently set at 70 years. But other age-based rules remain—particularly in relation to voluntary superannuation contributions. For example:
- superannuation funds may not accept voluntary (pre-tax and after-tax) superannuation contributions from persons aged 75 and over, nor from those aged 65 and over unless they meet certain conditions;
- members cannot split contributions with a spouse once their spouse has reached 65 years, and cannot make contributions to a spouse’s fund once their spouse has reached 70 years; and
- low income earners 71 and over are ineligible for the government co-contributions that other low income earners receive when they make voluntary (after-tax) superannuation contributions to their funds.
These rules act as barriers to the accumulation of superannuation for older people, and potentially impede their ability to prepare for retirement. But do these age-based rules act, in themselves, as barriers to continued employment? Perhaps not directly—but they do send a strong message about society’s expectations around retirement and retirement age. This message may be at odds with the realities posed by the increasing longevity of Australians.
The idea of ‘disincentives’ is more difficult. An incentive to leave work may be a disincentive to continue working. Is this necessarily contrary to the Government’s objective?
What if the incentive to leave does not impose a burden on Government, in the sense of the person’s ‘retirement’ being self-funded and the opportunity to volunteer is thereby created? How much is this a ‘law reform’ problem?
Here are some examples the team has identified.
One overarching issue in this Inquiry is the operation of the tax-transfer system. It is well documented that means testing for various income support payments can be a disincentive to work. That is, when a person spends more time in paid employment, his or her taxable income increases, which can increase the amount of tax paid and may mean that he or she no longer satisfies the means test for a certain payment. This can therefore reduce his or her level of income support (such as the Age Pension) and other concessions and supplements tied to that payment (such as concession cards). Some measures have been put in place to maintain incentives to work, including various tax offsets and provisions that enable a person to retain their concession card for a period of time after commencing work. This equation raises actuarial questions that may be out of the ambit of the ALRC’s expertise—and not so much a ‘law reform’ problem. However, there may be circumstances where a person decides not to work as it is simply too complex to determine whether it would be more financially advantageous to work or not. It may be that the complexity of the tax transfer system itself acts as a barrier to work and needs improvement.
Access to superannuation benefits may constitute a direct incentive to exit the workforce. The age that persons may access superannuation benefits—once they have retired or under the transition to retirement rules—is gradually increasing from 55 to 60. (If a person has not retired at 65, however, he or she may access their superannuation even though continuing in the paid workforce.) If this age setting is too low, it may provide an incentive for early retirement. It may also send an outdated message about expectations of retirement age. The ‘Australia’s Future Tax System’ review—chaired by Dr Ken Henry—recommended that the superannuation access age should be aligned to the Age Pension age, and both should gradually increase to 67. This gradual increase has been implemented in relation to the Age Pension. Increasing the superannuation access age so that it aligns with the Age Pension, as recommended by the Henry Review, may remove an incentive for early retirement, and help set a more appropriate cultural standard around expectations of retirement age.
The other important idea is the idea of ‘incentives’ to enter/re-enter or remain in the workforce. The key incentives the ALRC is examining include:
- the operation of the Job Services Australia system;
- flexible working arrangements including the right to request under the National Employment Standards (NES);
- individual flexibility arrangements in enterprise agreements and the scope in awards; and
- workplace barriers and employer responsibilities under OHS legislation—given the potential workplace modifications that could be made to accommodate mature age workers the ALRC is interested in stakeholder views on the most appropriate place to include information on mature age workers and OHS issues in guidance material.
The law reform process involves a number of steps: sizing up the problem within the constraints of the Terms of Reference; defining the conceptual/policy landscape in which the development of law reform recommendations will occur; consultation, consultation, consultation; and, finally, the report, containing recommendations for reform. Most importantly, we never start with answers, only questions.
Once the ALRC has completed its work on any inquiry, a report is presented to the Attorney-General, who must then table it in each House of Parliament ‘within 15 sitting days’ of that House after having received it. Once tabled in Parliament, the report becomes a public document. The report will not be self-executing—rather, each inquiry provides recommendations about the best way to proceed, but implementation is a matter for others. But we do keep watch. Each Annual Report now provides a table of ‘Implementation Status’ of all ALRC Reports.
On the one hand, ALRC reports and consultation documents give leverage at a high public level for achieving reform, providing a voice, through the consultative processes and their embodiment in the public documents (consultation papers and Report), in a coherent public way for key stakeholders on the issue the subject of each inquiry.
We are just at the beginning in this Inquiry. It is the point where we have lots of questions and many people to talk to. One of the most important features of ALRC inquiries is the commitment to widespread community consultation. The nature and extent of this engagement is normally determined by the subject matter of the reference—particularly whether the topic is regarded as a technical one, of interest largely to specialists in the field, or is a matter of interest and concern to the broader community.
We will have at least two consultation rounds throughout this inquiry before we report at the end of March next year. We released an Issues Paper at the end of April and have now ‘hit the road’ talking to key stakeholders, government agencies, community groups, academics, lawyers, and so on. In September we will pull all our preliminary thinking together in a Discussion Paper in which we will put out draft recommendations as ‘proposals’—flying some ideas way up the mast, maybe to bring them down a little, or a lot, but really testing the waters (apologies for my mixed metaphors). We will then hit the road again, with a wider round of consultations, finally leading to the report early next year. We seek, and press, for submissions to both our consultation documents, and this provides us rich material to inform our thinking and also to quote in our work.
Our inquiry process is described on the ALRC website: <www.alrc.gov.au>.
How can you help?
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- Spread the word—use COTA networks—please!
* Prepared in conjunction with the ALRC legal officer team: Sara Peel, Krista Lee-Jones and Amanda Alford.
 Productivity Commission, Economic Implications of an Ageing Australia (2005), xiii.
 Ibid, xiv.
 Ibid, xiv.
 National Seniors Productive Ageing Centre, Ageing and the Barriers to Labour Force Participation in Australia (2011), prepared for Consultative Forum on Mature Age Participation.
 Ibid, 6.
 United Nations, United Nations Principles for Older Persons—adopted by General Assembly resolution 46/91 of 16 December 1991; Advisory Panel on the Economic Potential of Senior Australians, Realising the Economic Potential of Senior Australians—Enabling Opportunity (2011); Advisory Panel on the Economic Potential of Senior Australians, Realising the Economic Potential of Senior Australians—Turning Grey into Gold (2011).
 Australian Government, The Social Inclusion Agenda,Australian Government <www.socialinclusion.gov.au/> at 19 April 2012.
 Ibid, ‘Social Inclusion Principles’, 1.
 Ibid, 1.
 United Nations, United Nations Principles for Older Persons—adopted by General Assembly resolution 46/91 of 16 December 1991.
 Australian Law Reform Commission, Family Violence and Commonwealth Laws—Improving Legal Frameworks, ALRC Report 117 (2011), ch 2.
 Australian Government and Social Inclusion Unit, A Stronger, Fairer Australia—National Statement on Social Inclusion.
 Super Systems Review Panel, Super System Review (2010), pt 1, 4, principle 8.
 The Treasury, Australia’s Future Tax System: Final Report (2010), pt 1, xxi.
 The Treasury, Australia’s Future Tax System: The Retirement Income System—Report on Strategic Issues (2009), 15–16.
 Ibid, 1.
 Department of Veterans’ Affairs, Report of the Review of Veterans’ Entitlements (2003), 248. It is also available on grounds of permanent unemployability at any age and pulmonary tuberculosis at any age.
 ‘[D]ata on life insurance shows that salary continuance coverage for workers older than the pension or retirement age is also very limited. Benefit periods for workers aged 65 or more are generally limited to between six months and two years and some schemes provide no coverage for older workers. There is a trend to increase this age restriction, but it is quite limited.’ Aon Hewitt, ‘Time for a change in executive remuneration design?’ HR Connect Australia Volume 1, Issue 2, 2011. See also the work of Commissioner Susan Ryan ‘Remove age discrimination, and we’ll have more financially independent older people and a more productive economy’, published in The Equality Law Reform Project (10 October 2010).
Age Discrimination Act 2004 (Cth) s 37(3).
Australian Law Reform Commission Act 1996 (Cth) s 25.
Ibid s 23.
 However, the ALRC has a strong record of having its advice followed. About 59% of the Commission’s previous reports have been fully or substantially implemented, about 29% of reports have been partially implemented, 4% of reports are under consideration and 8% have had no implementation to date: Australian Law Reform Commission, Annual Report 2005–06, 38.
 See the tables in the Annual Reports available on the ALRC website: www.alrc.gov.au.
B Opeskin, ‘Measuring Success’ in B Opeskin and D Weisbrot (eds), The Promise of Law Reform (2005) 202.