Comparable Foreign Payments

Introduction

A Comparable Foreign Payment (CFP) is any payment from a foreign country that is paid periodically to people in receipt of certain Australian income support payments, including:

  • age pension
  • wife pension
  • widow allowance
  • widow B pension
  • bereavement allowance
  • parenting payment
  • disability support pension, and
  • carer payment.

Under the social security legislation, income support recipients who are likely to be eligible for a foreign payment are required to take reasonable action to claim their foreign entitlement. Those who fail to do this may not be able to claim or continue to receive an Australian income support payment. The requirement applies to people who claim or receive the income support payments specified above, as well as to their partner, who may be a non-pensioner partner.

A CFP can include any foreign income related to:

  • retirement
  • disability
  • widowhood, or
  • survivorship.

It also includes:

  • payments to a partner or carer, and
  • company pensions and superannuation payments that are regulated through a country's national social security system.

War service and restitution pensions and compensation payments are not regarded as CFPs.

Background to CFP Legislation

Prior to September 2000, only income support recipients who were likely to have been eligible for a foreign payment from a country with which Australia has a social security agreement were required to take reasonable steps to obtain foreign payments. However, some income support recipients from non-agreement countries did not pursue their entitlements, due to a lack of awareness about their entitlements or the added complications in making claims for these entitlements. Income support recipients frequently missed out on the additional income that CFPs provided.

In September 2000 the requirement to claim CFPs was extended to all income support recipients likely to have a foreign pension entitlement. The extension means that all Australians in receipt of the specified income support payments who have lived and worked overseas may be required to test their eligibility for a foreign pension.

These requirements benefit the specified income support recipients (where entitled) through increased disposable income.

Benefits of CFP Legislation

Around one quarter of Australians were born overseas and many have spent part of their working lives outside Australia. Requiring the specified income support recipients who are likely to be eligible for a foreign payment to claim ensures a fairer social security system. It ensures that those in need receive income support, while recognising that countries should share the cost of social support and retirement in the new trans-national labour market.

The CFP policy acknowledges that there is an increasing movement of people between Australia and other countries. It reconciles Australia's model of social security with the contributory-based models that operate in much of Europe, Asia and the Americas. Under contributory systems, entitlements to benefits are an 'accrued right' and rates of payment often relate to the length and value of contribution. By contrast, the Australian social security system is universal, subject to eligibility, income and assets test requirements, and is funded through general taxation revenue. Benefits are paid on the basis of residence and need (assessed through the income and assets test). Once a person has satisfied the qualification criteria, their rate of payment in Australia does not depend on their length of residence in Australia.

In most cases claiming a CFP provides an increased level of disposable income for an income support recipient. Subject to the 'income free area' rules, income support recipients are able to receive a CFP in addition to an Australian pension up to a certain amount before their Australian income support payment will be reduced. For instance, a single income support recipient can receive up to $164 per fortnight in CFP and still be entitled to the full rate of the income support payment (January 2017). For every dollar earned above $164, their Australian income support payment will be reduced by fifty cents.

CFP and International Social Security Agreements

Many countries do not allow access to their social security payments if the person is not a resident. Also, former residents of Australia cannot claim Australian income support payments from overseas. To overcome this obstacle, many countries sign reciprocal agreements, which facilitate access to other countries' social security payments. To date, there are thirty such agreements in operation. Because Australian social security rules may require people to claim foreign pensions, other countries may also be interested in gaining access to Australian social security payments for former Australian residents who now reside in these countries.

Operation of CFP Scheme

If a person indicates that they have lived overseas, Centrelink may issue a legal notice which requires them to apply for the relevant foreign pension. If the person’s partner is likely to be entitled to a CFP he or she may also be issued with a legal notice from Centrelink requiring them to do the same.

Centrelink issues notices to the specified income support recipients who are likely to make successful claims for foreign pensions. Income support recipients who are unlikely to be eligible for a foreign pension are not required to make a claim.

Reasonable Action

Income support recipients who are required to make a claim for a CFP must take 'reasonable action' to claim the CFP. This action requires them to:

  • lodge a claim for the foreign pension within a specified time, and
  • pursue the claim to finalisation, if there is an entitlement to a foreign pension.

The requirement to take 'reasonable action' is a legal requirement and thereby obliges the specified income support recipient to do anything that is within his or her power and would not expose him or her (or his or her family) to danger or trauma. Thus, although CFP countries may vary their claim requirements, the income support recipient’s obligation is to meet these requirements. The specified income support recipients can only become exempt from the CFP requirement in very limited circumstances. In broad terms these may be defined as medical, political and age-related factors that make it unreasonable for them to comply with the requirements of the CFP country. Examples would be situations where the person:

  • is in political exile and contacting the CFP country would expose him or her to danger;
  • has a well-founded fear of persecution if the CFP country is contacted;
  • has dementia or another serious ongoing illness and cannot supply the CFP country with the information necessary to complete the claim.

If a specified income support recipient or their partner are not exempt from the requirement and fail to take reasonable action to obtain a CFP:

  • Australian income support payment may be cancelled or suspended; or
  • claim for an Australian income support payment may be rejected.

Overpayment of Benefits

The CFP rules reinforce the specified income support recipient’s obligations to declare that they are receiving a foreign payment. Australian income support payments are paid to Australian residents in need. The level of required support is tested through the income and assets test. CFPs along with any other payments received from Australia or overseas are treated as "income" under these tests. Therefore, income support recipients have always had to declare their foreign pensions.

The CFP rules introduced in 2000 reflect the need to declare a foreign pension and provide a better mechanism to check whether the specified income support recipients receive any overseas payment.

All income support recipients potentially eligible for foreign payment are now required to test their eligibility. The mechanism allowing for assessment of existing income support recipients has been improved over the years. For example, Centrelink now collects information on the length of time an income support recipient has lived outside Australia. Also, Centrelink has developed a comprehensive database of the requirements of many overseas countries to claim their payments.

Conclusion

The CFP requirements constitute a 'win-win' situation for Australian income support recipients and taxpayers alike. In an overwhelming number of cases, the combination of the Australian income support and the CFP increases the person's overall level of disposable income.

The CFP rules strengthen the policy of mutual obligation by helping Australia to work with other countries to discharge their mutual international obligations. CFPs result in reduced social security outlays and leads to increasing numbers of Australian residents receiving their earned overseas entitlements.

Revised: February 2017
Residence and Portability Section, International and Means Test Policy Branch

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