The Distributional Impact of the Welfare-to-Work Reforms Upon Australians with Disabilities

In the May 2005 Budget the Federal Government announced a range of proposed welfare to work measures, to take effect from 1 July 2006. Among the numerous measures announced in the Budget were significant changes for Australians with disabilities — including that those people with disabilities who apply for income support after 1 July 2006 and who can work between 15 and 29 hours a week at award wages will be placed on Newstart Allowance or Youth Allowance rather than Disability Support Pension. This report analyses the impact of the proposed changes upon the disposable incomes and effective marginal tax rates of those affected. It shows that the disposable incomes of people with disabilities can be up to about $120 a week lower under the proposed new system than under the current system. It also finds that effective marginal tax rates will be sharply increased under the proposed new system, over a reasonably wide range of earned income.