The Disability Support Pension (DSP) is the Australian federal government’s primary means-tested income support payment for people with disability who have reduced capacity to work. The 2014 reforms to the DSP resulted in the removal of younger recipients (under the age of 35) with some work capacity from the DSP. This paper explores the effect on household income and health outcomes for those removed from the DSP. 

The paper finds that outcomes differed significantly depending on living arrangements. The findings have important implications for the design of income support payment. 

Key findings

1. Informal safety nets matter: the differential impact by living arrangements highlights the importance of informal safety nets and household self-insurance in shaping outcomes.
2. Unintended health consequences: the impact on removal from the DSP on antipsychotic medication underscores the potential mental health costs of income support payment changes when there are insufficient support mechanisms in place.
3. Unemployment benefit: for those removed from the DSP and without in-house family support, the unemployment benefit became their main financial fallback, despite offering a lower payment level.