Commonwealth Expenditure Associated with Retirement Visa - Report

Release Date
18 February 2011

In 2002, the then Department of Immigration, Multicultural and Indigenous Affairs (DIMIA) sought the advice of Australian Government Actuary (AGA) on the financial implications of a proposed new visa category for parent migration. Under the proposal, successful applicants were to be required to make a significant contribution towards the costs expected to be met by the Commonwealth Government through a large second visa application charge.

In response to this request, we developed a model to estimate cashflows and the net financial impact (in present value terms) of the proposal. The model was also used to explore the sensitivity of the results to key parameters. The model assumptions were subsequently updated in 2008 to reflect more recent data on health and aged care costs.

At the time we undertook this update, the Department of Immigration and Citizenship (DIAC) asked AGA to also look at the costs of a proposal to grant permanent residence to those holding a Retirement (Subclass 410) visa. Because this visa subclass is no longer open to new applicants, there is a closed population who could potentially benefit from this proposal if it were implemented. This group do not currently have access to Australian health and welfare benefits but would become eligible if granted permanent residence. DIAC sought our advice on the costs that might be associated with this proposal using the same present value framework as we adopted for our original work on the parent migration visa.

Under the proposal, Subclass 410 visa holders would be able to apply for permanent residence after holding the visa for ten years. At this point, they would have immediate access to health and aged care services. They would not, however, be eligible for the age pension until they had a further ten years as a permanent resident in Australia.

In costing this proposal, we have relied primarily on the assumptions which had been used to estimate the costs associated with the parent migration visa in 2008. The minor exceptions relate to mortality and access to income security payments. The results from the most recent Australian Life Tables (ALT2005-07) were not available in 2008 but have been incorporated in this latest costing. These tables showed a continuing reduction in mortality at most ages.

In relation to income security payments, it is necessary to adopt a different approach from that used for the contributory parent visa, reflecting the conditions under which the two visas are granted. The Retirement visa population are assumed to have significant financial resources but unrestricted access once they have satisfied the residence requirements. By contrast, the contributory parent visa is granted under provisions which severely restrict access to income security benefits.

This report sets out the basis for the assumptions adopted and the results generated by the model when applied to the population of visa holders as at 30 June 2010.