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The Commonwealth of Australia was formed on I January 1901 by federation of the six States under a written constitution which, among other things, authorised the new Commonwealth Parliament to legislate in respect of age and invalid pensions. In the event, the Commonwealth did not exercise this power until June 1908 when legislation providing for the introduction of means-tested 'flat-rate' age and invalid pensions was passed. The new pensions, which were financed from general revenue, came into operation in July 1909 and December 1910 respectively, superseding State age pension schemes which had been introduced in New South Wales (1900), Victoria (1900) and Queensland (1908) and an invalid pension scheme introduced in New South Wales (1908).
The new pension was paid to men from age 65. It was paid to women at age 60, but not until December 1910. The age pension was also subject to a residence qualification of 25 years which was reduced to 20 years shortly after introduction. A residence qualification of five years applied to the invalid pension.
In 1912 the Commonwealth introduced a maternity allowance. This allowance was a lump sum cash grant payable to a mother on the birth of a child.
No new Commonwealth social security payments were introduced until World War II. There were, however, several notable developments in the States, including: in New South Wales, the introduction of widows' pensions in 1926 and child endowment in 1927; and in Queensland the introduction of an unemployment insurance scheme in 1923.
The principal changes in age and invalid pensions during this period were in the rates and the means test. A provision for automatic increases in pension rates on the basis of changes in the cost of living was introduced in 1933, repealed in 1937 and reintroduced in 1940. Measures which would have placed pensions on a social insurance basis and introduced a number of new cash payments were proposed in 1928 and 1938 but were not implemented.
The Commonwealth Department of Social Services was created in 1939 and became fully operative in 1941. Pensions had previously been administered within the Department of the Treasury.
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