More than 8 million Australians rely on income support as health-related work loss rises

A larger share of Australians is drawing on income support

More than 8 million Australians now rely on some form of income support, according to newly compiled data showing a steady rise over the past decade. The increase is substantial: about 2 million more people are accessing payments or support mechanisms than 10 years ago, adding pressure to a safety net that was not designed to serve so many people at once.

The findings point to a broad-based lift in demand across all 11 income support systems operating in Australia. These systems span a wide range of arrangements, from employer-provided sick leave and workers’ compensation to social security payments, superannuation and life insurance claims. While these supports are often discussed separately, the data suggests they are increasingly being used by the same population—people whose physical or mental health has deteriorated to the point they can no longer work as they once did.

Industry representatives and researchers argue that the trend is not only a social policy issue, but also a workforce and productivity challenge. Christine Cupitt, chief executive of the Council of Australian Life Insurers (CALI), described the situation as a “major national productivity challenge,” saying the entire system is under pressure as more Australians leave work for health reasons.

Most support is short-term sick leave—but more people are moving beyond it

Although the headline number—more than 8 million people receiving some form of income support each year—can sound like a surge in government welfare, the data indicates the majority of support is coming from employers in the form of sick leave. About 7.5 million people are accessing more employer-provided sick leave, typically for short periods of around three weeks, rather than relying on government welfare payments such as JobSeeker or the disability support pension.

Even so, researchers and insurers warn that a growing number of people are exhausting sick leave and shifting into longer-term support. That transition matters because time away from work can change outcomes. The longer a person is out of the workforce, the less likely they are to return, according to Associate Professor Ross Iles, a Monash University researcher and chief research adviser at SuperFriend.

Once sick leave runs out, people may need to navigate other systems—workers’ compensation, insurance, or social security. That can mean new forms, new medical assessments, and new processes at a time when someone is already unwell. The data and commentary suggest that these handovers are a weak point in the current model, with delays and administrative burdens potentially affecting recovery and increasing long-term costs.

Mental ill health is now a major driver of claims

A key shift highlighted in the compiled data is the growing role of mental health in income support claims. Mental ill health now accounts for about one-third of claims across Australia’s major income support schemes, based on data compiled by researchers at Monash University and SuperFriend for CALI.

According to Cupitt, mental health has “really changed the profile” of claims. She said it is now one of the leading drivers of people needing income support, and that these claims tend to be more complex and longer in duration. That combination—high volume, complexity, and longer timeframes—adds to the strain felt across systems that were built with different rules, different evidence standards, and different administrative pathways.

The data also points to a sharp increase among a specific working-age group. Over a 10-year period, mental health claims by Australian workers aged between 30 and 40 have increased by more than 730 per cent. While the figures do not explain every cause behind the rise, they underline the scale of the change and the importance of how systems respond when people’s health affects their ability to work.

A personal example: long COVID and partial income protection

For Lauren Frahamer, 30, the broader statistics reflect a sudden and disruptive change in daily life. Frahamer was unable to continue full-time work due to long COVID. Before she fell ill, she worked as a stage manager on major musical theatre productions, putting in around 50 hours a week, often nights and weekends. Outside work, she maintained an intense fitness routine that included gym sessions, swimming, running and yoga.

She contracted COVID-19 in December 2021 during an outbreak that spread through her workplace. The acute illness was severe—weeks of fever, pain and exhaustion—but she did not recover in the way she expected. When she tried to return to work, she found she could not sustain it.

Frahamer described extreme fatigue and brain fog, including difficulty remembering a sentence well enough to pass on a message. In a role that depends on focus for hours at a time, she said she no longer had the capacity required. As symptoms continued, she said fear and confusion set in, and the experience took her by surprise because she had not previously faced a major health event.

Eventually she resigned, moved back to Melbourne to be closer to family, and began treatment through an allied health clinic specialising in complex, long-term conditions. She said the turning point in seeking support came when her partner at the time was made redundant, prompting her to look more closely at what assistance existed.

Frahamer said she was uncertain whether long COVID would be recognised for support and did not know if it was claimable. In mid-2022, she was granted partial income protection—support she said helped her avoid losing independence altogether after burning through savings under the weight of rent, day-to-day living costs, appointments and medications.

She now works nine hours a week from home in client support at the same allied health clinic that once treated her—about 40 per cent of her former capacity. She said she has been at this level for about a year and remains determined to take steps toward full-time work again, describing the loss of work capacity “through no fault of your own” as difficult.

Common misunderstandings about income protection

The data and case study also highlight confusion about what different supports do and do not cover. One point raised is that people often—wrongly—believe income protection insurance would be paid out if a person was unable to work due to losing their job for any reason. In practice, eligibility depends on the terms and conditions of the relevant policy and the nature of the claim, adding another layer of complexity for people trying to understand what help is available during a health or employment shock.

This misunderstanding matters because it can delay action. When someone assumes a payment will be available automatically, they may not seek advice or start an application process early. By the time they discover the limits of a policy or the evidence required, they may already be under financial stress, dealing with health challenges, or navigating multiple systems at once.

Fragmentation across 11 systems creates repeated hurdles

One of the central problems identified by Iles is fragmentation. Australia’s income support landscape includes multiple schemes, each with its own eligibility rules, medical evidence requirements and application processes. The result is that people can be forced to repeat steps while their health and finances deteriorate.

Iles gave a practical example: if someone’s workers’ compensation claim is rejected and they need to turn to insurance or social security, that shift can trigger a whole new application. That means new forms, new medical assessments and new processes—an administrative load that can be overwhelming for someone who is unwell.

Beyond paperwork, fragmentation can also affect timing. Iles said delays in treatment, claim processing and coordinated support reduce recovery prospects and increase long-term costs. The implication is that the design of the system—how quickly it can connect a person to care and support, and how smoothly it can transition them between programs—can influence whether a temporary work interruption becomes a long-term absence.

The scale of spending, and why coordination is being discussed

Income support is also a major fiscal undertaking. Iles said Australia is spending close to $80 billion a year on income support. With demand rising across all 11 systems, the combination of growing caseloads and long-duration claims is intensifying debate about how to make support more effective, more consistent, and less burdensome for people who need it.

From the life insurance sector, the argument is that the current system intervenes too late. CALI—whose members have a direct commercial interest in reducing long-term income protection claims—has said earlier intervention is critical. The industry position is that better-coordinated support while people are still working could reduce the likelihood of long-term work loss.

That is not just a question of cost control. The data and commentary emphasise that earlier support could improve a person’s chance of staying connected to work, or returning sooner, particularly in complex cases where mental health is involved and claims can be lengthy.

What earlier intervention could involve

Insurers are calling for earlier, better-coordinated support while people are still working, alongside a government-led overhaul that links Australia’s 11 income support systems to employers, insurers and public agencies. The proposed direction is aimed at reducing silos and smoothing transitions between supports.

Elements described as part of this approach include nationally consistent mental health definitions, shared data, better identification of people at risk of long-term work loss, and smoother transitions between supports. While the report’s findings do not prescribe a single model, the thrust of the recommendations is that people should not have to “start again” each time they move from one scheme to another.

Cupitt argued that the current arrangement—systems operating separately while more Australians get sick and leave the workforce—is not sustainable. She described the situation as a “burning platform,” signalling urgency in addressing the pressure building across multiple schemes.

Key points emerging from the data

• More than 8 million Australians access some form of income support each year, around 2 million more than a decade ago.
• Demand has increased across all 11 income support systems, including sick leave, workers’ compensation, social security payments, superannuation and life insurance claims.
• Most recipients—about 7.5 million—are using employer-provided sick leave, typically for short periods of around three weeks.
• More people are exhausting sick leave and moving into longer-term support, where the chances of returning to work diminish.
• Mental ill health accounts for about one-third of claims across major income support schemes, and mental health claims among workers aged 30 to 40 have increased by more than 730 per cent over 10 years.
• Close to $80 billion a year is being spent on income support, with fragmentation and repeated assessments adding to the burden on people who are unwell.

An evolving challenge for workers, employers, insurers and government

The rise in income support use is being driven by Australians whose physical and mental health has deteriorated to the point they can no longer work. The data suggests the issue touches every part of the support ecosystem: employers managing sick leave, insurers handling income protection and related claims, and public agencies administering social security and other payments.

At the centre of the debate is how to respond earlier and more consistently, particularly as mental health becomes a larger share of claims and as more people move from short-term leave into longer-term support. Researchers and insurers point to the same structural problem—fragmentation—and the same risk—longer absences from work reducing the likelihood of return.

For individuals like Frahamer, the consequences are immediate and personal: reduced capacity, financial stress, and uncertainty about what help is available and how to access it. For the broader system, the trend raises questions about whether existing processes are fit for a growing number of complex, long-duration claims, and whether coordinated, early support could help more people remain connected to work while managing illness.