• A person holds a cashless welfare card. (AAP)Source: AAP
Contactless payments, interest earnings at one percent, and trial extensions will be applied to the cashless welfare debit card as legislation is put on hold due to COVID-19.
Shahni Wellington

6 May 2020 - 2:50 PM  UPDATED 6 May 2020 - 2:50 PM

Participants in the cashless debit card welfare scheme will soon receive contactless payments and a one percent interest rate on account balances.

The federal government announced the changes affecting current trial sites in Ceduna in SA, the East Kimberley and Goldfields in WA, and Hervey Bay in Queensland.

The controversial program quarantines 80 percent of welfare payments onto a debit card which can't be used to withdraw cash or buy alcohol or gambling products.

As many retailers move towards contactless payment in line with COVID-19 safety measures, there were concerns that cashless debit cardholders were unable to do the same.

Minister for Families and Social Services, Anne Ruston, said in a statement, the new cards can be expected in "coming months."

"Contactless payments have become a mainstream part of banking in Australia, and it is important that Cashless Debit Card participants have access to this functionality," Minister Ruston said.

The government also announced a new interest rate to be back-dated to 1 July 2019, with the government expecting payments to be made from next month.

"Participants are now earning interest on their Cashless Debit Card accounts at a rate of one percent per which is higher than rates offered on typical every day accounts," Minister Ruston said.

Trial sites extended

While there is currently a temporary pause on new participants being placed on the welfare card, the federal government has announced that current trial sites will be extended.

Existing trial sites were due to expire in July this year but will instead continue until 31 December. 

The federal government's reasoning behind the extension is based on Parliament being adjourned until August due to COVID-19.

Legislation reform is being considered that would extend cashless cards trials in existing sites to 2021, introduce the system in Cape York in Queensland, and replace the 'Basics Card' in the Northern Territory, affecting more than 23,000 people.

The cashless debit card scheme has been criticised for stigmatising welfare recipients and disproportionately targeting Indigenous communities.

A 2018 report by the Australian National Audit Office (ANAO) questioned whether the scheme reduced social harm or was value for money for taxpayers.

It found the Department of Social Services' monitoring and evaluation of the trial was "inadequate," and was unable to conclude whether there had been a reduction in social harm, or whether the card was a lower cost welfare quarantining approach.