A radical overhaul of Australia’s welfare system has been flagged in a new government review, with plans to slash the current 77 types of payments to just five.

The five primary payments would include an age pension, working age payment, supported living pension, carer payment and child and youth payment.

The Coalition government called for the review in December 2013 after they deemed the current welfare system unsustainable and costly.

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According to the ABC, lead author former Mission Australia boss Patrick McClure was asked to find ways to save money and encourage more people to return to work.

The current welfare system is reported to cost $150 billion annually.

The government is now considering the recommendations and changes will be included in the upcoming May budget.

Lead author Patrick McClure. Photo: AAP

The disability support pension has been flagged for an overhaul as part of the plan, with suggestions it should change to a supporting living pension based on the recipient’s capacity to work.

The pension would only be available to those with a disability which leaves them incapacitated for at least five years, replacing the current minimum of two years.

Those will a less severe disability would be placed on a working age payment, or unemployment benefit, with rates reflecting their capacity to work.

Mr McClure told Sky News the emphasis was on people’s capacity to work and, where there was an opportunity, to at least “explore possibilities”.

“People who are currently in the system will not receive a reduced payment. It’s not going to affect people currently in the system,” Mr McClure said.

The child and youth payment would also be conditional, with children needing to be in school and immunised to be eligible.

Young people also wouldn’t qualify for welfare payments until they turned 22.

Social Services Minister Scott Morrison said the review ddressed the costly, confusing and inequitable elements within the commonwealth welfare system.

“The government’s focus is to acknowledge those who need our help, while respecting those who pay for it,” Mr Morrison said in a statement on Wednesday.

The welfare system as it is now (left), and the review’s proposed changes (right). Source: Welfare review final report.

– with AAP