This Digest is prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments.
This Digest was available from 10 October 1996.
Social Security Legislation Amendment (Budget and Other
Measures) Bill 1996
Date Introduced: 12 September 1996
House: House of Representatives
Portfolio: Social Security
Commencement: The Bill contains a large number of
measures with varying commencement dates which will be referred to
in the Main Provisions section of this Digest.
The main amendments contained in the Bill relate to:
- abolition of minimum rates for certain benefits for those under
- tightening the activity test and penalty periods for those on
Newstart and Youth Training Allowance;
- extension of the waiting period relating to industrial
- increased waiting periods in regard to unused annual leave and
liquid assets waiting periods;
- removing the connection between sickness allowance and a loss
- abolition of the earnings credit scheme;
- abolition of the employment entry payment and restriction on
the availability of the education entry payment;
- alteration of the treatment of lump sum compensation payments;
- the removal of administrative error as a reason for excluding
debt recovery provisions.
As there is no central theme to the Bill, the Background to the
amendments will be discussed below.
Schedule 1 - Abolition of Minimum Rate for Under 18 year
Currently, people under 18 receiving Newstart, Sickness or Youth
Training Allowance are subject to a parental income and assets
tests unless they satisfy a number of criteria, such as being
independent, a member of a couple, have a dependent child or are
homeless. If the parental means tests apply, the payment to the
under 18 year old will be reduced by the amount that the parents
income or assets exceed the appropriate threshold. However, there
is a limit on the maximum reduction that can be made under the
parental means test so that there is a minimum payment to such
people when their parents assets or income would otherwise reduce
their payment to zero. This amount is known as 'parental means test
minimum rate' and is currently approximately $65.75 per fortnight.
Since the 1996 Election, the government has announced that the
minimum rate would be abolished.
For the Newstart allowance (NSA) and the Sickness allowance
(SA), the abolition will be achieved by amending Point 1067 of the
Social Security Act 1991 (SS Act) which contains the
method for calculating amount of reduction for parental income. The
amendments remove parental means test minimum rate from the
calculation and makes subsequential amendments on the removal.
The Youth Training Allowance (YTA) is available to those under
18 unemployed and satisfying similar criteria as for NSA (eg
satisfying the activity test). YTA recipients are also required to
enter into a Youth Training Activity Agreement to be eligible for
the allowance. YTA payments also contain parental means tests
calculated in the same way as under the SS Act. Part 3 of Schedule
2 will abolish the minimum rate by making similar amendments to the
Student and Youth Assistance Act 1973 (SYA Act) to those
The measures are estimated to save $3.7 million in 1996-97, $8.2
million in 1997-98 and $8.5 million in 1998-99 (as with other
estimated financial figures in this Digest, these figures are taken
from the Explanatory Memorandum to the Bill).
Application: 1 January 1997
Schedule 5 - Activity Test and Penalty Periods for
Newstart and the Youth training Allowance.
Section 601 of the SS Act provides that a person will satisfy
the activity test if the Secretary is satisfied that person is
actively seeking and willing to undertake paid work that is not
unsuitable. Part 3 of the Schedule will alter the circumstances in
which work will be taken to be unsuitable. Major differences
between the current and proposed tests are:
- currently a job is considered unsuitable if person lacks the
skills experience or qualifications to perform the job. It will be
an additional requirement that the employer provides no
- currently a job is unsuitable if the person has an illness,
disability or injury that will be aggravated by the conditions of
the employment. Under the Bill, it is proposed that there will need
to be medical evidence of such a condition;
- a job is also currently considered unsuitable if the conditions
in which it is to be performed are a risk to health or safety and
would breach occupational health or safety law. Under the
amendments the person would also have to make a reasonable attempt
to remove or reduce the risk through discussions with the employer
concerned (as the payments relate to unemployment, this additional
requirement means that the person is aware of the work conditions
and must discuss the matter with the potential employer before
- a job will currently be unsuitable if it will involve the
person becoming self-employed. This ground for unsuitability will
Currently a job would be unsuitable if commuting between home
and work would be unreasonably difficult. This will be maintained
with a minor modification and a new ground added, ie that they
would be required to move home and none of the grounds in proposed
subsection 601(2AB) - see below- applies. It is likely that if a
job requires a person to move home and they are not covered by one
of the grounds in proposed subsection 601(2AB) that makes the job
unsuitable, the job will be considered suitable and they will be
required to move home to be eligible for benefits. The grounds
contained in proposed subsection 201(2AB) are:
- the person is under 18 or over 50;
- the person is pregnant;
- the person's partner is pregnant but in all the circumstances
it is reasonable for the person to move;
- the person's partner has a severe medical condition but in all
the circumstances it is reasonable for the person to move;
- the person resides with a partner who performs full time,
permanent part time or casual work;
- the person resides with a dependent child/children;
- having regard to the person's education and cultural background
it is unreasonable for them to move; or
- moving would cause the person severe financial stress.
The amendments also provide that if a job is suitable and the
person is required to move home (ie the above amendments apply),
the grounds for a job not being suitable cannot include that the
person's commuting would be unreasonably difficult.
Similar amendments will also be made to the SYA Act in respect
of the youth training allowance.
The Principal Act contains a number of circumstances where a
person will not be eligible for Newstart allowance for the period
of the 'activity test deferment period' (the Period), including
where a person fails the activity test, leaves their job
voluntarily, refuses a suitable job or where their unemployment is
due to their own conduct (also see below). The Period is currently
based on the number of breaches that occur in the three years prior
to the breach under consideration. If it is the first breach in
that time, the Period is 2 weeks, six weeks for the second, 12
weeks for the third and an additional 6 weeks for each other breach
in the prior 3 years. The Period will be altered by Item 51 to 6
weeks for the first breach or, if there has been one or more
breaches during the past three years, 13 weeks. The 13 weeks will
apply regardless of the number of the breaches.
Proposed section 601A (Item 119) will deem failure to attend an
interview and voluntarily cease to attend a labour market program
without reasonable excuse to be a breach of the activity test.
Similarly, a failure to provide information about income from
remunerated work without reasonable excuse, or knowingly or
recklessly providing false or misleading information in relation to
such income, will also be deemed to be a breach of the activity
Currently, where a person breaches certain administrative
requirements, principally non-attendance at a CES interview when
requested to do so and failure to comply with notification
requirements, the same Periods apply as in relation to breaches of
the activity test. During those periods the person is not eligible
to receive the allowance. The proposal contained in the Bill is to
remove the ineligibility for the allowance but to provide that it
will be payable at a reduced rate. The Bill will substitute new
rules in relation to administrative breaches (AB).
An AB will occur when a person breaches the following
requirements without reasonable excuse:
- failure to supply a partner's tax file number;
- notification of a change of event or circumstances;
- a requirement to supply information relating to the payment of
the allowance; and
- a breach of section 1034 of the Principal Act (this appears to
be an error. Section 1034 deals with the calculation of lump sum
bereavement payments under the double orphan pension. It has
nothing to do with either administrative requirements or Newstart.
I presume it is meant to be a reference to section 1304 which is
the general power to gain information).
If a person commits an AB, Newstart will be payable to the
person at a reduced rate until the end of the AB rate reduction
period (AB Period).
The AB Period will be 8 weeks. If the person is also subject to
an activity test deferment period, the AB Period will commence at
the end of the activity test deferment test period. Similar rules
apply in relation to any applicable waiting periods.
The AB rules will not apply where all of the following
conditions are satisfied:
- the allowance ceases to payable due to non-compliance with a
request to attend a CES interview or a failure to comply with
- payment has been cancelled or terminated; and
- the person lodges an application for Newstart more than 14 days
after the cancellation or termination occurred.
The effect of this is that if a person has not received Newstart
for 2 weeks they may apply to receive the full allowance (this will
impose a minimum penalty equal to the rate reduction).
The rate of reduction during the AB period will be 25% of the
person's entitlement (proposed section 644H).
Items 79 to 113 propose similar amendments in respect of the
youth training allowance.
Item 112 will insert a section 630BD which deals with the
situation where a failure to provide information is both an AB and
a breach of the activity test due to the new categories of activity
test violations relating to the provision of information (see
above). The effect of the amendment is that where an event could
trigger both penalties, only the penalty for the breach of the
activity test will apply. Again there is a similar amendment in
respect of the Youth Training Allowance.
Schedule 6 - Unemployment Due to Industrial
People are not eligible to receive Newstart if the Secretary is
satisfied that the unemployment is due to industrial action.
However, they are eligible for benefits after the relevant
industrial action has stopped if they meet the criteria for
Newstart. Schedule 6 will amend various sections of the SS and YTA
Acts to provide that people who are unemployed due to industrial
action will not be eligible for Newstart for 6 weeks after the
industrial action ceases.
Schedule 7 - Waiting Periods Unused Annual Leave and Liquid
Under both the SS Act and the SYA Act, various waiting periods
apply before a person who is otherwise eligible for a benefit or
allowance will receive the payment. There is a general waiting
period of 7 days, so that a person will not be eligible for payment
until 7 days has lapsed since their application (there are
exceptions to this rule, such as where a person transfers from one
benefit to another). In addition, an applicant may be subject to
other waiting periods, principally the unused annual leave,
education leavers, newly arrived residents and liquid assets test
periods. These periods may be additional to each other or,
depending on the circumstances and the type of waiting period
involved, only the longest waiting period will apply. The waiting
periods generally aim to require people to use their own resources
for a period before being paid a benefit. The education leavers
waiting period is also designed to prevent students claiming
benefits during annual breaks in education.
In relation to the unused annual leave waiting period, a person
who is otherwise eligible for payment will cease to be eligible
during their 'notional leave period', which is the time of unused
annual leave they have since the day their employment ceased up to
a maximum of 28 days. It was announced in the 1996 Budget that the
unused annual leave waiting period, which as noted above has a
maximum period of 28 days, will be replaced by an income
maintenance period, which has no maximum period.
The changes to the unused annual leave waiting period will be
achieved by removing from the SS Act references to this waiting
period and introducing the income maintenance period in the Modules
used to calculate the ordinary income of the person (which is used
to determine if the person is eligible for benefits. In normal
circumstances receipt of leave payments for a period will make that
persons income such that they are not eligible for benefits). As a
result, if a person is receiving annual leave for the period they
will be deemed to be in receipt of ordinary income for the period
covered by the unused annual leave and so generally not eligible
for benefits. However, if the person is entitled to receive a lump
sum payment in respect of the leave and this amount is rolled-over
(ie. generally used for retirement purposes such as superannuation)
the amount will not be taken into account.
The changes will apply to those payments currently covered by
the unused annual leave period, ie. NSA, SA, parenting allowance
and partner allowance.
Schedule 7 will also make complementary changes to the SYA
The changes are estimated to cost $262 000 in 1996-97 and save
$20.4 million in 1997-98 and $27.7 million in 1998-99.
As noted above, the amendments will also effect the liquid
assets test applicable to a person. The liquid assets test provides
that if a person has liquid assets, ie cash and certain other
assets easily convertible to cash, above a certain level ($5000 for
an individual and $10 000 for a couple) they will be required to
serve a waiting period of, generally, 4 weeks or until their
relevant asset level is reached. In changes announced by the
government, the maximum level of liquid assets exempt from the test
will be reduced to $2 500 for an individual and $5 000 for a couple
and the maximum period of the waiting period will be removed. The
length of the liquid assets test waiting period will now be
calculated by subtracting from the persons liquid assets the new
exempt amount referred to above and dividing this amount by the
'Divisor', which is $500 for a single person without a dependent
and $1000 otherwise. This will determine the number of weeks of the
waiting period with fractions of a week disregarded. (This means
that the test deems a single person to consume $500 of liquid
assets a week and others $1000 per week).
Similar amendments will be made to the YTA Act.
The changes are estimated to cost $165 000 in 1996-97 and save
$3.7 million in 1997-98 and $4.9 million in 1998-99.
Application: 20 September 1997.
Schedule 8 - Sickness Allowance
To be eligible for SA an applicant must currently show that they
satisfy the relevant criteria, the most important of which are that
they are: incapacitated for work due to an illness or disease; the
incapacity is, or is likely to be, temporary; and the Secretary is
satisfied that the person has, or is likely to, suffer a loss of
salary, wages or other income due to the incapacity. Residency
requirements must also be satisfied. Where a person cannot qualify
for sickness benefits due to a failure to met the criteria they may
be eligible for other benefits, such as special benefit. Schedule 8
contains two changes to the payability of SA:
- first, the need for the Secretary to be satisfied as to loss or
wages etc will be removed, so that the eligibility criteria will
now be based on the incapacity to work; and
- secondly, sick leave entitlements that a person has but is not
using will be deemed to be included in ordinary income, and so
included for the income test. Currently, sick leave is considered
to be ordinary income if actually received. Under the new test, a
person will be deemed to be on sick leave for a day if the have
sufficient entitlements to cover that day, they have a right to
claim the leave, the employer is able to pay the leave (eg the
employer is not bankrupt) and the person is not on another type of
leave on that day.
This measure, together with minor changes to the way in which
applications may be made, is estimated to cost $797 000 in 1996-97,
$2.8 million in 1997-98 and $2.9 million in 1998-99.
Application: 20 March 1997.
Schedule 10 - Abolition of the Earnings Credit
This scheme was introduced in 1991 and applies to those in
receipt of a pension, other than the carers pension. The scheme
aims to address the situation where an eligible person has a short
period of remunerated work the income from which would exceed the
amount they can earn before the pension is reduced. Normally, such
income would be considered to have been earned during the period of
the work and this would result in a reduction of the pension for
the period of work and a potential loss of other benefits, such as
a health card. Under the earnings credit scheme, credits can be
accumulated in an account to a certain maximum level (approximately
$1 100 for an individual and $2 200 for a couple). Credits are
accrued where the persons income for a fortnight is less than the
income free level for that period. The amount accumulated is the
difference between the actual income and the income free level. The
account is debited each time the person's income exceeds the income
free level and the amount of the debit is difference between the
income and income free level. If the account balance is nil, the
ordinary income test applies. The earning credits scheme therefore
allows income earned during a short term of paid work to be spread
over a period so that the pension is not immediately effected.
Schedule 10 will amend the SS Act and the YTA Act to remove
references to the credit earnings scheme, thereby abolishing the
The measure is estimated to save $20.6 million in 1996-97, $75.8
million in 1997-98 and $79.6 million in 1998-99.
Application: 20 March 1997.
Schedule 11 - Abolition of the Employment Entry Payment
and Restriction on the availability of the Education Entry
These schemes provide for the payment of a lump sum amount to
people who are on benefits and satisfy certain criteria. For NSA
and Jobsearch recipients the payment is available where the person
has been registered with the CES for a least 12 months, they will
cease to be eligible for the allowance because of the employment
and the employment is likely to continue for more than 4 weeks. The
payment is only available once each 12 month period. For recipients
of other benefits other tests apply, the main other type of test
being that the payment may be made when the persons income exceeds
a threshold level and is likely to do so for more than 4 weeks. The
payment was introduced to help off-set initial costs associated
with commencing employment (clothes, tools, fares etc). The payment
is generally $100 for those 18 and over and $50 for those under
Restrictions on eligibility for the employment entry payment are
estimated to save $5 million in 1996-97, $17.3 million in 1997-98
and $79.6 million in 1998-99.
Item 1 of Schedule 11 will repeal provisions relating to the
employment entry payment, so abolishing the scheme.
The education entry payment is similar to the employment entry
payment but applies to situations where people on benefits enter a
full-time education course that is approved under AUSTUDY or
ABSTUDY. The benefit may also be available where the applicant
satisfies the Secretary that they intend to enrol in such a course.
As with the employment entry payment, different criteria may apply
depending on the benefit received before entering education.
The effect of Items 2 to 4 of Schedule 11 is to remove the
education entry payment to those who are transferring from special
benefits, job search, youth training allowance, NSA, mature age
allowance, widow allowance, mature age partner allowance, and
Changes to the education allowance are estimated to cost $270
000 in 1996-97, and save $2.3 million in 1997-98 and $2.5 million
Application: 20 March 1997.
Schedule 15 - Lump Sum Compensation
The SS Act, and the YTA Act as it adopts this part of the SS
Act, contains provisions designed to prevent people from receiving
both compensation for an injury and social security benefits in
respect of the same injury. This is generally done by either making
benefits not payable during the period that the person is receiving
the compensation or by providing for the recovery of amounts where
benefits have been paid prior to the compensation being payable.
Where compensation is settled by agreement, the SS Act deems 50% of
the payment to be the compensation part of the lump sum and in
other circumstances will be the amount determined by the
To determine the period for which the lump sum contribution will
preclude the payment of benefits, the compensation part of the lump
sum is currently divided by average weekly earnings. Part 2 of
Schedule 15 provides for the introduction, from 20 March 1997, of a
new formula to calculate the period for which benefits will not be
payable. The formula is the compensation part of the lump sum (as
currently applied) divided by the income cut-out amount. This is
based on the maximum basic (single) rate and the pharmaceutical
allowance, plus the income free area for a single person. As this
amount will be less average weekly earnings, for a given lump sum
payment the preclusion period will be greater under the new rules
than those currently in force. To prevent any impact on lump sum
payments received before 20 March 1997, the Schedule also contains
transitional provisions that provide that payments received before
this date are to be treated under the old rules.
The measure is estimated to save $778 000 in 1996-97, $13.6
million in 1997-98 and $20.2 million in 1998-99.
Application: 20 March 1997.
Schedule 21 - Debt Recovery
The SS Act provides that debts due under the Act and under
certain other legislation and schemes are recoverable by deductions
from payments, legal proceedings and garnishee notices. Examples of
debts that may become due under the SS Act relate to overpayments,
prepayments, automatic termination or reduction of benefits that
are paid before the rate is reduced (eg a reduced benefit is
payable due to a change of circumstances that is not notified but
is paid at the full rate until the changed circumstances are
discovered). However, if the person is entitled to a benefit and
the benefit is paid at a higher rate than the person is eligible
for and the person has notified the changed circumstances, the
overpayment is currently not recoverable due to the Departments
Amendments contained in Schedule 21 fall into three main
- automatic rate reduction will apply where a person has provided
the appropriate notification of changed circumstances and the
payment has not been reduced (ie where the Department has not
reduced the payment although provided with the relevant
information, the overpayment will be recoverable by reduction to
- an overpayment will be a debt even if the person is entitled to
the benefit but it is paid at a greater rate that that due to the
person (eg administrative error);
- the SS Act currently gives the Secretary a discretion to waive
a debt due to the Commonwealth under the Act. Part 5 of Schedule 21
will restrict the circumstances under which a debt may be waived to
those where the debt is irrecoverable at law, the debtor has no
capacity to pay, the debtors whereabouts are unknown and all
reasonable steps have been taken to locate the debtor or the debtor
is not in receipt of a social security benefit and recovery would
not be cost-effective. This will restrict the circumstances when a
debt may be waived, and excludes waiver due to administrative
Estimates of the savings from these measures are combined with
those from a general tightening of the enforcement of the current
provisions and, therefore the following figures relate to more than
the savings expected from the legislation. Estimated savings in
1996-97 are $5.9 million, $56.6 million in 1997-98 and $148.5
million in 1998-99.
Application: 1 October 1997.
Chris Field Ph. 06 277 2439
8 October 1996
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