Bills Digest 150 1996-97 Social Security Legislation Amendment (Activity Test Penalty Periods) Bill 1997


Numerical Index | Alphabetical Index

WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments. This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

CONTENTS

Passage History

Social Security Legislation Amendment (Activity Test Penalty Periods) Bill 1997

Date Introduced: 26 March 1997
House: House of Representatives
Portfolio: Social Security
Commencement: The amendments described in this Digest will apply from the date fixed by Proclamation, or if such a date is not fixed, on the first day after the expiration of six months after the Bill receives the Royal Assent

Purpose

To introduce a rate reduction period that will apply for first and second breaches of the activity test within a two year period. Third and subsequent breaches of the activity test will continue to result in non-payment of the Newstart Allowance

Background

The Bill is a result of negotiations in the Senate regarding the penalty period that should apply to people in receipt of the Newstart Allowance when they breach the activity test which must be complied with for recipients to continue to be eligible for the allowance. The Social Security (Budget and Other Measures) Bill 1996 proposed a number of changes to the penalty provisions that apply when a recipient of a Newstart Allowance fails to comply with the requirements of eligibility for the payment.

First, the Bill proposed to create two categories of breaches, administrative breaches and breaches of the activity test. For administrative breaches, such as a failure to provide a partner's tax file number, failure to notify a change in circumstances or a failure to provide information, the penalty is a reduction in the rate of Newstart Allowance for 13 weeks with the reduction being 16% of the person's entitlement (the Bill had originally proposed a 25% reduction for 8 weeks. In both methods, the penalty is approximately equal to two weeks payment). With the modification noted above, the provisions relating to administrative breaches came into force under the Social Security (Budget and Other Measures) Act 1996.

In relation to breaches of the activity test, such as refusing a suitable job or breaching a Newstart Activity Agreement, the penalty period prior to the introduction of the Social Security (Budget and Other Measures) Bill 1996 was two weeks where the person had been unemployed for less than 12 months, four weeks were the length of unemployment was between 12 and 18 months and six weeks were the person had been unemployed for 18 months or more. In addition, if there had been a previous breach in the prior three years, there was an additional six week period applied for each previous breach during the three year period.

The Social Security (Budget and Other Measures) Bill 1996 proposed that the penalty period be increased to six weeks for an initial breach and a 13 week period if there had been a previous breach or breaches in the past three years. This proposal was amended in the Senate. Under the amendments, the penalties described above (ie. two, four or six weeks depending on the length of unemployment) apply and, where there had been a previous breach of the activity test in the past three years, 12 weeks.

The debate in the Senate was largely based on the effect that a removal of payments for a significant period, such as the originally proposed 13 weeks for a second breach within three years, would have on recipients, and the proposed minimum of a six week penalty period for the first breach of the activity test regardless of the length of unemployment.

While the amendments described above were passed, the Minister also foreshadowed other changes to the activity test penalty period that will result in a reduction of payments for the first breach of the activity test similar to the situation that will apply for administrative breaches, rather than an ineligibility to receive any benefits for the penalty period. In the Committee stage of debate on the Social Security (Budget and Other Measures) Bill 1996, the Minister stated:

I foreshadow that I would move an option which would provide for a rate reduction for a first breach of the activity test and the second and subsequent breach would still be seen as the most serious breach of all..... We would propose that, for a first activity breach, there should be a 20 per cent rate reduction over 25 weeks. That equates to a full reduction for five weeks. For the second and subsequent breach there should be eight weeks of non-payment.(1)

While the amendments contained in this Bill do not mirror the above statement, they change the emphasis for breaches of the activity test from periods of non-payment to periods of payment reduction. Rate reduction is seen as a more appropriate way of imposing a penalty without leaving a person with no income support payments for a considerable period. However, for a third or grater breach within two years, a non-payment period will apply. It is argued that this is necessary to prevent people from accepting a long term lower rate of payment (ie. their normal entitlement less the rate reduction penalty) and not seek to comply with the activity test.

Main Provisions

A new subsection 624(1) will be inserted into the Social Security Act 1991 (the Principal Act). The proposed subsection provides that while there is a breach of the activity test, the Newstart Allowance will not be payable. If the allowance then becomes payable (ie. because the recipient has rectified the breach), they will be subject to an activity test reduction period if it is their first or second breach of the activity test within two years of the latest breach, and if it is their third or greater breach during this period, they will be subject to a non-payment penalty.Section 625 of the Principal Act, which deals with penalties for failure to enter into an activity allowance, and section 626, which deals with penalties for failure to comply with an activity agreement, will be amended in a similar manner as section 624 (Items 10 to 16 of Schedule 1).

Similar provisions will also apply in respect of unemployment due to a voluntary act, misconduct, refusal of a job offer and for a failure to provide information in relation to income from remunerative work (Items 19 of Schedule 1).

The activity test non-payment period will be 13 weeks (proposed section 630A), while the rate reduction period is dealt with in proposed Subdivision AA, which will be inserted into the Principal Act by Item 32. The rate reduction period will be 26 weeks. The rate of reduction will be 18% in the case of a first breach in a two year period (equivalent to a non-payment period of 4.68 weeks) while for a second breach in a two year period the reduction will be 36% (equivalent to a 9.36 week non-payment period) (proposed section 644AE).

Another major issue is the time from which the reduction or non-payment period will apply.

Where a person may be subject to more than one non-payment period or a mixture of non-payment and rate reduction penalties, the following will apply:

  • if the recipient is subject to a non-payment period before an additional non-payment period is applied, the first mentioned non-payment period will cease to apply on the commencement of the later non-payment period (ie. non-payment periods will not be cumulative);
  • where both a non-payment and rate reduction period apply, the periods are to be run concurrently and if the person is subject to a rate reduction period and is later subject to a non-payment period, the rate reduction period will cease to apply from the beginning of the non-payment period;
  • similarly, if a person is subject to a waiting period and a non-payment period also applies to the person, the periods are to run concurrently;
  • if a person is subject to both an administrative breach period and a rate reduction period due to non-compliance with the activity test, only the later penalty will apply (so that the person is not subject to a rate reduction under both the administrative breach and activity test breach provisions); and
  • if a person who is not eligible for the Newstart Allowance engages in an act that would result in a rate reduction period applying to the person had they been on the Allowance, and the person later applies for the Allowance, their rate reduction period will apply from the date after the breach occurred (Note: this may result in the situation where a person has not applied for the Allowance, and is not aware of the conditions that have to be met to avoid a breach of the activity test, being subject to all or part of a rate reduction period after they subsequently apply for the Allowance and could, therefore, be seen as requiring people to satisfy the activity test before they are qualified for the allowance if they are to avoid a rate reduction period). (Items 22 -36 of Schedule 1).

Transitional provisions provide that if a rate reduction or non-payment period applies under the Principal Act prior to the amendments coming into force, the Principal Act will continue to have affect despite these amendments. If, after the commencement of the Bill, a person would have been subject to a penalty for an event that occurred before the commencement of the Bill and that penalty period had not commenced before the commencement of the Bill, the person will be subject to the amendments contained in the Bill (Item 42).

Amendments of the same effect as those described above will be made to the Student and Youth Assistance Act 1973, which provides for the eligibility and payment of the Youth Training Allowance, which issimilar to the Newstart Allowance for those below the eligibility age for the later allowance (Items 43 to 71 of Schedule 1).

Endnotes

1 Senate, Hansard, 13 December 1996.

Contact Officer and Copyright Details

Chris Field
12 June 1997
Bills Digest Service
Information and Research Services

This Digest does not have any official legal status. Other sources should be consulted to determine whether the Bill has been enacted and, if so, whether the subsequent Act reflects further amendments.

IRS staff are available to discuss the paper's contents with Senators and Members and their staff but not with members of the public.

ISSN 1328-8091
© Commonwealth of Australia 1997

Except to the extent of the uses permitted under the Copyright Act 1968, no part of this publication may be reproduced or transmitted in any form or by any means, including information storage and retrieval systems, without the prior written consent of the Parliamentary Library, other than by Members of the Australian Parliament in the course of their official duties.

Published by the Department of the Parliamentary Library, 1997.

This page was prepared by the Parliamentary Library, Commonwealth of Australia
Last updated: 17 June 1997


Back to top


Facebook LinkedIn Twitter Add | Email Print
Back to top