WARNING:
This Digest was prepared for debate. It reflects the legislation as
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CONTENTS
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
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
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.
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).
1 Senate, Hansard, 13 December
1996.
Chris Field
12 June 1997
Bills Digest Service
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This Digest does not have any official legal status. Other
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ISSN 1328-8091
© Commonwealth of Australia 1997
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Published by the Department of the Parliamentary Library,
1997.
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Last updated: 17 June 1997
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