Bills Digest no. 166 2006–07
Social Security Amendment (Apprenticeship Wage Top-Up
for Australian Apprentices) Bill 2007
This Digest was prepared for debate. It reflects the legislation as
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Amendment (Apprenticeship Wage Top-Up for Australian Apprentices)
24 May 2007
Portfolio: Vocational and Further
Sections 1 3 commence on
Royal Assent. The amendments contained in Schedule 1 commence
on 1 July 2007.
The Bill amends
the Income Tax Assessment Act 1997, the Social
Security Act 1991 and the Veterans Entitlements Act
1986 in order to exempt the Apprenticeship Wage Top-Up
payments introduced in the 2007 08 Budget from assessment as income
under these Acts.
In the 2007 08 Budget, the Government
announced under its Realising
our potential measures the introduction of Apprenticeship
Wage Top-Up payments. Payments will be made to apprentices who are
under 30 years of age and who are undertaking Australian
Apprenticeships in areas of skill shortage as defined by the
Migration Occupations in Demand List (MODL). The payments will
total $2 000: $1 000 for each of the first and second years of
training. This payment recognises that the low level of apprentice
wages in the first two years of training, estimated to average $15
000 and $19 500 respectively,(1) may discourage
Full-time apprentices will attract $1 000
annually in two instalments. Part-time and school-based apprentices
will receive $500 annually, attracting the full $2 000 over a
longer period of time. The payments will be tax-free and will not
count as income for determining eligibility for income support,
e.g. income support provided by the Youth Allowance or Austudy.
The Government has been extending the regime
of financial incentives available to individuals to encourage them
to engage in vocational education and training (VET). Making VET,
and more specifically apprenticeships in the traditional trades,
more attractive to both employers and students, is one of the
Government s strategies to combat skill shortages.
Traditionally the Commonwealth s financial
incentive payments have mainly been in the form of wage subsidies
to employers of apprentices. These employer subsidies have been
enhanced, and in recent years have become more targeted to areas of
A recently introduced incentive, which may
either be paid to the employer or to the apprentice, is the wage
subsidy for mid-career apprentices, i.e. those over 30 years of
age, undertaking apprenticeships in occupations in high demand. The
introduction of this incentive from 1 July 2007 was in recognition
that mid-career workers with family responsibilities would be less
likely to be attracted to apprenticeships if they were to be paid
the standard training wage. It provided for $7 800 in the first
year and $5 200 in the second year.(2)
A range of other measures have been introduced
that target the apprentices themselves. The extension of
eligibility for the Youth Allowance and Austudy for
over-25-year-olds to apprentices, from 1 July 2005, was one such
measure. Other measures introduced at the same time were targeted
specifically to apprentices in areas of skill shortage. These
included the Commonwealth Trade Learning Scholarship and the
toolkits provided under the Tools for Your Trade initiative.
The introduction of the Apprenticeship Wage
Top-Up payments both supplements and complements these measures
that target the individual apprentice undertaking an apprenticeship
in areas of skill shortage.
Funding for the Apprenticeship Wage Top-Up
payments will be provided separately through annual appropriations.
The payments are estimated to cost $342.5 million over four years.
No estimate has been provided for the cost of the income
As outlined in the Explanatory Memorandum.
There are signs of higher levels of training
in the traditional trades which include areas of skill shortage. In
the year to September 2006, the number of traditional apprentices
in training rose by 8 per cent. Of the 404 200 apprentices and
trainees, 159 100 were traditional apprentices .(4) The
extent to which government incentives such as a tax-free extra $1
000 per year can contribute to this is impossible to calculate, as
strong labour demand and market conditions are likely to be major
The Apprenticeship Wage Top-Up payment is an
additional benefit that will only be available to those apprentices
in skill-shortage areas. The income and tax-free status of the
payment is obviously designed so that it can supplement any
financial assistance that some may already be receiving by way of
the Youth Allowance and Austudy. The age limit is in turn designed
so as not to duplicate the wage subsidy paid for mid-career
apprenticeships in areas of high demand.
It is also likely that the payment is being
introduced on account of the less-than-anticipated numbers who have
benefited from the more generally-available income support provided
by the Youth Allowance. Only 8 052 Australian Apprentices actually
received the Youth Allowance in 2005 06, a figure well below
departmental estimates of 75 000 when it was first
announced(5) and 15 854 when it was revised in the
context of the 2005 06 Additional Estimates Hearings.(6)
The explanation given by the Department was that the revised
estimates reflect higher than anticipated New Apprenticeship wages
and parental incomes, likely to be a reflection of the current
strong labour market and economic conditions .(7) The
Apprenticeship Wage Top-Up payment will not be subject to any such
limitations and it has been estimated that it will benefit 228 000
Australian Apprentices over four years.(8)
- Andrew Robb,
Minister for Vocational and Further Education, $1,000
tax free boost to take home pay of apprentices, media
release, 8 May 2007.
John Howard, Prime Minister, Skills for the
future, Ministerial statement to Parliament,
12 October 2006.
Memorandum, p. .
- National Centre for
Vocational Education Research (NCVER), Apprentices and trainees,
September quarter 2006 ,
accessed on 28 May 2007.
John Howard, Prime Minister, Extending Youth Allowance
eligibility to New Apprentices, media release, 26 September
Senate Employment, Workplace Relations and Education Committee,
Education, Science and Training portfolio, 2005 06 Additional
Estimates Hearing, February 2006, Answers to questions on notice,
DEST Question No. E1020_06 ,
accessed on 28 May 2007.
Andrew Robb, Minister for Vocational and Further Education, Second
reading speech: Social Security Amendment (Apprenticeship Wage
Top-Up for Australian Apprentices) Bill 2007 , House of
Representatives, Debates, 24 May 2007, p. 11.
31 May 2007
Social Policy Section
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