Bills Digest no. 42 2009–10
Social Security and Other Legislation Amendment (Income
Support for Students) Bill 2009
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
Purpose
Background
Financial implications
Main provisions
Concluding comments
Contact officer & copyright details
Passage history
Date
introduced: 10
September 2009
House: House of Representatives
Portfolio: Employment and Workplace
Relations
Commencement:
There are various
commencing dates as set out in the table in clause
2.
Links: The
relevant links to the Bill, Explanatory Memorandum and second
reading speech can be accessed via BillsNet, which is at http://www.aph.gov.au/bills/.
When Bills have been passed they can be found at ComLaw, which is
at http://www.comlaw.gov.au/.
To reform student income support to make higher education more
accessible in response to the Review of Higher Education conducted
by Emeritus Professor Denise Bradley.
Background
In Opposition, the Australian Labor Party (ALP) claimed that no
policy is more important than Australia s investment in human
capital the education, skills and training of our workforce and our
people .[1] This
emphasis on investing in education as the basis for productivity
growth, overcoming individual disadvantage and social inclusion
continues in government. However the reforms of the sector and
student income support which were promised by the ALP before their
election were delayed in Government whilst the Review of Australian
Higher Education was undertaken in 2008 with Professor Denise
Bradley as chair of the panel. The review commonly referred to as
the Bradley Review reported in December 2008.[2] Among the 46 recommendations made by
the Bradley Review were that the Australian Government should
introduce a package of reforms to the student income support
system;[3] and
undertake a regular process of triennial review to assess the
overall effectiveness of the support payments in reducing financial
barriers to participation of students in need.[4]
Concerns over the adequacy and equity of student income support
had been mounting for some time. In 2005, the Senate Employment,
Workplace Relations and Education References Committee tabled the
report of its inquiry into student support measures. The Committee
was critical of the inadequacy of student income support, the
harshness of Youth Allowance eligibility criteria relating to the
age of independence and the parental income test threshold.[5] Despite ongoing calls for
review and reform of the system governments took no action until
the Rudd Government commissioned the Bradley Review in
2008.[6]
Specifically the Bradley Review recommended that the Government
should:
- Increase the threshold for the Parental Income Test to
$42 559, consistent with the value used for the Family Tax
Benefit.
- Change the Parental Income Test indexation rate to be
consistent with the Family Tax Benefit index, a combination of the
Consumer Price Index (CPI) and Male Total Average Weekly Earnings
(MTAWE).
- Change the Parental Income Test taper rate for reduction in
benefits for each child in the family on income support benefits to
20 per cent. Apply the new taper rate only once as is the case for
the Family Tax Benefit rather than for every child in the family
receiving benefits.
- Increase the personal income threshold for Youth Allowance and
Austudy to $400 per fortnight.
- Change the indexation of the personal income threshold from
zero to a wage basis (for example, Male Total Average Weekly
Earnings).
- Reduce the age of independence for Austudy from 25 to 22
years.
- Remove the workforce participation criteria for independence
of: (a) working part-time for at least 15 hours per week for at
least 2 years; and (b) earning a specified amount in an 18-month
period since leaving school. Introduce grandfathering arrangements
for existing students who have already satisfied these criteria for
independence.
- Extend eligibility for benefits to students enrolled in all
masters by coursework programs.
- Continue and enhance the Commonwealth Scholarships program by
providing benefits to all eligible students on Austudy or Youth
Allowance for education costs and accommodation costs (for those
who need to leave home) and by transferring responsibility for the
payment of benefits to Centrelink.[7]
Julia Gillard, the Minister for Education, Employment and
Workplace Relations and Social Inclusion responded in broad terms
to the Bradley Review in March 2009.[8] The substantial response, accompanied
by significant structural change and policy initiatives, was given
in the 2009 10 Budget.[9]
The Government has accepted the recommendations of the Bradley
Review, with the exception of changing indexation rates to a wage
basis. The reforms are regarded as an important part of the goal of
improving access to higher education by students from low
socio-economic backgrounds, including those from rural backgrounds
and Indigenous students. The reforms are aimed at meeting the
Government s objectives of 40 per cent of all 25 to 34 year olds
attaining a qualification at bachelor level or above by 2025 (the
Bradley Review recommended this be attained by 2020) and that 20
per cent of higher education enrolments at undergraduate level
should be people from low socio-economic status (SES) backgrounds
by 2020.[10]
The Hawke Government s higher education equity policy statement
A Fair Chance for All was released in 1990.[11] It identified six
equity groups for targeted assistance: people from low
socio-economic backgrounds; people from rural or isolated areas;
people with a disability; people from a non-English speaking
background; women, especially in non-traditional areas of study and
higher degrees; and Aboriginal and Torres Strait Islander
people.[12] A 2004
government-commissioned analysis of five of the six equity groups
(Indigenous students were not included) concluded that
special emphasis should be given within the
equity policy framework to people from low socio-economic
backgrounds due to the continuing extent of under-representation of
this group, with recognition of the particular effects of
socio-economic background for people from rural and isolated
backgrounds .
Further emphasis for particular attention was given to rural and
isolated males due to their low, and dwindling, participation
shares .[13]
Research has shown that low SES is central to multiple or
compound disadvantage . Clarke et al described low SES as a common
central element in the disadvantage experienced by students in
other equity categories and affecting the impact of other forms of
disadvantage.[14]
Dobson et al found that more than 80% of low SES students and 60%
of rural and isolated students were also members of other equity
groups.[15] James
et al studied the attitudes and aspirations of school students
towards tertiary education and noted the influence of a complex mix
of interacting elements. Rurality and low socio-economic status in
particular combined to produce the greatest educational
disadvantage.[16]
Studies have also assessed the impact of the Higher Education
Contribution Scheme (HECS) since its introduction in 1989 and more
generally the role of financial considerations in the decisions of
students to take up places in higher education. This has focused on
students in the equity groups, particularly those from low
socio-economic backgrounds. Overwhelmingly the studies conclude
that social and cultural influences and attitudes are more
important than financial considerations in low SES students
participation in higher education and that HECS and fees have had
minimal impact.[17]
However some research indicates that credit constraints do have an
impact on low SES students from rural and remote areas.[18]
The reforms proposed in the Bill aim to ensure that financial
barriers to participation are reduced for students from low
socio-economic backgrounds, including students from rural areas and
Indigenous students, and that the assistance is targeted to those
most in need. The opposition and their regional constituents
continue to argue that the measures, in particular the changes to
the workforce participation criteria, will disadvantage regional
and remote students.[19] Their arguments are difficult to assess largely because
data on regional and remote access to youth allowance is limited.
What we do know is as follows:
- In 2008 there were 552 581 domestic undergraduate students. The
higher education equity statistics list 104 647 regional students
and 5477 remote students. This represents 19.9 per cent of domestic
undergraduate students. If postgraduate students are included the
share drops to 18.8 per cent.[20] By comparison, regional and remote residents make
up 27.9 per cent of the population. The participation ratio for
regional students is 0.71, slightly better than the ratios for low
SES (0.60), Indigenous (0.59) and significantly better than remote
(0.44).[21]
- At 30 June 2008 117 623 university students received Youth
Allowance. The total number of recipients coming from outside major
cities is not reported. However 29 per cent of all recipients
receiving the away from home rate (both dependent and independent)
came from regional or remote areas. This equates to approximately
18 900 students.[22]
- The breakdown of all recipients by dependent and independent
status is 46 009 (39.1%) dependent and 71 614 (60.9%) independent.
82.2% of independent recipients (or 58 000) qualified for Youth
Allowance through the workplace participation criteria.[23]
- Of those students who qualified for Youth Allowance through
workplace participation, 70 per cent lived in major cities (40 600
students), 21 per cent in inner regional areas, 8 per cent in outer
regional areas and 1 per cent in remote areas (a total of 17
400).[24] It is
this group that regional lobbyists claim will be unfairly
disadvantaged.[25]
The Government however expects that under the new parental income
test approximately 68 000 new students will be eligible for Youth
Allowance.[26] As
the average annual household wage and salary income is
significantly lower for those living outside the major urban areas
we might expect regional and remote students will qualify at a
higher rate than urban students.[27] An official from the Department of Education,
Employment and Workplace Relations (DEEWR) stated in Senate
estimates hearings:
Families in non-urban areas are more likely to
have lower household incomes than families in urban areas. That
means that families in non urban areas are more likely now to be
able to have their dependent child receiving some form of income
support than used to be the case. It used to be the case that
parental income tests meant that any amount of Youth Allowance
would cut out, for example, if you had two children 18 years or
over living at home; it now cuts out at $62,000 but it will cut out
at $106,279. If those two children were living away from home, it
now cuts out at $79,117, but under the new rules it would not cut
out completely until $139,388. What that does is include many more
families, and it is biased towards families on the lower incomes.
As we know, regional and rural families are more likely to be in
that category.[28]
- The Government estimates that
by January 2010, about 84 per cent of
Australian households will have incomes below $141 000 and outside
of major urban areas, around 90 per cent of households will have an
income that will allow their children to qualify for Youth
Allowance. [29]
Youth Allowance was introduced in July 1998 by the Howard
Government. It was the main income support payment for young
people. It replaced Youth Training Allowance, Newstart Allowance
and Sickness Allowance for 15 to 20 year old unemployed people. It
also replaced AUSTUDY for 16 to 24 year old students (and for older
students who started a course before turning 25 years of age).
The Government s main objectives[30] with the introduction of Youth
Allowance for students were to:
- simplify income support for young people by providing one
payment for all young people rather than the five that then
existed
- increase incentives for young people to study rather than go
onto unemployment payments by bringing higher rates of income
support for the unemployed into line with those for students,
and
- increase support for students who needed to move away from home
to study.
For students, full-time study was required. Rates of payment
varied according to the student s age and whether or not the
student was living at home or away from home. Rates were indexed
annually. Rent Assistance was also available to recipients
receiving the away from home rate.
Independent students did not have their parents income or assets
taken into account when their rate of payment was assessed.
Independent status applied if recipients had supported themselves
through employment for a significant period of time since leaving
school. It also applied if recipients were refugees, orphans,
homeless, in state care, parents or partnered for over 12
months.
Recipients who were not independent were subject to a Parental
Income and Assets test. The assets test discounted the value of
family business assets by 50 per cent. This test was supplemented
by the Family Actual Means Test which was applied to parents who
were self-employed or had significant income from certain sources
other than wages or salaries.
A personal income test applied to all recipients. Students were
able to receive up to $230 per fortnight before losing 50 cents for
each dollar of private income up to $310 per fortnight. Income
above that amount reduced payment by 70 cents for each dollar of
private income. An income bank of $6 000 per annum allowed students
to average income and reduce the impact of the income test during
high income periods.
A Fares Allowance and a Student Financial Supplement Scheme that
had applied to Austudy recipients continued to be available for
Youth Allowees who were students. Fares Allowance assisted with
travel costs for students who had to live away from home to study.
The Student Financial Supplement Scheme allowed students to trade
in one dollar of Youth Allowance and receive two dollars of an
interest free but indexed loan. Loans of between $500 and $7 000
were available.
From January 2001 75 per cent (rather than 50 per cent) of the
value of farm or business assets were disregarded under the family
assets test for Youth Allowance.[31]
From January 2004 no new loans were made under the Student
Financial Supplement Scheme.[32]
From September 2004 scholarships that pay or waive tuition fees
were not counted as income under the income test.[33]
From July 2006 the income test for students was changed so that
income above $316 per fortnight reduced payment by 60 cents for
each dollar of income.[34]
The most controversial aspect of the Bill is the change to
eligibility for independent status under Youth Allowance. From 1
July 2010, applicants for Youth Allowance will no longer be able
claim that they are independent based on part-time employment or
wages. The attainment of independent status means that applicants
for Youth Allowance are exempt from the parental means test that
normally applies to that payment.
Under the current work participation requirements for
independence, a person must have:
- worked full-time (at least 30 hours a week) for at least 18
months in the previous two years, or
- worked part-time (at least 15 hours a week) for at least two
years since leaving school, or
- have been out of school for at least 18 months and earned at
least 75 per cent of the maximum rate of pay under Wage Level A of
the Australian Pay and Classification Scale (that is, $19 532 in
2009) in an 18 month period.
Under this measure, announced in the 2009-10 budget, the second
and third of the above criteria will be abolished, preventing many
young people who previously took a gap year between finishing high
school and commencing university studies or who were employed after
finishing school, from claiming to be independent and thus escape
the parental income test on their payments.
Young people will still be able to claim independent status
after working 30 hours a week for at least 18 months in a two year
period, or if they meet any of the other non-work related criteria.
The Government estimates that around 30 700 of current
prospective recipients will be affected by this measure, and that
it will save $1.8 billion over four years.[35] Generally speaking, the measure
will result in some prospective recipients receiving Youth
Allowance as dependent students rather than as independent
students. Being subject to the parental income test may result in
less income support than they would have received as independent
students. However changes to the parental income test and the
introduction of new scholarship payments will mean that many more
dependent students qualify for a higher rate of assistance than
they would have received under the current arrangements. Other
prospective recipients will lose their entitlement to Youth
Allowance altogether because they still come from families whose
income is too high to allow them to qualify under the much more
generous parental income test introduced in this Bill.
The change was originally intended to commence on 1 January
2010. However, on 26 August 2009, Ms Gillard announced that
commencement of the change would be delayed by six months for those
students who must leave home in order to attend university.[36] This means that
students who left school in 2008, have taken a gap year and have to
leave home to attend university, may apply for independent status.
According to the Minister, this delay was to address the fact that
some students who had chosen to take a gap year in 2009 would have
been disadvantaged during the transition between the two systems
.[37] Ms Gillard
also announced that to pay for the change (that is, the delayed
start to the change to independence criteria) the measure to
increase the amount students may earn before affecting their youth
allowance would be deferred by 18 months.[38]
The Government argues that this change will ensure that Youth
Allowance is better targeted to those who need it .[39] This addresses the
finding of the Bradley Review that student income support was being
paid to students living in high income households. For example, it
reported that thirty-six per cent of youth allowance recipients who
are living at home are living in households with incomes over
$100 000 (see figure below).[40]
Figure 1: Annual household incomes of Youth Allowance
recipients living at home (in 2008 dollars)[41]
According to the Bradley Review, this provides strong evidence
that this aspect of student income support is quite poorly targeted
and inequitable .[42] The Bradley Review further noted that several
submissions to the review have raised this matter and suggested
that the eligibility criteria for independence be tightened to
prevent this type of likely abuse .[43] The term abuse in this context
highlights the point that independence criteria effectively
functioned as a loophole that allowed high income family students
to access Youth Allowance.
Higher Education financing expert, Professor Bruce Chapman, has
noted that the extension of the workforce participation criteria in
1998 led to a significant expansion in access to the independent
rate:
The number of students receiving the
independent at home allowance increased rapidly from 1999 to 2003,
from about 1000 in the first year to about 21,500 in the last.
Since then the figure has remained virtually unchanged and stood at
22,689 in 2007, or about 18 per cent of all recipients of the youth
allowance.
The critical policy issue concerns whether
these income support recipients are in fact financially
disadvantaged.[44]
On the basis of research conducted with a colleague, Kiatanantha
Lounkaew, (the source for the data used in the table above)
Professor Chapman has argued that
simply, many advantaged students seem to have
been enjoying an excessive generosity from this rule, and its
abandonment should be welcomed by those giving weight to basic
issues of fairness .[45]
According to Ms Gillard, money saved through this tightening of
workforce participation criteria has been used towards funding of
other higher education changes in this Bill.[46] The government estimates that these
changes (lowering of parental income tests and the age of
independence, offering of new scholarships) will assist 68 000
students who would have previously been excluded from Youth
Allowance and 35 000 students who will get higher payments.[47]
This change has attracted a great deal of criticism from student
representative groups, the opposition, minor parties and
independents. One of the main criticisms has been in relation to
the impact on the estimated 30 700 gap year students that is,
people who deferred a place at university in 2009 in order to meet
the existing independence criteria extant when the place was
offered. For example, the opposition leader, Malcolm Turnbull, has
suggested that this is an issue of fairness, arguing that you
simply cannot change the rules which people have in good faith
relied on .[48]
Similarly, Australian Greens (the Greens) youth affairs
spokesperson, Senator Sarah Hanson-Young, has argued in relation to
the impact on gap year students that it is absolutely indefensible
to bring in legislation that is effectively retrospective .[49] The opposition and the
Greens each foreshadowed amendments that would allow current gap
year students to remain eligible for independent status in
2010.[50] The
opposition estimates that this delay will cost around $573 million
over four years (though it is not clear how it arrived at this
figure).[51]
As noted above, the government responded to this criticism by
deferring the commencement of this change until 1 July 2010
however, only for those who need to leave home to attend
university. The government estimates that this will benefit 5000
prospective students who would have been ineligible for independent
status had the changes commenced, as originally planned, in January
2010.[52] The
opposition criticised this response on the grounds that it would
only assist 5000 of the 30 700 current gap year students meaning,
they argued, that it would still have a retrospective impact on up
to 25,000 prospective students.[53] The Greens welcomed the deferral but criticised
the fact that it is to be funded through a deferral of the increase
in the amount students may earn before affecting their Youth
Allowance.[54]
The other main criticism of the change to workforce
participation criteria relates to the impact on future students who
need to leave home to go to university, particularly those in rural
and regional areas.[55] In making this criticism, some have highlighted the
difficult nature of the current jobs market and suggested that many
students will simply not be able to find the amount of work
necessary to satisfy the new, narrowed criteria.[56] In relation to these criticisms,
it is important to note that many of these students will still
qualify for support as dependents because of the changes to the
Parental Income Test. Further, concerns raised about the nature of
the jobs market need to be understood in the context of the
intended purpose of the independent rate that is, as a provision
for those already working, rather than an alternative method of
qualifying for Youth Allowance.
Nevertheless, the government effectively acknowledged that there
will be an impact on such students when it targeted the deferred
commencement of this change specifically on those who need to leave
home to go to university. The opposition and Greens have each
foreshadowed proposals and/or amendments aimed at addressing the
impact of the government s changes on rural and regional
students.
The opposition has stated that it will propose a new,
effectively targeted, 'Rural and Regional Scholarship' program that
will particularly assist rural and regional students who do not
have the luxury of being able to stay home with their parents while
pursuing further study .[57] The Shadow Minister for Education, Apprenticeships and
Training has stated that this measure would be initially funded at
$120 million over the next four years .[58] The opposition proposes to fund the
delayed start for the new workforce participation criteria ($573
million) and the new rural and regional scholarships ($120 million)
by reducing the new student start-up scholarships from $2 254 to $1
000 per year, which it estimates will save $696 million over four
years.
The Greens amendment, would if passed, create a new independence
eligibility criterion to accommodate geographically disadvantaged
students, who can adequately prove to Centrelink that they have had
to move out of their family home to go to university or TAFE
.[59] It is
difficult to measure the cost of implementing this measure because
there are no details available about the specific nature of the
changes the Greens propose to make.
As discussed above, the government
has noted in response to such concerns that the savings realised by
this change are to be used to fund other changes designed to
increase participation in higher education. It also makes the point
that, in seeking to realise these savings through better targeting
of youth allowance, it is simply redirecting support to those who
need it most. Nevertheless, there is no inherent reason
why increased expenditure in one area of student support should be
funded through savings in another. Further, those concerned with
the impact on students from rural and regional areas, would be
likely to argue that the changes have not been sufficiently
targeted to avoid a detrimental impact on this group.
However, this criticism needs to be
seen within the context of the increased access to the dependent
rate of Youth Allowance provided for in this Bill. Under the
changes to the parental income test, a family where two children
have had to move to attend university will be able to receive some
Youth Allowance up to a parental income of almost
$141 000.[60]
DEEWR estimates that around 84 per cent of Australian households
have income below this level and that outside of major urban areas,
around 90 per cent of households will have an income that will
allow their children to qualify for Youth Allowance .[61]
The Bill proposes major reforms to the income tests that apply
to Youth Allowance which have attracted much less attention than
the changes to the independence criteria. They are, however,
probably of greater significance in the longer term. The Parental
Income Test, the Family Actual Means Test and the Personal Income
Test will all be retained along with the Family and personal Assets
Tests. However the Parental Income Test will be fairly dramatically
liberalised as follows:
- The annual income test free income threshold will increase from
$32 800 to $44 165. This will be done by using the same income free
threshold for Youth Allowance as applies to Family Tax Benefit part
A.
- The taper rate at which income above the free area reduces
payment will be reduced from 25 per cent to 20 per cent.
- The new 20 per cent taper rate will also be apportioned between
students in families where there are more than one Youth Allowance
students, rather than applying to each student as occurs at
present.
The Government estimates that 67 800 extra people will qualify
for youth allowance due to these changes and 34 600 students will
have their payment rate increased.[62]
The Personal Income Test will also be liberalised by increasing
from 2012 the income test free threshold from $236 per fortnight to
$400 per fortnight and indexing the threshold to movements in the
Consumer Price Index.
The Government estimates that 61 480 students will receive
higher rates of payment due to this change when introduced in
2012.[63] The
introduction date for this change was delayed from the original
2010 start up date announced in the Budget. This was done to
accommodate the additional costs incurred for the savings
provisions announced after the Budget for those affected by the
proposed changes to independence criteria.
A further loosening of the income testing arrangements will come
about due to the proposal to change the way that the income tests
interact. At present, the income test is applied in two stages. In
the first stage the Parental Income Test and the Family Actual
Means Test are applied to work out which test will result in the
lower rate of payment. The second stage is to apply the personal
Income Test to that lower rate. The Bill seeks to change this two
stage process so that only the single test producing the lower rate
is applied. This means that a student s rate of payment will only
be reduced by one test rather than two as at present. It will
result in higher rates of payment for many students.
The third significant measure in the Bill is the provision for
new scholarships for students on income support. Two scholarships,
the student start-up scholarship and the relocation scholarship,
will replace the existing Commonwealth Education Costs Scholarship
(CECS), Commonwealth Accommodation Scholarship (CAS) and National
Accommodation Scholarship. These equity-based Commonwealth
scholarships will be phased out. In 2010 33 978 students on the
scholarships will continue to receive them through grandfathering
arrangements funded by appropriations under the Higher
Education Support Amendment (2009 Budget Measures) Act
2009.[64]
The Bill proposes a student start-up scholarship be awarded to
all students receiving Youth Allowance or AUSTUDY while undertaking
an approved higher education course. In 2010, the scholarship will
total $2 254 for the year with payments made at the beginning of
each semester. An estimated 146 600 students will receive a student
start-up scholarship in 2010.
In addition to the student start-up scholarship some students
receiving student income support will also be eligible for a
relocation scholarship namely dependent students who are judged to
have to live away from home as well as independent students who are
disadvantaged by personal circumstances. The relocation scholarship
will provide $4 000 for students in their first year at university
and $1 000 in each year thereafter and will be indexed. An
estimated 14 200 students will receive a relocation scholarship
payment in 2010.
The value of the start-up scholarship is similar to the existing
CECS which is $2 207 in 2009. The significant change is the
automatic entitlement to the start-up scholarship compared to the
CECS which currently goes to only 17 per cent of all students on
income support.[65]
The Government argues that the student start-up scholarship payment
will effectively increase the value of student income support by
$86.77 per fortnight. [66] This may counter disappointment that the rates of Youth
Allowance and the indexation rate will not be increased. The
opposition is proposing a new scholarship for rural and regional
students who are ineligible for youth allowance and whose families
wouldn t have enough disposable income to pay for their relocation
.[67] To pay for
these scholarships (and a proposed delay in the introduction of the
workforce participation changes) the Coalition are reported to be
seeking to reduce the start-up scholarships from $2 254 to $1 000 a
year, saving $696 million over four years .[68]
Criticism on the changes to the scholarships is centred on the
value of the new relocation scholarship. The reduction to $1 000
per year after the first year reduces its value in comparison to
the abolished CAS even after the start-up scholarship is added.
Furthermore for those students who were awarded both a CECS and a
CAS the combined value was significantly higher than the combined
value of the proposed start-up and relocation scholarships.[69]
The Commonwealth scholarships were awarded and administered by
universities under Commonwealth guidelines.[70] This created uncertainty for students
when applying for courses and making decisions. The certainty of
eligibility and the administration and payment through Centrelink
of the proposed scholarships should be welcomed.
The Bill also proposes to exempt merit and equity based
scholarships from the income test up to a threshold of $6 762
per annum. The threshold would be indexed. These scholarships are
provided by individual universities and should not be confused with
other Government scholarships.
The Bill has been referred to the Senate Standing Committee on
Rural and Regional Affairs and Transport for inquiry and report by
26 October 2009.[71]
The Government has structured the reform package to ensure that
the enhancements to student income support are offset by savings.
In her ministerial statement accompanying the 2009 Budget, Ms
Gillard said:
The cost of these reforms is $3.1 billion over four years.
This will be offset by improved targeting of Youth Allowance,
ABSTUDY and other measures.[72]
The financial impact table in the Explanatory Memorandum to the
Bill indicates a saving over four years from the measures in the
Bill of $106.5 million. However it notes that a further $72.7
million will be spent on extending Youth Allowance and Austudy
Payment eligibility to students in masters by coursework programs.
That measure will be implemented by legislative instrument. An
additional $41.1 million will be spent on administrative costs
associated with the implementation of these reforms.
It should be noted that the table also takes account of savings
from the abolition of Commonwealth Education Costs Scholarships,
Commonwealth Accommodation Costs Scholarships and Commonwealth
Scholarships for Associate Degrees. These scholarships were dealt
with in the Higher Education Support Amendment (2009 Budget
Measures) Bill 2009 rather than in this Bill.
Main provisions
Items 1 4 amend the Social Security Act
1991 (the Social Security Act) in relation to the independence
criteria.
Item 1 repeals existing subsection 1067A(4) and
substitutes a new subsection. At present Youth Allowance students
become independent from their parents at 25 years of age.
Proposed subsection 1067A(4) introduces a staged
reduction to 24 years in 2010, 23 years in 2011 and 22 years in the
years after 2011.
At present very few Youth Allowance students become independent
by reaching the age 25 years, because eligibility for Youth
Allowance only extends to age 24 years. Students aged 25 years or
more can only receive Youth Allowance if they were receiving it
prior to turning 25 years of age and they continued in the same
course of study.
Item 2 inserts new subsections
1067A(10A) 1067A(10C). Existing subsection 1067A(10) sets
out the following criteria for independent status for people who
are self-supporting through employment:
- A person is independent if the person has supported himself or
herself through paid work consisting of:
- full-time employment of at least 30 hours per week for at least
18 months during any period of 2 years; or
- part-time employment of at least 15 hours per week for at least
2 years since the person last left secondary school; or
- a period or periods of employment over an 18 month period since
the person last left secondary school, earning the person at least
the equivalent of 75% of:
- the maximum rate of pay under Wage Level A of a transitional
Australian Pay and Classification Scale or modern award generally
applicable to trainees; or
- that maximum rate as varied or replaced from time to time by
Fair Work Australia; that applied at the start of the period of
employment.
New subsection 1067A(10A) provides that
paragraphs 1067A(1)(b) and (c) will only apply if:
- new subsection 1067A(10B) applies this allows
students who qualified under these paragraphs before 1 January 2010
to continue to be independent, or
- new subsection 1067A(10C) applies this allows
a clearly defined group of potential students to qualify under
these paragraphs until 30 June 2010.
Those who can qualify under new subsection
1067A(10C) are those who:
- completed secondary school in 2008
- did not study full-time in higher education in 2009
- intended to study full-time in higher education in 2010[73] start full-time study
in higher education between 1 January and 30 June 2010, and
- Are required to live away from home to study full-time.
The test to determine if a
student is required to live away from
home is set out in existing subsection 1067D(1) as
follows:
- A person is taken to be required to live away from home for the
purposes of this Part if, and only if:
- the person is not independent; and
- the person does not live at the home of either or both his or
her parents; and
- the Secretary determines that:
- the person needs to live away from home for the purpose of
education, training, searching for employment or doing anything
else in preparation for getting employment; or
- the likelihood of the person s getting employment will be
significantly increased if the person lives away from home; or
- the person needs to live away from home because the person is a
new apprentice.
This subsection is usually applied to dependent students who
wish to access the away from home rate of Youth Allowance. For the
purposes of new subsection 1067A(10C) paragraph
1067D(1)(a) and subparagraphs 1067D(1)(c) (ii) and (iii) are
disregarded.
The actual detail of how the need to
live away from home is determined is only found in the Guide to the
Social Security Law as follows:
There are separate conditions that apply ONLY
to full-time tertiary students. They can be approved for the away
from home rate if:
- travelling time is excessive ,OR
- they choose to study at an institution away from the parental
home, OR
- there is a compulsory requirement to reside at the institution
while studying, OR
- they are undertaking part of their Australian approved course
at an overseas institution.[74]
So if the student chooses a course that is at a distant
institution they would qualify. However the test for how distant
that institution needs to be is provided in the Guide to Social
Security Law :
For the purposes of YA, excessive travelling
time is where the time it takes for the young person to travel by
public transport from their parent's home to an approved activity,
exceeds 90 minutes including walking and waiting times.
Restrictions due to lack of, or deficiencies in public transport
should also be taken into account.
Example: If the only available transport is by
bus, with departure and arrival times too early and too late at
6.00am and 10.00pm.[75]
Items 5 9 amend the method statement in the
Youth Allowance Rate Calculator contained in section 1067G A1 of
the Social Security Act so that the requirement to apply three
separate income tests is removed.
Item 9 inserts a new step 13
into the method statement in subsection 1067G-A1. The effect of the
amendment is that a student s rate of payment will only be reduced
by one of three possible tests rather than two as at present. It
will result in higher rates of payment for many students.
Item 12 repeals existing points 1067G-F22 F25
of the Youth Allowance Rate Calculator which currently apply the
Parental Income Test. Item 12 substitutes new
point 1067-G22 so that there is a significant
increase to the income test free threshold for the Parental Income
Test. The income test free threshold that applies to Family Tax
Benefit part A from July of each year will be used for the purposes
of the Youth Allowance Parental Income Test from the following
January. That will result in an increase in the income test free
threshold from the present $32 800 per annum to $42 559 per annum
in January 2010.
Item 13 repeals the present provisions of the
Youth Allowance Rate Calculator which set the method for
calculating the rate of payment taking account of parental
income.
Presently Youth Allowance rates for dependent students are
determined by the following method:
- The family s income test free area is decided by adding set
amounts for other dependant children and students in the family to
the basic income test free area of $32 800.
- The maximum payment for each Youth Allowance student
in the family individually is then reduced by 25 per cent of the
family income in excess of the income test free area.
Item 13 inserts new points 1067-F26
F30 to substitute the following method:
- The family s income test free area will be $44 165.
- The maximum payment for all Youth Allowance students
in the family combined is then reduced by 20 per cent of the income
in excess of the income test free area.
Under the present method the 25 percent taper rate is applied
for each student, so if there were two students the combined
payment rate for the two students would be reduced by 50 percent of
the excess family income. The new method means that in families
with more than one student the combined payment of all students is
only reduced by 20 per cent of the excess family income.
Item 14 repeals existing point 1067-G15 and
substitutes new points 1067-G15 G19 to apply the
same changes to the Family Actual Means Test as item 13 applies to
the Parental Income Test.
Items 18 19 amend paragraphs 1067G-H29(a) and
(aa) and point 1067L-D28 respectively to increase the income test
free area for the Youth Allowance and AUSTUDY personal income tests
from $236 per fortnight to $400 per fortnight. At present income
above $236 reduces payment by 50 per cent for the first $80 and 60
per cent for income above that amount. This income test taper
boundary amount will still apply so that the first $80 above the
new $400 free area will reduce payments by 50 per cent.
Items 20 22 amend the tables in sections 1190
and 1191 of the Social Security Act respectively to provide for the
indexation of the income test free area and boundary amount to
movements in the CPI in January each year starting in January
2013.
Items 24 and 26 increase the
maximum amount that can be accumulated in a student s Income Bank
under the Youth Allowance and AUSTUDY personal income tests from
$6000 to $10 000. Students can accumulate credits for unused parts
of the income test free area from fortnight to fortnight until the
maximum amount is reached. This banked amount can then be used in
later fortnights when income earned exceeds the $400 income test
free area. Income peaks from holiday employment for example can be
averaged out over periods when income is low.
Items 28 30 amend the tables in sections 1190
1192 of the Social Security Act to provide for the indexation of
the maximum amount that can be accumulated to movements in the CPI
in January of each year starting in January 2013.
These changes to the personal income test take effect from 1
July 2012.
Item 4 inserts new part 2.11B
(proposed sections 592F 592N) into the Social
Security Act to provide for the new Student Start-up Scholarship
and the new Relocation Scholarship. These payments will replace the
existing Commonwealth Education Costs Scholarship and the
Commonwealth Accommodation Scholarship for new claimants.
New section 592F sets out the qualification
conditions for the start-up scholarship for Youth Allowance and
AUSTUDY recipients. To qualify a student must be:
- both qualified for and receiving Youth Allowance or
AUSTUDY
- receiving Youth Allowance or AUSTUDY not just rent assistance
or pharmaceutical allowance[76]
- undertaking full-time study in a course approved for
scholarship payment
- intending to start or continue the course within 35 days,
and
- unlikely to receive a Commonwealth Education Costs
Scholarship.
New section 592G sets out when a student is not
qualified for the scholarship. Proposed subsections 592G(1) (2)
provide that if a student has received, within the last six months,
a student start-up scholarship or one of a range of similar
scholarships they will not qualify for the Student Start-up
Scholarship. This provision allows the payment of the scholarship
every six months to qualified students. There is some discretion to
pay scholarships closer together than six months where this would
bring the payments into line with the beginning of semesters of
study. This could occur where a student commences to receive Youth
Allowance or AUSTUDY part way through a semester of study. Their
first scholarship payment would then be paid closer than six months
to the commencement of the next semester when they would receive
another scholarship payment.
New section 592H specifies that the amount of
the start-up scholarship is $1 127. Students would receive two such
payments per annum.
New section 592J sets out the qualification
conditions for the Relocation Scholarship for Youth Allowance. They
are the same as apply for the Start-up Scholarship but with the
following differences:
- only Youth Allowance recipients are eligible
- only some independent students are eligible: specifically those
who have a dependent child, are orphans, have parents who are
unable to exercise parental responsibilities, are refugees, are in
State care, find it is unreasonable for them to live at home or are
specially disadvantaged, and
- only dependent students who are required to live away from home
to study are eligible.
New section 592K sets out when a student is not
qualified for the relocation scholarship. Proposed
subsections 592K(1) (2) provide that if a student has
received, within the last twelve months, a relocation scholarship
or one of a range of similar scholarships they will not qualify.
This provision allows the payment of the scholarship every twelve
months to qualified students. There is some discretion to pay
scholarships closer together than twelve months where this would
bring the payments into line with 1 January. This could occur where
a student commences to receive Youth Allowance part way through a
year of study. Their first scholarship payment would then be paid
closer than twelve months to the commencement of the next year when
they would receive another scholarship payment.
Subsection 592K(5) provides that a student does
not qualify for the Relocation Scholarship if they have reached the
age of independence for Youth Allowance and had not received a
Relocation Scholarship or similar payment before reaching the age
of independence.
New section 592L specifies the amount of the
Relocation Scholarship is $4 000 for a student who has not received
a Relocation Scholarship already except where the student has
already relocated and commenced study. This means that students
relocating to start study will be paid $4 000 in their first year
of study. In subsequent years of study they will receive a $1 000
payment. These rates will be indexed annually to movements in the
Consumer Price Index.
New sections 592M and 592N
provide for approved scholarship courses to be identified by
ministerial determination. Approved scholarship courses would be
those courses of study that students need to be engaged in to be
paid the Start-up and Relocation Scholarships.
Items 5 9 amend the Higher Education
Support Act 2003 to facilitate the provision of information
about a person s receipt of Commonwealth scholarships to
Centrelink. This information will be used to assess the person s
entitlement to social security and veterans entitlements
scholarships.[77]
Item 10 inserts Proposed paragraph
258(3)(aa) into the Military Rehabilitation and
Compensation Act 2004 so that student Start-up Scholarship
payments and Relocation Scholarship payments can be made under the
Military Rehabilitation and Compensation Act Education and Training
Scheme.
Item 13 inserts new paragraph
8(8)(zjd) in the Social Security Act to exempt merit and
equity based scholarships up to a threshold amount from the
definition of income under that Act.
Item 14 inserts new subsection
8(8AA) into the Social Security Act. It will
provide for certain specific scholarships to be excluded payments
for income test purposes in addition to the scholarships exempted
under proposed paragraph
8(8)(zjc). The item also inserts new
subsection 8(8AB) which specifies the threshold amount up
to which scholarships under proposed paragraph
8(8)(zjd) would be exempt. It would initially be
$6 762 per annum and would then be indexed in line with the CPI
from 2011.
Item 23 inserts new section
1223ABE into the Social Security Act so that where a
person has received a Start-up Scholarship or Relocation
Scholarship payment because the person is proposing to undertake an
approved scholarship course the amount of the payment will be a
debt due to the Commonwealth if the person does not actually
undertake the course. However, there is an exception to this rule
where the person does not take up the course due to exceptional
circumstances beyond the person s control.
Similarly proposed subsections 1223ABE(2) (3)
provide for the creation of debts where a person has received a
Start-up Scholarship or Relocation Scholarship payment because the
person is undertaking an approved scholarship course but ceases to
undertake that course within 35 days after the date that the course
commenced.
Items 24 31 amend the Social Security
(Administration) Act 1999.
In particular, item 27 inserts new
section 47D so that where a portion of a person s Youth
Allowance is being paid to the person s parent, the same portion of
Start-up Scholarship or Relocation Scholarship, where payable, will
be paid to the person s parent.
Item 28 inserts new sections 123XPE
123XPF which will ensure that where a person is subject to
the income management regime, any Start-up Scholarship or
Relocation Scholarship payable to the person will be placed in the
person s income management account.
Items 32 33 insert consequential amendments
into the Veteran s Entitlement Act 1986.
Item 1 corrects an oversight created by the
Social Security Amendment (Training Incentives) Act 2009
which prevented the payment of a training supplement to certain
recipients of Parenting Payment (Partnered).
This bill seeks to make a number of changes to student income
support in order to increase the accessibility of higher education.
These changes form part of the government response to the Review of
Higher Education conducted by Emeritus Professor Denise Bradley.
The measures are wide ranging and include changes to income tests
and criteria for establishing independence for Youth Allowance and
AUSTUDY and expansion of the Commonwealth Scholarships program.
The most controversial aspect of the Bill is the tightening of
eligibility for independent status under Youth Allowance. This has
attracted criticism from student representative groups, the
opposition, minor parties and independents concerned about the
impact on students who will no longer be eligible for Youth
Allowance (particularly those who had taken a gap year in
anticipation of being eligible in 2010). Nevertheless, as noted
above, this change effectively closes a loophole under which
students from higher income families have been able to access Youth
Allowance an issue highlighted by the Bradley Review. Further,
changes to eligibility for independent status need to be seen
within the context of the increased access to the dependent rate of
Youth Allowance provided for in this Bill.
Copyright Commonwealth of Australia
Members, Senators and Parliamentary staff can obtain further
information from the Parliamentary Library on (02) 6277 2410.
Luke Buckmaster
Dale Daniels
Coral Dow
20 October 2009
Bills Digest Service
Parliamentary Library
© Commonwealth of Australia
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