Bills Digest no. 85,
2016–17
PDF version [540KB]
Michael Klapdor
Social Policy Section
29
March 2017
Contents
Purpose of the Bill
Commencement
History of the Bill
Background
Committee consideration
Senate Standing Committee for the
Scrutiny of Bills
Previous committee consideration
Policy position of non-government
parties/independents
Position of major interest groups
Financial implications
Statement of Compatibility with Human
Rights
Parliamentary Joint Committee on
Human Rights
Key issues and provisions
Income support eligibility and work
disincentives
Eligibility conditions for
unemployment payments
Income testing
Working credit
Employment income nil rate periods
Seasonal worker preclusion period
Seasonal horticultural seasonal work
trial
Key provisions
Date introduced: 23
March 2017
House: House of
Representatives
Portfolio: Social
Services
Commencement: Parts
1 and 2 of Schedule 1 on 1 July 2017; Part 3 of Schedule 1 on 1 July
2020.
Links: The links to the Bill,
its Explanatory Memorandum and second reading speech can be found on the
Bill’s home page, or through the Australian
Parliament website.
When Bills have been passed and have received Royal Assent,
they become Acts, which can be found at the Federal Register of Legislation
website.
All hyperlinks in this Bills Digest are correct as
at March 2017.
Purpose of
the Bill
The purpose of the Social Services Legislation Amendment
(Seasonal Worker Incentives for Jobseekers) Bill 2017 (the Bill) is to amend
the Social
Security Act 1991 (the SS Act), the Farm Household
Support Act 2014 and the Veterans’
Entitlements Act 1986 (VE Act) to provide for an income test
incentive aimed at encouraging job seekers on income support to undertake
seasonal horticultural work.
The measures are part of a two-year trial program
commencing 1 July 2017 to encourage jobseekers to undertake seasonal
horticultural work such as fruit-picking. Under the measure, participants will
be able to earn up to $5,000 from specified horticultural seasonal work during
the 12 months after they join the trial program, without that income affecting
their income support payment rate under the income test. Up to 7,600 job
seekers who have been in receipt of Newstart Allowance or Youth Allowance
(Other) for at least three months will be eligible to participate in the trial.[1]
The program will be run by employment services providers
who will receive a ‘Provider Seasonal Work Incentive Payment’ of $100 a week
for up to six weeks a year for each participant they place with eligible
farmers.[2]
Participants will be eligible for a travel allowance of $300 if they undertake
horticultural work that is more than 120 kilometres from their home.[3]
Commencement
Parts 1 and 2 of the Bill, the main provisions, commence
on 1 July 2017. Part 3, which repeals the amendments made by Parts 1
and 2, commences on 1 July 2020 so that it is clear that the trial
has a start date and an end date.
History of the Bill
The provisions in the Bill were first proposed in Schedule
12 of the Social Services Legislation Amendment (Omnibus Savings and Child Care
Reform) Bill 2017 (the Omnibus Bill).[4]
The Government was unable to secure the support of the Senate for some of the
measures in the Omnibus Bill and has decided to attempt to legislate some of
the measures via separate Bills.[5]
On 22 March 2017, the Senate passed a motion to vary the
routine of business in the Senate in order to consider two Bills proposing
amendments similar to some of those in the Omnibus Bill: the Social Services
Legislation Amendment Bill 2017 (a new Bill) and the Family Assistance
Legislation Amendment (Jobs for Families Child Care Package) Bill 2016 (which
was already before the House of Representatives).[6]
The motion stated that once these Bills had been finally considered the Social
Services Legislation Amendment (Omnibus Savings and Child Care Reform) Bill
2017 would be discharged from the notice paper.[7]
The Omnibus Bill was discharged from the Senate Notice Paper on 23 March 2017.[8]
Background
The measure was announced in the 2016–17 Mid-Year Economic
and Fiscal Outlook (MYEFO).[9]
A trial of such an income test incentive for jobseekers
was proposed by the Nick Xenophon Team (NXT) in the context of debate over
changes to the income tax rates for working holiday makers (the ‘backpacker
tax’).[10]
The NXT secured support for its proposal as part of an agreement to support the
backpacker tax legislation (the Income
Tax Rates Amendment (Working Holiday Maker Reform) Bill 2016 (No. 2).[11]
NXT MP Rebekha Sharkie stated:
We need to address the work force shortage that our local
growers experience during harvest time. With the uncertainly surrounding a
backpacker tax, we have developed a seasonal regional employment strategy for
Government that will encourage unemployed people to take on short term fruit picking
work and assist the horticulture and viticulture industries to address the ever
challenging issue of finding enough hands to get fruit into the packing shed.
This is a win-win for farmers and for local employment.
Our plan gives unemployed Australians the opportunity to
‘taste’ work in primary production without fear of losing unemployment
benefits. We are assisting farmers to access a wider pool of casual labour
though the Job Active program, which for many unemployed Australians could
likely lead to on-going work on the land.[12]
Committee
consideration
At the time of writing, the Bill had not been referred to
any Committees.
Senate Standing
Committee for the Scrutiny of Bills
At the time of writing, the Senate Standing Committee for
the Scrutiny of Bills had not considered the Bill. The Committee did not have
any comments on Schedule 12 of the Omnibus Bill.[13]
Previous
committee consideration
The Omnibus Bill was referred to the Senate Community
Affairs Legislation Committee for inquiry and report by 20 March 2017.
The Committee was granted an extension and reported on 21 March 2017.[14]
Details of the inquiry are available from the inquiry
homepage.[15]
The Committee recommended the Bill be passed.[16]
The Committee did not refer to the seasonal worker incentives measure in
Schedule 12 in its report.[17]
Policy
position of non-government parties/independents
It is unclear what the position of the Opposition is on
the Bill.
It is expected that NXT Members and Senators support the
Bill as they proposed the measure and secured the Government’s support for it.
Australian Greens Senators, in their dissenting report on
the Omnibus Bill, stated they ‘believe that this measure has some merit and
could be explored further for those on Newstart and Youth Allowance (Other)
payments but have concerns that it is limited to one industry’.[18]
Position of
major interest groups
The Australian Council of Social Service (ACOSS) is
‘broadly supportive’ of the measure but stated that it should be broadened to
apply to all people in receipt of an unemployment payment. ACOSS has
recommended an ‘income bank’ of $4,000 that accrues over time to ‘enable all
receiving an unemployment payment to undertake casual or sporadic work without
incurring a sharp or total loss of payment’.[19]
The Australian Council of Trade Unions (ACTU) stated that
it held no substantial objections to the proposed trial program but was
‘concerned about the underlying issue of worker exploitation in the agriculture
sector especially amongst temporary work visa holders’.[20]
The ACTU stated that the ‘Government must take action to end the exploitation
in this industry and, if this program goes ahead, ensure that job seekers are
not exposed to exploitation and abuse’.[21]
The National Social Security Rights Network (NSSRN)
suggested that incentives such as that proposed in the trial ‘have generally
been unsuccessful in the past ... because there are other far more significant
factors affecting the take up of work’.[22]
The NSSRN also suggested that the program would be a departure from the ‘very
fundamental principles of payment according to need and can therefore lead to
inequity’.[23]
The NSSRN stated it could support the measures as a trial, provided it is
rigorously evaluated.[24]
Financial
implications
According to the Explanatory Memorandum to the Bill, the
measure is expected to cost $27.5 million over the forward estimates.[25]
Statement of Compatibility with Human Rights
As required under Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the
Bill’s compatibility with the human rights and freedoms recognised or declared
in the international instruments listed in section 3 of that Act. The
Government considers that the Bill is compatible.[26]
Parliamentary
Joint Committee on Human Rights
At the time of writing, the Parliamentary Joint Committee
on Human Rights had not considered the Bill. The Committee did not comment on
Schedule 12 of the Omnibus Bill.[27]
Key issues
and provisions
Income
support eligibility and work disincentives
Eligibility
conditions for unemployment payments
The qualification criteria for Newstart Allowance require
that an individual be considered unemployed and meet the activity test.[28]
The qualification criteria for Youth Allowance require an individual to meet
the activity test but an individual undertaking full-time work of at least 35
hours a week is considered to have not met the activity test.[29]
This means that for both payments, an individual undertaking full-time work
would normally be disqualified.
The activity test for Newstart Allowance and Youth
Allowance (Other) requires claimants to look for and take up any offers of
suitable paid work (unless an exemption from activity test requirement
applies).[30]
Suitable paid work includes seasonal work, though certain
types of seasonal work might be considered unsuitable if the person has to
commute for more than 90 minutes.[31]
If a recipient has indicated they would be prepared to live away from home for
work or are accustomed to undertaking employment away from home, then they
would be expected to take up employment opportunities outside their local area.
Different types of employment are considered unsuitable for different types of
recipients—for example, those with caring responsibilities.[32]
Income
testing
Income testing is intended to target income support to
those without the means to support themselves. Income over certain thresholds
reduces payments rates, and income over a certain amount means that a person
receives a zero rate or is ineligible for payment. While the income test is
necessary for targeting payments to those in need, it can also act as a
disincentive to work as the withdrawal of income support partly offsets any
increased income from working. When combined with income tax, income test
withdrawals can significantly reduce the amount of disposable income gained
from undertaking paid work (the combined effect of income support reductions
and income tax is known as an effective marginal tax rate).
Newstart Allowance recipients can earn $104 a fortnight
before their payment rate is affected.[33]
Fortnightly rates of Newstart are reduced by 50 cents for every dollar of
income between $104 and $254, and by 60 cents in the dollar for every dollar of
income over $254 in a fortnight. Single parents have a different income
test—their fortnightly rates reduce by 40 cents for every dollar of income over
$104.
Single Newstart Allowance recipients with no children will
not receive any payment if their fortnightly income is over $1,036.34. Single
principal carers of dependent children will not receive any payment if their
fortnightly income is over $1,576.00.
Youth Allowance (Other) recipients can earn up to $143 per
fortnight before their payment rate is affected.[34]
Fortnightly rates of Youth Allowance (Other) are reduced by 50 cents for every
dollar of income between $143 and $250, and by 60 cents for every dollar of
income over $250 per fortnight. A single Youth Allowance (Other) recipient
living away from their family home will not receive any payment if their
fortnightly income is over $901.67.[35]
If a person is a member of a couple, their partner’s
income can also affect their payment rates.
Working
credit
The Working Credit scheme allows Newstart Allowance and
Youth Allowance (Other) recipients to build up credits during periods when
little or no income is earned which can reduce the amounts that are counted
under the income test when earned income increases.[36]
Recipients typically accrue one credit for each dollar of difference between
$48 and their income in each fortnight. For example, if an individual has no
income in a fortnight they can accrue 48 credits; if they earn $40 they can
accrue eight credits and if they earn $48 or more they cannot receive credits
in that fortnight. Newstart Allowance recipients can accrue a maximum of 1,000
credits (so $1,000 of income can be excluded from the income test if they do
take up work). Youth Allowance (Other) recipients can accrue 3,500 credits.
The Working Credit scheme is intended as an incentive for
payment recipients to take up work, including short-term work such as seasonal
work. It works to reduce the disincentive effect of high effective marginal tax
rates.
Employment
income nil rate periods
Another incentive for income support recipients to take up
short-term or seasonal work is the Employment Income Nil Rate Period. Where a
Newstart Allowance or Youth Allowance (Other) recipient’s payment is reduced to
nil due to employment income they can still be considered a benefit recipient
for a set period of time known as an ‘employment income nil rate period’.[37]
If the person’s income falls during this period, and they become eligible for
some income support again, they can recommence payment without having to
reapply and serve a waiting period. An employment income nil rate period can
last for up to six fortnights after the fortnight during which the payment was
reduced to nil (in effect this means a nil rate period can last for six or
seven fortnights).
Seasonal
worker preclusion period
People claiming income support payments who have
undertaken seasonal or intermittent work (or whose partner has undertaken such
work) in the six months prior to making a claim may be subject to a ‘seasonal
worker preclusion period’ (SWPP).[38]
The SWPP applies to a range of working-age income support payments, including Newstart
Allowance and Youth Allowance (Other).[39]
The SWPP is a period during which a person is not eligible to receive a social
security payment—it is calculated based on the amount of earnings a person or
their partner earned, the number of weeks spent undertaking
seasonal/intermittent work and any intervening weeks.
The SWPP only affects those lodging new claims for
affected payment if they are single and earned income above Average Weekly
Ordinary Time Earnings (or a member of a couple who earned more than twice
Average Weekly Ordinary Time Earnings) and the income was earned during a
period of seasonal or intermittent work that ended in the six months before
lodging a claim.[40]
Exemptions from the SWPP can be granted where a person was
in receipt of income support for a continuous period exceeding 12 months on the
day before they commenced intermittent work (does not apply to seasonal work).
Exemptions can also be granted if the person is undertaking certain employment
services or rehabilitation activities. SWPPs can be waived if the claimant is
in severe financial hardship and the hardship is a result of unavoidable or
reasonable expenditure.[41]
Seasonal
horticultural seasonal work trial
The measures proposed in the Bill are aimed at alleviating
some of the disincentives to take up seasonal work built into the design of
income support payments for jobseekers. Primarily, the measure will remove some
of the disincentive effect of the income test by allowing jobseekers to earn
income without losing part of their income support payment. Secondly, it will
allow Youth Allowance (Other) recipients to work full-time hours without losing
eligibility for the payment.
The trial is, in effect, providing an enlarged Working
Credit balance to a select group of income support recipients who are willing
to undertake seasonal work. This will provide a significant incentive for
eligible jobseekers to take up seasonal work.
A study by Roger Wilkins and Andrew Leigh on the effects
of the Working Credit program estimated that it has positive effects on the
employment participation of people receiving income support and the income of
these people (Wilkins and Leigh note that the way the program was implemented
and the data available make it difficult to credibly evaluate the causal
effects of the program).[42]
However, the study estimated that there were ‘ambiguous—or possibly
zero—effects on exits from the income support system’.[43]
The measures in the Bill have, however, not been framed as
measures that will encourage jobseekers to move off welfare. Instead, the
Minister has stated that ‘the measure responds to concerns about the ability of
the Australian horticulture industry to attract sufficient numbers of seasonal
workers’.[44]
As such, the measure is intended to boost labour supply rather than encouraging
people to move from welfare and into work.
It is unclear whether trial participants will be affected
by the SWPP.[45]
Only those who become ineligible for their Newstart Allowance or Youth
Allowance (Other) payment during the trial period could be affected by the SWPP
as it only affects new claims. It could affect those who earn a significant
amount of income while participating in the trial over a long period so that
their payment rate is reduced to zero under the income test (after accounting
for the proposed $5,000 exemption) and receive a zero rate for longer than the
permissible employment income nil rate period (six or seven fortnights). It is
unlikely that such a circumstance would arise during the trial period.
Key
provisions
Item 2 adds the ‘seasonal work living away and
travel allowance’ to the list of amounts excluded from the definition of income
at subsection 8(8) of the SS Act. This is the payment of $300 for those
who move 120 kilometres or more to participate in the trial program. The
amendment will mean that this amount is not included in the social security
income test.
As noted above, the qualification criteria for Youth
Allowance require an individual to meet the activity test but an individual
undertaking full-time work of at least 35 hours a week is considered to have not
met the activity test.[46]
Item 3 inserts proposed subsection 541(3A) into the SS Act
so that a person in receipt of Youth Allowance will not be disqualified for
undertaking full-time work of 35 hours a week or more if that work is
qualifying seasonal horticultural work (as defined at proposed subsection
1073K(6) inserted by item 7) and the income earned, derived or
received from that work is being disregarded under the income test (under proposed
subsection 1073K(2) inserted by item 7).
Item 7 inserts proposed Division 1AC—seasonal
horticultural work income exemption, which consists of proposed section
1073K, into Part 3.10 of the SS Act. To qualify for the exemption,
the Secretary of the Department of Social Services must be satisfied that a
person is placed in qualifying seasonal horticultural work under the program
known as the ‘Seasonal Horticultural Work Program’ in 2017–18 or 2018–19. If
the person qualifies for the income test exemption, they will have the first
$5,000 of any ordinary income earned, derived or received by the person under
that program disregarded when working out their payment rate. The exemption
applies for up to 12 months from the first day of the instalment period
(payment fortnight) that includes the day the person is placed in the program.
However, the $5,000 exemption is respective to each of the financial years of
the program and a person eligible in both years cannot transfer any unused
balance from their total from the first year over to the second year.
Proposed subsection 1073K(3) provides for this
exemption to also apply in relation to the person’s partner (for example, under
the partner income test if the partner is also receiving an income support
payment).
Proposed subsection 1073K(5) states that qualifying
payments for the seasonal horticultural work income exemption are Newstart
Allowance and Youth Allowance (Other).[47]
Proposed subsections 1073K(6) and (7) provide for
the Secretary of the Department of Employment to determine, by legislative
instrument, what kinds of seasonal work are to be considered qualifying
seasonal horticultural work.
Part 3 of the Bill (items 10–18) will repeal all of
the amendments made by the Bill on 1 July 2020.
[1]. Youth
Allowance (Other) is paid to jobseekers aged 16–21 and Newstart Allowance is
paid to jobseekers aged 22 and over. Youth Allowance (Student) is paid to
full-time students and apprentices and has different eligibility criteria. Department
of Human Services (DHS), ‘Youth
Allowance’, DHS website, 3 January 2017; Explanatory
Memorandum, Social Services Legislation Amendment
(Seasonal Worker Incentives for Jobseekers) Bill 2017, p. 3.
[2]. Department
of Social Services, Department of Education and Training and Department of
Employment, Submission
to Senate Community Affairs Legislation Committee, Inquiry into the Social
Services Legislation Amendment (Omnibus Savings and Child Care Reform) Bill
2017, submission no. 7, 3 March 2017, p. 12.
[3]. Ibid.
[4]. Parliament
of Australia, ‘Social
Services Legislation Amendment (Omnibus Savings and Child Care Reform) Bill
2017 homepage’, Australian Parliament website.
[5]. M
Cormann (Minister for Finance) and C Porter (Minister for Social Services), New
Social Services Amendment Bill secures $2.4 billion in Budget savings,
media release, 22 March 2017.
[6]. G
Brandis, ‘Business:
rearrangement’, Senate, Debates, (proof), 22 March 2017,
p. 7.
[7]. Ibid.
[8]. Parliament
of Australia, ‘Social
Services Legislation Amendment (Omnibus Savings and Child Care Reform) Bill
2017 homepage’, op. cit.
[9]. S
Morrison (Treasurer) and M Cormann (Minister for Finance), Mid-year
economic and fiscal outlook 2016–17, p. 195.
[10]. N
Xenophon and R Sharkie, Relax
dole rules to give Aussies a chance to work on farms, media release,
20 September 2016.
[11]. N
Xenophon and R Sharkie, A
win for NXT’s seasonal workers incentive trial and Aussie job seekers,
media release, 28 November 2016.
[12]. N
Xenophon and R Sharkie, Relax
dole rules to give Aussies a chance to work on farms, op. cit.
[13]. Senate
Standing Committee for the Scrutiny of Bills, Scrutiny
digest, 2, 2017, The Senate, Canberra, 15 February 2017,
p. 26.
[14]. Senate
Community Affairs Legislation Committee, ‘Social
Services Legislation Amendment (Omnibus Savings and Child Care Reform) Bill
2017’, Inquiry homepage.
[15]. Ibid.
[16]. Senate
Community Affairs Legislation Committee, Social
Services Legislation Amendment (Omnibus Savings and Child Care Reform) Bill
2017 [Provisions], The Senate, March 2017, p. ix.
[17]. Ibid.
[18]. Australian
Greens Senators, Dissenting
report, Senate Community Affairs Legislation Committee, Social Services
Legislation Amendment (Omnibus Savings and Child Care Reform) Bill 2017
[Provisions], The Senate, March 2017, p. 52.
[19]. Australian
Council of Social Service (ACOSS), Submission
to Senate Community Affairs Legislation Committee, Inquiry into the Social
Services Legislation Amendment (Omnibus Savings and Child Care Reform) Bill
2017, submission no. 13, 3 March 2017, p. 5.
[20]. Australian
Council of Trade Unions (ACTU), Submission
to Senate Community Affairs Legislation Committee, Inquiry into the Social
Services Legislation Amendment (Omnibus Savings and Child Care Reform) Bill
2017, submission no. 11, 3 March 2017, p. 10.
[21]. Ibid.
[22]. National
Social Security Rights Network, Submission
to Senate Community Affairs Legislation Committee, Inquiry into the Social
Services Legislation Amendment (Omnibus Savings and Child Care Reform) Bill
2017, submission no. 9, 3 March 2017, p. 6.
[23]. Ibid.
[24]. Ibid.
[25]. Explanatory
Memorandum, Social Services Legislation Amendment (Seasonal Worker
Incentives for Jobseekers) Bill 2017, p. 2.
[26]. Ibid.,
p. 7.
[27]. Parliamentary
Joint Committee on Human Rights, Report,
2, 2017, The Senate, Canberra, 21 March 2017, pp. 50–53.
[28]. Social Security Act
1991, sections 593 and 595.
[29]. Ibid.,
subsection 541(3).
[30]. DSS,
‘3.2.8.10
mutual obligation requirements for NSA/YA job seekers overview’, Guide
to social security law, version 1.229, DSS website,
4 January 2016.
[31]. DSS,
‘3.2.8.60
unsuitable work’, Guide to social security law, version 1.229, DSS
website, 1 July 2015.
[32]. Ibid.
[33]. DHS,
‘Income
test for Newstart Allowance, Partner Allowance, Sickness Allowance and Widow
Allowance’, DHS website, 20 March 2017.
[34]. DHS,
‘Personal
income test for Austudy and Youth Allowance’, DHS website, 20 March 2017.
[35]. Ibid.
[36]. DHS,
‘Working
Credit’, DHS website, 29 September 2016.
[37]. DSS,
‘3.1.12
employment income nil rate period’, Guide to social security law, version
1.230, DSS website, 20 March 2017.
[38]. DSS,
‘1.1.S.455
SWPP’, Guide to social security law, version 1.230, DSS website, 20 March 2017.
[39]. DSS,
‘3.1.7.10
who is affected by an SWPP’, Guide to social security law, version
1.229, DSS website, 9 November 2016.
[40]. DSS,
‘1.1.S.455
SWPP’, op. cit.
[41]. DSS,
‘3.1.7.10
who is affected by an SWPP’, op. cit.
[42]. R
Wilkins and A Leigh, ‘Effects
of temporary in-work benefits for welfare recipients: examination of the
Australian Working Credit programme’, Fiscal Studies, 33(3), 2012,
p. 367.
[43]. Ibid.
[44]. C
Porter, ‘Second
reading speech: Social Services Legislation Amendment (Omnibus Savings and
Child Care Reform) Bill 2017’, House of Representatives, Debates, 8 February 2017,
p. 221.
[45]. Concern
about the potential impact was raised by the National Social Security Rights
Network. See National Social Security Rights Network, Submission
to Senate Community Affairs Legislation Committee, Inquiry into the Social
Services Legislation Amendment (Omnibus Savings and Child Care Reform) Bill 2017,
submission no. 9, 3 March 2017, p. 6.
[46]. Subsection
541(3), Social
Security Act 1991 (Cth).
[47]. Youth
Allowance (Other) means for recipients other than Australian Apprentices or
full-time students.
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