Bills Digest 39 1996-97
Social Security Legislation Amendment (Budget and Other Measures) Bill
1996
WARNING:
This Digest is prepared for debate. It reflects the legislation as introduced
and does not canvass subsequent amendments.
This Digest was available from 10 October 1996.
CONTENTS
Social Security Legislation Amendment (Budget and Other Measures) Bill
1996
Date Introduced: 12 September 1996
House: House of Representatives
Portfolio: Social Security
Commencement: The Bill contains a large number of measures with
varying commencement dates which will be referred to in the Main Provisions
section of this Digest.
The main amendments contained in the Bill relate to:
- abolition of minimum rates for certain benefits for those under 18;
- tightening the activity test and penalty periods for those on Newstart
and Youth Training Allowance;
- extension of the waiting period relating to industrial action;
- increased waiting periods in regard to unused annual leave and liquid
assets waiting periods;
- removing the connection between sickness allowance and a loss of wages;
- abolition of the earnings credit scheme;
- abolition of the employment entry payment and restriction on the availability
of the education entry payment;
- alteration of the treatment of lump sum compensation payments; and
- the removal of administrative error as a reason for excluding debt
recovery provisions.
As there is no central theme to the Bill, the Background to the amendments
will be discussed below.
Schedule 1 - Abolition of Minimum Rate for Under 18 year Olds
Currently, people under 18 receiving Newstart, Sickness or Youth Training
Allowance are subject to a parental income and assets tests unless they
satisfy a number of criteria, such as being independent, a member of a
couple, have a dependent child or are homeless. If the parental means
tests apply, the payment to the under 18 year old will be reduced by the
amount that the parents income or assets exceed the appropriate threshold.
However, there is a limit on the maximum reduction that can be made under
the parental means test so that there is a minimum payment to such people
when their parents assets or income would otherwise reduce their payment
to zero. This amount is known as 'parental means test minimum rate' and
is currently approximately $65.75 per fortnight. Since the 1996 Election,
the government has announced that the minimum rate would be abolished.
For the Newstart allowance (NSA) and the Sickness allowance (SA), the
abolition will be achieved by amending Point 1067 of the Social Security
Act 1991 (SS Act) which contains the method for calculating amount
of reduction for parental income. The amendments remove parental means
test minimum rate from the calculation and makes subsequential amendments
on the removal.
The Youth Training Allowance (YTA) is available to those under 18 unemployed
and satisfying similar criteria as for NSA (eg satisfying the activity
test). YTA recipients are also required to enter into a Youth Training
Activity Agreement to be eligible for the allowance. YTA payments also
contain parental means tests calculated in the same way as under the SS
Act. Part 3 of Schedule 2 will abolish the minimum rate by making similar
amendments to the Student and Youth Assistance Act 1973 (SYA Act)
to those described above.
The measures are estimated to save $3.7 million in 1996-97, $8.2 million
in 1997-98 and $8.5 million in 1998-99 (as with other estimated financial
figures in this Digest, these figures are taken from the Explanatory Memorandum
to the Bill).
Application: 1 January 1997
Schedule 5 - Activity Test and Penalty Periods for Newstart and the
Youth training Allowance.
Section 601 of the SS Act provides that a person will satisfy the activity
test if the Secretary is satisfied that person is actively seeking and
willing to undertake paid work that is not unsuitable. Part 3 of the Schedule
will alter the circumstances in which work will be taken to be unsuitable.
Major differences between the current and proposed tests are:
- currently a job is considered unsuitable if person lacks the skills
experience or qualifications to perform the job. It will be an additional
requirement that the employer provides no training;
- currently a job is unsuitable if the person has an illness, disability
or injury that will be aggravated by the conditions of the employment.
Under the Bill, it is proposed that there will need to be medical evidence
of such a condition;
- a job is also currently considered unsuitable if the conditions in
which it is to be performed are a risk to health or safety and would
breach occupational health or safety law. Under the amendments the person
would also have to make a reasonable attempt to remove or reduce the
risk through discussions with the employer concerned (as the payments
relate to unemployment, this additional requirement means that the person
is aware of the work conditions and must discuss the matter with the
potential employer before becoming employed);
- a job will currently be unsuitable if it will involve the person becoming
self-employed. This ground for unsuitability will be removed.
Currently a job would be unsuitable if commuting between home and work
would be unreasonably difficult. This will be maintained with a minor
modification and a new ground added, ie that they would be required to
move home and none of the grounds in proposed subsection 601(2AB) - see
below- applies. It is likely that if a job requires a person to move home
and they are not covered by one of the grounds in proposed subsection
601(2AB) that makes the job unsuitable, the job will be considered suitable
and they will be required to move home to be eligible for benefits. The
grounds contained in proposed subsection 201(2AB) are:
- the person is under 18 or over 50;
- the person is pregnant;
- the person's partner is pregnant but in all the circumstances it is
reasonable for the person to move;
- the person's partner has a severe medical condition but in all the
circumstances it is reasonable for the person to move;
- the person resides with a partner who performs full time, permanent
part time or casual work;
- the person resides with a dependent child/children;
- having regard to the person's education and cultural background it
is unreasonable for them to move; or
- moving would cause the person severe financial stress.
The amendments also provide that if a job is suitable and the person
is required to move home (ie the above amendments apply), the grounds
for a job not being suitable cannot include that the person's commuting
would be unreasonably difficult.
Similar amendments will also be made to the SYA Act in respect of the
youth training allowance.
The Principal Act contains a number of circumstances where a person
will not be eligible for Newstart allowance for the period of the 'activity
test deferment period' (the Period), including where a person fails the
activity test, leaves their job voluntarily, refuses a suitable job or
where their unemployment is due to their own conduct (also see below).
The Period is currently based on the number of breaches that occur in
the three years prior to the breach under consideration. If it is the
first breach in that time, the Period is 2 weeks, six weeks for the second,
12 weeks for the third and an additional 6 weeks for each other breach
in the prior 3 years. The Period will be altered by Item 51 to 6 weeks
for the first breach or, if there has been one or more breaches during
the past three years, 13 weeks. The 13 weeks will apply regardless of
the number of the breaches.
Proposed section 601A (Item 119) will deem failure to attend an interview
and voluntarily cease to attend a labour market program without reasonable
excuse to be a breach of the activity test. Similarly, a failure to provide
information about income from remunerated work without reasonable excuse,
or knowingly or recklessly providing false or misleading information in
relation to such income, will also be deemed to be a breach of the activity
test.
Administrative Breaches
Currently, where a person breaches certain administrative requirements,
principally non-attendance at a CES interview when requested to do so
and failure to comply with notification requirements, the same Periods
apply as in relation to breaches of the activity test. During those periods
the person is not eligible to receive the allowance. The proposal contained
in the Bill is to remove the ineligibility for the allowance but to provide
that it will be payable at a reduced rate. The Bill will substitute new
rules in relation to administrative breaches (AB).
An AB will occur when a person breaches the following requirements without
reasonable excuse:
- failure to supply a partner's tax file number;
- notification of a change of event or circumstances;
- a requirement to supply information relating to the payment of the
allowance; and
- a breach of section 1034 of the Principal Act (this appears to be
an error. Section 1034 deals with the calculation of lump sum bereavement
payments under the double orphan pension. It has nothing to do with
either administrative requirements or Newstart. I presume it is meant
to be a reference to section 1304 which is the general power to gain
information).
If a person commits an AB, Newstart will be payable to the person at
a reduced rate until the end of the AB rate reduction period (AB Period).
The AB Period will be 8 weeks. If the person is also subject to an activity
test deferment period, the AB Period will commence at the end of the activity
test deferment test period. Similar rules apply in relation to any applicable
waiting periods.
The AB rules will not apply where all of the following conditions are
satisfied:
- the allowance ceases to payable due to non-compliance with a request
to attend a CES interview or a failure to comply with notification requirements;
- payment has been cancelled or terminated; and
- the person lodges an application for Newstart more than 14 days after
the cancellation or termination occurred.
The effect of this is that if a person has not received Newstart for
2 weeks they may apply to receive the full allowance (this will impose
a minimum penalty equal to the rate reduction).
The rate of reduction during the AB period will be 25% of the person's
entitlement (proposed section 644H).
Items 79 to 113 propose similar amendments in respect of the youth training
allowance.
Item 112 will insert a section 630BD which deals with the situation
where a failure to provide information is both an AB and a breach of the
activity test due to the new categories of activity test violations relating
to the provision of information (see above). The effect of the amendment
is that where an event could trigger both penalties, only the penalty
for the breach of the activity test will apply. Again there is a similar
amendment in respect of the Youth Training Allowance.
Schedule 6 - Unemployment Due to Industrial Action
People are not eligible to receive Newstart if the Secretary is satisfied
that the unemployment is due to industrial action. However, they are eligible
for benefits after the relevant industrial action has stopped if they
meet the criteria for Newstart. Schedule 6 will amend various sections
of the SS and YTA Acts to provide that people who are unemployed due to
industrial action will not be eligible for Newstart for 6 weeks after
the industrial action ceases.
Schedule 7 - Waiting Periods Unused Annual Leave and Liquid Assets Tests
Under both the SS Act and the SYA Act, various waiting periods apply
before a person who is otherwise eligible for a benefit or allowance will
receive the payment. There is a general waiting period of 7 days, so that
a person will not be eligible for payment until 7 days has lapsed since
their application (there are exceptions to this rule, such as where a
person transfers from one benefit to another). In addition, an applicant
may be subject to other waiting periods, principally the unused annual
leave, education leavers, newly arrived residents and liquid assets test
periods. These periods may be additional to each other or, depending on
the circumstances and the type of waiting period involved, only the longest
waiting period will apply. The waiting periods generally aim to require
people to use their own resources for a period before being paid a benefit.
The education leavers waiting period is also designed to prevent students
claiming benefits during annual breaks in education.
In relation to the unused annual leave waiting period, a person who
is otherwise eligible for payment will cease to be eligible during their
'notional leave period', which is the time of unused annual leave they
have since the day their employment ceased up to a maximum of 28 days.
It was announced in the 1996 Budget that the unused annual leave waiting
period, which as noted above has a maximum period of 28 days, will be
replaced by an income maintenance period, which has no maximum period.
The changes to the unused annual leave waiting period will be achieved
by removing from the SS Act references to this waiting period and introducing
the income maintenance period in the Modules used to calculate the ordinary
income of the person (which is used to determine if the person is eligible
for benefits. In normal circumstances receipt of leave payments for a
period will make that persons income such that they are not eligible for
benefits). As a result, if a person is receiving annual leave for the
period they will be deemed to be in receipt of ordinary income for the
period covered by the unused annual leave and so generally not eligible
for benefits. However, if the person is entitled to receive a lump sum
payment in respect of the leave and this amount is rolled-over (ie. generally
used for retirement purposes such as superannuation) the amount will not
be taken into account.
The changes will apply to those payments currently covered by the unused
annual leave period, ie. NSA, SA, parenting allowance and partner allowance.
Schedule 7 will also make complementary changes to the SYA Act.
The changes are estimated to cost $262 000 in 1996-97 and save $20.4
million in 1997-98 and $27.7 million in 1998-99.
As noted above, the amendments will also effect the liquid assets test
applicable to a person. The liquid assets test provides that if a person
has liquid assets, ie cash and certain other assets easily convertible
to cash, above a certain level ($5000 for an individual and $10 000 for
a couple) they will be required to serve a waiting period of, generally,
4 weeks or until their relevant asset level is reached. In changes announced
by the government, the maximum level of liquid assets exempt from the
test will be reduced to $2 500 for an individual and $5 000 for a couple
and the maximum period of the waiting period will be removed. The length
of the liquid assets test waiting period will now be calculated by subtracting
from the persons liquid assets the new exempt amount referred to above
and dividing this amount by the 'Divisor', which is $500 for a single
person without a dependent and $1000 otherwise. This will determine the
number of weeks of the waiting period with fractions of a week disregarded.
(This means that the test deems a single person to consume $500 of liquid
assets a week and others $1000 per week).
Similar amendments will be made to the YTA Act.
The changes are estimated to cost $165 000 in 1996-97 and save $3.7
million in 1997-98 and $4.9 million in 1998-99.
Application: 20 September 1997.
Schedule 8 - Sickness Allowance
To be eligible for SA an applicant must currently show that they satisfy
the relevant criteria, the most important of which are that they are:
incapacitated for work due to an illness or disease; the incapacity is,
or is likely to be, temporary; and the Secretary is satisfied that the
person has, or is likely to, suffer a loss of salary, wages or other income
due to the incapacity. Residency requirements must also be satisfied.
Where a person cannot qualify for sickness benefits due to a failure to
met the criteria they may be eligible for other benefits, such as special
benefit. Schedule 8 contains two changes to the payability of SA:
- first, the need for the Secretary to be satisfied as to loss or wages
etc will be removed, so that the eligibility criteria will now be based
on the incapacity to work; and
- secondly, sick leave entitlements that a person has but is not using
will be deemed to be included in ordinary income, and so included for
the income test. Currently, sick leave is considered to be ordinary
income if actually received. Under the new test, a person will be deemed
to be on sick leave for a day if the have sufficient entitlements to
cover that day, they have a right to claim the leave, the employer is
able to pay the leave (eg the employer is not bankrupt) and the person
is not on another type of leave on that day.
This measure, together with minor changes to the way in which applications
may be made, is estimated to cost $797 000 in 1996-97, $2.8 million in
1997-98 and $2.9 million in 1998-99.
Application: 20 March 1997.
Schedule 10 - Abolition of the Earnings Credit Scheme
This scheme was introduced in 1991 and applies to those in receipt of
a pension, other than the carers pension. The scheme aims to address the
situation where an eligible person has a short period of remunerated work
the income from which would exceed the amount they can earn before the
pension is reduced. Normally, such income would be considered to have
been earned during the period of the work and this would result in a reduction
of the pension for the period of work and a potential loss of other benefits,
such as a health card. Under the earnings credit scheme, credits can be
accumulated in an account to a certain maximum level (approximately $1
100 for an individual and $2 200 for a couple). Credits are accrued where
the persons income for a fortnight is less than the income free level
for that period. The amount accumulated is the difference between the
actual income and the income free level. The account is debited each time
the person's income exceeds the income free level and the amount of the
debit is difference between the income and income free level. If the account
balance is nil, the ordinary income test applies. The earning credits
scheme therefore allows income earned during a short term of paid work
to be spread over a period so that the pension is not immediately effected.
Schedule 10 will amend the SS Act and the YTA Act to remove references
to the credit earnings scheme, thereby abolishing the scheme.
The measure is estimated to save $20.6 million in 1996-97, $75.8 million
in 1997-98 and $79.6 million in 1998-99.
Application: 20 March 1997.
Schedule 11 - Abolition of the Employment Entry Payment and Restriction
on the availability of the Education Entry Payment
These schemes provide for the payment of a lump sum amount to people
who are on benefits and satisfy certain criteria. For NSA and Jobsearch
recipients the payment is available where the person has been registered
with the CES for a least 12 months, they will cease to be eligible for
the allowance because of the employment and the employment is likely to
continue for more than 4 weeks. The payment is only available once each
12 month period. For recipients of other benefits other tests apply, the
main other type of test being that the payment may be made when the persons
income exceeds a threshold level and is likely to do so for more than
4 weeks. The payment was introduced to help off-set initial costs associated
with commencing employment (clothes, tools, fares etc). The payment is
generally $100 for those 18 and over and $50 for those under 18.
Restrictions on eligibility for the employment entry payment are estimated
to save $5 million in 1996-97, $17.3 million in 1997-98 and $79.6 million
in 1998-99.
Item 1 of Schedule 11 will repeal provisions relating to the employment
entry payment, so abolishing the scheme.
The education entry payment is similar to the employment entry payment
but applies to situations where people on benefits enter a full-time education
course that is approved under AUSTUDY or ABSTUDY. The benefit may also
be available where the applicant satisfies the Secretary that they intend
to enrol in such a course. As with the employment entry payment, different
criteria may apply depending on the benefit received before entering education.
The effect of Items 2 to 4 of Schedule 11 is to remove the education
entry payment to those who are transferring from special benefits, job
search, youth training allowance, NSA, mature age allowance, widow allowance,
mature age partner allowance, and partner allowance.
Changes to the education allowance are estimated to cost $270 000 in
1996-97, and save $2.3 million in 1997-98 and $2.5 million in 1998-99.
Application: 20 March 1997.
Schedule 15 - Lump Sum Compensation Payments
The SS Act, and the YTA Act as it adopts this part of the SS Act, contains
provisions designed to prevent people from receiving both compensation
for an injury and social security benefits in respect of the same injury.
This is generally done by either making benefits not payable during the
period that the person is receiving the compensation or by providing for
the recovery of amounts where benefits have been paid prior to the compensation
being payable. Where compensation is settled by agreement, the SS Act
deems 50% of the payment to be the compensation part of the lump sum and
in other circumstances will be the amount determined by the Secretary.
To determine the period for which the lump sum contribution will preclude
the payment of benefits, the compensation part of the lump sum is currently
divided by average weekly earnings. Part 2 of Schedule 15 provides for
the introduction, from 20 March 1997, of a new formula to calculate the
period for which benefits will not be payable. The formula is the compensation
part of the lump sum (as currently applied) divided by the income cut-out
amount. This is based on the maximum basic (single) rate and the pharmaceutical
allowance, plus the income free area for a single person. As this amount
will be less average weekly earnings, for a given lump sum payment the
preclusion period will be greater under the new rules than those currently
in force. To prevent any impact on lump sum payments received before 20
March 1997, the Schedule also contains transitional provisions that provide
that payments received before this date are to be treated under the old
rules.
The measure is estimated to save $778 000 in 1996-97, $13.6 million
in 1997-98 and $20.2 million in 1998-99.
Application: 20 March 1997.
Schedule 21 - Debt Recovery
The SS Act provides that debts due under the Act and under certain other
legislation and schemes are recoverable by deductions from payments, legal
proceedings and garnishee notices. Examples of debts that may become due
under the SS Act relate to overpayments, prepayments, automatic termination
or reduction of benefits that are paid before the rate is reduced (eg
a reduced benefit is payable due to a change of circumstances that is
not notified but is paid at the full rate until the changed circumstances
are discovered). However, if the person is entitled to a benefit and the
benefit is paid at a higher rate than the person is eligible for and the
person has notified the changed circumstances, the overpayment is currently
not recoverable due to the Departments administrative error.
Amendments contained in Schedule 21 fall into three main categories:
- automatic rate reduction will apply where a person has provided the
appropriate notification of changed circumstances and the payment has
not been reduced (ie where the Department has not reduced the payment
although provided with the relevant information, the overpayment will
be recoverable by reduction to future payments);
- an overpayment will be a debt even if the person is entitled to the
benefit but it is paid at a greater rate that that due to the person
(eg administrative error);
- the SS Act currently gives the Secretary a discretion to waive a debt
due to the Commonwealth under the Act. Part 5 of Schedule 21 will restrict
the circumstances under which a debt may be waived to those where the
debt is irrecoverable at law, the debtor has no capacity to pay, the
debtors whereabouts are unknown and all reasonable steps have been taken
to locate the debtor or the debtor is not in receipt of a social security
benefit and recovery would not be cost-effective. This will restrict
the circumstances when a debt may be waived, and excludes waiver due
to administrative error.
Estimates of the savings from these measures are combined with those
from a general tightening of the enforcement of the current provisions
and, therefore the following figures relate to more than the savings expected
from the legislation. Estimated savings in 1996-97 are $5.9 million, $56.6
million in 1997-98 and $148.5 million in 1998-99.
Application: 1 October 1997.
Chris Field Ph. 06 277 2439
8 October 1996
Bills Digest Service
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ISSN 1323-9031
© Commonwealth of Australia 1996
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Last updated: 4 October 1996
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