Bills Digest 150 1996-97
Social Security Legislation Amendment (Activity Test Penalty Periods)
Bill 1997
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
Social Security Legislation Amendment (Activity Test Penalty Periods)
Bill 1997
Date Introduced: 26 March 1997
House: House of Representatives
Portfolio: Social Security
Commencement: The amendments described in this Digest will apply
from the date fixed by Proclamation, or if such a date is not fixed, on
the first day after the expiration of six months after the Bill receives
the Royal Assent
To introduce a rate reduction period that will apply for first and second
breaches of the activity test within a two year period. Third and subsequent
breaches of the activity test will continue to result in non-payment of
the Newstart Allowance
The Bill is a result of negotiations in the Senate regarding the penalty
period that should apply to people in receipt of the Newstart Allowance
when they breach the activity test which must be complied with for recipients
to continue to be eligible for the allowance. The Social Security (Budget
and Other Measures) Bill 1996 proposed a number of changes to the penalty
provisions that apply when a recipient of a Newstart Allowance fails to
comply with the requirements of eligibility for the payment.
First, the Bill proposed to create two categories of breaches, administrative
breaches and breaches of the activity test. For administrative breaches,
such as a failure to provide a partner's tax file number, failure to notify
a change in circumstances or a failure to provide information, the penalty
is a reduction in the rate of Newstart Allowance for 13 weeks with the
reduction being 16% of the person's entitlement (the Bill had originally
proposed a 25% reduction for 8 weeks. In both methods, the penalty is
approximately equal to two weeks payment). With the modification noted
above, the provisions relating to administrative breaches came into force
under the Social Security (Budget and Other Measures) Act 1996.
In relation to breaches of the activity test, such as refusing
a suitable job or breaching a Newstart Activity Agreement, the penalty
period prior to the introduction of the Social Security (Budget and Other
Measures) Bill 1996 was two weeks where the person had been unemployed
for less than 12 months, four weeks were the length of unemployment was
between 12 and 18 months and six weeks were the person had been unemployed
for 18 months or more. In addition, if there had been a previous breach
in the prior three years, there was an additional six week period applied
for each previous breach during the three year period.
The Social Security (Budget and Other Measures) Bill 1996 proposed that
the penalty period be increased to six weeks for an initial breach and
a 13 week period if there had been a previous breach or breaches in the
past three years. This proposal was amended in the Senate. Under the amendments,
the penalties described above (ie. two, four or six weeks depending on
the length of unemployment) apply and, where there had been a previous
breach of the activity test in the past three years, 12 weeks.
The debate in the Senate was largely based on the effect that a removal
of payments for a significant period, such as the originally proposed
13 weeks for a second breach within three years, would have on recipients,
and the proposed minimum of a six week penalty period for the first breach
of the activity test regardless of the length of unemployment.
While the amendments described above were passed, the Minister also
foreshadowed other changes to the activity test penalty period that will
result in a reduction of payments for the first breach of the activity
test similar to the situation that will apply for administrative breaches,
rather than an ineligibility to receive any benefits for the penalty period.
In the Committee stage of debate on the Social Security (Budget and Other
Measures) Bill 1996, the Minister stated:
I foreshadow that I would move an option which would provide for a
rate reduction for a first breach of the activity test and the second
and subsequent breach would still be seen as the most serious breach
of all..... We would propose that, for a first activity breach, there
should be a 20 per cent rate reduction over 25 weeks. That equates to
a full reduction for five weeks. For the second and subsequent breach
there should be eight weeks of non-payment.(1)
While the amendments contained in this Bill do not mirror the above
statement, they change the emphasis for breaches of the activity test
from periods of non-payment to periods of payment reduction. Rate reduction
is seen as a more appropriate way of imposing a penalty without leaving
a person with no income support payments for a considerable period. However,
for a third or grater breach within two years, a non-payment period will
apply. It is argued that this is necessary to prevent people from accepting
a long term lower rate of payment (ie. their normal entitlement less the
rate reduction penalty) and not seek to comply with the activity test.
A new subsection 624(1) will be inserted into the Social Security
Act 1991 (the Principal Act). The proposed subsection provides that
while there is a breach of the activity test, the Newstart Allowance will
not be payable. If the allowance then becomes payable (ie. because the
recipient has rectified the breach), they will be subject to an activity
test reduction period if it is their first or second breach of the activity
test within two years of the latest breach, and if it is their third or
greater breach during this period, they will be subject to a non-payment
penalty.Section 625 of the Principal Act, which deals with penalties for
failure to enter into an activity allowance, and section 626, which deals
with penalties for failure to comply with an activity agreement, will
be amended in a similar manner as section 624 (Items 10 to 16 of Schedule
1).
Similar provisions will also apply in respect of unemployment due to
a voluntary act, misconduct, refusal of a job offer and for a failure
to provide information in relation to income from remunerative work (Items
19 of Schedule 1).
The activity test non-payment period will be 13 weeks (proposed section
630A), while the rate reduction period is dealt with in proposed Subdivision
AA, which will be inserted into the Principal Act by Item 32. The
rate reduction period will be 26 weeks. The rate of reduction will be
18% in the case of a first breach in a two year period (equivalent to
a non-payment period of 4.68 weeks) while for a second breach in a two
year period the reduction will be 36% (equivalent to a 9.36 week non-payment
period) (proposed section 644AE).
Another major issue is the time from which the reduction or non-payment
period will apply.
Where a person may be subject to more than one non-payment period or
a mixture of non-payment and rate reduction penalties, the following will
apply:
- if the recipient is subject to a non-payment period before an additional
non-payment period is applied, the first mentioned non-payment period
will cease to apply on the commencement of the later non-payment period
(ie. non-payment periods will not be cumulative);
- where both a non-payment and rate reduction period apply, the periods
are to be run concurrently and if the person is subject to a rate reduction
period and is later subject to a non-payment period, the rate reduction
period will cease to apply from the beginning of the non-payment period;
- similarly, if a person is subject to a waiting period and a non-payment
period also applies to the person, the periods are to run concurrently;
- if a person is subject to both an administrative breach period and
a rate reduction period due to non-compliance with the activity test,
only the later penalty will apply (so that the person is not subject
to a rate reduction under both the administrative breach and activity
test breach provisions); and
- if a person who is not eligible for the Newstart Allowance engages
in an act that would result in a rate reduction period applying to the
person had they been on the Allowance, and the person later applies
for the Allowance, their rate reduction period will apply from the date
after the breach occurred (Note: this may result in the situation where
a person has not applied for the Allowance, and is not aware of the
conditions that have to be met to avoid a breach of the activity test,
being subject to all or part of a rate reduction period after they subsequently
apply for the Allowance and could, therefore, be seen as requiring people
to satisfy the activity test before they are qualified for the allowance
if they are to avoid a rate reduction period). (Items 22 -36 of Schedule
1).
Transitional provisions provide that if a rate reduction or non-payment
period applies under the Principal Act prior to the amendments coming
into force, the Principal Act will continue to have affect despite these
amendments. If, after the commencement of the Bill, a person would have
been subject to a penalty for an event that occurred before the commencement
of the Bill and that penalty period had not commenced before the commencement
of the Bill, the person will be subject to the amendments contained in
the Bill (Item 42).
Amendments of the same effect as those described above will be made
to the Student and Youth Assistance Act 1973, which provides
for the eligibility and payment of the Youth Training Allowance, which
issimilar to the Newstart Allowance for those below the eligibility age
for the later allowance (Items 43 to 71 of Schedule 1).
1 Senate, Hansard, 13 December 1996.
Chris Field
12 June 1997
Bills Digest Service
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This Digest does not have any official legal status. Other sources should
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ISSN 1328-8091
© Commonwealth of Australia 1997
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Published by the Department of the Parliamentary Library, 1997.
This page was prepared by the Parliamentary Library, Commonwealth of
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Last updated: 17 June 1997
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