Bills Digest No. 138   1997-98 Social Security and Veterans' Affairs Legislation Amendment (Budget and Other Measures) Bill 1997

Numerical Index | Alphabetical Index

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.


Passage History Purpose Background Main Provisions Endnotes Contact Officer and Copyright Details

Passage History

Social Security and Veterans' Affairs Legislation Amendment (Budget and Other Measures) Bill 1997

Date Introduced: 3 December 1997

House: House of Representatives

Portfolio: Social Security

Commencement: Upon Royal Assent except:

Schedules 1& 2 which commence on 1 July 1998.

Schedule 3, which commences on 20 September 1998.

Schedule 4 which commences on 1 July 1998 with the exception of items 3-11 which commence on 1 July 1998 but immediately after the commencement of Part 1 of Schedule 4 to the Social Security Legislation Amendment (Parenting and Other Measures) Act 1997 and items 18-19 which commence immediately after the commencement of the Social Security Legislation Amendment (Youth Allowance) Act 1997.

Items 1-11 of Schedule 5 commence on 1 July 1999.

Items 44-47, 50, 140-143 and 146 of Schedule 6 commence immediately before the commencement of Schedule 20 to the Social Security and Veterans' Affairs Legislation Amendment (Family and Other Measures) Act 1997.

Schedule 7 commences, or is taken to have commenced, on 1 April 1998.


The Bill amends the Social Security Act 1991 and the Veterans' Entitlements Act 1986 so as to introduce a carer's payment for carers of profoundly disabled children, relax the means test for certain superannuation products and make other consequential or technical amendments to these acts and a number of other acts.


The Social Security Portfolio consists of the Department of Social Security (DSS), Centrelink (set up under the Commonwealth Services Delivery Agency Act 1997) and the Social Security Appeals Tribunal. The Social Security Act 1991 and the Housing Assistance Act 1996 are both administered by the portfolio.

The recent establishment of the Commonwealth Services Delivery Agency (the 'CSDA') is described in the 1996-97 Annual Report as causing 'undoubtedly the largest organisational change it [DSS] has experienced since it began functioning in 1941.'(1) The CSDA was established by combining the delivery elements of DSS and the Department of Employment, Education and Training and Youth Affairs.

The Budget papers estimate that the DSS will save $1.161m in running costs as a result of the 'review of superannuation supplementation arrangements for employer superannuation liability for the Public Sector Superannuation Scheme and the Commonwealth Superannuation Scheme.'(2)

An additional $0.403m in running costs was allocated in part to allow the DSS to 'contribute to the implementation of changes to the child care programme in 1997-98.'

Expenditure on Welfare

In October 1997, the third report of the Australian Institute of Health & Welfare, Australia's Welfare 1997 was published. The report created some controversy by stating that Australia is spending more on welfare services than ever before and that welfare spending by both government and non-government organisations was around $8.9 billion in 1995-96 (approximately $489 per person).(3) Work done by carers at home (ie caring for disabled family members or friends) is not included in this figure. Welfare services expenditure when expressed as a percentage of GDP increased according to the report:

Total welfare services expenditure as a proportion of GDP increased from 1.3% in 1989-90 to 1.8% in 1992-93, after which it remained at that level for the next three years.(4)

However, the increase in spending is explainable, at least partly, in terms of Australia having an aging population (ie more people on the age pension) and the fact that unemployment levels are quite high. When unemployment is high, the number of people on welfare tends to increase, not only in the unemployment category but in the disability category and the sole-parent's pension category.

The report also states that government spending declined:

In 1995-96, total expenditure by all levels of government in Australia for all purposes was $175 billion (ABS 1997a), a decline from the previous year of 1.2%. ...In terms of proportions, social security accounted for 24.4% of total expenditure, followed by health (15.6%) and education (13.6%). Welfare services accounted for 3.3% of total expenditure.(5)

The definition of welfare services expenditure is the assistance delivered to clients, or groups of clients, with special needs, such as the young, the old or people with a disability.

The Organisation for Economic Co-operation and Development (OECD) keeps statistics showing the international comparisons of government expenditure on welfare services. The accuracy of these figures depends very much on the definitions of welfare services being consistent from country to country, the population size of the country and the currency conversions. Nevertheless, Australian government welfare services expenditure as a proportion of GDP 'remained marginally above the OECD average from 1987, when State and Territory government expenditures were first included in the data, to 1989.' 'Sweden, Denmark, Norway and Finland have the highest levels of per person government expenditure on family and child welfare, and Sweden and Denmark have the highest levels of government expenditure on welfare for aged and disabled persons.(6)

The Child Disability Allowance

The Child Disability Allowance (CDA) is paid to the parents of children with disabilities. It is designed to assist those parents with the extra costs (including the carer's loss of income) that come with having a child which requires constant and substantial daily care. CDA is payable where the child is under 16 (or a full-time student between 16 and 21) and has a diagnosed physical, intellectual or psychiatric disability which calls for substantially more care and attention on a daily basis than a child of the same age who is not so afflicted.(7) CDA is not taxable and is not subject to an income or assets test. CDA continues to be paid for the child's temporary absences from home provided that they are less than 42 days in a calendar year.

As at 30 June 1997, 106,784 children and students qualified for CDA, representing a 6% increase over the figures for 1995-96.(8) The increased figures are attributed to a greater community awareness of the availability of CDA together with broader targeting by DSS of the payment.(9)

One of the main features of the Bill is that it will introduce a new carer's payment to people who are caring for profoundly disabled children.

Main Provisions

Schedule 1 will allow carers of profoundly disabled children to receive a carer's payment. This is the first time such carers will be eligible for this benefit and therefore it is generally regarded as a positive step. The carer's payment is subject to both an income test and an assets test.

The objective of the carer payment is to 'facilitate caring in the community and ensure that carers have adequate levels of income and maximum opportunities to participate in society.'(10) The Annual Report notes that 29,558 people received the Carer Pension (now called the 'carer payment') in 1996-97 at a cost of $228 million. Women comprised 53% of the recipients of carer pensions.(11)

The definition of a 'profoundly disabled child' is contained in proposed subsection 18A and includes children who have either a severe multiple disability or a severe medical condition. The second portion of the definition lists a number of conditions and the child must have three or more of those conditions to satisfy the definition of a profoundly disabled child. It would appear from the list of disabilities or conditions in proposed subsection 18A (2)(c) that many of those conditions on their own would ensure that the child needed constant care. However, the test is that the child must have three or more of the listed disabilities or conditions.

Proposed subsection 198(1) defines the qualifications of a carer who will be eligible for the carer payment. For example, the care must be provided in a private residence that is the home of the child and is in Australia.

Proposed subsection 198D(1) establishes the assets test for the carer's payment. The total value of assets of the disabled child and the parents (if they are resident in the same house) must be less than $406,000. As with other social security benefits, the Bill prohibits the disposal of assets for the purposes of obtaining a benefit (proposed sections 198F(1), 198HA and 198JA).

Schedule 2 - Amendments to provide for the consistent treatment of lump sums

The Bill proposes to exclude certain lump sums ('exempt lump sums') from the definition of 'ordinary income' for the purposes of the Principal Act. One-off payments that are not from remunerative work and fall under the definition of exempt lump sums will be exempt under the income test. Proposed section 8(11)(d) will allow the Secretary to determine what constitutes an exempt lump sum and the note indicates that things like lottery wins and one-off gifts might be determined as exempt lump sums. The Bill does not expressly provide that this determination by the Secretary will be a disallowable instrument.

Lump sums received that are not exempt will be treated either as if they were received in equal weekly instalments over a 12 month period or as if they are a financial asset and therefore subject to the deeming rules.

Schedule 3 - Amendments relating to income streams

Income streams are a 'regular series of payments, made for life or for a fixed term, and purchased with a capital sum or made directly from accumulated superannuation contributions.'(12)

Schedule 3 will deal with superannuation-type products and according to the Explanatory Memorandum will give people on the age pension more flexibility in their choice of superannuation-type product whilst cutting back on the payments to independently wealthy pensioners.

The 1997/98 Budget Statement, Savings: Choice and Incentive announced changes to the treatment of retirement income stream products under the social security means tests. The new rules, scheduled to apply from September 1998,(13) will exempt certain products from the age pension assets test. The aim of the Government's policies in this area, according to the Annual Report, is to 'encourage private saving and to enhance Australia's retirement income systems...through the introduction of the deferred pension bonus plan and simplification of the means test treatment of income streams'.(14)

Income streams that will be asset-tested are those where the benefit is capital in nature. Proposed subsection 9(1) gives an example of one that is capital in nature being one where the income stream has a term over 5 years but the life expectancy of the recipient is less than five years.

Item 17 inserts proposed subsection 9(1) which defines income stream to include certain specified superannuation type products but not available money, managed investments or the like.

Item 31 allows the Secretary to determine written guidelines designating income streams for the purposes of the Act. Such written determinations are disallowable instruments and are therefore subject to Parliamentary control.

Item 35 inserts proposed section 9A which defines an asset-test exempt income stream. Unless otherwise determined by the Secretary, a product meets the definition if essentially it either features a steady drawdown over a long period with no access to capital or it runs for over 15 years where the recipient's life expectancy is greater than 15 years.(15) To be exempt from the asset test, the income stream must, among other things, be payable at least annually throughout the recipient's life and if the income stream features a reversionary beneficiary (ie where the recipient dies and the benefit reverts to another person such as a child or spouse of the recipient) then that benefit must be either payable throughout the beneficiary's life or (if they are a child) until they reach the age of 16 years or, if between 16 and 25, finish their full-time studies.

Schedule 3 Part 2 amends the Veterans' Entitlements Act 1986 so as to achieve consistency between that Act and the Principal Act in relation to the treatment (ie means testing) of income streams.

A person cannot receive a Service Pension from the Department of Veterans' Affairs and an Age Pension under the Principal Act at the same time, regardless of age.(16)

Schedule 4 - Amendments relating to seasonal workers

As the title indicates, schedule 4 is intended to apply to seasonal workers (for example tuna-fishermen, fruit pickers and shearers) who earn high or relatively high incomes for part of the year and are then 'out of work' for part of the year. The provisions in the Bill will make it more difficult for such workers to claim benefits, although there is still the safety net if they satisfy the financial disadvantage test.

The Secretary will be able to determine what constitutes seasonal work for the purposes of the Act. That written determination will be a disallowable instrument and therefore Parliament will retain control over the definition of seasonal work.

There will be a preclusion period which will prevent the worker from obtaining benefits straight away. The preclusion period will depend upon the amount of seasonal work done in the past 6 months, the income earned, and will be calculated according to each seasonal worker's situation. The seasonal worker's spouse or partner's situation will also be taken into account if the seasonal worker is a member of a couple.

The safety net appears in each area of the Bill that proposes a seasonal work preclusion period in applying for a benefit. For example, in proposed subsection 19C(3) b the test of 'severe financial hardship' for a person who is a member of a couple is such that the definition is only satisfied when the value of the couple's liquid assets is less than twice the maximum fortnightly payment of the benefit applied for.

Proposed section 408CH will apply a seasonal work preclusion period to people applying for a widow allowance if they have undertaken seasonal work in the six months preceding the application.

Proposed section 500Z will similarly apply a seasonal work preclusion period to applications for parenting allowances. The Bill also limits other benefits by applying the same seasonal work preclusion period to benefits such as: newstart allowance; youth allowance; mature age allowance; and partner allowance. In each case, the severe financial hardship test operates as a safety net to ensure that people who are genuinely in desperate financial straits still qualify for the particular benefit applicable to them.

Schedule 5 - Amendments to Apply Hardship Rules to Income Maintenance Periods

The financial hardship rules apply generally to recipients of benefits where the benefit is not payable due to the assets test and the disposal of assets test (ie where someone has disposed of their assets for the purpose of qualifying for a benefit) does not apply and the person claims financial hardship. In those circumstances, the Secretary may satisfy themselves that the person would suffer severe financial hardship if they were not paid the particular benefit. 'Unrealisable assets' (where they can't be sold or where it is unreasonable to expect that they be sold) may be disregarded for the purposes of calculating whether someone would suffer severe financial hardship. An example of an 'unrealisable asset' may be a family farm where the farmer has lived on the property for 20 years or more and yet the property is not capable of being subdivided and sold. In such circumstances, it would be unreasonable to expect that farmer to sell the property in order to secure an income in retirement. The Government established a Special Rural Task Force in September 1996 to assess the impact of the assets tests in the social security legislation to make sure that farm families were not disadvantaged.(17) These proposed amendments largely come from that inquiry.

Item 1 defines what is meant by severe financial hardship for single people and for persons who are members of a couple. For example, a single person will be deemed to be in severe financial hardship if their liquid assets are less than the fortnightly amount of the maximum rate of the payment or allowance that would otherwise be payable to them.

The proposed amendments will allow the Secretary to satisfy themselves that a person's severe financial hardship was caused by either unavoidable or reasonable expenditure and thereby give relief by approving payment of the benefit.

Schedules 6-8

Schedules 6 and 7 make consequential or technical amendments to the Principal Act and various other pieces of legislation as a result of the introduction of the CSDA and the change of name of family payment to family allowance. Schedule 8 makes consequential amendments to the Farm Household Support Act 1992 resulting from the change of name of the drought relief payment to an exceptional circumstances relief payment or restart income support.


  1. Department of Social Security, Annual Report 1996-97, 5.
  2. P17 Budget papers.
  3. Australia's Welfare 1997: Services and Assistance, vii.
  4. Report of the Australian Institute of Health & Welfare entitled Australia's Welfare 1997, 50.
  5. Ibid , 17.
  6. Although in the case of Sweden this is to do with the classification of services. Ibid, 45.
  7. 1997 DSS Information Handbook: A Guide to Payments and Services, 29.
  8. Department of Social Security, Annual Report 1996-97, 93.
  9. Ibid.
  10. Department of Social Security, Annual Report 1996-97, 75.
  11. Ibid., 77.
  12. Explanatory Memorandum, 21.
  13. Press Release of the Minister for Social Security, Senator Jocelyn Newman, of 9 October 1997.
  14. Department of Social Security Annual Report, 1996-97, at 44.
  15. Explanatory Memorandum, 41.
  16. 1997 DSS Information Handbook: A Guide to Payments and Services, 16.
  17. Department of Social Security, Annual Report 1996-97, 45.

Contact Officer and Copyright Details

Susan Downing
2 March 1998
Bills Digest Service
Information and Research Services

This paper has been prepared for general distribution to Senators and Members of the Australian Parliament. While great care is taken to ensure that the paper is accurate and balanced, the paper is written using information publicly available at the time of production. The views expressed are those of the author and should not be attributed to the Information and Research Services (IRS). Advice on legislation or legal policy issues contained in this paper is provided for use in parliamentary debate and for related parliamentary purposes. This paper is not professional legal opinion. Readers are reminded that the paper is not an official parliamentary or Australian government document.

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ISSN 1328-8091
© Commonwealth of Australia 1997

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Published by the Department of the Parliamentary Library, 1997.

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