Bills Digest No. 172   1997-98 Commonwealth Rehabilitation Service Reform Bill 1998

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
Main Provisions
Concluding Comments
Contact Officer & Copyright Details

Passage History

Commonwealth Rehabilitation Service Reform Bill 1998

Date Introduced: 26 March 1998

House: House of Representatives

Portfolio: Health and Family Services

Commencement: Formal and transitional provisions come into effect on Royal Assent. The remainder of the Bill commences on a date fixed by proclamation but no later than 6 months after Royal Assent.


These are transitional measures that facilitate the corporatisation of the Commonwealth Rehabilitation Service (CRS).


On 22 December 1997, the Minister for Family Services, Warwick Smith, announced that the CRS would separate from the Department of Health and Family Services from 30 June 1998.(1)

This statement followed an announcement made on 19 November 1997 that the Government was developing initiatives intended to improve access to employment assistance services for people with disabilities. In this earlier announcement, Minister Smith indicated that by mid-May 1998 Centrelink would be providing a new eligibility assessment and referral service for people with disabilities seeking employment.(2)

In late 1997, the Minister also released a guide to services entitled: Improving Access to Employment Assistance for Job Seekers with A Disability.(3)


The Commonwealth Rehabilitation Service (CRS) aims to help people with a disability or injury to get or keep employment. A key objective of the CRS is to minimise the personal, social and financial costs of disability by the provision of rehabilitation services.

To be eligible for assistance from the CRS, clients need:

  • to be permanent residents of Australia
  • to be aged between 14 and 65 years
  • to have a disability either from birth or which has resulted from sickness or injury
  • to have a disability that impairs their ability to gain or keep a job and to live independently
  • to show that by being involved with CRS programs they are likely to make a substantial gain towards being employed and being able to live independently.

The type of support provided by the CRS is tailored to each individual and may include services such as: work experience, on the job training, counselling, suggestions as to how to handle their disability, help with job applications, help with contacting community support organisations and other support and advice. Referrals to the CRS may come from the individuals themselves but also from medical practitioners, insurance providers and other government departments and agencies.

The significance and scope of the operation of the CRS is indicated by the size of its budget and the number of citizens who benefit from the services it provides.

Each year the CRS assists approximately 30 000 people with injury or disabilities to return to the workforce, and find and retain jobs.(4)

The Commonwealth currently provides rehabilitation services free-of-charge to eligible people through a nation-wide network of 170 service outlets operated by the CRS.(5)

In the 1997-98 Federal Budget in excess of $113m was apportioned to the organisation.


The CRS currently operates as a division of the Commonwealth Department of Health and Family Services and derives its legislative authority from Part III of the Disability Services Act 1986.

Under the current proposal, the CRS will cease to be a Division of the Department of Health and Family Services staffed under the Public Service Act 1922 and will become Commonwealth owned company limited by shares, established under the Corporations Law, ie a proprietary company.

The changes proposed are intended to create what is commonly referred to as a 'purchaser-provider' split. The Department of Health and Family Services will be the purchaser of services and the newly corporatised CRS initially will be the sole service provider.

The Government has indicated that corporatisation will open the way in the longer term for competition in the provision of services. In his Second Reading Speech, Minister Smith indicated that from 1999 it is intended that CRS will cease to be a monopoly provider. In the interim, however, the Department of Health and Family Services will continue to purchase rehabilitation services from the CRS under contract.(6)

The Minister has further indicated that the company will be designated a Government Business Enterprise (GBE). This would appear to have implications in relation to the accountability mechanisms established under the Commonwealth Authorities and Companies Act 1997 which makes special provision in relation to Commonwealth companies which are GBEs. This designation may also have implications for the proposed company in relation to the Governance Arrangements for Commonwealth Government Business Enterprises which were issued by the Department of Finance(7) in response to the Report prepared by Richard Humphry for the Howard Government in March 1997.(8) Presumably any proposed measures are to be effected by regulation.

It is noted, however, that neither the Minister's Second Reading Speech, nor the Explanatory Memorandum, detail the precise nature of any special governance arrangements and accountability measures that are to apply to the CRS arising from its status as a taxpayer funded body.


As noted above, the CRS is presently staffed under the Public Service Act 1922. The Government proposes that CRS staff be transferred to the new company by virtue of section 81C of the Public Service Act which provides for the compulsory transfer of staff to 'Commonwealth authorities'.

As the proposed company is not a 'Commonwealth authority', the present Bill provides that the proposed company is to be deemed to be a 'Commonwealth authority' for the purposes of the Public Service Act even though it is not otherwise to be treated as such an authority (clause 16).

Main Provisions

Clause 5 outlines the new corporate structure of the CRS and provides that it shall not come into existence until a declaration is issued by the Minister after the company has been registered under the Corporations Law of the Australian Capital Territory and has share capital.

Clause 6 further provides that the CRS will remain a Commonwealth-owned company if, and only if, all shares in the company are beneficially owned by the Commonwealth at any time.

Clauses 10 and 12 respectively provide for the transfer of assets and liabilities to the new company. The clauses provide for such transfer to be effected by ministerial declaration but transfers by other means are not precluded.

Clause 15 exempts the company from State and Territory taxes. As noted in the Second Reading Speech, however:

The new company will pay all Commonwealth taxes. However, consistent with current taxation policy it will be exempt from state and territory taxes. To ensure competitive neutrality it will instead make payments to the Commonwealth equivalent to the level of state taxes it would otherwise have paid.(9)

As noted above, clause 16 deems the company to be a Commonwealth authority for the purposes of the Public Service Act 1922, but makes it plain that it is not a Commonwealth authority for other purposes.

The schedules make consequential changes to a range of Commonwealth laws. Clause 18 excludes the operation of the yet to be enacted Legislative Instruments Bill 1996.

Schedule 2 includes a savings provision which seeks to protect the rights of current CRS clients by continuing to apply repealed provisions of the Disability Services Act 1986 to those clients in regard to programs in force immediately prior to the new provider arrangements coming into effect.

Concluding Comments

The purchaser/provider model has the potential to lead to greater efficiency in service delivery. The National Commission of Audit identified the following potential benefits of this approach to service provision:

  • policy priorities are better specified and hence clearer
  • working relationships can be improved because expectations and responsibilities are clarified
  • conflicts of interest can be minimised because providers are not the sole source of advice on targets, evaluation and standards - the balance of power is not weighted in favour of the provider
  • contestability can be enhanced because potential providers are exposed to competition
  • accountability can be heightened because a purchaser may specify what performance information is expected from the provider
  • managerial autonomy can be increased because relevant roles and structure can be clarified
  • responsiveness to clients can be improved because purchase agreements require the provider to meet client needs.(10)

A purchaser/provider split can be achieved using a variety of different entities and it is not necessary to achieve the intended result by incorporating the service provider as a Corporations law company and designating it a GBE. Of course, the Government may have reasons for selecting this particular option rather than (say) establishing a Commonwealth company or Commonwealth authority under its own enabling Act. A Corporations law company may be easier to privatise and it will be plain that the provisions of the Commonwealth administrative law will not apply to a Corporations law entity.

Richard Humphry in his March 1997 Report to Minister for Finance, John Fahey, (referred to above) noted that:

¼ that unlike the analogous private sector investor, there are other relationships the Government has with its GBEs. These are:
  • the Community Service Obligation purchaser-provider relationship;
  • the regulatory and industry policy relationship;
  • where the Government is a direct and significant consumer of GBEs goods and services [here in relation to its own employees], it has a consumer-producer relationship.

The requirement that the portfolio Minister balance the shareholder interests in GBEs, with the other relationships that the Government has with its GBEs, places that Minister in an extremely difficult position because of the potential conflicts of interest. A more transparent arrangement would be to remove the responsibility for the shareholder function from the portfolio Minister altogether. That is, the function could be undertaken by an economic Minister or the Government could appoint a Minister specifically to act as a shareholder in the GBE.(11)

It may, of course, be that the full detail of the Government's proposal addresses any concerns relating to the meeting of community service obligations and potential conflicts of interest in the company's governance structure.

Given, however, the decision to bring this Bill on for debate in the House at relatively short notice, the above matters cannot be explored in depth in preparing this Digest.


  1. Media Release, No.42/97.

  2. Media Release, No.23/97.

  3. Released November 1997.

  4. Hon Warwick Smith MP, Media Release, No.42/97.

  5. Ibid.

  6. House of Representatives, Parliamentary Debates, 26 March 1998, 1167.

  7. In June 1997.

  8. Review of GBE Governance Arrangements, 14 March 1997.

  9. Op cit., 1167.

  10. Report to the Commonwealth Government, June 1996, 15-16.

  11. Op cit., 3-4.

Contact Officer and Copyright Details

Bob Bennett
Greg McIntosh
Bills Digest Service

Information and Research Services

31 March 1998

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 1998

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Published by the Department of the Parliamentary Library, 1998.

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