Bills Digest no. 31 2015–16
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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.
Michael Klapdor
Social Policy Section
14 October 2015
Contents
Purpose
of the Bill
Background
Committee consideration
Policy position of non-government parties/independents
Position of major interest groups
Financial implications
Statement of Compatibility with Human Rights
Youth Allowance/ABSTUDY—overview
Key issues and provisions
Concluding comments
Date introduced: 10
September 2015
House: House of
Representatives
Portfolio: Social
Services
Commencement: Sections
1 to 3 commence on Royal Assent. Schedule 1, items 1 to 18 and 20 commence on 1 January
2016; Part 2 of Schedule 1 commences on 1 July 2016; and Part 3 of Schedule 1
on 1 January 2017.
Schedule 1 Item 19 will not commence as the Social Services Legislation
Amendment (Youth Employment and Other Measures) Bill 2015 did not pass the
Senate.[1]
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 ComLaw
website.
The purpose of the Social Services Legislation Amendment
(More Generous Means Testing for Youth Payments) Bill 2015 (the Bill) is to
amend the Social Security Act 1991[2]
(the SS Act) and the Social Security (Administration) Act 1999[3]
(the SS Admin Act) to:
- remove
the family assets test and the family actual means test from the Youth
Allowance means testing arrangements, from 1 January 2016
- align
the parental income test exemptions for Youth Allowance with current
arrangements for Family Tax Benefit Part A (FTB-A), from 1 January 2016
- not
include maintenance income paid to parents in the Youth Allowance parental
income test assessment, from 1 January 2016
- introduce
a new maintenance income test as part of the Youth Allowance parental income
test to assess child support paid to a parent, from 1 January 2017 and
- include
all dependent children who qualify for Family Tax Benefit in the ‘family pool’
for the Youth Allowance parental income test, not just those children who are
senior secondary school children aged 16 or more, from 1 July 2016.
The measures were announced in the 2015–16 Budget as part
of the Families Package.[4]
In his second reading speech, the Minister for Social Services, Scott Morrison,
stated that the measures:
... were adopted following an examination of issues by an
Interdepartmental Committee on Access to Higher Education for Regional and
Remote Students at the urging of Senator Bridget McKenzie and her backbench
colleagues, who have been pressing us to do more to improve access to education
for regional and remote students.[5]
No reports or details of this committee have been
published but Senator McKenzie held a number of public forums in regional areas
with representatives from the Department of Education and Training and the
Department of Social Services between July and September 2015.[6]
Senator McKenzie stated that participants at these forums had discussed a range
of issues affecting regional and remote students’ access to higher education:
These included the hefty cost of relocating to study (between
$15,000-$20,000 a year), distance, lack of affordable accommodation, and
trouble accessing and the adequacy of student assistance.
...
Desperate parents tapping into their retirement savings to
support their child, students working up to four jobs to make ends meet
(leaving little time to study), students opting to study close-by rather than
at the institute that offers the best course, no public transport, and internet
access were among the many issues raised not only at the forums but also
through emails and social media.[7]
Further background information to the measures can be
found in the ‘Key issues and provisions’ section of this Bills Digest.
Senate Standing on Community
Affairs
On 10 September 2015, the Senate Selection of Bills
Committee referred the Bill to the Senate Community Affairs Legislation
Committee for inquiry and report by 9 November 2015.[8]
Details of the inquiry are available on the Committee’s
website.[9]
Senate Standing Committee for the Scrutiny
of Bills
The Committee considered the Bill in the Alert Digest
of 16 September 2015 but had no comment to make on the Bill.[10]
At the time of writing, the Opposition, minor parties and
independents had not stated their position on the measures contained in the
Bill.
The Australian Council of Social Service (ACOSS) stated
that the measures will result in a ‘welcome easing of high effective tax rates
for some parents’ but will also result in a ‘weakening of the integrity of
these payments by allowing parents with high income who engage in common tax
avoidance techniques to qualify for income support’.[11]
In their Budget Analysis, ACOSS found that the measure will extend
income support ‘to dependent young people in families who use private trusts
and negative gearing to avoid tax by removing long-standing restrictions’.[12]
According to the Explanatory Memorandum to the Bill, the
changes will cost an estimated $262.7 million over the forward estimates.[13]
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.[14]
Parliamentary Joint Committee on
Human Rights
The Parliamentary Joint Committee, in its twenty-eighth
report of the 44th Parliament has deferred consideration of the Bill.[15]
Youth Allowance is an income support payment for young
people aged 16–21 who are looking for work, full-time tertiary students aged
18–24, full-time apprentices aged 16–24 and, in special circumstances, young
people attending school.[16]
To be eligible, job-seekers must meet certain activity requirements (looking
for work or undertaking training or vocational education) while students and
apprentices must be enrolled full-time in approved courses or recognised
apprenticeships.
ABSTUDY is a scheme that helps Aboriginal and Torres
Strait Islander Australians who are studying or undertaking an apprenticeship
with their costs, and includes allowances and other benefits.[17]
Payments and rates depend on the person’s study load, age, where they are
living and what course they are studying. One of the payments, the ABSTUDY
Living Allowance, is similar to Youth Allowance for students in that it is paid
at the same rate and applies similar means testing arrangements. The ABSTUDY
scheme is an administrative scheme and is not provided for by any legislation.
However, the means testing arrangements are aligned with those legislated for
Youth Allowance.[18]
The Budget measure announced changes to both Youth Allowance and to ABSTUDY
Living Allowance means testing—and as a result, it should be noted that the
legislative amendments proposed in the Bill will reflect similar changes to the
ABSTUDY means testing arrangements. While the following analysis will only
refer to Youth Allowance, the changes should be read as applying also to the
means testing arrangements for ABSTUDY Living Allowance.
The Bill makes a number of changes to the way in which the
means of the parents of some Youth Allowance claimants is assessed. Where a
Youth Allowance claimant is not considered ‘independent’ of their parents, that
is, they are still considered to be supported financially by their parents,
then the income and assets of their parents are assessed in determining
eligibility for and the payment rate of Youth Allowance.
Independent/dependent
Being considered independent affects a
person’s eligibility for and payment rate of youth allowance. Dependency means
financial dependence on parents/guardians. A dependent person will have their
parents’/guardians’ income and assets taken into account in determining
eligibility (see below).
A person can be considered independent if
they meet one of the following criteria:
- are aged 22 or more and a full-time student or Australian Apprentice
- have supported themselves through employment (full-time work for 18
months in a two year period)
- are or have been legally married or in a registered relationship
- are living in a de facto relationship with another person as a member
of a couple for at least 12 months (six months in special circumstances)
- have, or have had, a dependent child
- have a partial capacity to work as determined by a Job Capacity
Assessment (job seekers only)
- are at least 18 years old, had full-time employment of at least 30
hours per week for at least 12 months, not living in the home of a parent, not
receiving financial support from a parent/guardian on a long-term basis, and
considered to be specially disadvantaged in respect to education or employment
- are unable to live at home
- have parents who cannot exercise their responsibilities
- are a refugee without parents living in Australia
- are an orphan and have not been legally adopted or
- are in state care, or only stopped being in state care because of their
age.[19]
Students who had to move away from home to
study from areas classified as inner regional, outer regional, remote and very
remote can be assessed as independent if, since leaving school, they:
- have earned at least 75 per cent of Wage Level A of the National
Training Wage Schedule included in a modern award, in an 18-month period or
- have worked part-time (at least 15 hours each week) for at least two
years.[20]
Their parents must also have earned less
than $150,000 in the most recent tax year (or current tax year if income has
changed substantially) to meet this component of the independence test.
Means tests
Multiple means tests currently apply to
Youth Allowance, determining both eligibility and payment rates: a family means
test (if not independent), a personal income test, a partner income test and a
personal assets test. If considered dependent, the family means and the
personal income tests apply. If considered independent, the personal income,
partner income and personal assets tests apply. The test that results in the
lowest payment rate applies. A liquid assets test also applies and determines
whether or not a special waiting period applies before the claimant’s payment
commences.
Parental means test
If not independent, a family means test
applies. This test takes one of three forms: a parental income test, family
assets test or family actual means test (applies in cases where the income or
assets test does not reflect a family’s actual means—such as where they have
significant investments in family trusts). The test that produces the lowest
rate, or precludes eligibility applies.
Under the parental income test, the payment
rate is reduced by 20 cents for every dollar of the parents’ adjusted taxable
income over $50,151 for the relevant tax year (usually the financial year
ending on 30 June of the calendar year immediately before the calendar year in
which the payment is to be made).[21]
This includes taxable income, any adjusted employer provided benefits, target
foreign income, net investment losses, reportable superannuation contributions,
and maintenance received by either parent less maintenance amounts paid out.[22]
Under the family assets test, no payment can
be made if family’s assets exceed $642,000 (a 75 per cent discount on
farm/business assets applies to the family assets test). The assets of all
family members are included—this includes the person’s parents and other
children in the family except independent children and the partners of
dependent Youth Allowance recipients (who may live with the family). The
family’s principal home is excluded from the assets test. The family assets
test does not apply to parents or their partners who receive an income support
payment, an ABSTUDY Living Allowance, a Farm Household Allowance, or who are
holders of a Low Income Health Care Card.[23]
The family actual means test is aimed at
parents who may receive income from sources other than a wage or salary or who
have assessable income which may not accurately reflect their capacity to pay
the costs of education because of their ability to minimise their taxable
income.[24]
It is only applied where either one or both of a dependent Youth Allowance
claimant’s parents meet one of the family actual means test categories of ‘designated
parents’. A parent is considered a designated parent if:
- in the base tax year, they had an interest in a trust, private company
or unlisted public company
- in the base tax year, they were self-employed, except as a sole trader
who was mainly or wholly engaged in a primary production owned by the person
- in the base tax year, they were a partner in a partnership
- in the base tax year, they derived $A2,500 of income, or more, that
does not consist only of income from a pension or similar payment from a source
in Norfolk Island or overseas
- in the base tax year, they derived income from a salary or wage and
claimed a tax deduction for a business loss (for that year or previous year)
that does not consist only of a total net investment loss or net passive
business loss
- have a current interest of $2,500 or more in any assets located outside
Australia and its external territories or
- entered Australia under a permanent visa or entry permit visa in a business
skills category in the last 10 years before 1 January in the calendar year in
which a Youth Allowance payment period ends.[25]
The base tax year is the financial year
ending on 30 June of the calendar year immediately before the calendar year in
which the payment is to be made.
Under the family actual means test, the
spending and savings of all current family members in the base tax year are
assessed and a formula applied to provide an equivalent family income that can
be assessed in a similar way to the parental income test. In some cases, the
family’s actual means can be assessed for the tax year after the base tax year
(where there has been a reduction in a family’s means since the base tax year).
A family’s actual means includes any spending on a home (including purchase,
mortgage repayments, rates and utility bills), spending on transport (including
purchases, running costs and public transport costs), education costs, general
living expenses and other costs such as expenditure on investments, fringe
benefits and tax deductible business expenditure not necessary for carrying on
the business. It also includes any savings such as bank accounts, retained
profits, or superannuation contributions.[26]
Amounts that are not included as part of a family’s actual means include prior
year savings, the sale of assets, windfall gains, business spending, spending
on maintenance or child support payments, and business spending.[27]
The formula used to work out the family’s
equivalent income works as follows: halving the family’s gross actual means
(spending plus savings minus any deductions), adding the marginal tax rate and
Medicare levy that would notionally apply to the amount, doubling the resulting
amount and then adding the total net investment loss or net passive business
loss of each parent (if any). The resulting amount is the family’s equivalent
income to be used for assessment purposes. For every dollar of this equivalent
income above $50,151, the Youth Allowance rate is reduced by 20 cents (as
occurs with the parental income test).[28]
Multi-child households
A special formula is used to calculate rate reductions
under the parental income test and the family actual means test, where parental
income (or equivalent income worked out under the family actual means test)
exceeds the threshold level for receiving the maximum payment and the claimant
has parental income in common with any other person receiving one of the
following payments:
- Youth
Allowance
- ABSTUDY
living allowance
- ABSTUDY
Group 2 school fees allowance (means-tested component)
- additional
boarding allowance under Assistance for Isolated Children or
- Family
Tax Benefit (FTB) (for a child aged 16 or older who is a full-time secondary
student).[29]
The formula apportions the total amount of income over the
threshold across all the dependent children in receipt of the above payments
(the family pool). The maximum payment rates for each of the payments paid to
children in the family pool are totalled, and the proportion that Youth
Allowance represents of this total is worked out. The proportion that the
maximum rate of Youth Allowance represents of the total payments to the family
pool is the proportion of parental income (or equivalent income) that is assessed
under the parental income test or family actual means test for the Youth
Allowance claimant.[30]
There is no limit on the number of children who can be
included in the family pool under these provisions.
Personal income test
For students and apprentices:
- gross income over $427 up to $512 per fortnight reduces payment by 50
cents in the dollar and
- income over $512 per fortnight reduces payment by 60 cents in the
dollar.
For jobseekers:
- gross income over $143 up to $250 per fortnight reduces payment by 50
cents in the dollar and
- income over $250 per fortnight reduces payment by 60 cents in the
dollar.[31]
Partner income test
Where dependent Youth Allowance claimants are in
a couple relationship, the claimant’s partner is exempt from the partner income
test. The partner income test only applies to independent Youth Allowance
claimants who are members of a couple (where the partner is not a dependent
Youth Allowance recipient). Under the partner income test, an individual’s rate
of Youth Allowance is reduced by 60 cents for each dollar of fortnightly income
that exceeds the ‘partner income free area’.[32]
The partner income free area is the income cut-out point at which either
Newstart Allowance or Youth Allowance would no longer be payable to that person
under the personal income test for those payments. The cut-out point will vary
depending on the partner’s circumstances, as set out in Table 1.
Table 1: Partner income free area under the
Youth Allowance partner income test
If the partner is ...
|
And has ...
|
Then the partner income free area is the amount of
the partner's income, rounded up to the nearest dollar, beyond which ...
|
NOT receiving a social security benefit,
|
NOT turned 22,
|
Youth Allowance would not be payable to the partner if the
partner were qualified for Youth Allowance and were not undertaking full-time
study. The cut out point for job seeker Youth Allowance recipients is used
even where the partner is a student.
|
turned 22,
|
Newstart Allowance would not be payable to the partner if
the partner were qualified for Newstart Allowance.
|
turned age pension age,
|
Newstart Allowance would not be payable to the partner if
the partner were qualified for Newstart Allowance.
Note: The partner is assumed to be qualified for Newstart
Allowance even though the person is above the upper age limit for that
payment. In such a case the rate of Newstart Allowance is assumed to include
the applicable amount of pension supplement payable to persons of age-pension
age.
|
receiving a social security benefit,
|
-
|
the benefit would not be payable to the partner.
|
Source: Department of Social Services (DSS), ‘4.2.2
Benefits income test and limits’, Guide to social security
law, version 1.215, released 21 September 2015, DSS website, last updated 17 August 2015, accessed
16 September 2015.
Personal assets test
If considered independent, a personal assets
test applies. Under the personal assets test, an individual is not eligible for
Youth Allowance if they have assets (including vehicles, appliances, household
items, real estate separate from their own primary residence, bank accounts and
financial investments) with a total value over the limits set out in Table 2.
Table 2: Assets test limits for Youth
Allowance
Family situation
|
Homeowner
|
Non-homeowner
|
Single
|
$202,000
|
$348,500
|
Couple (combined)
|
$286,500
|
$433,000
|
Source: DHS, ‘Income and assets test for Youth Allowance’,
DHS website, 13 April 2015, accessed 16 September 2015.
Liquid assets test
A liquid assets test of $5,500 for singles
and $11,000 for couples or singles with dependants applies. Individuals with
liquid assets (assets such as savings or investments which can be readily
realised) valued over these thresholds have to serve a Liquid Assets Waiting
Period before they can receive any payment (the period is calculated based on
the value of the assets but cannot exceed 13 weeks).[33]
Removing the family assets test and
family actual means test
The Bill proposes removing any assessment of a dependent
Youth Allowance claimant’s assets or their family’s means other than parental
income from 1 January 2016. This means that eligibility and payment rates of
Youth Allowance for claimants considered dependent will no longer assess the
value of the claimant’s assets, their family’s assets nor their family’s actual
means. The family assets test and family actual means test currently apply in
order to target Youth Allowance at recipients whose families do not have
adequate means to support them. However, the family means test and the
assessment of independence/dependence has long been an area of contention with
various groups arguing that the tests are too restrictive, should not apply at
all, or act as a barrier to higher education for some groups of students,
particularly those from regional and rural areas.[34]
Groups representing regional families have proposed introducing a non-means
tested payment for rural students who need to move away from home to study
(which could be paid in addition to Youth Allowance), or allowing for 100 per
cent of farm and business assets to be excluded from the family assets test.[35]
Alternatively, the NSW Farmers’ Association has previously suggested treating
all rural and remote students who leave home as independent automatically.[36]
By abolishing the family assets test and family actual means
test, the Bill will provide greater access to Youth Allowance and higher
payment rates to dependent young people whose families have low adjusted
taxable incomes but significant assets or means that fall outside the income
test. This will be of significant benefit to farm families who often have
relatively high levels of assets (in terms of land, machinery, stock and
vehicles) but low incomes. However, it will also benefit wealthy families whose
financial arrangements (via family trusts or business structures) mean that
their wealth is not reflected in the level of income assessed under the parental
income test. Dependent children in such families will be able to access
government income support, despite the fact that their families could
comfortably provide financial support. The family actual means test was introduced
by the Labor Government in 1996 primarily to respond to ‘community concerns
that a small number of students get Austudy even though their families clearly
have financial resources well in excess of the take-home pay of the Austudy
target group’ (Austudy was the main payment for all young people in higher
education before Youth Allowance was introduced in 1998 and Austudy became
payable only to students over the age of 25 years).[37]
Then Minister for Employment, Education, Training and Youth Affairs, Amanda
Vanstone, explained further in 1997:
... the actual means test was introduced by
Labor in 1996, I believe, to try to ensure that those people who have the
capacity to rearrange their assets and income so as to bypass an ordinary asset
or income test would not be able to nonetheless get Austudy.
...
The stories are legion in universities
around Australia of the sons of surgeons, for example, who might have incomes
that you and I and others would regard as quite substantial, nonetheless being
able to get Austudy. I would not imagine that there was a person in this place
who has not heard of one Austudy rort or another.[38]
It would appear that concerns about such
‘rorting’ have diminished. Rather, the Minister described these tests as a
‘significant regulatory burden’ on the 30,000 families subject to the family
actual means test and the 200,000 families subject to the family assets test.[39] The Minister stated that
removing the two tests will provide ‘extra support to families as their
children move into young adulthood’—removing the family assets test will allow
an additional 4,100 Youth Allowance claimants to qualify for the first time
while removing the family actual means test will allow an additional 1,200
Youth Allowance claimants to qualify for the first time and increase the
payment rates of 4,860 students by $2,000 a year (it is unclear if this is an
average figure).[40]
The amendments will also mean that
dependent Youth Allowance claimants will not face a personal assets test, only
the personal income and parental income test. It is unclear why the personal
assets test will not be applied to these claimants, given that it would only
exclude young people with significant assets (single non‑homeowners would
need to have assets over $348,500 to be excluded by the personal assets test).
Main provisions
Item 1
repeals the family actual means test definitions at section 10B of the SS
Act.
Item 2 repeals
and substitutes subsection 547B(2) so that a person considered not
independent is excluded from the application of the Youth Allowance assets test
(both the family assets test and the personal assets test).
Item 3
repeals the family assets test limit at paragraph 547C(a) as the limit will no
longer apply to any claimants.
Item 4 removes
references to a person being independent for the purposes of the different
asset test limit amounts at subparagraphs 547C(b)(i), (c)(i), (d(i) and
(e)(i) as only independent claimants will be subject to the assets test.
Item 6 repeals
and substitutes section 547D so that the Youth Allowance asset tests
will only include the value of the partner’s assets where the claimant is a
member of a couple, in certain circumstances, but will no longer include the
value of any family assets under any circumstances.
Item 7 repeals
section 547G which provides for the treatment of farm and business
assets under the family assets test. Section 547G is made redundant by
the item 6.[41]
Items 8, 9, 10 and 15 amend point 1067G-A1 and repeal Module G of the Youth Allowance
rate calculator at section 1067G to remove the family actual means test, and
references to the test, from the Youth Allowance rate calculator.
Removing parental
income test exemptions
The Bill will remove exemptions from the
parental income test for Youth Allowance claimants with a parent who qualifies
for a Low Income Health Card or is in receipt of a New Enterprise Incentive
Scheme allowance. The Minister stated in his second reading speech that this
will align the exemptions for the Youth Allowance parental income test with the
existing arrangements for Family Tax Benefit Part A (which excludes those in
receipt of an income support payment or who have an employment income nil-rate
period of up to six fortnights).[42]
The Low Income Health Care Card is provided
to those who have a low income but do not qualify for an automatic issue Health
Care Card (provided to those in receipt of certain allowance payments such as
Newstart Allowance and those who receive the maximum rate of Family Tax Benefit
Part A). For those with dependent children, income must, in the eight weeks
prior to applying for the card, be below $919 per week if single or $953 per
week for couples (combined, with one dependent child), plus $34 for each
additional dependent child.[43]
The New Enterprise Incentive Scheme assists jobseekers who are interested in
running a small business and is part of the jobactive employment services
scheme.[44]
Participants are paid an allowance for 39 weeks of a business operation,
equivalent to the single, no children rate of Newstart Allowance.[45] The rate of the allowance
is unaffected by any revenue from their business but may be affected by other
income.
While it is possible that some Low Income
Health Care Card holders and New Enterprise Incentive Scheme allowance recipients
will have income over the Youth Allowance parental income free area of $50,151 per year, it is likely to only be a small group that would have
income at a level that would significantly impact on their child’s Youth
Allowance eligibility or rate (due to the eligibility requirements and nature
of the New Enterprise Incentive Scheme). The main reason for no longer
excluding these two groups from the parental income test appears to simply be
making the income test more consistent with the Family Tax Benefit Part A
income test.
Main provisions
Item 12
repeals paragraph 1067G-F3(e) of the SS Act which provides for those
whose parents qualify for a Low Income Health Care Card to be exempt from the
parental income test.
Item 16
repeals table item 11 in Module L of the Youth Allowance Rate Calculator at
section 1067G.[46]
Paragraph 1067G-F3(a) exempts those whose parents are in receipt of payments listed
at Module L from the parental income test. Repealing table item 11 in Module L,
which refers to the New Enterprise Incentive Scheme allowance, will mean that
Youth Allowance claimants whose parents are recipients of the New Enterprise
Incentive allowance will no longer be exempt from the parental income test.
Adding Family Tax
Benefit children to the family pool for Youth Allowance
As described above, the Youth Allowance
family means test applies a formula to apportion the total parental income to each
dependent child in receipt of one of the following payments:
- Youth
Allowance
- ABSTUDY
living allowance
- ABSTUDY
Group 2 school fees allowance (means-tested component)
- additional
boarding allowance under Assistance for Isolated Children or
- Family
Tax Benefit (FTB) (for a child aged 16 or older who is a full-time secondary
student).
The use of this formula is a way of acknowledging that the
total amount of parental income is used to support multiple children, and an
attempt to apply an equivalent assessment of the income of families supporting
multiple young people as applies to families supporting just one young person.
Currently, these family pool arrangements only take account of children over
the age of 16, who might legitimately qualify for Youth Allowance or ABSTUDY themselves,
or who might also qualify their parents for Family Tax Benefit. The Bill
proposes to make two key changes to this arrangement, to apply from 1 July 2016:
- to
expand the family pool to include younger children who qualify their
parent/guardian for FTB and
- to
ensure that the notional amounts assigned to each child take account of the
level of care provided to that child (where there are shared care arrangements
in place).
The Bill will mean that all FTB children and ‘regular care
children’ will be included in the family pool, not just those considered
‘secondary school FTB children’. FTB children are those that qualify their
parent or guardian for FTB, and to be an FTB child the parent or guardian must
have care of the child for at least 35 per cent of the time (when care is
shared between two or more individuals).[47]
A regular care child is a child in the care of an individual for at least 14
per cent but less than 35 per cent of the time—individuals with a regular care
child will not be eligible for the main components of FTB but they may be
eligible for Rent Assistance, a Health Care Card and child care payments if the
person pays childcare fees.[48]
Where a Youth Allowance claimant’s only relevant sibling is a regular care
child, the amount of FTB worked out for that child as part of the family pool
arrangements will be the Rent Assistance payable in respect of that child.
The changes will mean that more Youth Allowance claimants
will be eligible for the payment and some will receive a higher payment
rate—this is because the total parental income can be apportioned amongst all
children in the family, not just those aged 16 or over who qualify for one of
the payments listed above. For affected Youth Allowance claimants, a small
amount of their parental income will be assessed under the parental income
test. The Minister stated that 13,700 families will become eligible for an
increase in their payment rates—with an average increase of $1,100 per year.[49]
Around 5,800 families who currently miss out on a payment (either Youth
Allowance or one of the other relevant payments) will become eligible for a
payment—with an average benefit of $1,300 a year.[50]
Main provisions
Item 22 repeals points 1067G-F31 and 1067G-F32 of
the SS Act, which provide for secondary school FTB children to be
included in the family pool, and substitutes proposed points 1067G-F31,
1067G-F32, 1067G-F33, 1067G-F34 and 1067G-F35 to include all FTB and
regular care children in the family pool and sets out how the FTB rates are to
be calculated in respect of these children. The rate used will be the maximum
FTB-A rate worked out using step 1 of the method stated at clause 3 of Part 2 in
Schedule 1 of the A New Tax System (Family Assistance) Act 1999—this is
the rate unadjusted for income or other factors which may affect the person’s
FTB-A. If the only relevant sibling to be included in the family pool is a
regular care child however, then the rate used will be that worked out under
step 1 of the method statement at clause 28A of Schedule 1 of the A New Tax
System (Family Assistance) Act 1999 (which works out the Rent Assistance
payable to an individual with a regular care child).
Maintenance income
The Bill proposes two changes to the way maintenance income
(child support and payments made to a former partner following a divorce or
separation) is assessed under the parental income test for dependent Youth
Allowance. The first change is to repeal, from 1 January 2016, the current arrangements—which
includes any maintenance paid to the parent for the upkeep of a child of the
parent if the parent has care of the child and any maintenance paid by a former
partner of the parent—in the parental income amount assessed under the parental
income test. The second change is to introduce a separate maintenance income
test which will assess only the child support paid in respect of the Youth
Allowance claimant in the parental income test for Youth Allowance. The new
test will apply from 1 January 2017 and is based on the maintenance income test
for FTB.[51]
It is unclear why there is a one year gap between the repeal of the existing
arrangements and the introduction of the new test.
While the current arrangements allow for
the total income of the parent(s) to be assessed under the parental income
test, including maintenance paid in respect of other children or spousal
maintenance (alimony), this runs against the aims of the family pool
arrangements outlined above—where it is recognised that some forms of income
are paid for the specific purpose of supporting another dependent child. The
proposed new arrangements will align the treatment of maintenance income in
respect of dependent Youth Allowance claimants with the treatment of
maintenance income in respect of the FTB payments to dependent children. It
will also ensure that only maintenance paid in respect of the Youth Allowance
claimant will be assessed for the purposes of the parental income test.
The change is beneficial and ensures
consistency for the treatment of maintenance income under the means test
applicable to benefits paid in respect of dependent children. The Department of
Social Services estimates that the repeal of the current arrangements for
assessing maintenance income from 1 January 2016 will see an increase in
payments for 3,800 ABSTUDY and Youth Allowance claimants, with an average
increase of $900 per year.[52]
However, when the new arrangements commence from 1 January 2017, 850 payment
recipients will see a reduction in their payment rates.[53]
Main provisions
Item 14
repeals point 1067G–F21 of the SS Act, which currently provides for any
maintenance income paid to the parent of a dependent Youth Allowance recipient
to be included in the amount of income assessed under the parental income test.
Item 24 substitutes
step 8 of the method statement at point 1067G–A1 so that dependent Youth
Allowance claimants will have the impact of the parental income test worked out
according to the method statement set out in proposed Module E, which is
inserted by item 25. Currently, Module F is used for this purpose.
Module E incorporates the parental income test result worked out in Module F,
but sets up a method for also applying the new maintenance income test and
ensuring that where the maintenance income test applies, it cannot reduce a
claimant’s payment rate by more than the difference between the maximum and
base rate of FTB-A for those aged 16 or over. The amount of this difference,
currently $176.26 per fortnight, will be known as the MIT reducible amount.
This method reflects an aspect of the FTB-A maintenance income test which
ensure that the impact of the test cannot result in a recipient’s payment rate
falling below the base rate of FTB-A.
Under the new method statement for working
out the impact of the parental income test on a dependent Youth Allowance
claimant’s payment:
- the maintenance income test component will only apply if the
parental income test result worked out using Module F (the current parental
income test arrangements) is less than the MIT reducible amount. If the
parental income test result is equal to or more than the MIT reducible
amount, then the claimant’s payment rate will be reduced by the parental
income test result or
- if the maintenance income test applies, the result will be added to
the parental income test result to form a notional reduction. If the notional
reduction is less than or equal to the MIT reducible amount, then the
notional reduction is used to reduce the claimant’s payment rate. If the
notional reduction is more than the MIT reducible amount, the MIT
reducible amount will be used to reduce the claimant’s payment rate.
Items 26–36 amend various parts of Module F to reflect the terminology used in
the method statement at Module E, particularly to replace references to person’s
reduction for parental income with parental income test result.
Item 37
inserts the new maintenance income test as Module GA. The maintenance income
test operates in a similar way to the FTB maintenance income test at clause 20
of Schedule 1 of the A New Tax System (Family Assistance) Act 1999.[54] The test differs from that
which applies to FTB in that it only assesses the maintenance income paid in
respect of the Youth Allowance claimant, and excludes any maintenance income
paid to the same parent(s) for any other children.
Other provisions
Items 38–45 amend the SS Admin Act to provide for how the Department of
Human Services should assess the amount of maintenance income a person is in
receipt of (using estimates for payments in the current financial year based on
information provided by the parent such as their child support assessment) and
how determinations in regards to the amount of Youth Allowance to be paid can
be revised based on new information in regards to maintenance income received
or following an internal review to be conducted at the end of the financial
year. In part, these amendments are intended to replicate the reconciliation
process for FTB, where a recipient’s income estimates provided for the year are
reconciled against their actual income (usually based on their tax return).[55] The reconciliation process
can result in a favourable determination, where it is found they should have
received a higher payment rate, or an adverse determination, where it is found
that the person received an overpayment and a debt is raised against them.
The Bill will provide easier access to Youth Allowance for
those young people deemed as dependent on their parents. It will be of
particular benefit to those whose families have significant asset holdings but
relatively low incomes such as farming families. However, the changes will also
mean that young people from some high wealth families, who structure their
finances in ways that minimise their tax liabilities, will also be able to
access income support. While the stated aim of the measures is to provide
additional support to students from families from rural and regional areas, a
much broader group of students and young people will be able to benefit from
the changes.
Members, Senators and Parliamentary staff can obtain
further information from the Parliamentary Library on (02) 6277 2500.
[1]. The
Social Services Legislation Amendment (Youth Employment and Other Measures)
Bill 2015 passed the House of Representatives on 24 June 2015 and was
negatived in the Senate on 9 September 2015. Parliament of Australia, ‘Social
Services Legislation Amendment (Youth Employment and Other Measures) Bill 2015
homepage’, Australian Parliament website, accessed 6 October 2015.
[2]. Social Security Act 1991
(Cth), accessed 25 September 2015.
[3]. Social Security
(Administration) Act 1999 (Cth), accessed 25 September 2015.
[4]. Australian
Government, Budget
measures: budget paper no. 2: 2015–16, p. 156, accessed 25 September
2015.
[5]. S
Morrison, ‘Second
reading speech: Social Services Legislation Amendment (More Generous Means
Testing for Youth Payments) Bill 2015’, House of Representatives, Debates,
10 September 2015, p. 9741, accessed 14 October 2015.
[6]. B
McKenzie, Wangaratta
forum next on McKenzie’s agenda, media release, 16 July 2015, accessed
6 October 2015.
[7]. B
McKenzie, Now
time to ensure regional students get fair access to higher education,
media release, 21 September 2015, accessed 6 October 2015.
[8]. Senate
Selection of Bills Committee, Report,
11, 2015, The Senate, Canberra, 10 September 2015, p. 1, accessed 11 September
2015.
[9]. Senate
Community Affairs Legislation Committee, Inquiry
into the Social Services Legislation Amendment (More Generous Means Testing for
Youth Payments) Bill 2015, The Senate, Canberra, 10 September 2015,
accessed 11 September 2015.
[10]. Senate
Standing Committee for the Scrutiny of Bills, Alert
digest, 10, 2015, The Senate, Canberra, 16 September 2015, p. 7,
accessed 1 October 2015.
[11]. J
Phillips, T Boyd-Caine, R Evans, P Davidson, E Livesey and P Dorsch, Budget
analysis 2015–16, Australian Council of Social Service (ACOSS), Sydney,
2015, p. 19, accessed 25 September 2015.
[12]. Ibid.
[13]. Explanatory
Memorandum, Social Services Legislation Amendment (More Generous Means
Testing for Youth Payments) Bill 2015, p. 1.
[14]. The
Statement of Compatibility with Human Rights can be found at page 18 of the
Explanatory Memorandum to the Bill.
[15]. Parliamentary
Joint Committee on Human Rights, Twenty-eighth
Report of the 44th Parliament, 17 September 2015, p. 2, accessed
13 October 2015.
[16]. Department
of Human Services (DHS), ‘Youth
Allowance’, DHS website, 21 September 2015, accessed 25 September 2015.
[17]. DHS,
‘ABSTUDY’,
DHS website, 21 September 2015, accessed 25 September 2015.
[18]. Department
of Social Services (DSS), ABSTUDY policy manual,
DSS, Canberra, 1 July 2015, p. 6, accessed 25 September 2015.
[19]. DSS,
‘3.2.5.10
Qualification for YA & DSP as an independent young person’, Guide to
social security law, version 1.215, released 21 September 2015,
DSS website, last updated 9 February 2015, accessed 7 October 2015.
[20]. DSS,
‘3.2.5.80
YA & DSP – Self-supporting through paid employment’, Guide to social
security law, version 1.215, released 21 September 2015, DSS website, last
updated 1 July 2015, accessed 7 October 2015.
[21]. The
base tax year: Social Security Act 1991 section 1067G–F5.
[22]. DSS,
‘4.2.8.10
Dependent YA – parental income test and limits’, Guide to social
security law, version 1.215, released 21 September 2015, DSS website, last
updated 17 August 2015, accessed 13 October 2015.
[23]. DSS,
‘4.2.8.20
Dependent YA – family assets test and limits’, Guide to social security
law, version 1.215, released 21 September 2015, DSS website, last updated
21 September 2015, accessed 13 October 2015.
[24]. DSS,
‘4.2.9.10
Family actual means test – designated parents’, Guide to social security
law, version 1.215, released 21 September 2015, DSS website, last updated
10 November 2014, accessed 7 October 2015.
[25]. Ibid.
[26]. DSS,
‘4.2.9.20
Family actual means test – actual means’, Guide to social security law,
version 1.215, released 21 September 2015, DSS website, last updated 1 July
2013, accessed 16 September 2015.
[27]. DSS,
‘4.2.9.30
Family actual means test – amounts not included in the family actual means test’,
Guide to social security law, version 1.215, released 21 September 2015,
DSS website, last updated 17 August 2015, accessed 16 September 2015.
[28]. DSS,
‘4.2.9.40
Family actual means test – application of the test’, Guide to social
security law, version 1.215, released 21 September 2015, DSS website, last
updated 11 August 2014, accessed 13 October 2015. The family actual
means free area is the same as the parental income free area: currently, $50,151.
[29]. Ibid.
[30]. Ibid.
[31]. DHS,
‘Personal
income test for ABSTUDY, Austudy and Youth Allowance’, DHS website, last
updated 22 September 2015, accessed 13 October 2015.
[32]. Ibid.
[33]. DHS,
‘Liquid
assets waiting period’, DHS website, 29 June 2015, accessed 25 September
2015.
[34]. See,
for example, Chapter 3 of the Senate Rural and Regional Affairs and Transport
References Committee, Rural
and regional access to secondary and tertiary education opportunities,
The Senate, Canberra, December 2009, pp. 51–86; and Chapter 9 of the
House of Representatives Standing Committee on Primary Industries and Regional
Services, Time
running out: shaping regional Australia’s future: report of the inquiry into
infrastructure and the development of Australia’s regional areas, House
of Representatives, Canberra, 2000, pp. 255–286, both accessed 21
September 2015.
[35]. Senate
Rural and Regional Affairs and Transport References Committee, op. cit., pp.
282–283; House of Representatives Standing Committee on Primary Industries and
Regional Services, op. cit., pp. 79–80.
[36]. NSW
Farmers’ Association, Submission
to Senate Rural and Regional Affairs and Transport References Committee, Inquiry
into rural and regional access to secondary and tertiary education
opportunities, August 2009, p. 15, accessed 21 September 2015.
[37]. J
Faulkner, ‘Austudy
regulations’, Senate, Debates, 19 October 1995, p. 2109, accessed 21
September 2015.
[38]. A
Vanstone, ‘Answer
to Question without notice: Austudy [Questioner: B Harradine]’, Senate, Debates,
5 February 1997, p. 140, accessed 21 September 2015.
[39]. S
Morrison, op. cit.
[40]. S
Morrison, op. cit.
[41]. Explanatory
Memorandum, op. cit., p. 5.
[42]. DSS,
‘3.1.1.10
Calculating a rate of FTB – overview’, Guide to social security law, version
1.215, released 21 September 2015, DSS website, last updated 12 August 2013,
accessed 24 September 2015.
[43]. DSS,
‘3.9.1.70
Low income HCC – assessment of income’, Guide to social security law,
version 1.215, released 21 September 2015, DSS website, last updated 21
September 2015, accessed 24 September 2015.
[44]. Department
of Employment, ‘Jobactive’, Department website, 10 September 2015, accessed 6 October 2015.
[45]. Department
of Employment, ‘Self-employment—New
Enterprise Incentive Scheme (NEIS)’, Department website, accessed
24 September 2015.
[46]. Module
L relates to the table of pensions, benefits, allowances and compensation in
Part 3.5 of the Youth Allowance Rate Calculator.
[47]. DSS,
‘2.1.1.10
FTB child’, Family assistance guide, version 1.181, released 21
September 2015, DSS website, last updated 1 July 2015, accessed 24 September
2015.
[48]. DSS,
‘2.1.1.13
Regular care child’, Family assistance guide, version 1.181,
released 21 September 2015, DSS website, last updated 11 May 2015,
accessed 24 September 2015.
[49]. S
Morrison, op. cit.
[50]. S
Morrison, op. cit.
[51]. DSS,
‘3.1.7.10
Maintenance income test – general provisions’, Family assistance guide,
version 1.181, released 21 September 2015, DSS website, last updated 1 July
2015, accessed 25 September 2015.
[52]. DSS,
‘Means
testing arrangements for youth payments: 2015 Budget’, DSS, Canberra, 2015,
p. 2, accessed 25 September 2015.
[53]. Ibid.
[54]. A New Tax System (Family
Assistance) Act 1999, accessed 13 October 2015.
[55]. DSS,
‘6.4.1
Overview of reconciliation’, Family assistance guide, version 1.181,
released 21 September 2015, DSS website, last updated 1 July 2015,
accessed 25 September 2015.
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