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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

Passage History
Purpose
Background
Main Provisions
Contact Officer and Copyright Details

Passage History

Social Security and Veterans' Affairs Legislation Amendment (Payment Processing) Bill 1998

Date Introduced: 25 June 1998

House: House of Representatives

Portfolio: Social Security

Commencement: The amendments described in the Bill, other than the transitional provisions contained in Schedules 6 and 7, commence on 1 July 1999.

Purpose

To introduce uniform rules requiring social security and veterans' affairs payments to be made fortnightly in arrears; introduce a uniform notification period for a change in circumstances that may effect the rate of payment; and to introduce uniform rules relating to the date of effect of a decision adverse to an applicant.

Background

Currently there are two main payment regimes operating in relation to pensions, allowances and other benefits. First, for pensions and family payments eligibility is determined by the person's circumstances on the day when the benefit becomes payable. For example, if a person satisfies the criteria for the aged pension on the Thursday payday they will be eligible for the payment regardless of their circumstances on other days. In this regard pension and family payments, although paid fortnightly, do not represent payments for the prior or next fortnight but reflect eligibility on payday only. The second method applies to allowances, such as the Newstart allowance, and provides payment for the prior fortnight. A major practicable difference between the two payment methods is that for allowances a person can be paid for part of a fortnight when they qualify for the allowance whereas this is not possible in the case of pensions and family payments.

There is no policy or administrative reason, other than that these are the current rules, for the differences in the payment methods for the various benefits, which have largely resulted from the administrative history of the payments. The differences cause confusion for both the staff administering the benefits and customers.

In the 1997-98 Budget the Government announced that all social security and veterans' affairs payments would be made fortnightly for the previous fortnight. As a result, eligibility for payments will be assessed on a daily basis so that an applicant for a pension will be paid from when they become eligible, rather than from the next pension pay day.

There is also a difference between pension and allowance payments relating to the period in which a person is required to notify a change in circumstances which may affect the rate of pension/allowance payable. For pensions, recipients are required to notify the change in circumstances within 14 days while for allowances the time allowed is 7 days. So long as notification occurs during the required time, the adjustment to the rate of payment occurs from the date of notification. As a result, pension recipients may receive a higher payment than they would otherwise be entitled to by a late notification of the changed circumstances. Similarly, a late notification of a change in circumstances that would result in increased pension payments may result in lower payments due to late notification. In the 1997-98 Budget it was also announced that the notification period would be standardised as 7 days.

The same amendments will also be made to those veterans' entitlements which are substantially the same as social security payments.

Main Provisions

The Social Security Act 1991 (the Principal Act) is structured so that the provisions relating to a pension or allowance are largely self-contained within different Parts of the Act. As a result, to implement the announcements described above it is necessary to make substantially similar amendments to a large number of provisions.

Item 31 will substitute a new section 57 into the Principal Act that provides for the payment of age pension by instalment. The pension is to be paid in arrears for a maximum period of 14 days. The pension will be payable for each day that that the person is eligible during the previous fortnight (this changes the eligibility criteria from being assessed only on the payment day to assessment for each day of the period). Consequently, instalment payments are to be calculated on a daily basis. If the pension is received overseas, the Secretary may determine the payment day (this reflects the current payment regime for overseas recipients).

Other payments that are subject to the same amendments are:

• disability support pension
• carers payment
• bereavement allowance
• widow B pension
• widow allowance
• parenting payment
• youth allowance
• newstart allowance
• mature age and mature age partner allowances
• sickness allowance
• special benefit
• partner allowance
• special needs pension
• family allowance
• family tax payment
• child disability allowance
• double orphans pension
• mobility allowance, and
• pensioner education supplement

Other amendments in Schedule 1 of the Bill provide, where such provisions do not already exist, for the daily calculation of the pension, allowance or benefit to enable payment to be calculated on the basis of the eligible days during the payment period and formalise that the rate of the payment is to be calculated on a daily basis.

Items 209 and 212 amend the Principal Act to provide that the denial of payments to people in imprisonment or psychiatric confinement following a criminal charge are to be assessed for eligibility on a daily basis rather than on the payday basis that currently applies.

Schedule 2 of the Bill makes a number of amendments to the bereavement allowance which provides for the continuation of benefits for a short period, or the payment of a lump sum, following the death of a recipient. The amendments alter the wording of various sections of the Principal Act to reflect the change to bereavement allowance to an instalment payment regime.

Section 68 of the Principal Act provides that the Secretary may request a person to provide information on a change of circumstances that may effect their eligibility for the age pension and that if such a request is made the information must be provided within 14 days of the change in circumstances or within 14 days of when the person becomes aware that a change of circumstances is likely to occur (in practice the requirement to provide information on a change in relevant circumstances is part of the eligibility criteria for the receipt of benefits). Item 2 of Schedule 3 provides that the 14 day period is to be reduced to 7 and also allows the Secretary to determine that due to special circumstances the notification period may be extended to a maximum of 28 days.

Currently, where a person notifies a change in circumstances that leads to the age pension being cancelled or paid at a reduced rate, this is to have effect from the end of the notification period. Items 5 and 8 provide that if the pension is cancelled or reduced in the instalment period immediately following the instalment period during which the event leading to the cancellation or reduction occurred, the pension will be payable at the previous rate until the end of the second instalment period. If the pension is not reduced or cancelled during this period, it will be cancelled or reduced at the end of the notification period.

Item 12 of Schedule 3 will repeal sections 81, 81A and 81B of the Principal Act, which deal with the implementation date of decisions adverse to a recipient of the age pension, and substitute new provisions. Currently, such determinations have effect from the date of the determination or the date specified in the determination unless there has been a contravention of provisions requiring the provision of information, in which case the determination may specify an earlier date if the breach of those provisions resulted in a delay in making the determination. Proposed section 81 provides that:

• if the changed circumstances have been notified within the allowable time and no payment of age pension has been made since notification, the change of rate will have effect from the date of the change in circumstances
• if the adverse decision relates to the provision of periodic compensation payments in arrear, the determination will have effect from the start of the periodic payment period during which the compensation payments were made
• if there has been a contravention of the Principal Act, other than provisions relating to the requirement to notify certain information, that causes a delay in the making of a determination, the determination will have effect from the day specified in the determination (which may be earlier than the making of the determination)
• if a person has made a false representation and this results in the pension either not being cancelled or paid at a reduced rate, an adverse decision will have effect from the date specified in the determination, and
• in other circumstances the determination will have effect from either the date it is made or a later day specified in the determination.

Similar amendments are also proposed for the:

• disability support pension
• wife pension
• carer payment
• bereavement allowance
• widow B pension
• widow allowance
• parenting payment
• youth allowance
• austudy payment
• newstart allowance (which currently applies a notification period of 7 days but will be amended in regard to the other aspects mentioned above, such as the date of effect of an adverse determination)
• mature age allowance
• sickness allowance (which also currently applies a notification period of 7 days but will be amended in regard to the other aspects mentioned above, such as the date of effect of an adverse determination)
• special benefit (which also currently applies a notification period of 7 days but will be amended in regard to the other aspects mentioned above, such as the date of effect of an adverse determination)
• partner allowance (which also currently applies a notification period of 7 days but will be amended in regard to the other aspects mentioned above, such as the date of effect of an adverse determination)
• special needs pension
• family allowance
• family tax payment
• child disability allowance
• double orphan pension
• mobility allowance, and
• pensioner education supplement.

Amendments to the Veterans' Entitlement Act 1986 provide for payments made under that Act to be paid fortnightly (currently payments are based on eligibility on pension day) in arrears and for the period of notification of a change in circumstances to be standardised at 7 days. The amendments reflect the changes in the social security system discussed above (Schedule 4 of the Bill).

Transitional provisions relating to social security payments are contained in Schedule 6 of the Bill. Item 1 of the Schedule will allow the Secretary to determine that instalment payments may commence from 18 June 1998 prior to the introduction of instalment payments from 1 July 1999. Payment during the instalment period prior to 1 July 1999 will be based on the new provisions contained in Schedule 1 of the Bill (payment by instalment), however the amendments relating to notification of a change in circumstances and the date of effect of an adverse determination will apply only from the first instalment period after 30 June 1999.

Similar transitional provisions are made to the Veterans' Entitlements Act 1986 by Schedule 7 of the Bill. However, these amendments reflect the different paydays for veterans' payments and allow the first instalment period to commence from 13 June 1999.

Contact Officer and Copyright Details

Chris Field
4 August 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.

IRS staff are available to discuss the paper's contents with Senators and Members
and their staff but not with members of the public.

ISSN 1328-8091
© Commonwealth of Australia 1998

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Published by the Department of the Parliamentary Library, 1998.

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