Senate Community Affairs Legislation Committee


JUNE 1998

© Commonwealth of Australia 1998

ISSN 1440-2572

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Membership of the Committee


Senator Sue Knowles, Chairman LP, Western Australia
Senator Andrew Bartlett, Deputy Chair AD, Queensland
Senator Kay Denman ALP, Tasmania
Senator Alan Eggleston LP, Western Australia
Senator Michael Forshaw ALP, New South Wales
Senator Ross Lightfoot LP, Western Australia

Participating Members

Senator Lyn Allison
for the consideration of the provisions of the
Commonwealth Rehabilitation Service Reform Bill 1998

AD, Victoria
Senator Eric Abetz LP, Tasmania
Senator Bob Brown Greens, Tasmania
Senator Mal Colston Ind, Queensland
Senator Barney Cooney ALP, Victoria
Senator the Hon Rosemary Crowley ALP, South Australia
Senator Chris Evans ALP, Western Australia
Senator the Hon John Faulkner ALP, New South Wales
Senator Brenda Gibbs ALP, Queensland
Senator Brian Harradine Ind, Tasmania
Senator Sue Mackay ALP, Tasmania
Senator Dee Margetts GWA, Western Australia
Senator Shayne Murphy ALP, Tasmania
Senator Belinda Neal ALP, New South Wales
Senator Kay Patterson LP, Victoria
Senator the Hon Margaret Reynolds ALP, Queensland
Senator Sue West ALP, New South Wales
Senator John Woodley AD, Queensland





1.1 The Commonwealth Rehabilitation Service Reform Bill 1998 was introduced into the House of Representatives on 26 March 1998 and into the Senate on 13 May 1998. On 13 May 1998, the Senate, on the recommendation of the Selection of Bills Committee (Report No. 6 of 1998), referred the provisions of the Bill to the Committee for report by 4 June 1998. The reporting date was subsequently extended to 23 June 1998.

1.2 The Committee considered the Bill at a public hearing on 29 May 1998. Details of the public hearing are referred to in Appendix 2. The Committee received five submissions relating to the Bill and these are listed at Appendix 1.


2.1 The Commonwealth Rehabilitation Service Reform Bill 1998 provides for a number of transitional provisions to facilitate restructuring of the Commonwealth Rehabilitation Service (CRS) as a Commonwealth company. CRS, which currently operates as a Division of the Department of Health and Family Services (DHFS), is to be replaced by a Commonwealth owned company limited by shares, established under the Corporations Law. The Bill provides for the transfer of CRS assets, contracts and liabilities to the new company. With the restructure, the CRS will become an incorporated organisation operating under its own Board. The corporatised CRS will continue to provide the current range of free rehabilitation services but under legal contract to DHFS. [1]

2.2 The new company is to be declared a Government Business Enterprise (GBE) which will bring the company under the GBE governance arrangements. This will ensure that Ministers exercise continuing scrutiny over its strategic directions and over financial issues.

2.3 The Bill also repeals Part III of the Disability Services Act 1986, which relates to the provision of rehabilitation services by the Secretary of the Department (or his delegate). This Part will become redundant once the CRS separates from the Department. However, the objects and principles of the Disability Services Act and the programs and services referred to in Part III will be incorporated into the legal contract between the Department and the CRS. [2] The transfer of CRS staff will be handled separately under the provisions of section 81C of the Public Service Act 1922.

2.4 The Minister in the Second Reading Speech stated that:

2.5 The Department, referring to the Parliamentary Library's Bills Digest, summarised the benefits of separation as follows:

2.6 DHFS stated that the reforms will change the corporate structure of the CRS but will not result in changes to existing rehabilitation policies or services. Rehabilitation policy and the `purchase' of these services are not being devolved to the new company. The Government's intent is to separate the provider function being performed by the CRS from the policy or `purchaser' function which will remain with the Department. [5] The Department further noted that `while the bill facilitates the incorporation of CRS there is no change in existing rehabilitation policies and services. All services will continue as they currently exist. In particular, eligible clients will continue to receive the full range of services currently available'. [6]

2.7 The Department emphasised in evidence that the Bill is really only about the corporatisation of CRS and the separation of the purchaser and provider functions. It does not provide for the introduction of competition. DHFS added that:


Access to CRS Work Training Scheme

3.1 ACROD and Jobsupport commented on the benefits of the CRS Work Training Scheme and the problems it would cause the employment future of people with high support needs if access to the scheme were removed as a result of the corporatisation of the CRS. [8]

3.2 Under the scheme the client is paid a training allowance and covered by Comcare for workers compensation during the trial period of employment. ACROD noted that the scheme has allowed people with disabilities to access an unpaid work trial to allow a `try before you buy' period for both the person with a disability and the employer. The scheme also provides adequate levels of workers compensation coverage for unpaid work trials, which is not accessible under other schemes. [9]

3.3 The Department advised that the Government had made no decision concerning the future of the scheme but will be consulting widely with stakeholders over the next 12 months over possible options – `whether or not it stays with the CRS and we pay for it there as a community service obligation and specify access by clients that are not directly clients of the CRS. That is certainly one option. Other options would involve taking the money out of the CRS budget and offering it as a separate budget to provide the money to other service providers who can then purchase it from the CRS'. [10]

3.4 DHFS stated that the restructured CRS will continue to provide the existing range of services, including training allowances. Clients participating in work training will continue to be covered by the current workers compensation arrangements. [11] DHFS stated that `there will effectively be no change in those [workers compensation] arrangements because all existing services will continue and be provided by the corporatised CRS'. [12]

3.5 Jobsupport noted that work experience insurance coverage varies between the States and that in some States coverage is not at a level comparable with workers compensation coverage. [13] DHFS noted that the need for this cover is `fairly peculiar' to New South Wales – `many non-government service providers in other states actually take their own workers compensation policies when they place people in a work trial'. [14]

3.6 The adequacy of assessments performed by Centrelink to determine who should be referred to disability services was also raised in evidence. [15] DHFS advised that the work of the former disability review panels is now performed by Centrelink – `[they] do the same function that the panels used to do – that is, identify clients on pensions and benefits who can benefit from a rehabilitation or other disability employment program'. [16]

Appeal rights/complaints process

3.7 Some groups claimed that the removal of the right of clients to appeal reviewable decisions to the Administrative Appeals Tribunal (AAT) will disadvantage clients. [17]

3.8 DHFS advised that as the corporatised CRS will be a service provider acting under contract and will not be exercising any statutory powers or functions, appeals to the AAT would become redundant. However, the Department noted that under the new arrangements there will be a range of mechanisms for clients to lodge complaints or appeal decisions:

– Departmental decisions will be subject to normal administrative law processes;

– Centrelink, which will make decisions regarding eligibility on behalf of the Department, will be subject to appeal processes;

– CRS will have its own complaints handling processes and these will be explicitly provided for in its contract;

– dissatisfied CRS clients will also be able to lodge complaints with the Department as purchaser; and

– rights of appeal and complaint handling processes will be a feature of a new Accreditation System which is to be introduced for the CRS and non government service providers. [18]

3.9 DHFS stated that these new arrangements `will offer clients an enhanced and improved complaints and appeal process than is possible under the current arrangements, including review at various levels of the system'. [19]

Provision of services

3.10 Some groups claimed that the Bill would effect clients through the charging of fees to both employers and job seekers, loss of the independent living program and the potential loss of services to clients in regional and remote areas. [20]

3.11 DHFS confirmed that there will be no change to these arrangements when the CRS is corporatised. In relation to fees, DHFS indicated that CRS will be bound by its contract with the Department which will not allow it to charge for services to clients eligible for free services, or to employers for employing those clients. [21] The Department further stated that the independent living program will continue. [22]

3.12 The CRS gave an undertaking that in relation to services in regional and remote areas `the clear intention is to continue to provide the same level and quality of service in the whole of Australia that CRS does now. The intention is that that will continue….[T]here has been no change, and no intention to change, any of our locations and service delivery points in rural, remote areas'. [23]

Staffing arrangements

3.13 The Community and Public Sector Union claimed that CRS staff would be subject to the `forced transfer' to the corporatised CRS with consequent loss of positions with `tenure' in the Australian Public Service and a potential loss of entitlements and conditions. [24]

3.14 DHFS confirmed that CRS staff are to be transferred to the new company along with their existing entitlements under the provisions of section 81C of the Public Service Act 1922. That will include continued access to the CSS and the PSS superannuation schemes for existing staff, and also provide staff with the right of return to the public service. [25]

3.15 Regarding the terms and conditions of employment, CRS responded that `a transfer under section 81C of the Public Service Act is really focussed on retaining those conditions and transferring those conditions. At the same time, CRS has been negotiating with its staff for some time a new certified agreement, which sets out those conditions of employment in the future… Any change in the future to employment conditions will be as a result of any amendments of that certified agreement'. [26] The CRS noted that the certified agreement currently under consideration makes provisions for ongoing employees, as employees transferred under section 81C of the Public Service Act, and employees who are engaged post corporatisation. [27]

3.16 In relation to staffing levels the CRS advised that `to date, that adjustment has been done on a voluntary redundancy basis and the intention, in the future, is that any adjustments which are required will either be done by natural attrition process or continue on a voluntary redundancy basis'. [28]


4.1 The Committee reports to the Senate that it has considered the Commonwealth Rehabilitation Service Reform Bill 1998 and recommends that the Bill proceed.

Senator Sue Knowles

June 1998



This Bill gives rise to a number of very significant concerns. Some of these concerns relate to the Government's stated intention that the Bill is the first step in a process that will eventually lead to opening up rehabilitation services to competition. Others arise as a more direct result of the Bill itself, particularly the repeal of Part III of the Disability Services Act and the corporatisation of the Commonwealth Rehabilitation Service. The repeal of Part III with no legislated replacement (only a contract) may lead to the situation that people with disabilities would be even less likely to maintain employment status in the future.

1. Whether it is appropriate to introduce competition into the field of rehabilitation services:

With regard to this issue it should first be noted that officers of the Department said in their evidence that the Bill does not provide for the introduction of competition and that the Government is still to make decisions on how competition is to be introduced (Mr Blazow, Hansard transcript, pages CA57 and 61). Nevertheless, it is clear that one of the key aims, of the Bill is to open up the field to competition and that that is the long-term aim of the Government. In the Second Reading Speech to the Bill, the Minister said that the corporatisation of the CRS “paves the way in the longer term for the introduction of competition in Commonwealth funded rehabilitation services…”. While the precise way in which competition is to be introduced is yet to be determined, it is not correct to say that this Bill is not about competition.

The issue here is whether competition in this context will prove effective at improving the quality, affordability and accessibility of rehabilitation services, or whether it will in fact compromise these objectives. Of particular concern is the risk that an increased focus on competition combined with a reduction in government funding will shift the focus of service providers away from providing free services to pensioners with disabilities and toward fee-paying clients.

There is also the risk as one witness put it, that:

That the Department does not appear to see this issue as posing any significant challenge (Mr Law, Hansard transcript, page CA60) offers little comfort. Nor is much comfort gained by the fact that work into the classification of client needs is ongoing (Mr Law, Hansard transcript, page CA60). In a complex area such as this, where client needs vary greatly, it is absolutely essential that an adequate system for assessing need be in place if payment for service is to be linked to outcomes.

A further concern raised by some witnesses is that smaller specialised services that have developed a considerable amount of expertise over the years will be at a competitive disadvantage and may not be awarded tenders which will go to larger organisations with more resources to devote to the tendering process. This could mean a loss of valuable services and expertise from the field (Mr Corcoran, Hansard transcript, page CA48). This concern has certainly been borne out with the abolition of the CES and full competition in the delivery of employment services. Many community based providers with a proven track record in placing the unemployed were not successful tenderers. The Government has indicated that this is the model which is being used to open up the CRS to competition.

Concerns about the effects of competition in regional and rural areas were raised by a number of witnesses (Hansard transcript - Ms Taylor, page CA41; Mr Sawyer, page CA46; Mr O'Neill, page CA50; Mr Greasley, page CA51). The issue is simply that the provision of rehabilitation services in these areas is less profitable and, as competition shifts the focus toward profit, the number and quality of services in these areas may decline. As one witness put it:

The Department has given conflicting evidence on this issue to the Committee. One witness stated, “the clear intention is to continue to provide the same level and quality of service in the whole of Australia that CRS does now” and “there has been no change, and no intention to change, any of our locations and service delivery points in rural, remote areas” (Mr Law, Hansard transcript, page CA61). Another witness from the Department stated that the contract between the Department and the CRS will include terms aimed at ensuring that “it continues to be a national organisation with national coverage. We will leave scope for the CRS to work out how they do that: whether they do it through a physical location or through outreach services, travelling services and so forth” (Ms Blazow, Hansard transcript, page CA61).

It appears that the CRS will be given some scope to change the way it operates in rural and remote areas and the concern remains that it may be forced to make such changes for commercial reasons rather than for the purpose of improving the quality of its service.

2. The effects of the repeal of Part III of the Disability Services Act and the corporatisation of the CRS:

It has been said that it is necessary to repeal Part III of the Act to achieve the separation of the provider function from the Department. The guidance provided by Part III with respect to the delivery of rehabilitation services will not be replaced by the proposed legislation and will, instead, be provided in the terms of the contracts between the Department, the CRS and, eventually, private service providers.

According to the Department's evidence, the objects and principles of the Act and the detailed provisions relating to service delivery, payment of allowances and so forth will be incorporated into the contract (Mr Blazow, Hansard transcript, page CA57). It is impossible to make a confident assessment of this aspect of the proposal without actually seeing the contract containing the essential details.

Of course contractual terms can, at least in theory, be negotiated at the outset, taking commercial considerations into account, and altered during their currency by agreement of the parties and this can be done much more easily than amending legislation. There would therefore be less certainty in the way the scheme operates under this proposal than under the existing provisions. This issue could have been avoided by inserting provisions in the Bill setting minimum terms to be contained in all such contracts. However, the Government has chosen not to follow this path.

3. The future of the Work Training Scheme:

A number of witnesses raised the issue of the work training scheme under which people with disabilities are placed in open employment for particular periods (Hansard transcript – Ms Taylor, page CA41; Mr Tuckerman, pages CA41 to 43; Mr Sawyer, page CA46). According to these witnesses, this scheme is one of the most important that the CRS has to offer. The scheme involves payment of a training allowance to participants, which provides them with some monetary incentive. It also involves an arrangement whereby participants are deemed to be Commonwealth employees and therefore covered by Comcare. This means that the burden of providing insurance coverage is removed from prospective employers. Witnesses indicated that there would be serious problems for the work training scheme if the insurance arrangement were not maintained (Mr Sawyer, Hansard transcript, page CA46).

The repeal of Part III of the Act and the corporatisation of the CRS have the potential to affect both of these important elements of the work training scheme. Under this proposal, payment of the allowance would be governed by contracts agreed to by the parties rather than enshrined in the legislation, as is presently the case. This can only make entitlement to the allowance less certain.

A witness from the Department stated that there will be no change to the insurance arrangements and that participants in the scheme will continue to be covered by Comcare, even where they are being assisted by private service providers (Mr Blazow, Hansard transcript, page CA59). But it is not altogether clear how the present arrangement will not be affected by the proposed changes. The service providing assistance, whether that service is the corporatised CRS or a private provider, will not be a part of the Commonwealth under this proposal and it is therefore unclear how a participant in the work training scheme could come within the terms of the Comcare legislation.

4. The issue of appeals:

A further concern raised at the hearing is that with the repeal of Part III, the right of appeal to the Administrative Appeals Tribunal disappears. It is understood that an internal complaints process within the CRS will replace that right of appeal and that a person who is still not happy with the service of the CRS can approach the Department as purchaser (Mr Blazow, Hansard transcript, page CA60). The Department also pointed out that work is being done to develop an independent complaints and appeals mechanism to ensure that the disability service standards are complied with and that this mechanism will have the authority to deal with complaints against the CRS and private providers (Ms Blazow, Hansard transcript, page CA60).

But this misses the point. The AAT is not a complaints mechanism concerned with the quality of service being provided. It is an appeal body, which is independent of the Government Departments over whose decisions it has jurisdiction, and it has the power to make determinative decisions regarding the entitlements of individuals. It enhances the quality of Departmental decision-making because it puts officers of the Department on notice that their decisions may become the subject of external scrutiny and because it provides valuable feedback. An intradepartmental review process by the Department of Health and Family Services is not an independent mechanism.

Of equal importance, the AAT provides individuals with the opportunity to have adverse decisions reviewed in a rigorous fashion by a body that is independent of both the purchaser and provider of services. The loss of AAT appeal rights would represent a loss to the CRS and the individuals who use it.

It is also of concern that, while complaint and appeal mechanisms are currently being developed, the right of appeal to the AAT will disappear immediately upon the repeal of Part III of the Act. Any alternative dispute mechanisms would need to be in place before that happens.


Due to the failure of the Government to address the concerns outlined above adequately and their intention to risk the quality, affordability, and accessibility of rehabilitation services to Australians with disabilities we oppose the bill and reserve the right to seek amendments. We are not convinced that the possible advantages of corporatising the CRS and opening up disability services to competition outweigh the risks. Clients of the CRS form a particularly vulnerable group and we have grave concerns about the potential of this proposal to shift the focus away from the vocational needs of pensioner clients. This is so despite the Department's evidence that the CRS will not be dominated by the profit motive to the exclusion of all else (Mr Blazow, Hansard transcript, page CA58).

To conclude, the repeal of Part III of the Disability Services Act will replace existing and substantial services and community obligations with a future contract that has no legislative basis, leaving people with disabilities without the protection afforded to them under Part III of the Act as it now stands.

Senator Michael Forshaw Senator Kay Denman

(ALP, New South Wales) (ALP, Tasmania)



The Democrats acknowledge the important work undertaken by the Commonwealth Rehabilitation Service (CRS) in assisting people with a disability or injury to get or keep employment.

The Democrats support the key objective of the CRS: to minimise the personal, social and financial costs of the disability by the provision of rehabilitation services. We believe that this service is vital to provide some measure of equity in employment opportunities for people with a disability.

The Democrats do not believe that the aim of the CRS is more likely to be achieved through corporatising this service. The Democrats accept that there are some government agencies and services where corporatisation can contribute to more efficient service delivery, however, as there is no private sector equivalent of the CRS we do not believe that in the case of the CRS such a move is warranted.

The Democrats do not believe that the Government has made a convincing case for separating the CRS from the Commonwealth Department of Health and Family Services (DHFS). While we acknowledge that in the short term this Bill may not directly impact upon services, we understand that this Bill forms part of a wider government move to open up the provision of rehabilitation services to competition. The Government has stated that from 1999 the CRS will cease to be a monopoly provider of rehabilitation services and this Bill forms part of this long-term strategy.

The Democrats do not believe that the Government has adequately supported its claims that the corporatising of the CRS is the only or the best way to achieve greater efficiency in service delivery, a clearer policy direction and increased accountability.

While there may be some benefit in effecting a purchaser/provider split in the area of rehabilitation services, the Democrats believe that this could be achieved in a range of different ways (for example establishing a Commonwealth company or Commonwealth authority) and are not satisfied that corporatisation of the CRS as a Government Business Enterprise (GBE) is the optimum strategy. We are also concerned that the Government has not adequately justified its proposal to corporatise the CRS as a GBE or detailed any specific governance arrangements or accountability measures that will apply to the CRS under corporatisation in recognition of its community service obligations.

The Democrats have noted the concerns of a number of disability service consumers and advocates regarding the corporatisation of the CRS. In particular we are concerned that in corporatising the CRS there will be a disincentive to provide services to people with high level needs. We are also concerned that there will be an adverse impact on people in rural areas where services are expensive to run and there are few opportunities for profit making. These concerns were raised by Disability Action in its submission to the Committee:

The Democrats are also concerned that when competition is introduced to this area, some of the most important (but expensive) programs such as the Work Training Scheme may be closed down if they are not considered profitable. We note the concerns raised in submissions and at the Public Hearing about the potential for competition to result in cost cutting measures which will adversely impact upon some of the most disadvantaged clients.

The Democrats support the concerns raised by stakeholders regarding the removal of right to appeal to the AAT and the impact of unclear procedures for appeals on people with disabilities.

The Democrats support the continuation of AAT appeal rights as an appeal mechanism independent of the DHFS.

The Democrats are also concerned about the impact of corporatisation on CRS employees as they undergo compulsory transfer to the new company by virtue of section 81C of the Public Service Act. In particular, we are concerned that current employees may lose their status as Australian Public Service employees and consequently some of their current working conditions and benefits.

The Democrats believe that the Government should work with the relevant unions to ensure that the rights of CRS employees are protected in the move toward corporatisation. If this does not occur, the Democrats will consider amending this Bill to strengthen the position of public servants being transferred under Section 81C.

Finally, the Democrats acknowledge concerns about the potential conflict of interest resulting from the portfolio Minister being required to balance the shareholder interests in GBEs, with the other relationships that the Government has with its GBEs. The Democrats believe that consideration should be given to removing the responsibility for the shareholder function from the portfolio Minister and appointing another Minister to this role.

Senator Lyn Allison

Australian Democrats Senator for Victoria


Submissions received by the Committee

2 Jobsupport Inc.
- Additional Information, dated 12 June 1998
3 Commonwealth Department of Health and Family Services
4 Community and Public Sector Union, PSU Group (CPSU)
5 Disability Action Inc.


Public hearing

A public hearing was held on the Bill on 29 May 1998 in Senate Committee Room 1S3.

Committee Members in attendance

Senator Sue Knowles (Chairman)

Senator Lyn Allison

Senator Kay Denman

Senator Alan Eggleston

Senator Michael Forshaw

Senator Brenda Gibbs



Ms Sue Taylor, Deputy Executive Director

Mr Scott Holz, NSW Representative, National Committee on Employment and Training

Jobsupport Inc

Mr Phil Tuckerman, Director

Disability Action Inc via teleconference

Mr Maurice Corcoran, Executive Officer

Mr David Morrell, Systems Advocate

Mr Gary Sawyer, Manager

Mr Lindsay Spackman, DARE Advocate

Community and Public Sector Union

Mr David O'Neill, National Industrial Officer

Mr Keith Greasley, Deputy President, CPSU Health and Family Services Section Council

Department of Health and Family Services

Ms Judy Blazow, Assistant Secretary, Strategic Management Branch,

Disability Programs Division

Mr Nick Blazow, Assistant Secretary, Corporate Development Branch,

Corporate Services Division

Mr Alan Law, General Manager, Commonwealth Rehabilitation Service



[1] Explanatory Memorandum; Submission No.3, pp.3-4.

[2] Submission No.3, p.4.

[3] Minister's Second Reading Speech

[4] Committee Hansard, 29.5.98, p.62. See also Parliamentary Library, Commonwealth Rehabilitation Service Reform Bill 1998, Bills Digest No.172, 1997-98, p.4.

[5] Submission No.3, p.3.

[6] Committee Hansard, 29.5.98, p.57.

[7] Committee Hansard, 29.5.98, p.61.

[8] Committee Hansard, 29.5.98, pp.41-42; Submissions No.1, pp.1-2; No.2, pp.1-2.

[9] Submission No.1, pp.1-2.

[10] Committee Hansard, 29.5.98, p.66.

[11] Committee Hansard, 29.5.98, pp.57-59; Submission No.3, p.5.

[12] Committee Hansard, 29.5.98, pp.59.

[13] Submission No.2, p.2.

[14] Committee Hansard, 29.5.98, p.65.

[15] Committee Hansard, 29.5.98, p.52.

[16] Committee Hansard, 29.5.98, p.63.

[17] Committee Hansard, 29.5.98, pp.46, 48-49,52; Submissions No.4, p.1; No.5, p.1.

[18] Submission No.3, p.5. See also Committee Hansard, 29.5.98, p.58.

[19] Committee Hansard, 29.5.98, p.58.

[20] See, for example, Submissions No.4, pp.1-2; No.5, pp.2-3; Committee Hansard, 29.5.98, pp.46-47,49,51-56.

[21] Committee Hansard, 29.5.98, p.65; Submission No.3, p.6.

[22] Committee Hansard, 29.5.98, p.65.

[23] Committee Hansard, 29.5.98, p.61.

[24] Submission No.4, pp.2-3; Committee Hansard, 29.5.98, pp.50-51.

[25] Committee Hansard, 29.5.98, pp.58,62,66; Submission No.3, p.3.

[26] Committee Hansard, 29.5.98, pp.62-63.

[27] Committee Hansard, 29.5.98, p.63.

[28] Committee Hansard, 29.5.98, p.62.