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FAMILY AND COMMUNITY SERVICES LEGISLATION AMENDMENT (DISABILITY REFORM) BILL 2002

2002

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

HOUSE OF REPRESENTATIVES

FAMILY AND COMMUNITY SERVICES LEGISLATION AMENDMENT (DISABILITY REFORM) BILL 2002

EXPLANATORY MEMORANDUM

(Circulated by authority of the Minister for Family
and Community Services,

Senator the Hon Amanda Vanstone)

FAMILY AND COMMUNITY SERVICES LEGISLATION AMENDMENT (DISABILITY REFORM) BILL 2002

OUTLINE AND FINANCIAL IMPACT STATEMENT

Schedule 1 Amendments relating to disability support pension

Schedule 1 of the Bill gives effect to the Governments undertaking, made in response to the Final Report of the Reference Group on Welfare Reform, to review the legislative qualifications for disability support pension in relation to work capacity. These measures aim to ensure that the eligibility criteria for disability support pension are more in step with modern labour market participation patterns. Changes to the qualification criteria will place greater focus on identifying a persons ability to work and benefit from services that will improve their work capacity. There will be no change to current arrangements for people claiming or receiving disability support pension who are permanently blind.

Date of effect: 1 July 2003

Financial Impact:

Expense ($m)

Schedule 2- Amendments relating to newstart allowance

In Part 1 of the Schedule, amendments are made to the Social Security Act 1991 under which newstart allowance customers who are incapacitated for work may not be exempt from the activity test if they are able to undertake a suitable activity. Part 2 of the Schedule makes amendments to the Social Security (Administration) Act 1999 so that the people affected by the changes in Part 1 are able to be sent notices under section 64 of that Act.

Date of effect:   20 September 2003

Financial Impact: There are no financial implications from these changes.

Schedule 3- Amendments relating to youth allowance

In Part 1 of the Schedule, amendments are made to the Social Security Act 1991 under which youth allowance customers who are incapacitated for work may not be exempt from the activity test if they are able to undertake a suitable activity. Part 2 of the Schedule makes amendments to the Social Security (Administration) Act 1999 so that the people affected by the changes in Part 1 are able to be sent notices under section 64 of that Act.

Date of effect:   20 September 2003

Financial Impact: There are no financial implications from these changes.

FAMILY AND COMMUNITY SERVICES LEGISLATION AMENDMENT (DISABILITY REFORM) BILL 2002

Clause 1 sets out how the Act is to be cited, that is, the Family and Community Services Legislation Amendment (Disability Reform) Act 2002.

Clause 2 provides a table that sets out the commencement dates of the various sections in and Schedules to the Act.

Clause 3 provides that each Act that is specified in a Schedule is amended or repealed as set out in that Schedule.

For ease of description, this explanatory memorandum uses the following abbreviations:

Social Security Act means the Social Security Act 1991; and

Administration Act means the Social Security (Administration) Act 1999.

Schedule 1 Amendments relating to the disability support pension

Summary

From 1 July 2003, the qualification criteria for disability support pension under Part 2.3 of the Social Security Act will be amended. The new criteria reflect the intention, in assessing a persons qualification for disability support pension, to focus more closely on identifying their ability to work and benefit from services that will improve their work capacity.

The new criteria set the work capacity threshold at 15 hours per week at award wages or above. The new criteria also broaden the types of interventions or assistance that can be taken into account, in addition to mainstream training, in determining a persons capacity to work. Finally, the new criteria ensure consistency of treatment by providing that local labour market conditions are not a relevant consideration in determining a persons work capacity for those aged over 55 years of age. Most of those people affected by the new rules will receive an alternative income support payment such as newstart allowance.

Background

Welfare Reform Next Steps for People with Disabilities

Over 650,000 are currently in receipt of disability support pension. This number has been growing at an average rate of around 4% per annum over the past four years. In the 1990s, Australia had the highest rate of growth in disability-related payments of all OECD countries. Almost half of all people granted disability support pension are aged 50 years or over, suggesting that disability support pension provides an early retirement option for some recipients.

The existing disability support pension eligibility provisions effectively enable people with disabilities to withdraw from the labour market by drawing distinctions between those who have capacity to work full time and those who do not. Without preventative action now, these trends will lead to increasing numbers of older people having fewer resources when they retire from work. In addition, the social and economic costs associated with people prematurely withdrawing from the labour force are significant. Boosting labour force participation will also lessen the potentially adverse impacts of an ageing population on prospects for future economic growth.

In August 2000, the Final Report of the Reference Group on Welfare Reform, Participation Support for a More Equitable Society (the McClure Report) was released. The McClure Report recommended, amongst other things, that the Government review the work capacity criterion for people with disabilities (previously set at a 30-hour per week threshold) with a view to ensuring a better match with contemporary patterns of labour market participation.

In its Response to the McClure Report, Welfare Reform A Stronger, Fairer Australia, the Government gave an undertaking to move towards basing eligibility criteria for disability support pension more strongly around work capacity. The results of the Assessment and Contestability Trial have also influenced this process, demonstrating that the work capacity of people with disabilities can be markedly improved when people access services that are appropriately tailored to their needs.

The Government is committed to developing a system that engages all people of working age in active social and economic participation. These measures aim to ensure that the qualification criteria are changed so that disability support pension is only payable to people with very restricted work capacity (less than 15 hours at award wages a week). These measures also ensure that Centrelink will also be able to consider a broader range of interventions, in addition to mainstream training, in assessing the work capacity of people claiming or receiving disability support pension. Those aged 55 years and over will no longer have their local labour market conditions taken into account in determining their qualification for disability support pension. Most of those people affected by the new rules will receive newstart allowance instead and it is also expected that better employment outcomes will be achieved for people with a disability under the new arrangements. There will be no change to current arrangements for people claiming or receiving disability support pension who are permanently blind. Schedule 1 to the Bill makes the relevant amendments to the social security law.

Explanation of changes

Part 1 Amendment of the Social Security Act 1991

Item 1 makes a minor technical amendment to the qualification criteria for disability support pension at section 94 of the Social Security Act. Existing subparagraph 94(1)(c)(ii) provides an alternative qualification criteria in respect of a person who is participating in the supported wage system. Existing subparagraph 94(1)(c)(ii) reflects the historical administrative arrangement under which the supported wage system was administered by the then-Department of Health and Aged Care. Since 2000, the supported wage system has been administered by the Department of Family and Community Services. The references to the Health Minister and the Health Department at subparagraph 94(1)(c)(ii) are consequently obsolete. Item 1 repeals existing subparagraph 94(1)(c)(ii) and substitutes new subparagraph 94(1)(c)(ii), which substitutes a reference to the supported wage system administered by the Department.

Item 2 inserts a new category of employment assistance to be taken into consideration under paragraph 94(2)(b) of the Social Security Act for the purposes of determining whether a person has a continuing inability to work. Paragraph 94(2)(b) is applied to test a persons capacity to do work for which he or she could become skilled if trained or otherwise assisted to obtain that skill. If a persons impairment would not prevent them from undertaking work for which they could become skilled if trained or otherwise assisted to obtain that skill, the person will not have a continuing inability to work for the purposes of subsection 94(1). Item 2 inserts the new category of another work-related activity at subparagraph 94(2)(b)(i), with the result that a person will not have a continuing inability to work for the purposes of subsection 94(1) of the Social Security Act if, despite the persons impairment, he or she could acquire skills through educational or vocational training, on-the-job training, or another work-related activity, and thereby equip himself or herself for work within the next 2 years. Item 6 substitutes new subsection 94(4), which defines the phrase another work-related activity. The amendment at subparagraph 94(2)(b)(i) enables the Secretary to consider the existence of work-related programs, courses and other activities which do not come within the scope of educational or vocational training or on-the-job training but which could assist a person to equip themselves for work within the next two years.

Item 3 inserts a reference to activity at subparagraph 94(2)(b)(ii) of the Social Security Act to take into account the introduction of the new category of employment assistance at subparagraph 94(2)(b)(i). Under subparagraph 94(2)(b)(ii), the Secretary must be satisfied that, if a persons impairment does not prevent the person from undertaking educational or vocational training, on-the-job training or another work-related activity, such training or activity is unlikely (because of the impairment) to enable the person to do any work within the next 2 years.

Item 4 inserts a reference to the new term another work-related activity, at paragraph 94(3(a) of the Social Security Act. Paragraph 94(3)(a) provides that, in deciding whether a person has a continuing inability to work, the Secretary is not have regard to the actual availability to the person of the categories of training and assistance set out at paragraph 94(3)(a). Paragraph 93(3)(a), as amended, provides that, in deciding whether a person has a continuing inability to work, the Secretary is not to have regard to the actual availability to the person of educational or vocational training, on-the-job training, or another work-related activity that would assist in skilling the person to obtain work. Item 6 inserts new subsection 94(4), which defines the phrase another work-related activity.

Item 5 amends paragraph 94(3)(b) by removing the reference to subsection 94(4) to reflect the repeal of existing subsection 94(4) at Item 6.

Item 6 repeals existing subsection 94(4) of the Social Security Act. The repeal of existing subsection 94(4) has the consequence that, from 1 July 2003, the actual availability to the person of work in the locally accessible labour market will be irrelevant in determining whether a person has a continuing inability to work, regardless of the persons age.

Item 6 also substitutes new subsection 94(4). New subsection 94(4) provides a definition of the phrase another work-related activity for the purposes of subsections 94(2) and (3). New subsection 94(4) provides that the phrase another work-related activity is a reference to a person who undertakes one of the following activities: pre-vocational assistance; participation in a labour market program; or vocational rehabilitation. A definition of pre-vocational assistance is provided for under subsection 94(5) at Item 9. The reference to labour market programs contemplates programs the objective of which is to give job seekers the necessary skills and work experience to enable them to compete more equitably in the labour market and to seek and obtain secure employment. The reference to vocational rehabilitation contemplates programs, courses or activities of a rehabilitative nature, including programs, courses or activities delivered by services funded under Part III of the Disability Services Act 1986.

Item 7 amends the definition of educational or vocational training contained at subsection 94(5) of the Social Security Act to provide that educational or vocational training does include a program designed specifically for people with physical, intellectual or psychiatric impairments.

Item 8 amends the definition of on-the-job training contained at subsection 94(5) of the Social Security Act to provide that on-the-job training does include a program designed specifically for people with physical, intellectual or psychiatric impairments.

Item 9 inserts a definition of pre-vocational assistance at subsection 94(5) of the Social Security Act. For the purposes of section 94, pre-vocational assistance means a program, course or activity, whether or not designed specifically for people with physical, intellectual or psychiatric impairments, that, in the opinion of the Secretary would either improve a participants prospects of obtaining work, or would assist a participant in seeking work. This definition covers work-related programs, courses or activities that would not fall within the categories of educational or vocational training, on-the-job training, labour market programs or vocational rehabilitation. Some examples of the types of activities that may be considered pre-vocational assistance include presentation skills courses, job search skills programs (for example, programs encompassing resumX-writing and interview skills) or a basic computing skills class. In order to consider that a program, course or activity meets the definition of pre-vocational assistance provided for at subsection 94(5), the Secretary must be satisfied that the program, course or activity would improve a participants prospects of obtaining work, or that the program, course or activity would assist a participant in seeking work. The Secretary is not required to consider whether the program, course or activity would improve the prospects of obtaining work of a particular participant in the program, course or activity, or whether the program, course or activity would assist a particular participant in seeking work.

As a consequence of the amendments at Items 7, 8, and 9, in determining whether a person has a continuing inability to work for the purposes of section 94, the Secretary is to take into account the existence of tailored or targeted assistance designed specifically for people with physical, intellectual or psychiatric impairments. For example, for the purposes of subparagraph 94(2)(b)(i), the Secretary would need to consider whether the persons impairment prevented him or her from undertaking educational or vocational training or on-the-job training or pre-vocational assistance during the next 2 years, including educational or vocational training or on-the-job training or pre-vocational assistance designed specifically for people with physical, intellectual or psychiatric impairments.

Item 10 amends the definition of work at subsection 94(5) of the Social Security Act. The reference to 30 hours is repealed. In its place, a reference to 15 hours is inserted. The new definition of work provides that, for the purposes of section 94 of the Social Security Act, work is work that is for at least 15 hours per week at award wages or above, and that exists in Australia, even if not within the person's locally accessible labour market. The threshold of 15 hours reflects labour market trends towards widespread part-time and casual employment, and operates to ensure that people with capacity for part-time work are encouraged to participate in the labour market and to take opportunities to build self-reliance.

Items 11 to 14 inclusive make technical amendments to reflect the introduction of the 15 hour work capacity threshold by Item 10.

Item 11 omits the reference to 30 hours per week and substitutes a reference to 15 hours per week at paragraph 146T(1)(b) of the Social Security Act which relates to the 12 month extension of fringe benefits for disability support pension.

Item 12 omits the reference to 30 hours per week and substitutes a reference to 15 hours per week at subparagraph 664C(1)(A)(i) of the Social Security Act which deals with employment entry payment.

Item 13 omits the reference to 30 hours per week and substitutes a reference to 15 hours per week at paragraph 1061ZD(2)(b) of the Social Security Act in respect of pensioner concession cards.

Item 14 omits the reference to 30 hours per week and substitutes a reference to 15 hours per week at paragraph 1061ZE(2)(c) of the Social Security Act in respect of pensioner concession cards.

Item 15 inserts new clause 135 at Schedule 1A of the Social Security Act, providing application and transitional provisions in respect of the amendments made under Schedule 1 of this Bill.

New subclause 135(1) provides that the amendments made by Schedule 1 of the Bill apply in respect of any new claim for disability support pension made on or after 1 July 2003.

New subclause 135(2) provides a protected status for a disability support pension recipient whose claim is made prior to 1 July 2003. New subclause 135 provides that, if a claim is properly made before 1 July 2003, having regard to Division 1 of Part 3 of the Administration Act which sets out requirements in regard to the making of a claim, the claim is to be determined and any payment of pension is to be made as if the amendments referred to in subclause 135(1) (the amendments made by Schedule 1 of the Bill) had not been made. As a result, if a person properly claimed disability support pension prior to 1 July 2003, the persons qualification for disability support pension is to be determined with reference to section 94 of the Social Security Act as those sections stood prior to 1 July 2003 (the old qualification rules), regardless of whether the claim is determined prior to 1 July 2003 or after that date. Furthermore, payment of disability support pension is to be made with reference to the relevant provisions of the social security law (the old rules) as if the amendments made under Schedule 1 of this Bill had not been made.

New subclause 135(3) provides for three circumstances in which new subclause 135(2) is to cease to apply to a person.

Under new subclause 135(3)(a), where subclause 135(2) applies to a person, payment of disability support pension to that person will continue under the old rules (that is, as if the amendments made under Schedule 1 of this Bill had not been made) until such a time as the person ceases to be qualified for disability support pension under the old qualification rules. The following scenario gives an example of how new subclause 135(3)(a) will operate.

       Example 1

Sofia has been in receipt of disability support pension since 1998. She is not permanently blind, and so her qualification for disability support pension is assessed with reference to section 94 of the Social Security Act. Sofia currently works for 25 hours per week at award wages.

From 1 July 2003, Sofia continues to qualify for disability support pension (even though she works more than 15 hours per week at award wages) until such a time as one of the events set out in new clause 135 occurs in relation to her disability support pension. This is because new subclause 135(2) of Schedule 1 of the Social Security Act has the effect that Sofias qualification for disability support pension continues to be determined with reference to the old qualification rules.

In September 2003, Sofia begins to work for 35 hours per week. She notifies Centrelink and her disability support pension is suspended on the grounds that she does not have a continuing inability to work for the purposes of subparagraph 94(1)(c)(i) of the Social Security Act. In making the decision that Sofia is not qualified for disability support pension, the decision maker has reference to the old qualification rules, by virtue of new subclause 135(2) of Schedule 1 of the Social Security Act.

In April 2004, Sofias working hours drop back to 25 hours per week at award wages. Sofia contacts Centrelink to request that her payment of disability support pension be restored. In restoring Sofias disability support pension, the decision-maker must be satisfied that Sofia is properly qualified for disability support pension and that disability support pension is payable in respect of Sofia. In considering whether Sofia is entitled to disability support pension, the decision-maker, by virtue of new subclause 135(3)(a) of Schedule 1 of the Social Security Act, is to have reference to the qualification criteria at section 94 of the Social Security Act as amended by Schedule 1 of this Bill. This is because new subclause 135(3)(a) of Schedule 1 of the Social Security Act provides that, once a person ceases to be qualified for disability support pension under the old rules, the person loses their protected status. Any future assessment of their entitlement to payment of disability support pension is to be made with regard to the new rules established by this Bill.

Under new subclause 135(3)(b), where subclause 135(2) applies to a person, payment of disability support pension to that person will continue under the old rules (that is, as if the amendments made under Schedule 1 of this Bill had not been made) until such a time as disability support pension ceases to be payable to the person under the old rules. The following scenario gives an example of how new subclause 135(3)(b) will operate.

       Example 2

Brenton has been in receipt of disability support pension since 2000. He is not permanently blind, and so his qualification for disability support pension is assessed with reference to section 94 of the Social Security Act. Brenton currently works for 20 hours per week at award wages.

From 1 July 2003, Brenton continues to qualify for disability support pension (even though he works more than 15 hours per week at award wages) until such a time as one of the events set out in new clause 135 occurs in relation to his disability support pension. This is because new subclause 135(2) of Schedule 1 of the Social Security Act has the effect that Brentons qualification for disability support pension continues to be determined with reference to the old qualification rules.

In January 2003, Brenton is promoted and gets a substantial payrise. Brenton notifies Centrelink of his increase in income from employment, and Centrelink reassesses Brentons rate of disability support pension. Centrelink determine that, because of his increased income from employment, Brentons rate of disability support pension would be reduced to nil. Under section 98 of the Social Security Act, as a result of Brentons rate of disability support pension being nil, disability support pension would not be payable to Brenton. As disability support pension is not payable to Brenton, Brentons disability support pension is suspended.

In March 2003, Brenton begins to suffer debilitating side effects from his new medication and accordingly decreases his hours of work to 12 hours per week. As a result, his income from employment decreases. Brenton notifies Centrelink of his change in circumstances and Centrelink reconsiders Brentons entitlement to disability support pension. In assessing Brentons entitlement for disability support pension, the decision-maker, by virtue of new subclause 135(3)(b) of Schedule 1 of the Social Security Act, is to have reference to the qualification criteria at section 94 of the Social Security Act as amended by Schedule 1 of this Bill. This is because new subclause 135(3)(b) of Schedule 1 of the Social Security Act provides that, once disability support pension ceases to be payable to a person under the old rules, the person loses their protected status. Any future assessment of their entitlement to payment of disability support pension is to be made with regard to the new rules established by this Bill.

Under new subclause 135(3)(c), where subclause 135(2) applies to a person, payment of disability support pension to that person will continue under the old rules (that is, as if the amendments made under Schedule 1 of this Bill had not been made) until such a time as the person is required, by reason of a notice given to the person under subsection 64(2) of the Administration Act, to undertake a specified activity (for example, a medical examination or a Work Capacity Assessment) for the purpose of reviewing that persons capacity to undertake work. The following scenario gives an example of how new subclause 135(3)(c) will operate.

       Example 3

Michelle has been in receipt of disability support pension since 1996. She is not permanently blind, and so her qualification for disability support pension is assessed with reference to section 94 of the Social Security Act. She currently works for 16 hours per week at award wages.

From 1 July 2003, Michelle continues to qualify for disability support pension (even though she works more than 15 hours per week at award wages) until such a time as one of the events set out in new clause 135 occurs in relation to her disability support pension. This is because new subclause 135(2) of Schedule 1 of the Social Security Act has the effect that Michelles qualification for disability support pension continues to be determined with reference to the old qualification rules.

After 1 July 2003, Michelles situation does not change: she continues to be qualified for disability support pension and disability support pension continues to be payable in respect of her. In December 2004, Centrelink issues Michelle with a notice under subsection 64(2) of the Administration Act requiring Michelle to attend a medical examination for the purposes of reviewing her capacity to undertake work.

Michelle complies with the notice and attends the medical examination. Centrelink reassesses Michelles qualification for disability support pension on the basis of the information provided from the medical examiner. In assessing Michelles entitlement for disability support pension, the decision-maker, by virtue of new subclause 135(3)(c) of Schedule 1 of the Social Security Act, is to have reference to the qualification criteria at section 94 of the Social Security Act as amended by Schedule 1 of this Bill. This is because new subclause 135(3)(b) of Schedule 1 of the Social Security Act provides that, once a notice is issued to a person under subsection 64(2) of the Administration Act requiring a person to undertake a specified activity (for example, a medical examination or a Work Capacity Assessment) for the purpose of reviewing that persons capacity to undertake work, the person loses their protected status. Any assessment of their entitlement to payment of disability support pension made after the issue of the notice is to be made with regard to the new rules established by this Bill. Sections 28A and 29 of the Acts Interpretation Act 1901 applies in relation to notices under subsection 64(2) of the Administration Act.

Part 2 Amendment of the Social Security (Administration) Act 1999

Part 2 of the Bill makes a number of consequential amendments to the Administration Act necessary as a result of the amendment to the definition of work for the purposes of sections 94 of the Social Security Act, which introduces the new work capacity threshold of 15 hours per week at award wages. These amendments ensure consistency in relation to notification requirements and decision-making under the Administration Act.

Suspension or cancellation of disability support payment

Section 93 of the Administration Act provides for an automatic cancellation where a person who is receiving a social security payment informs the Department of a change of circumstances in compliance with a notice issued under subsection 68(2) of the Administration Act. Amongst other things, section 96 of the Administration Act provides that, in certain circumstances the Secretary may determine that section 93 does not apply where a person have provided information in relation to their disability support pension, and may suspend payment of that pension under the conditions provided for at section 96. Amongst other things, section 97 of the Administration Act provides that, where a persons disability support pension has been cancelled under section 93, in certain circumstances the Secretary may determine that the person is to be treated as if the disability support pension had been suspended under section 96 of the Administration Act.

Item 10 of this Bill amends the definition of work at subsection 94(5) of the Social Security Act to introduce a new work capacity threshold of 15 hours per week at award wages or above. Item 16 amends paragraph 96(1)(a) of the Administration Act to insert a reference to the new 15 hour work capacity threshold. Paragraph 96(1)(a) provides that the Secretary may determine that section 93 does not apply to a person in circumstances where a person ceases to be qualified for disability support pension because the person obtains paid work that is for at least 15 hours per week.

Item 17 amends paragraph 97(1)(a) of the Administration Act to insert a reference to the new 15 hour work capacity threshold. Paragraph 96(1)(a) provides that the Secretary may determine that section 93 did not apply to a person in circumstances where disability support pension ceased to be payable to a person under section 93 because the person obtained paid work that is for at least 15 hours per week and, within 2 years of disability support pension ceasing to be payable, the person ceases to do that work.

Schedule 2 Amendments relating to newstart allowance

Summary

In broad terms, in order to qualify for newstart allowance, a claimant must either satisfy the activity test or not be required to satisfy that test. A person is not required to satisfy the activity test in respect of a period for the purposes of newstart allowance if the requirements of Subdivision BA of Division 1 of Part 2.12 are met. In general terms, those requirements are that the person is temporarily incapacitated for work and the person has provided a medical certificate to Centrelink which contains certain specified information. The effect of the changes made by this measure is that the exemption from the activity test may not be applicable where the Secretary is of the opinion that the person is capable of undertaking a suitable activity. In relation to what constitutes a suitable activity, the existing provision dealing with activities for the purposes of Newstart Activity Agreements will be relevant.

Background

Currently, there are around 84,000 newstart/youth allowance recipients who are exempt from the activity test because of a temporary incapacity. This number has been increasing at a rate of around 7% per year over the last few years.

Existing legislation requires that customers seeking to claim a temporary exemption from the activity test due to a medical condition, illness or injury must only be unable to undertake 8 hours or more a week of work. Non-activity tested allowees can face a greater risk of long term dependence on income support payments than activity tested customers as there are no specific measures in place to require, encourage and facilitate participation by this group. Providing people with easy access to an exemption from the activity test does not encourage people with an incapacity to participate to the best of their abilities.

The changes made by this measure will make it possible for people who are incapacitated for work to be referred to appropriate activities for example, rehabilitation  which they can undertake and which will help their long term employment prospects. The focus is on a persons capacity rather than their incapacity and on what sort of specialist support they need so that they can participate in an appropriate activity to their full capacity.

Explanation of the changes

Part 1 Amendment of the Social Security Act 1991

Section 598 is concerned with the liquid assets test waiting period. Among other things, paragraphs 598(3AA)(b) and 598(3B)(b) deal with the question of when that period should start in circumstances where the customer is, under Subdivision BA, not required to satisfy the activity test. However, one broad effect of the changes being made as part of this initiative is that certain people will now be required to satisfy that test (by complying with the terms of their Newstart Activity Agreement) who, under Subdivision BA of Division 1, would previously not have been required to do so. Items 1 and 2 make consequential amendments to section 598 to ensure that the existing operation of the provisions dealing with the liquid assets test waiting period is not affected as a result of this initiative. This is achieved by making the relevant provisions applicable where the person either is, under Subdivision BA, not required to satisfy the activity test or is the subject of a determination under new subsection 603(1A) (which is inserted into the Social Security Act by Item 4 of this Bill).

In broad terms, section 600 allows the Secretary to make prospective determinations of qualification for newstart allowance in specified circumstances. The effect of subsection 600(5) is that the Secretary may make such a determination where the person is incapacitated for work and is not required to satisfy the activity test under Subdivision BA of Division 1. However, one broad effect of the changes being made as part of this initiative is that certain people will now be required to satisfy that test (ie by complying with the terms of their newstart allowance activity agreement) who, under Subdivision BA, would previously not have been required to do so. Accordingly, Item 3 makes consequential amendments to subsection 600(5) to ensure that the operation of that provision is not affected as a result of this initiative. This is achieved by making subsection (5) applicable where the person either is, under Subdivision BA, not required to satisfy the activity test or is the subject of a determination under new subsection 603(1A) (which is inserted into the Social Security Act by Item 4 of this Bill).

The effect of paragraph 593(1)(b) is that, to be qualified for NSA, a person must either satisfy the activity test or not be required to satisfy the activity test. In broad terms, one of the effects of Subdivision BA of Division 1 of Part 2.12 of the Social Security Act is that a person who is incapacitated for work is not required to satisfy the activity test. Section 603C of the Social Security Act sets out the basic requirements in order for a person to be exempt from the activity test under Subdivision BA. Broadly, those requirements are that, throughout the period, the person is temporarily incapacitated for work because of sickness or accident and has given a medical certificate to the Secretary which contains certain information.

The effect of Item 4 is that, despite the fact that a person is incapacitated for work, the Secretary may determine that subsection 603C(1) does not apply to the person if the Secretary is satisfied that the person is able to undertake a suitable activity.

Item 5 provides a definition of the term suitable activity. In effect, a suitable activity may be any activity of the kind referred to in subsection 606(1) that the person might be required to undertake for the purposes of a Newstart Activity Agreement. Existing subsections 606(3) and (4) require the Secretary to have regard to certain matters (such as the persons capacity to comply, education and skills) when considering whether an activity is suitable for inclusion in a persons agreement.

Existing section 603F provides for the duration of the exemption under Subdivision BA. The broad effect of subsection 603F(2) is that a persons maximum exemption period is either the period stated on the medical certificate or 13 weeks, whichever is the lesser. Subsections (4) to (6) provide for the maximum exemption period to be extended in certain circumstances. Subsection 603F(1) provides that a person ceases to be exempt if the persons maximum exemption period ends.

It is recognised that there will be situations where a person, although initially not capable of undertaking a suitable activity, will subsequently be able to undertake such an activity. That is, there will be situations where a person is granted an exemption from the activity test under Subdivision BA (ie no determination under new subsection 603C(1A) has been made) but, prior to the end of the persons maximum exemption period, the Secretary becomes satisfied that the person is now capable of undertaking a suitable activity. If the Secretary makes a determination under new subsection (1A) in these circumstances, it is intended that the persons exemption should cease. Further the provisions relating to the extension of the exemption period would have no application. Accordingly, Item 6 provides that a persons exemption ceases if the persons maximum exemption period ends or at any time that the Secretary determines that the person is able to undertake a suitable activity.

Item 7 provides for certain technical amendments to point 1068-D2 as well as consequential amendments to ensure that the operation of that provision is not affected as a result of this initiative.

Part 3.6 of the Social Security Act contains Benefit Rate Calculator B which is relevant for the purposes of calculating the rate of newstart allowance. Module D of that Rate Calculator is concerned with entitlement to pharmaceutical allowance. Point 1068-D2 contains only two paragraphs but the lettering for those paragraphs is incorrectly described as (c) and (d). Item 7 contains technical amendments so that the correct lettering, (a) and (b), is substituted.

For newstart allowance purposes, the broad effect of point 1068-D2 is that a person will be entitled to pharmaceutical allowance if the person is, under Subdivision BA, exempt from the activity test. However, one broad effect of the changes being made as part of this initiative is that certain people who previously would have been exempt from the activity test will no longer be so (or may be exempt for a lesser period). With this in mind, Item 7 makes consequential amendment to point 1068-D2 to ensure that the existing application of that provision is not affected as a result of this initiative. Newstart allowance customers who previously would have been entitled to receive pharmaceutical allowance as a result of an incapacity under this provision will continue to be entitled to receive that allowance for the relevant period.

In general terms, point 1068-G4 is concerned with the treatment of certain payments made by approved friendly societies in circumstances where a recipient or the recipients partner is, under Subdivision BA, not required to satisfy the activity test. Item 8 makes consequential amendment to ensure that the application of that provision is not affected as a result of this initiative. This is achieved by making paragraph 1068-G4(c) applicable where the person, or the persons partner, either is, under Subdivision BA, not required to satisfy the activity test or is the subject of a determination under new subsection 603(1A) (which is inserted into the Social Security Act by Item 4 of this Bill).

Section 1161 is contained in Part 3.14 of the Social Security Act which is concerned with compensation recovery. Subparagraph 1161(1)(a)(i) basically provides that payments of a compensation affected payment are affected under Part 3.14 if the compensation affected payment is a newstart allowance in relation to which, under Subdivision BA, the recipient of the allowance is not required to satisfy the activity test. Item 9 makes consequential amendment to ensure that the application of subparagraph 1161(1)(a)(i) is not affected as a result of this initiative. This is achieved by making subparagraph (i) applicable where the person either is, under Subdivision BA, not required to satisfy the activity test or is the subject of a determination under new subsection 603(1A) (which is inserted into the Social Security Act by Item 4 of this Bill).

Item 10 contains the application and transitional provisions for the purposes of Part 1 of Schedule 2.

Paragraph 133B(1)(i) is concerned with situations where a claim for newstart allowance has been made before 20 September 2003 but has not been determined before that date. In those circumstances, the determination of the claim is to be undertaken by consideration of the amended legislation.

The effect of paragraph 133B(1)(ii) is that claims made on or after 20 September 2003 will be determined by reference to the amended legislation.

Subclause 133B(2) is concerned with situations where a recipient of newstart allowance is, before 20 September 2003, exempt from the activity test under Subdivision BA of Division 1 and is seeking to have that exemption extended.

In part, section 603F provides for the Secretary to extend a persons maximum exemption period if the person gives the Secretary a certificate of a medical practitioner (or other written evidence that the incapacity will continue). The effect of subparagraph 133B(2)(b)(i) is that, where the person gives the Secretary such a certificate (or other written evidence) before 20 September 2003 but no decision under section 603F has been made concerning extending the maximum exemption period (ie with reference to that certificate or other written evidence) before that date, the decision is to be made by reference to the amended legislation.

Subparagraph 133B(2)(b)(ii) is concerned with situations where the medical certificate or other written evidence is given to the Secretary on or after 20 September 2003. Again, the legislation as amended applies in those circumstances.

Subclause 133B(3) is concerned with situations where a recipient of newstart allowance is not, before 20 September 2003, exempt from the activity test under Subdivision BA of Division 1.

The effect of subparagraph 133B(3)(b)(i) is that, where the recipient has given the Secretary a medical certificate prior to 20 September 2003 but no decision in relation to an exemption has been made on the basis of that certificate prior to that date, the decision is to be made by reference to the amended legislation.

The effect of subparagraph 133B(3)(b)(ii) is that, where the recipient has given the Secretary a medical certificate on or after 20 September 2003, the decision about an exemption on the basis of that certificate is also to be made by reference to the amended legislation.

Part 2 Amendment of the Social Security (Administration) Act 1999

Items 11 and 12 make amendments to section 64 of the Administration Act. The effect of section 64 is that, if subsection (1) applies to a person, the Secretary may give the person written notice requiring the person to do one of the things referred to in paragraphs 64(2)(c) to (h). Included in those matters are the requirements to attend an office of the Department, to contact the Department or to undergo a medical, psychiatric or psychological examination. Subsection 64(4) details what is the effect of a person failing to take reasonable steps to comply with the requirement set out in the notice.

Subsection 64(1) sets out who section 64 applies to. In part it provides that section 64 applies to a person if the person is receiving a newstart allowance and is exempt from the activity test under Subdivision BA of Division 1. In its current form, section 64 would not apply to a person who is incapacitated for work but in relation to whom there has been a determination under new subsection 603C(1A) that the person is capable of undertaking a suitable activity. This measure is not intended to reduce the scope of section 64. Accordingly, Item 11 makes consequential amendment to ensure that the application of section 64 is not affected as a result of this initiative. This is achieved by inserting new paragraph 64(1)(ea) which has the effect of expanding the operation of section 64 so that it applies to a person who is receiving newstart allowance and is subject to a determination under new subsection 603C(1A).

The effect of Item 12 is to amend subsection 64(4) so that the appropriate penalties will apply where a person to whom new paragraph 64(1)(ea) applies fails to take reasonable steps to comply with a requirement set out in a notice given under section 64.

Schedule 3 Amendments relating to youth allowance

Summary

In broad terms, in order to qualify for youth allowance, a claimant must either satisfy the activity test or not be required to satisfy that test. A person is not required to satisfy the activity test in respect of a period for the purposes of youth allowance if the requirements of section 542A are met. In general terms, those requirements are that the person is temporarily incapacitated for work and the person has provided a medical certificate which contains certain information. The effect of these changes is that the exemption from the activity test may not be applicable where the Secretary is of the opinion that the person is capable of undertaking a suitable activity. In relation to what constitutes a suitable activity, the existing provision dealing with activities for the purposes of Youth Allowance Activity Agreements will be relevant.

Background

Currently, there are around 84,000 newstart/youth allowance recipients who are exempt from the activity test because of a temporary incapacity. This number has been increasing at a rate of around 7% per year over the last few years.

Existing legislation requires that customers seeking to claim a temporary exemption from the activity test due to a medical condition, illness or injury must only be unable to undertake 8 hours or more a week of work. Non-activity tested allowees can face a greater risk of long term dependence on income support payments than activity tested customers as there are no specific measures in place to require, encourage and facilitate participation by this group. Providing people with easy access to an exemption from the activity test does not encourage people with an incapacity to participate to the best of their abilities.

The changes made by this measure will make it possible for people who are incapacitated for work to be referred to appropriate activities for example, rehabilitation  which they can undertake and which will help their long term employment prospects. The focus is on a persons capacity rather than their incapacity and on what sort of specialist support they need so that they can participate in an appropriate activity to their full capacity.

Explanation of the changes

Part 1 Amendment of the Social Security Act 1991

The effect of subparagraph 540(a)(i) of the Social Security Act is that, to be qualified for youth allowance, a person must either satisfy the activity test or not be required to satisfy the activity test. According to section 542, a person is not required to satisfy the activity test if the person has a temporary incapacity exemption. The broad effect of subsection 542A(1) is to set out what is required in order for a person to have a temporary incapacity exemption. As far as is relevant for the purposes of this measure, those requirements are essentially that, throughout the period, the person is temporarily incapacitated for work because of sickness or accident and has given a medical certificate to the Secretary which contains certain information.

The effect of Item 2 is that, despite the fact that a person is incapacitated for work, the Secretary may determine that subsection 542A does not apply to the person if the Secretary is satisfied that the person is able to undertake a suitable activity. Consequential amendment is made to subsection 542A(1) by Item 1 to reflect the change made by Item 2.

Item 3 provides a definition of the term suitable activity. In effect, a suitable activity may be any activity of the kind referred to in subsection 544B(1) that the person might be required to undertake under a Youth Allowance Activity Agreement. Existing subsections 544B(3) and (4) require the Secretary to have regard to certain matters (such as the persons capacity to comply, education and skills) when considering whether an activity is suitable for inclusion in a persons agreement.

Existing section 542C provides for the duration of temporary incapacity exemptions. The broad effect of subsection 542C(2) is that a persons maximum exemption period is either the period stated on the medical certificate or 13 weeks, whichever is the lesser. Subsections (3) to (7) provide for the maximum exemption period to be extended in certain circumstances. Subsection 542C(1) provides that a person ceases to have a temporary incapacity exemption if the persons maximum exemption period ends.

It is recognised that there will be situations where a person, although initially not capable of undertaking a suitable activity, will subsequently be able to undertake such an activity. That is, there will be situations where a person has a temporary incapacity exemption (ie no determination under new subsection 542A(1A) has been made) but, prior to the end of the persons maximum exemption period, the Secretary becomes satisfied that the person is now capable of undertaking a suitable activity. If the Secretary makes a determination under new subsection (1A) in these circumstances, it is intended that the persons temporary incapacity exemption should cease. Further, the provisions relating to the extension of the exemption period would have no application. Accordingly, Item 4 provides that a person ceases to have a temporary incapacity exemption if the persons maximum exemption period ends or at any time that the Secretary determines that the person is able to undertake a suitable activity.

In broad terms, section 546 allows the Secretary to make prospective determinations of qualification for youth allowance in specified circumstances. The effect of paragraph 546(6)(a) is that the Secretary may make such a determination where the person has a temporary incapacity exemption under section 542A. However, one broad effect of the changes being made as part of this initiative is that certain people will now be required to satisfy the activity test (ie by complying with the terms of their youth allowance activity agreement) who, under section 542A, would previously have had a temporary incapacity exemption. Accordingly, Item 5 makes consequential amendments to subsection 546(6)(a) to ensure that the operation of that provision is not affected as a result of this initiative. This is achieved by making subsection 546(6) applicable where the person either has a temporary incapacity exemption or is the subject of a determination under new subsection 542A(1A).

Section 549B is concerned with the liquid assets test waiting period. Existing subsection 549B(1) deals with the commencement of the period for people who do not have a temporary incapacity exemption and subsection 549B(2) deals with the commencement of the period for people who do have such an exemption. One effect of this initiative is that certain people who previously would have had a temporary incapacity exemption will now not have one. With that in mind, Items 6 and 7 makes consequential amendments to those subsections to ensure that their application to particular customers is not affected as a result of this initiative.

Part 3.5 of the Social Security Act contains the Youth Allowance Rate Calculator. Module C of that Rate Calculator is concerned with entitlement to pharmaceutical allowance. The broad effect of point 1067G-C1 is that a person will be entitled to pharmaceutical allowance if the person has a temporary incapacity exemption. However, one broad effect of the changes being made as part of this initiative is that certain people who previously would have had a temporary incapacity exemption will now not have one (or will have one for a lesser period). With this in mind, Item 8 makes consequential amendment to point 1067G-C1 to ensure that the existing application of that provision is not affected as a result of this initiative. Youth allowance customers who previously would have been entitled to receive pharmaceutical allowance as a result of an incapacity under this provision will continue to be entitled to receive that allowance for the relevant period.

In general terms, point 1067G-H3 is concerned with the treatment of certain payments made by approved friendly societies in circumstances where the recipient or the recipients partner has a temporary incapacity exemption. Item 9 makes consequential amendments to ensure that the application of that provision is not affected as a result of this initiative. This is achieved by making point 1067G-H3 applicable where the person, or the persons partner, either has a temporary incapacity exemption or is the subject of a determination under new subsection 542A(1A).

Module H of the Youth Allowance Rate Calculator is concerned with the income test. Points 1067G-H5 and 1067G-H9 form part of Module H and are concerned with the treatment of certain sick leave entitlements. Items 10, 11 and 12 make consequential amendments to ensure that the application of those provisions is not affected as a result of this initiative.

Item 13 contains the application and transitional provisions for the purposes of Part 1 of Schedule 3.

Paragraph 133C(1)(i) is concerned with situations where a claim for youth allowance has been made before 20 September 2003 but has not been determined before that date. In those circumstances, the determination of the claim is to be undertaken by consideration of the amended legislation.

The effect of paragraph 133C(1)(ii) is that claims for youth allowance made on or after 20 September 2003 will also be determined by reference to the amended legislation.

Subclause 133C(2) is concerned with situations where a recipient of youth allowance has, before 20 September 2003, a temporary incapacity exemption and is seeking to have that exemption extended.

In part, section 542C provides for the Secretary to extend a persons maximum exemption period if the person gives the Secretary a certificate of a medical practitioner (or other written evidence that the incapacity will continue). The effect of subparagraph 133C(2)(b)(i) is that, where the person gives the Secretary such a certificate (or other written evidence) before 20 September 2003 but no decision under section 542C has been made concerning extending the maximum exemption period (ie on the basis of that certificate or other written evidence) before that date, the decision is to be made by reference to the amended legislation.

Subparagraph 133C(2)(b)(ii) is concerned with situations where the medical certificate or other written evidence is given to the Secretary on or after 20 September 2003. Again, the legislation as amended applies in those circumstances.

Subclause 133C(3) is concerned with situations where a recipient of youth allowance does not have, before 20 September 2003, a temporary incapacity exemption.

The effect of subparagraph 133C(3)(b)(i) is that, where the recipient has given the Secretary a medical certificate prior to 20 September 2003 but no decision in relation to an exemption has been made on the basis of that certificate prior to that date, the decision is to be made by reference to the amended legislation.

The effect of subparagraph 133C(3)(b)(ii) is that, where the recipient has given the Secretary a medical certificate on or after 20 September 2003, the decision about an exemption on the basis of that certificate is also to be made by reference to the amended legislation.

Part 2 Amendment of the Social Security (Administration) Act 1999

Items 14 and 15 make amendments to section 64 of the Administration Act. The effect of section 64 is that, if subsection (1) applies to a person, the Secretary may give the person written notice requiring the person to do one of the things referred to in paragraphs 64(2)(c) to (h). Included in those matters are the requirements to attend an office of the Department, to contact the Department or to undergo a medical, psychiatric or psychological examination. Subsection 64(4) details what is the effect of a person failing to take reasonable steps to comply with the requirement set out in the notice.

Subsection 64(1) sets out who section 64 applies to. In part it provides that section 64 applies to a person if the person is receiving a youth allowance and has a temporary incapacity exemption under section 542A. In its current form, section 64 would not apply to a person who is incapacitated for work but in relation to whom there has been a determination under new subsection 542A(1A) that the person is capable of undertaking a suitable activity. This measure is not intended to reduce the scope of section 64. Accordingly, Item 14 makes consequential amendment to ensure that the application of section 64 is not affected as a result of this initiative. This is achieved by amending paragraph 64(1)(h) to expand the operation of section 64 so that it applies to a person who is receiving youth allowance and who is subject to a determination under new subsection 542A(1A).

The effect of Item 15 is to amend subsection 64(4) so that the appropriate penalties will apply where a person to whom new subparagraph 64(1)(h)(ii) applies fails to take reasonable steps to comply with a requirement set out in a notice given under section 64.

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