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2008-2009
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
SOCIAL SECURITY AMENDMENT (LIQUID ASSETS WAITING PERIOD) BILL 2009
EXPLANATORY MEMORANDUM
(Circulated by authority of the Minister for Employment and Workplace
Relations
and Minister for Education the Honourable Julia Gillard MP)
SOCIAL SECURITY AMENDMENT (LIQUID ASSETS WAITING PERIOD) BILL 2009
OUTLINE
Under the current social security law people claiming Newstart Allowance,
Youth Allowance, Sickness Allowance and Austudy who have liquid assets
above a maximum reserve amount (of $2,500 if single without dependants or
$5,000 otherwise) must generally serve a waiting period, called the Liquid
Assets Waiting Period, before being able to access income support.
The Bill will amend the Social Security Act 1991 to double the maximum
reserve threshold for liquid assets to $5,000 for singles without
dependants or $10,000 for others for a two year period from 1 April 2009.
The effect of this will generally be to reduce the length of the Liquid
Assets Waiting Period.
The Bill will also amend the Social Security Act 1991 to exclude the
surrender value of life insurance policies from the definition of 'liquid
assets' for social security purposes. This will mean that life insurance
policy surrender values will not be taken into account in calculating any
applicable Liquid Assets Waiting Period or in determining severe financial
hardship for the purposes of eligibility for income support. This
amendment will ensure that income support claimants are not unreasonably
disadvantaged by having to cash in their life insurance policies before
they can access income support.
These measures will commence on 1 April 2009.
Finally the Bill will make technical amendments to the Income Tax
Assessment Act 1936, the Income Tax Assessment Act 1997, the Social
Security Act 1991, the Social Security (Administration) Act 1999 and the
Veterans' Entitlements Act 1986 to correct the citation of the Household
Stimulus Package Act (No. 2) 2009 in those Acts.
FINANCIAL IMPACT
Year Expense
2008-09 $5.64m
2009-10 $12.47m
2010-11 $11.10m
Total $29.21m
SOCIAL SECURITY AMENDMENT (LIQUID ASSETS WAITING PERIOD) BILL 2009
NOTES ON CLAUSES
Clause 1 - Short title
Provides for the Act to be cited as the Social Security Amendment (Liquid
Assets Waiting Period) Act 2009.
Clause 2 - Commencement
Subclause 2(1) inserts a three column table setting out commencement
information for various provisions in the Act. Each provision of the Act
specified in column 1 of the table commences (or is taken to have
commenced) in accordance with column 2 of the table and any other statement
in column 2 has effect according to its terms.
The table has the effect of providing for sections 1-3 and any provision
not covered elsewhere in the table to commence on Royal Assent; for Parts 1
and 2 of Schedule 1 to commence on 1 April 2009; and for part 3 of Schedule
1 to commence immediately after the time specified in the Household
Stimulus Package Act (No. 2) 2009 for the commencement of Schedule 5 to
that Act.
Clause 3 - Schedule(s)
Provides that each Act that is specified in a Schedule is amended or
repealed as set out in the applicable items in the Schedule and that any
other item in a Schedule has effect according to its terms.
Schedule 1 - Amendments
Part 1-Main amendments
Social Security Act 1991
Items 1 and 2 - Subsection 14A(1)
Subsection 14A(1) sets out social security benefit liquid assets test
definitions. Item 1 inserts new paragraph 14A(1)(dac) to amend the
definition of liquid assets to have the effect of excluding the surrender
value of a life policy (within the meaning of the Life Insurance Act 1995)
from the concept of liquid assets. (An equivalent amendment is made to the
concept of liquid assets in section 19B, see item 4).
Item 2 inserts a note at the end of subsection 14A(1) to alert readers that
the definition of maximum reserve is affected by new subsections 14A(6A)
and (6B) inserted by item 3.
Item 3 - At the end of section 14A
Inserts new subsections 14A(6A) and (6B). These new subsections have the
effect of doubling the maximum reserve for the social security benefit
liquid assets test definitions for a designated period.
New subsection (6A) has the effect of providing that, for the purposes of
Parts 2.11, 2.11A, 2.12 and 2.14 of the Act, the amounts of the maximum
reserve prescribed in paragraphs (a) and (b) of the definition of maximum
reserve in subsection 14A(1) are doubled to $5000 and $10 000 respectively
for the designated period.
New subsection (6B) inserts a definition of designated period for the
purposes of new subsection (6A). The designated period is the period
beginning on 1 April 2009 and ending on either 31 March 2011 or a later
date if prescribed by the Minister by legislative instrument.
By doubling the maximum reserve amounts, the length of a Liquid Assets
Waiting Period will normally be reduced. Under the Social Security Act
1991, only the value of liquid assets of a person above the maximum reserve
are used in calculating the length of the person's waiting period.
Consequently, increasing the maximum reserve reduces the value of liquid
assets that are used to calculate the length of the waiting period.
Item 4 - Section 19B (after paragraph (fb) of the definition of liquid
assets)
Section 198N of the Act sets out exemptions from the care receiver assets
test to allow for carer payments in the case of financial hardship.
Section 19B provides for a definition of liquid assets for the purposes of
section 198N. Item 4 amends the definition of liquid assets in section 19B
by inserting a new paragraph (fc) to have the effect of including the
surrender value of a life policy (within the meaning of the Life Insurance
Act 1995) among the list of exemptions from the care receiver assets test.
Part 2- Application and transitional provisions
Item 5 - Claims made on or after 1 April 2009
Provides that the amendments made by Part 1 apply in relation to a person
making a claim on or after 1 April 2009 for a social security payment.
Item 6 - Persons subject to liquid assets test waiting period at beginning
and end of designated period
Subitems 6(1) and (2) are application provisions relating to persons
subject to the liquid assets test waiting period at the beginning of the
designated period.
Subitem 6(1) has the effect of providing that the amendments made by items
1, 2 and 3 of this Schedule will apply in relation to a person if she/he is
subject to a liquid assets test waiting period on 1 April 2009 and the
Liquid Assets Waiting Period commenced before that date. In short, a
person who is subject to a Liquid Assets Waiting Period when the new
maximum reserve amounts come into effect will have the length of their
waiting period re-calculated using the new maximum reserve amounts. This
may result in the length of their waiting period being reduced. If, as a
result of this re-calculation, a person's waiting period would have ended
before 1 April 2009, their waiting period is considered to have ended on 31
March (see subitem 6(2)).
Subitem 6(3) is a transitional provision relating to persons subject to the
Liquid Assets Waiting Period after the end of the designated period. The
effect of this provision is to preserve the application of subsection
14A(6A) of the Social Security Act 1991 (as inserted by item 3 of this
Schedule) in relation to a person after the end of the designated period,
if that person is subject to a Liquid Assets Waiting Period on the day
after the end of the designated period and the waiting period started
before the end of the designated period. That is, if a person's waiting
period has been calculated using the increased maximum reserve amounts
before those amounts reduce to their pre-amendment levels, then the length
of the waiting period is not affected by the reduction of the maximum
reserve amounts.
Subitem 6(4) defines designated period and liquid assets test waiting
period for the purposes of item 6 of this Schedule. For the purposes of
item 6, designated period means the designated period referred to in
subsection 14A(6B) of the Social Security Act 1991 (as inserted by item 3
of this Schedule) and liquid assets test waiting period means a liquid
assets test waiting period under Part 2.11, 2.11A, 2.12 or 2.14 of the
Social Security Act 1991.
Part 3-Technical amendments
Items 7 to 13
Items 7 to 13 make a number of technical amendments to the Income Tax
Assessment Act 1936 (item 7), the Income Tax Assessment Act 1997 (items 8
to 10), the Social Security Act 1991 (item 11), the Social Security
(Administration) Act 1999 (item 12) and the Veterans' Entitlements Act 1986
(item 13) to correct the citation of the Household Stimulus Package Act
(No. 2) 2009 in those Acts.