SOCIAL SERVICES LEGISLATION AMENDMENT BILL 2017 Explanatory Memorandum

Commonwealth of Australia Explanatory Memoranda

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SOCIAL SERVICES LEGISLATION AMENDMENT BILL 2017

2016- 2017 THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA SENATE SOCIAL SERVICES LEGISLATION AMENDMENT BILL 2017 EXPLANATORY MEMORANDUM (Circulated by the authority of the Minister for Social Services, the Hon Christian Porter MP) 1

Contents Outline........................................................................................................................................ 3 Financial Impact Statement........................................................................................................ 4 Schedule 1 - Indexation ............................................................................................................. 7 Schedule 2 - Automation of income stream review processes .................................................. 9 Schedule 3 - Ordinary Waiting Periods................................................................................... 12 Schedule 4 - Family tax benefit............................................................................................... 19 STATEMENTS OF COMPATIBILITY WITH HUMAN RIGHTS ...................................... 20 Schedule 1 - Indexation ....................................................................................................... 20 Schedule 2 - Automation of income stream review process ............................................... 21 Schedule 3 - Ordinary waiting periods ................................................................................ 23 Schedule 4 - Family tax benefit........................................................................................... 29 2

SOCIAL SERVICES LEGISLATION AMENDMENT BILL 2017 Outline This bill contains the following Schedules: 1. Indexation This Schedule implements the following changes to Australian Government payments:  maintain at level for three years from 1 July of the first financial year beginning on or after the day this Act receives Royal Assent the income free areas for all working age allowances (other than student payments) and for parenting payment single; and  maintain at level for three years from 1 January of the first calendar year beginning on or after the day this Act receives Royal Assent the income free areas and other means test thresholds for student payments, including the student income bank limits. 2. Automation of income stream review processes This Schedule will allow for the automation of the regular income stream review process by enabling the Secretary to require income stream providers to transfer a dataset to the Department of Human Services (DHS) on a regular basis. 3. Ordinary waiting periods This Schedule makes amendments to extend and simplify the ordinary waiting period for working age payments. 4. Family tax benefit This Schedule will maintain the current family tax benefit (FTB) rates for two years, from 1 July 2017. This change applies to the maximum standard, base rate and approved care organisation rate of family tax benefit part A and the maximum rate of family tax benefit Part B. 3

Financial Impact Statement The measures in this Bill have the following estimated impact on the underlying cash balance over the forward estimates 2016-17 to 2019-20 ($ million): Schedule Title Indicative Financials 1 Indexation 69.0 Automation of income stream 2 30.2 review processes 3 Ordinary waiting periods 189.4 Family tax benefit (maintain 4 certain FTB rates for two 1,377.0 years)* *Note: the indicative financials covering 2017-18 to 2020-21 for this measure is around $1,950 million. 4

STATEMENTS OF COMPATIBILITY WITH HUMAN RIGHTS The statements of compatibility with human rights appear at the end of this explanatory memorandum. REGULATION IMPACT STATEMENT Where appropriate, the Regulation Impact Statement for the four Schedules is incorporated in the respective chapters. 5

SOCIAL SERVICES LEGISLATION AMENDMENT BILL 2017 Abbreviations used in this explanatory memorandum  Family Assistance Act means the A New Tax System (Family Assistance) Act 1999;  FTB means Family Tax Benefit;  Social Security Act means the Social Security Act 1991;  Social Security Administration Act means the Social Security (Administration) Act 1999 6

Schedule 1 - Indexation Schedule 1 - Indexation Summary This Schedule implements the following changes to Australian Government payments:  maintain at level for three years from 1 July of the first financial year beginning on or after the day this Act receives Royal Assent the income free areas for all working age allowances (other than student payments) and for parenting payment single; and  maintain at level for three years from 1 January of the first calendar year beginning on or after the day this Act receives Royal Assent the income free areas and other means test thresholds for student payments, including the student income bank limits. Background Under the current rules, income free areas and means test thresholds are indexed annually in line with movements in the Consumer Price Index. Indexation occurs either on 1 July or 1 January, depending on the payment involved. This Schedule pauses for three years the indexation that occurs on 1 July each year of various income thresholds that apply to certain social security benefits and allowances (other than student payments) and the income test free area for parenting payment single. Under this measure, these amounts will not be indexed on 1 July for three years following Royal Assent. Similarly, the usual 1 January indexation of the income free areas and other means test thresholds for student payments will be paused for three years. These amounts will not be indexed on 1 January for three years following Royal Assent. When indexation recommences, it will apply to the (paused) thresholds and there will be no catch-up in respect of indexation that would otherwise have occurred during the three-year pause. Explanation of the changes Amendments to the Social Security Act Item 1 relates to the benefits and allowances 'payment free area' (defined in item 20AAA of the table in section 1190 of the Social Security Act). Current subsection 1192(4AB) provides that the first indexation of amounts to which item 14AAA of the CPI Indexation Table in subsection 1191(1) relates is to take place on 1 July 2015. This item inserts new subsection 1192(4AC), providing that amounts under this table item are not to be indexed on 1 July of the first financial year on or after Royal Assent and on 1 July of the next 2 financial years. Item 2 adds further subsections to section 1192.

Schedule 1 - Indexation New subsection 1192(5AAA) affects indexation provided for by item 14 in the CPI Indexation Table in subsection 1191(1). Item 14 deals with the pension free area (which is an abbreviation for the ordinary income free area for social security pension - see item 20 of the table in subsection 1190(1)). To the extent the pension free area relates to the Pension PP (Single) Rate calculator in point 1068A-E14, new subsection 1192(5AAA) provides it is not to be indexed on 1 July of the first financial year on or after Royal Assent and on 1 July of the next 2 financial years. New subsection 1192(5AAB) affects indexation provided for by items 14AA (the youth allowance and austudy ordinary income free area), 14AB (the youth allowance and austudy range reduction boundary), 15 (the student income bank balance limit) and 24 (the youth allowance (non-independent) assets value limit) of the CPI Indexation Table in subsection 1191(1). The amounts under these items are not to be indexed on 1 January of the first calendar year on or after Royal Assent and on 1 July of the next 2 calendar years.

Schedule 2 - Automation of income stream review processes Schedule 2 - Automation of income stream review processes Summary This Schedule will allow for the automation of the regular income stream review process by enabling the Secretary to require income stream providers to transfer a dataset to the Department of Human Services (DHS) on a regular basis. Background This Schedule amends the Social Security (Administration) Act. Currently, under social security legislation, the Secretary can require that income support recipients with an income stream provide updated information about their income stream on a regular basis. Currently, the Secretary (or DHS as delegate) does not have the legislative authority to require income stream providers to provide income stream information for all income support recipients. These amendments empower DHS to give a notice requiring the provision of income stream information by providers. The amendments made by this Schedule are expected to create cost savings by reducing regulatory and compliance costs, and improving the efficiency of DHS' service delivery. It is also expected that the amendments will improve the accuracy of income support payments and reduce customer debts that arise when a customer fails to inform DHS of changes to their income streams, or when they do not inform DHS that they have commenced receiving an income stream payment. Once the amendment commences, DHS will coordinate a staged implementation in consultation with income stream providers. The amendments made by this Schedule commence on the day after this Act receives the Royal Assent. Explanation of the changes Amendments to the Social Security (Administration) Act Item 1 inserts new paragraph 195(2)(ja). Section 195 sets out when the Secretary may require a person to give information about a class of persons to the Department for various purposes. Subsection 195(2) sets out the types of information that the Secretary may require about each person in the class of persons. Currently subsection 195(2) does not specifically list information in relation to income stream payments. New paragraph 195(2)(ja) provides that the Secretary may require the following information: (ja) in relation to an income stream received by the person: (i) the type of income stream; and

Schedule 2 - Automation of income stream review processes (ii) a unique identifier allocated to the income stream (also known as a product reference number); and (iii) the date on which the income stream was purchased; and (iv) the purchase price; and (v) the commencement day; and (vi) the date of the first payment under the income stream; and (vii) the relevant number; and (viii) the account balance of the income stream as at the date of the notice; and (ix) the account balance of the income stream on 1 July of the financial year in which the notice is given; and (x) for every payment made under the income stream in the 52 weeks before the date of the notice--the gross amount of the payment, the date on which it was paid and, if the payment is paid as a lump sum, the period to which the payment relates; and (xi) for every payment to be made under the income stream in the 52 weeks after the date of the notice--the gross amount of the payment and the date on which it is to be paid; and (xii) the date on which, rate at which and way in which the income stream is indexed; and (xiii) the residual capital value; and (xiv) if there is a reversionary beneficiary to which the income stream reverts on the death of the person - the name of the reversionary beneficiary and the percentage of the income stream that the reversionary beneficiary will receive; and (xv) if the income stream was purchased before 20 September 2007--whether the income stream satisfies section 9A, 9B or 9BA of the 1991 Act, as those sections applied immediately before that date; and (xvi) if the income stream was purchased on or after 20 September 2007--whether the income stream was purchased with funds resulting from the commutation of an asset-test exempt income stream and whether it is eligible to retain its asset-test exempt income stream status; and (xvii) if the income stream is commuted--the date of commutation and the commuted amount; and (xviii) if the income stream is a defined benefit income stream--the deductible amount for the year in which the notice is given and the method used to work out the tax free components of that deductible amount; and (xix) if payments made under the income stream represent an amount for a child of the person--the number of children for which payment is made and the amount of each payment made under the income stream for each child; and (xx) any other information required by the Minister in an instrument made under subsection (3A). 10

Schedule 2 - Automation of income stream review processes New paragraph 195(2)(ja) allows DHS to obtain an agreed dataset from income stream providers Item 2 inserts new subsections 195(3A) and 195(3B) and provides that the Minister may specify further information required to be given in relation to an income stream, by way of legislative instrument. This allows for new income stream products, where such products are not yet available and have not been contemplated in the drafting of these amendments, to be included in the income stream review process. Subsection 195(3B) provides that before making an instrument under subsection (3A), the Minister must consult the Information Commissioner in relation to matters relating to the privacy functions of the instrument. The Minister must also have regard to any submissions made by the Information Commissioner because of the consultation. REGULATION IMPACT STATEMENT Policy objective This schedule will automate the regular income stream review process by requiring income stream providers to electronically transfer a dataset to the Department of Human Services (DHS) on a regular basis. The amendments made by this schedule are expected to create cost savings by reducing regulatory and compliance costs and improving the efficiency of DHS' service delivery. It is also expected that the amendments will improve the accuracy of income support payments and reduce customer debts that arise when a customer fails to inform DHS of changes to their income streams, or when they do not inform DHS that they have commenced receiving an income stream payment. Once the amendment commences, DHS will implement coordinate a staged implementation in consultation with income stream providers. Regulatory impacts associated with this proposal The amendments are minor in machinery and have small regulatory change. The Office of Best Practice Regulation approval ID for this regulatory impact statement is 20629. Regulatory costs/savings associated with this proposal The amendments have significant regulatory savings (preliminary estimate of over $19 million) for recipients and providers although some providers will experience an initial increase to the regulatory burden in order to transition to the new process. The ongoing burden will be significantly reduced for recipients in a reduced time, effort and cost to comply with the departmental requirements and reduced interaction with their financial planners and the Department. 11

Schedule 3 - Ordinary Waiting Periods Schedule 3 - Ordinary Waiting Periods Summary This Schedule makes amendments to extend and simplify the ordinary waiting period for working age payments. Background Currently, a person who is qualified for newstart allowance or sickness allowance under the Social Security Act must, subject to some exceptions, serve an ordinary waiting period of seven days before either of those allowances is payable. The exceptions include where the Secretary is satisfied that the person is in severe financial hardship. Depending on the circumstances, an ordinary waiting period may be served concurrently with other waiting periods and preclusion periods. This Schedule creates a new ordinary waiting period for parenting payment, and for youth allowance for a person who is not undertaking full-time study and is not a new apprentice (in this Schedule, referred to as youth allowance (other)). This Schedule also provides that the current exemption on the basis of severe financial hardship will only apply if the person is also experiencing a personal financial crisis. A person will be taken to be experiencing a personal financial crisis if they have been subjected to domestic violence, incurred unavoidable or reasonable expenditure or in the circumstances prescribed by the Secretary in a legislative instrument. The Schedule further clarifies that an ordinary waiting period is to be served after certain other relevant waiting periods or preclusion periods have ended. The amendments made by this Schedule commence on the first 1 January or 1 July to occur after the Royal Assent. Explanation of the changes Part 1 - Main amendments Amendments to the Social Security Act Items 1 and 2 amend the definition of unavoidable and reasonable expenditure so the definition can apply for the purpose of whether a person is experiencing a personal financial crisis. Item 5 inserts a new section 19DA to provide for when a person is experiencing a personal financial crisis. This is relevant for whether a person has an exemption from the ordinary waiting period. Under new subsection 19DA(3), a person is experiencing a personal financial crisis if the person is in severe financial hardship because the person has incurred unavoidable or reasonable expenditure. 12

Schedule 3 - Ordinary Waiting Periods Current subsection 19C(4) provides for the meaning of unavoidable or reasonable expenditure in relation to a person who is serving a liquid assets test waiting period, is subject to a seasonal work preclusion period, or a person to whom an income maintenance period applies. Items 1 and 2 amend subsection 19C(4) to provide that, in relation to working out whether a person is subject to an ordinary waiting period, unavoidable or reasonable expenditure includes, but is not limited to, the reasonable costs of living, under subsection 19C(6) and (7) that the person has incurred in the four-week period before the person's claim for the relevant payment, if the person is qualified for the payment on the day of claim. Current subsection 19C(5) provides that the reasonable costs of living of a person include, but are not limited to, the following costs:  food costs;  rent or mortgage payments;  regular medical expenses;  rates, water and sewerage payments;  gas, electricity and telephone bills;  costs of petrol for the person's vehicle;  public transport costs; and  any other cost that the Secretary determines is a reasonable cost of living in relation to a person. Items 3 and 4 amend subsections 19C(6) and (7) to provide for the maximum amount of the reasonable costs of living that are taken to have been incurred for the purpose of subsection 19C(4). The amount of reasonable costs of living cannot exceed the amount of newstart allowance, youth allowance (other), sickness allowance or parenting payment (as the case may be) that would have been payable in the four-week period before the person's claim for that payment if the payment was payable, or in the case of a person who is a member of a couple, twice the amount of the payment that would have been payable in that period. Item 5 inserts a new definition of experiencing a personal financial crisis. There is currently an exemption to the ordinary waiting period for newstart allowance and sickness allowance for a person who is in severe financial hardship. Section 19C generally provides that a person is in severe financial hardship if the value of the person's liquid assets is less than the fortnightly amount at the maximum payment rate of the relevant social security payment. Other items in this Schedule replace this exemption with a new concept of experiencing a personal financial crisis. A person will still need to be in severe financial hardship in order to be experiencing a personal financial crisis. However, the exemption will now apply only if, in addition to being in severe financial hardship, subsection 19DA(2), (3) or (4) applies to the person. Those subsections will apply if the person: 13

Schedule 3 - Ordinary Waiting Periods  has been subjected to domestic violence in the four-week period before the person makes a claim for a relevant payment, if the person is qualified for the payment on the day of claim (subsection (2));  is in severe financial hardship because the person has incurred unavoidable or reasonable expenditure in the four-week period before the person makes a claim for a relevant payment, if the person is qualified for the payment on the day of claim. Items 1 and 2 amend the definition of unavoidable and reasonable expenditure in section 19C so that it can apply for the purpose of determining whether a person has an exemption from an ordinary waiting period (subsection (3)); or  satisfies circumstances prescribed in a legislative instrument made by the Secretary (subsection (4)). Subsection 19DA(5) provides the Secretary with the power to prescribe circumstances for this purpose. Subsection 19DA(6) clarifies that a person will not be taken to satisfy the circumstances in subsections 19DA(2), (3) or (4) unless he or she can produce evidence that demonstrates a reasonable possibility that he or she satisfies the circumstances. It is expected that a person will meet this evidence requirement by complying with the current evidentiary requirements of the Department of Human Services. It will not always be necessary for a person to provide written evidence. For example, a person may provide confirmation from a social worker that they have experienced domestic violence and this will likely satisfy the 'evidence requirement' in subsection 19DA(6). Item 6 is consequential to the amendments made by item 5. Items 7 and 8 amend the definitions of ordinary waiting period and waiting period in subsection 23(1) to refer to the new ordinary waiting periods for parenting payment and youth allowance (other). The definition of waiting period is also amended to refer to a newly arrived resident's waiting period. This is a waiting period that may currently apply under the Social Security Act but which has been inadvertently omitted from the definition of waiting period. Item 9 amends subsection 23(10) to clarify when a person is taken to have served an ordinary waiting period. Current subsection 23(10) refers to the ordinary waiting periods for newstart allowance and sickness allowance. The amendments made by this item replace the references to 'newstart allowance' and 'sickness allowance' with references to 'social security benefit' and 'social security pension' to cover all of the payments to which an ordinary waiting period may apply. Items 10 and 12 provide for a new ordinary waiting period for parenting payment and youth allowance (other), and provide for the duration of those waiting periods. New subsection 549CA(1) makes it clear that the new ordinary waiting period provisions for youth allowance apply only in relation to a person who is qualified for youth allowance (other) and not in relation to a person who is qualified for youth allowance on the basis of being a student or new apprentice. 14

Schedule 3 - Ordinary Waiting Periods Under new subsections 500WA(1) and 549CA(2), a person will be subject to the ordinary waiting period for parenting payment and youth allowance (other) unless:  the person was receiving an income support payment at some time in the 13 weeks immediately before the person made a claim for parenting payment or youth allowance (other); or  the Secretary is satisfied that the person is experiencing a personal financial crisis (as defined in new section 19DA, inserted by item 5); or  in relation to youth allowance (other), immediately before the person was qualified for that payment, the person was qualified for youth allowance on the basis of being a student or new apprentice. This means that a person transitioning from youth allowance on the basis of being a student or new apprentice to youth allowance (other) will not serve an ordinary waiting period. Further, subsections 500WA(2) and 549CA(3) provide that an ordinary waiting period will not apply if the person is undertaking an activity specified in a legislative instrument. These provisions replicate a current exemption to the ordinary waiting period for newstart allowance and sickness allowance. The legislative instrument made for the purpose of those current provisions (the Social Security (Exemptions from Non-payment and Waiting Periods - Activities) Specification 2015 specifies the following activities:  an activity undertaken by a person as part of Stream C employment services provided to the person;  a rehabilitation programme; and  an activity undertaken by a person as part of the Remote Jobs and Communities Programme (subsequently renamed the Community Development Programme) in certain circumstances. Subsections 500WA(3) and 549CA(4) allow the Secretary to specify these activities in a legislative instrument. Subsections 500WB(1) and 549CB(1) provide that, subject to subsections (2) and (4) of those provisions, the ordinary waiting period is a period of seven days that starts on the day that parenting payment or youth allowance (other), as applicable, would have been payable but for the ordinary waiting period. Subsection 500WB(2) provides for the start of an ordinary waiting period for parenting payment where the person is subject to a seasonal work preclusion period, a lump sum preclusion period or an income maintenance period, where the rate of parenting payment payable would be nil on the start day. Subsection 549CB(2) provides for the start of an ordinary waiting period for youth allowance (other) where a person is subject to one or more these preclusion periods, but also where the person is subject to a liquid assets test waiting period or a newly arrived resident's waiting period. 15

Schedule 3 - Ordinary Waiting Periods If a person is subject to one or more of the other waiting periods or preclusion periods, then the ordinary waiting period starts on the day after all the other waiting periods and preclusion periods have ended. The effect of this is that the ordinary waiting period cannot be served concurrently with other relevant waiting periods and preclusion periods. Subsections 500WB(3) and 549CB(3) provide for circumstances in which a person is subject to an income maintenance period where the person's rate of parenting payment or youth allowance (other) is nil on the person's start day, but where the rate of payment subsequently would become payable at a rate greater than nil during the income maintenance period. In these circumstances, the effect of subsections 500WC(3) and 549CB(3) is that the income maintenance period is taken to have ended for the purpose of the ordinary waiting period provisions when the payment would have become payable at a rate greater than nil. This means that the person will serve the ordinary waiting period when their rate of parenting payment or youth allowance (other) would have become payable at a rate greater than nil. Subsections 500WB(4) and 549CB(4) provide for the start of an ordinary waiting period for parenting payment or youth allowance (other) where:  a person is subject to an ordinary waiting period (the first ordinary waiting period) for any payment; and  during the first ordinary waiting period, the person ceases to be qualified for the payment to which the first ordinary waiting period relates; and  during the first ordinary waiting period, the person claims another payment which has an ordinary waiting period (the second ordinary waiting period). In these circumstances, the second ordinary waiting period starts on the day that the first ordinary waiting period starts. Item 11 inserts a reference to an ordinary waiting period in section 549. Section 549 provides that a youth allowance is not payable to a person who is subject to a waiting period. Certain waiting periods are specified for the purpose of that provision, and it is appropriate to include a reference to an ordinary waiting period, given one of the effects of this Schedule is to create an ordinary waiting period for youth allowance (other). Items 13, 14 and 15 make consequential amendments to section 549F. Section 549F makes it clear that a youth allowance is not payable until both the waiting periods mentioned in Subdivision C of Division 2 of Part 2.11 of the Social Security Act have ended. As this Schedule inserts a new ordinary waiting period for youth allowance (other), section 549F will now make it clear that a youth allowance is not payable until all of the waiting periods in Subdivision C, including an ordinary waiting period, have ended. 16

Schedule 3 - Ordinary Waiting Periods Items 16 and 21 amend paragraphs 620(1)(a) and 693(a). Current sections 620 and 693 provide for the ordinary waiting period for newstart allowance and sickness allowance. Paragraphs 620(1)(a) and 693(a) provide that a person is not subject to an ordinary waiting period for newstart allowance and sickness allowance if the person has received an income support payment in a 13-week period. The effect of these items is to make it clear that this 13-week period is the period before the person's start day, disregarding clause 5 of Schedule 2 to the Social Security Administration Act. This will generally be the 13 weeks before the person made a claim for newstart allowance or sickness allowance. Items 17 and 22 are consequential to the amendments made by items 19 and 24. Items 18 and 23 amend paragraphs 620(1)(g) and 693(f), the effect of which is that an ordinary waiting period for newstart allowance and sickness allowance will not apply if the person is experiencing a personal financial crisis, as defined in new section 19DA (inserted by item 5 of this Schedule). Items 19 and 24 insert new notes that are consequential to the amendments made by this Schedule. Items 20 and 25 substitute sections 621 and 694 with new provisions that provide for the duration of the ordinary waiting period for newstart allowance and sickness allowance. The effect of subsections 621(1) and 694(1) is that, subject to subsections (3) and (5) of those provisions, the ordinary waiting period is a period of seven days starting on the day that newstart allowance or sickness allowance, as applicable, would have been payable but for the ordinary waiting period. Subsections 621(2) and 694(2) provide for the start of an ordinary waiting period for newstart allowance and sickness allowance where the person is disqualified for those payments because of the liquid assets test. In these circumstances, the ordinary waiting period is the period of seven days that starts after the end of the liquid assets test waiting period. Subsections 621(3) and 694(3) provide for the start of an ordinary waiting period for newstart allowance and sickness allowance where the person is subject to a newly arrived resident's waiting period, a seasonal work preclusion period, a lump sum preclusion period or an income maintenance period where the rate of newstart allowance or sickness allowance payable would be nil on the start day. If a person is subject to one or more of the other waiting periods or preclusion periods, then the ordinary waiting period starts on the day after all the other waiting periods and preclusion periods have ended. The effect of this is that the ordinary waiting period cannot be served concurrently with other relevant waiting periods and preclusion periods. 17

Schedule 3 - Ordinary Waiting Periods Subsections 621(4) and 694(4) provide for circumstances in which a person is subject to an income maintenance period where the person's rate of newstart allowance or sickness allowance is nil on the person's start day, but where the rate of payment subsequently would become payable at a rate greater than nil during the income maintenance period. In these circumstances, the effect of subsections 621(4) and 694(4) is that the income maintenance period is taken to have ended for the purpose of the ordinary waiting period provisions when the payment would have become payable at a rate greater than nil. This means that the person will serve the ordinary waiting period when their rate of newstart allowance or sickness allowance would have become payable at a rate greater than nil. Subsections 621(5) and 694(5) provide for the start of an ordinary waiting period for newstart allowance and sickness allowance where:  a person is subject to an ordinary waiting period (the first ordinary waiting period) for any payment; and  during the first ordinary waiting period, the person ceases to be qualified for the payment to which the first ordinary waiting period relates; and  during the first ordinary waiting period, the person claims another payment which has an ordinary waiting period (the second ordinary waiting period). In these circumstances, the second ordinary waiting period starts on the day that the first ordinary waiting period starts. Item 26 provides that the amendments made by this Schedule apply in relation to a claim for a social security payment that is made on or after the commencement of this Schedule. 18

Schedule 4 - Family tax benefit Schedule 4 - Family tax benefit Summary This Schedule implements the following changes to Australian Government payments:  maintain the standard family tax benefit (FTB) child rates for two years, from 1 July 2017, in the maximum and base rate of family tax benefit Part A and the maximum rate of family tax benefit Part B. Background Family tax benefit The FTB child rates for family tax benefit Part A (methods 1 and 2), the standard rates for family tax benefit Part B, and an approved care organisation's standard rate are currently indexed in accordance with movements in the Consumer Price Index on 1 July each year. From 1 July 2017, indexation of these amounts will be paused for two years. Indexation will resume on 1 July 2019. Explanation of the changes Amendments to the Family Assistance Act Part 1 - Amendments commencing on Royal Assent Schedule 4 to the Family Assistance Act provides for the indexation or adjustment (as relevant) of specified amounts. Item 1 repeals existing subclause 3(3), which is a spent provision, and inserts a new subclause (3). The new provision ensures that specified amounts are not indexed on 1 July 2017 or 1 July 2018. These amounts are the standard FTB child rates for family tax benefit Part A (methods 1 and 2); the standard rates for family tax benefit Part B; and an approved care organisation's standard rate. 19

STATEMENTS OF COMPATIBILITY WITH HUMAN RIGHTS STATEMENTS OF COMPATIBILITY WITH HUMAN RIGHTS Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 SOCIAL SERVICES LEGISLATION AMENDMENT BILL 2017 Schedule 1 - Indexation This Schedule is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011. Overview of the Schedule This Schedule implements the following changes to Australian Government payments:  maintain at level for three years from 1 July following Royal Assent the income free areas for all working age allowances (other than student payments) and for parenting payment single; and  maintain at level for three years from 1 January following Royal Assent the income free areas and other means test thresholds for student payments, including the student income bank limits. Human rights implications The Schedule engages the following human rights: Right to social security Article 9 of the International Covenant on Economic, Social and Cultural Rights (ICESCR) recognises the right of everyone to social security. The Schedule has no effect on the right to social security. The changes to the value of income test free areas and thresholds for certain Australian Government payments assist in targeting payments according to need. Payments will not be reduced unless customers' circumstances change, such as their income increasing in value. Conclusion The amendments in the Schedule are compatible with human rights because they do not limit access to social security. 20

STATEMENTS OF COMPATIBILITY WITH HUMAN RIGHTS Schedule 2 - Automation of income stream review process This Schedule is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011. Overview of Schedule This schedule will automate the regular income stream review process by requiring income stream providers to electronically transfer an agreed dataset to the Department of Human Services (DHS) on a regular basis. The amendments made by this schedule are expected to create cost savings by reducing regulatory and compliance costs and improving the efficiency of DHS' service delivery. It is also expected that the amendments will improve the accuracy of income support payments and reduce customer debts that arise when a customer fails to inform DHS of changes in the amount of income received from income streams, or when they do not inform DHS that they have commenced receiving an income stream payment. Human rights implications The Schedule engages the following human rights:  The right of everyone to social security in Article 9, and the right of everyone to an adequate standard of living for an individual and their family, including adequate food, clothing and housing, and the continuous improvement of living conditions in Article 11 of the International Covenant on Economic, Social and Cultural Rights. The schedule will assist to improve the accuracy of income support payments to people with income streams, and as a result reduce social security debts. It will also reduce regulatory burdens for recipients and the industry. Article 17 of the International Covenant on Civil and Political Rights (ICCPR) provides that no one shall be subjected to arbitrary or unlawful interference with their privacy. Privacy guarantees a right to secrecy from the public of personal information. For interference with privacy not to be arbitrary, it must be in accordance with the provisions, aims and objectives of the ICCPR and should be reasonable in the particular circumstances. Reasonableness in this context incorporates notions of proportionality to the end sought and necessity in the circumstances. The measure will automate the current income stream review process by requiring income stream providers to electronically transfer a dataset to the Department of Human Services on a regular basis, instead of the information being sought via the income support recipient. The information will be solely for the purpose of administering social security payments and reduce regulatory costs for all parties. 21

STATEMENTS OF COMPATIBILITY WITH HUMAN RIGHTS Conclusion The amendments in the Schedule are compatible with human rights because they do not limit access to social security. 22

STATEMENTS OF COMPATIBILITY WITH HUMAN RIGHTS Schedule 3 - Ordinary waiting periods This Schedule is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011. Overview of the Schedule This Schedule amends the Social Security Act 1991 to extend and simplify the application of the ordinary waiting period. The ordinary waiting period is a one-week waiting period that currently applies to new claimants of newstart allowance and sickness allowance. These new claimants must serve the waiting period before they start payment, unless they are exempt or the waiting period is waived. The ordinary waiting period reflects the general principle that people should support themselves before seeking Government assistance and has existed since the first iteration of these payments commenced in 1945. The amendments in this Schedule seek to better promote self-support and discourage a culture of automatic entitlement to income support by ensuring that the waiting period is applied consistently and effectively across similar working age payments. Extend the ordinary waiting period to youth allowance (other) and parenting payment This Schedule will extend the application of the ordinary waiting period to new claimants of youth allowance (other) and parenting payment. Claimants of these payments will be required to serve the one week ordinary waiting period before those payments are payable, unless exempt or the waiting period is waived. The ordinary waiting period will also continue to apply to new claimants of newstart allowance and sickness allowance. This means that the rules governing when payment commences will be more consistent across similar working age payment types. This limitation is reasonable as it ensures more consistent access to similar working age payments while maintaining the longstanding principle of self-support. Claimants without the means to support themselves will have access to exemptions and waivers. Introducing additional evidentiary requirements to 'severe financial hardship' waiver Under existing legislation, claimants can have their ordinary waiting period waived if the Secretary is satisfied that they are in 'severe financial hardship'. A person is in 'severe financial hardship' if the value of their liquid assets is less than their fortnightly rate of payment if they are single, or less than double their fortnightly payment if they are partnered. 23

STATEMENTS OF COMPATIBILITY WITH HUMAN RIGHTS This Schedule will tighten these waiver provisions by introducing an additional requirement, in addition to severe financial hardship, that the person be experiencing a 'personal financial crisis' and provide supporting evidence in order to have the ordinary waiting period waived. The tightening of the severe financial hardship waiver also acts as a discouragement for people to spend their resources on non-essential items in order to obtain income support payments. These limitations are reasonable as they ensure claimants use their own resources first, while still enabling those who are in hardship due to extenuating circumstances to access payments immediately. A person may be taken to be experiencing a personal financial crisis if they have been subjected to domestic violence or incurred unavoidable or reasonable expenditure. Further, as the individual circumstances of people are many and sometimes complex, it is not possible to envisage or legislate specifically in the primary legislation to cover all circumstances. The use of legislative instruments provides the Secretary or the Minister with the flexibility to refine policy settings to ensure that the rules operate efficiently and fairly without unintended consequences. The measure in this Schedule allows the Secretary (under the current Administrative Arrangements Order, this means the Secretary of the Department of Social Services) to prescribe, by legislative instrument, the circumstances which constitute a 'personal financial crisis' for the purposes of waiving the ordinary waiting period, in addition to the circumstances set out in this Schedule. This provision provides the Secretary with the flexibility to consider other unforeseeable or extreme circumstances which may be identified in the future where it would be appropriate for a person to have immediate access to income support. Using an instrument will enable this to occur in a timely manner without having to amend the primary legislation. This power can only be used beneficially and any instrument made by the Secretary would be subject to Parliamentary scrutiny and disallowance. Other existing exemptions from the ordinary waiting period will also continue to be available to claimants of the above payments who are:  reclaiming within 13 weeks of last receiving an income support payment; or  participating in certain employment services designed for vulnerable job seekers with multiple barriers to work. Removing the concurrent application of the waiting period Currently, depending on individual circumstances, claimants may be able to serve the ordinary waiting period concurrently with certain other waiting periods or periods of reduced or non-payment. This may result in some claimants being treated more beneficially than others. 24

STATEMENTS OF COMPATIBILITY WITH HUMAN RIGHTS The Government acknowledges the increasing costs of the welfare system and seeks to ensure that working age people first use their own resources before relying on Government assistance. Exclusion periods, such as the income maintenance period and liquid assets test waiting period, apply to certain working age income support payments to enforce self-support for a period which is based on the person's level of resources. The amendments in this Schedule will remove the ability for claimants to serve the ordinary waiting period concurrently with other waiting periods. This means the ordinary waiting period will be served following the end of any other waiting periods, including the liquid assets test waiting period, income maintenance period, seasonal work preclusion period and newly arrived resident's waiting period. The changes to the concurrency rules in this measure ensure that income support payments are directed towards those in need. Human rights implications Right to social security This Schedule engages the rights to social security contained in article 9 of the International Covenant on Economic, Social and Cultural Rights (ICESCR). The right to social security requires that a system be established under domestic law, and that public authorities must take responsibility for the effective administration of the system. The social security scheme must provide a minimum essential level of benefits to all individuals and families that will enable them to cover essential living costs. The United Nations Committee on Economic, Cultural and Social Rights (the Committee) has stated that a social security scheme should be sustainable and that the conditions for benefits must be reasonable, proportionate and transparent (see General Comment No.19). Article 4 of ICESCR provides that countries may limit the rights such as to social security in a way determined by law only in so far as this may be compatible with the nature of the rights contained within the ICESCR and solely for the purpose of promoting the general welfare in a democratic society. Such a limitation must be proportionate to the objective to be achieved. A central principle underpinning Australia's social security system is that support should be targeted to those in the community most in need in order to keep the system sustainable and fair. The amendments in this Schedule do not affect eligibility for social security pensions or benefits, rather they affect the rules governing when those eligible for certain payments can start receiving their entitlements. The amendments focus on promoting self-support by requiring people to meet their own living costs for a short period where they are able. New claimants who need immediate financial assistance will still be able to access exemptions and waivers provided they meet the relevant eligibility criteria. In this way, the amendments help to ensure that immediate access to working age payments is targeted to those most in need. 25

STATEMENTS OF COMPATIBILITY WITH HUMAN RIGHTS To the extent that the changes in this Schedule may limit the right to social security, those limitations are reasonable and proportionate to the policy objective of ensuring a sustainable and well-targeted payment system. Right to an adequate standard of living, including food, water and housing This Schedule engages the right to an adequate standard of living, including food, water and housing, contained in article 11 of the ICESCR. The right to an adequate standard of living, including food, water and housing provides that everyone is entitled to adequate food, clothing and housing and to the continuous improvement of living conditions. To the extent that there is an impact on a person's right to an adequate standard of living, including food, water and housing, by virtue of this Schedule, the impact is limited. The ordinary waiting period is a period of one week only during which those claimants with the means to support themselves are expected to do so. Those who are unable to accommodate their own living costs for that one week period because they are in severe financial hardship and have experienced a personal financial crisis will be able to have the waiting period waived. Therefore, this Schedule is compatible with the right to an adequate standard of living as the potential limitations on this right are proportionate to the policy objective of encouraging self-support while providing a safety net as eligible people can be exempted from serving the ordinary waiting period or can have the ordinary waiting period waived. Right to equality and non-discrimination To avoid doubt, this Schedule is compatible with the right to equality and non-discrimination contained in articles 2 and 26 of the International Covenant on Civil and Political Rights (ICCPR). Article 2(1) of the ICCPR obligates each State party to respect and ensure to all persons within its territory and subject to its jurisdiction the rights recognised in the Covenant without distinction of any kind, such as race, colour, sex, language, religion, political or other opinion, national or social origin, property, birth or other status (see CCPR General Comment No. 18). Article 26 not only entitles all persons to equality before the law as well as equal protection of the law, but also prohibits any discrimination under the law and guarantees to all persons equal and effective protection against discrimination on any ground such as race, colour, sex, language, religion, political or other opinion, national or social origin, property, birth or other status (see CCPR General Comment No. 18). It is important to note, however, that not all differential treatment will be considered discriminatory. The Committee has provided the following commentary on when differential treatment will be considered discriminatory: 26

STATEMENTS OF COMPATIBILITY WITH HUMAN RIGHTS Differential treatment based on prohibited grounds will be viewed as discriminatory unless the justification for differentiation is reasonable and objective. This will include an assessment as to whether the aim and effects of the measures or omissions are legitimate, compatible with the nature of the Covenant rights and solely for the purpose of promoting the general welfare in a democratic society. In addition, there must be a clear and reasonable relationship of proportionality between the aim sought to be realised and the measures or omissions and their effects. A failure to remove differential treatment on the basis of a lack of available resources is not an objective and reasonable justification unless every effort has been made to use all resources that are at the State party's disposition in an effort to address and eliminate the discrimination, as a matter of priority (CESCR, General Comment No. 20). This Schedule will extend and simplify the application of the ordinary waiting period. There will be no differential treatment on the basis of race, colour, sex, language, religion, political or other opinion, national or social origin, property or birth as the ordinary waiting period will apply equally to claimants of affected working age income support payments. As more than 90 per cent of parenting payment recipients are women, the changes may more significantly impact on women in that regard. However, the changes are reasonable and proportionate to achieving the legitimate objective of providing consistency across similar working age payments by ensuring that all new claimants meet their own living costs for a short period before receiving Government assistance, where they are able. The application of the ordinary waiting period to youth allowance (other) and parenting payment, in addition to newstart allowance and sickness allowance, will ensure that the waiting period is applied consistently to working age payments which have a similar purpose. While the ordinary waiting period is not being extended to all social security payments, this will not be a limitation on the right to equality and non- discrimination as the differential treatment is for a reasonable and objective purpose. The above working age payments are generally intended to be shorter-term payments which provide support while also offering incentives to return to work. Claimants of these payments are also more likely to be able to support themselves for a time before needing income support as they may have transitioned from employment or had other means of support. In contrast, pension payments, such as age pension and disability support pension, provide longer-term support and are designed to acknowledge ongoing barriers that make it difficult for claimants to support themselves through paid employment. Additionally, claimants of student payments generally have up-front expenses associated with their study which may substantially reduce any means of self-support. It is therefore reasonable and objective to apply an ordinary waiting period with respect to the above mentioned types of working age payments to ensure that claimants of these payments support themselves where they are able before calling on the Government for income support. Claimants will be able to access exemptions and waivers to receive assistance sooner, if they are eligible. 27

STATEMENTS OF COMPATIBILITY WITH HUMAN RIGHTS For these reasons, this Schedule is compatible with the right of equality and non-discrimination. Conclusion This Schedule is compatible with human rights. To the extent that it may have limited adverse impact on a person's right to social security, an adequate standard of living and equality and non-discrimination, the limitation is reasonable, proportionate to the policy objective and for legitimate reasons. 28

STATEMENTS OF COMPATIBILITY WITH HUMAN RIGHTS Schedule 4 - Family tax benefit This Schedule is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011. Overview of the Schedule The Schedule will deliver the following changes to Australian Government payments:  Amendments to the A New Tax System (Family Assistance) Act 1999. From 1 July 2017, this Schedule maintains the standard FTB child rates for two years in the maximum and base rate of family tax benefit Part A and the maximum rate of family tax benefit Part B.  This reform will improve the sustainability of the family payments system over the long term, while continuing to provide assistance to families in need. Human rights implications The Schedule engages the following human rights: Article 9 of the International Covenant on Economic, Social and Cultural Rights (ICESCR) recognises the right of everyone to benefit from social security. Article 26 of the Convention on the Rights of the Child (CRC) requires countries to recognise the right of the child to benefit from social security. Benefits should take into account the resources and the circumstances of the child and persons having responsibility for the maintenance of the child. The United Nations Committee on Economic, Cultural and Social Rights has stated that a social security scheme should be sustainable and that the conditions for benefits must be reasonable, proportionate and transparent. To the extent that maintaining the family tax benefit standard payment rates limits the right to social security, this is reasonable and proportionate. The standard rates are not being reduced, and families will continue to receive assistance at current rates for another two years. Certain elements of family tax benefit, namely rent assistance, newborn supplement, large family supplement and multiple birth allowance, will continue to be indexed. This reform will help ensure the sustainability of the family payments system. Conclusion These amendments are compatible with human rights because they advance the protection of human rights and, to the extent that these changes limit access to family payments, these limitations are reasonable and proportionate. 29

STATEMENTS OF COMPATIBILITY WITH HUMAN RIGHTS [Circulated by the authority of the Minister for Social Services, the Hon Christian Porter MP] 30

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