Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2010-2011-2012
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
THE HOUSE OF REPRESENTATIVES
SOCIAL SECURITY LEGISLATION AMENDMENT (FAIR INCENTIVES TO
WORK) BILL 2012
EXPLANATORY MEMORANDUM
(Circulated by authority of the Minister for Employment and Workplace
Relations, the Honourable Bill Shorten MP)
Social Security Legislation Amendment (Fair Incentives to Work) Bill 2012
GENERAL OUTLINE
Parenting Payment
The Bill will remove the "grandfathering" transitional arrangements from
parenting payment with effect 1 January 2013. This affects those recipients
who have been continuously receiving parenting payment since before
1 July 2006. Previously grandfathered recipients could receive parenting
payment until their youngest child turned 16 years old provided that child was
in their care before 1 July 2011. Changes to the Social Security Act 1991
passed by Parliament on 9 May 2012 reduced this age to 12 (or 13 in 2013)
and will take effect on 1 January 2013 without the further changes introduced
in this Bill.
From 1 January 2013, eligibility for parenting payment for all recipients,
including those parents whose payments were grandfathered, will cease
when their youngest child turns 6 years old for partnered recipients or 8 years
old for single recipients.
As part of the removal of grandfathering from parenting payment, formerly
grandfathered recipients will have participation requirements from when their
youngest child turns 6 years old, instead of the previous 7 years old.
These amendments will bring provisions relating to parents who have
received parenting payment continuously since before 1 July 2006 in line with
those of parents who have claimed income support since 1 July 2006. The
changes will encourage parents with school age children to re-engage with
the workforce and provide strong working role models for their children.
Liquid Asset Waiting Period
Under the current social security law, people claiming Newstart Allowance,
Youth Allowance, Sickness Allowance and Austudy payment 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
$10,000 for others. The effect of this will generally be to reduce the length of
the Liquid Assets Waiting Period for claimants with modest liquid assets.
This will help newly unemployed Australians and students keep more of their
savings while looking for a job or studying.
Beginning on 1 July 2013, the new thresholds will reduce waiting times by up
to five weeks for unemployed Australians and students with modest savings
2
or liquid assets. Around 21,000 people each year will begin receiving
payment up to five weeks earlier under this measure.
Income Maintenance Period
This Bill also provides an amendment to replace the definition of "termination
payment" for the purposes of the income maintenance period.
Under the new definition "termination payments" would include payments that
are redundancy payments, leave payments relating to the person's
termination of employment and any other payments that are connected with
the termination of a person's employment.
FINANCIAL IMPACT STATEMENT
The abolition of grandfathering for parenting payment recipients will have the
following budgetary implications:
Year Expense ($ million)
2012-13 -130.2
2013-14 -208.4
2014-15 -161.6
2015-16 -227.6
TOTAL: -727.9
The doubling of the Liquid Asset Waiting Period thresholds will have the
following budgetary implications:
Year Expense ($ million)
2012-13 0.0
2013-14 12.0
2014-15 12.0
2015-16 12.0
TOTAL: 36.0
Note: Total expenditure is rounded.
3
STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS
The statement of compatibility with human rights appears at the end of this
explanatory memorandum.
4
Social Security Legislation Amendment (Fair Incentives to Work) Bill
2012
Abbreviations used in this explanatory memorandum
SS Act means the Social Security Act 1991.
Clause 1 - Short Title
This clause sets out how the new Act is to be cited, that is, the Social Security
Legislation Amendment (Fair Incentives to Work) Act 2012.
Clause 2 - Commencement
This clause provides a table that sets out the commencement dates of the
various sections in, and Schedules to, the new Act.
Table item 1 provides that sections 1 to 3 and anything in the new Act and not
covered elsewhere in the table commence on Royal Assent.
Table item 2 provides that Schedule 1 is to commence on 1 January 2013.
Table item 3 provides that Schedule 2 is to commence on 1 July 2013.
Table item 4 provides that Schedule 3 is to commence on the day after Royal
Assent.
Clause 3 - Schedule(s)
This clause provides that each Act that is specified in a Schedule is amended
or repealed as set out in that Schedule.
5
Schedule 1
Parenting payment transitional arrangement
Summary
The effect of Schedule 1 would be to remove the parenting payment
transitional arrangement so that eligibility for parenting payment for all
recipients, including those parents whose payments were grandfathered, will
cease when their youngest child turns 6 years old (for partnered recipients),
or 8 years old (for single recipients).
This change when passed will supersede the previous changes to the
transitional arrangement passed by Parliament on 9 May 2012 which reduced
this eligibility age of the youngest child from 16 years to 12 years (or 13 in
2013) and that will take effect on 1 January 2013.
Grandfathered parents will have participation requirements when their
youngest child turns six years old, in the same way as parents who have
claimed Parenting Payment since July 2006.
Background
Currently, grandfathered recipients can receive parenting payment until their
youngest child turns 16 years old, provided that child was in their care before
1 July 2011. Changes to the Social Security Act 1991 passed by Parliament
on 9 May 2012 reduced this age to 12 (or 13 in 2013) and will take effect on 1
January 2013 without the further changes introduced in this Bill.
As part of the removal of grandfathering, formerly grandfathered parenting
payment recipients will have participation requirements from when their
youngest child turns 6 years old, making the participation requirements the
same for all recipients.
Explanation of the Changes
Item 1 - Subsection 23(1) (definition of subject to participation
requirements)
Item 1 would amend the definition of subject to participation requirements in
subsection 23(1) to reflect the removal of the parenting payment transitional
arrangement.
6
Item 2 - Subsection 23(1) (note at the end of the definition of subject to
participation requirements)
Item 2 repeals a note at the end of the definition (which referred to subsection
500F(4) that limited the circumstances in which a person covered by the
parenting payment transitional arrangement would need to meet participation
requirements).
Item 3 - Paragraph 500(1)(a)
Item 3 would make a minor technical amendment to paragraph 500(1)(a) to
remove cross references to provisions relating to the parenting payment
transitional arrangement.
Item 4 - Subsection 500D(3) (not including the note)
Item 4 would make a minor technical amendment by repealing subsection
500D(3) - which reflects the removal of the parenting payment transitional
arrangement.
Item 5 - Subdivision AA of Division 1 of Part 2.10
Item 5 would repeal Subdivision AA of Division 1 of Part 2.10 - which
contains the parenting payment transitional arrangement.
Item 6 - Paragraph 729(2)(bc)
Item 6 would make a minor technical amendment to paragraph 729(2)(bc)
(which concerns qualification for special benefit) to remove cross references
to provisions relating to the parenting payment transitional arrangement.
Item 7 - Application provision
Item 7 is an application provision, the effect of which would mean that the
amendments made by items 3, 4 and 5 apply for the purposes of working out
whether a person is qualified for parenting payment for a day that is on or
after 1 January 2013.
7
Schedule 2
Liquid assets waiting period
Summary
Schedule 2 gives effect to a 2012-13 Budget measure to allow applicants for
Newstart Allowance, Sickness Allowance, Youth Allowance or Austudy
payment to have up to double the current maximum reserve amount in liquid
assets before being subject to a liquid assets waiting period for these social
security payments. This will apply from 1 July 2013. The new maximum
reserves will be set at $5,000 for a single person (with no dependent children)
and $10,000 for a person who is partnered, or has dependent children.
New claimants of Newstart Allowance, Sickness Allowance, Youth Allowance
and Austudy payment who have modest savings will benefit from the change
by no longer having to serve a waiting period, or having a reduced waiting
period, before receiving Government assistance.
Background
The liquid assets test applies to new claimants of Newstart Allowance,
Sickness Allowance, Youth Allowance and Austudy payment. Currently, new
claimants of these allowances could be required to wait for up to 13 weeks
before receiving assistance if they have liquid assets (such as cash in the
bank) in excess of the current maximum reserves of $2,500 for single people
and $5,000 for those who are partnered or have a dependent child.
According to the liquid assets test rules, a waiting period of one week applies
for every $500 of liquid assets above the threshold for single people and
every $1,000 of liquid assets above the threshold for those who are partnered
or have a dependent child. The maximum waiting period is 13 weeks.
The waiting period can be waived in some limited circumstances where the
person is in severe financial hardship because they have incurred
unavoidable or reasonable expenditure.
The changes to the thresholds will give effect to a commitment by the
Government to help newly unemployed Australians and students to keep
more of their savings while looking for a new job or studying.
8
Explanation of the Changes
Items 1, 2 and 3 - Subsection 14A(1)
Subsection 14A(1) of the SS Act defines the maximum reserve a person
may have for liquid assets test purposes. For paragraph (a) of the definition,
the maximum reserve is currently $2,500 for a single person without a
dependent child. For paragraph (b) of the definition, the amount is currently
$5,000 for all other persons.
Item 1 substitutes the amount of $5,000 for the amount of $2,500 in
paragraph (a) of the definition.
Item 2 substitutes the amount of $10,000 for the amount of $5,000 in
paragraph (b) of the definition.
The note at the end of the definition of maximum reserve alerts readers that
the definition is affected by subsections 14A(6A) and (6B). Item 3 repeals the
note. This is a consequential amendment to Item 4 which repeals
subsections 14A(6A) and (6B).
Item 4 - Subsections 14A(6A) and (6B)
Subsections 14A(6A) and (6B) had the effect of doubling the maximum
reserve for a designated period from 1 April 2009 until 31 March 2011. As
that period has now ended, Item 4 repeals subsections 14A(6A) and (6B).
Item 5 - Subsection 14A(7)
Division 3A of Part 3 of the Social Security (Administration) Act 1999
(Administration Act) deals with compliance with obligations in relation to
participation payments for Newstart Allowance and, for some people, Youth
Allowance, Parenting Payment and Special Benefit.
For the purposes of Division 3A of Part 3 of the Administration Act, severe
financial hardship is defined in subsection 14A(7) of the SS Act.
Subsection 14A(7) of the SS Act provides that a person is suffering severe
financial hardship if the value of their liquid assets does not exceed the
person's maximum reserve. A person's maximum reserve is defined in
subsection 14A(1) of the SS Act.
Items 1 and 2 of Schedule 2 would double the current maximum reserve
amounts in subsection 14A(1) to $5,000 for a single person (with no
dependent children) and $10,000 for a person who is partnered, or has
dependent children.
9
With the doubling of the maximum reserve amounts for liquid assets test
purposes, it is no longer appropriate to use the maximum reserve to define
severe financial hardship.
Item 5 would repeal and substitute subsection 14A(7) of the SS Act. The
effect of the new subsection 14A(7) would be that, for the purposes of
Division 3A of Part 3 of the Administration Act, a person is in severe financial
hardship if their liquid assets do not exceed $2,500 for a single person (with
no dependent children) or $5,000 for a person who is partnered, or has
dependent children. In other words, there would be no change to the current
meaning of severe financial hardship for the purposes of Division 3A of Part 3
of the Administration Act.
Item 6 - Application provision
Item 6 is an application provision which makes it clear that the amendments
made by Schedule 2 will apply to a person who makes a claim for a social
security payment on or after 1 July 2013. Item 6 does not apply to the
amendment to be made by Item 5 of Schedule 2.
Item 7 - Transitional provision
Item 7 is a transitional provision.
Subitem 7(1) applies Item 7 to persons who are subject to the liquid assets
test waiting period on 1 July 2013 (the commencement of Schedule 2) where
the waiting period had commenced before that date.
In such circumstances, assuming that the amendments made by this
Schedule had been in force prior to 1 July 2013:
· if a person would not have been subject to a liquid assets waiting
period, or their waiting period would have ended before 1 July 2013 -
then the waiting period is taken to have ended on 30 June 2013
(subitem 7(2))
· if the person's waiting period would have ended on or after 1 July 2013
- then the waiting period is worked out in accordance with the SS Act
as amended by this Schedule (using the new maximum reserve
amounts) (subitem 7(3)).
In other words, if a person is subject to a liquid assets test waiting period on 1
July 2013 and the waiting period started before that date, the waiting period
will be recalculated based on the new assets test. If the recalculated period
would have ended before 1 July 2013, the period is deemed to have ended
on 30 June 2013.
Subitem 7(4) defines liquid assets test waiting period for the purposes of
Item 7 of this Schedule. For the purposes of Item 7, liquid assets test
10
waiting period means a liquid assets test waiting period under Parts 2.11
(Youth Allowance), 2.11A (Austudy), 2.12 (Newstart Allowance) or 2.14
(Sickness Allowance) of the SS Act.
11
Schedule 3
Termination payments
Summary
Schedule 3 would repeal and replace the definition of termination payment
in several points of the social security rate calculator in the SS Act.
Under the new definition "termination payments" would include payments that
are redundancy payments, leave payments relating to the person's
termination of employment and any other payments that are connected with
the termination of a person's employment.
Background
The intention of the Income Maintenance Period is to ensure that people who
receive a lump-sum payment as part of the termination of their employment
use that payment to support themselves for a period before turning to the
social security system.
The current definition of termination payment does not reflect accurately the
policy intent and leaves it unclear as to the types of payment that may be
included as a termination payment. In practice this has been open to
unintended interpretations by decision-makers (such as Tribunals) including
that certain termination payments are exempt from the Income Maintenance
Period for some social security recipients. This has occurred particularly in
relation to payments in lieu of notice, where that type of payment has
occasionally been found not to be a redundancy payment but a general
employee entitlement.
This is not the policy intent as described in the Guide to Social Security Law,
which includes a broader range of termination payments which should be
included in the Income Maintenance Period, such as:
· payments in respect of untaken long service leave, annual leave, sick
leave and other types of personal leave
· payments in respect of untaken maternity/paternity leave (except
payments made under the Paid Parental Leave Act 2010)
· payments made under contracts for early termination of employment
· gratuity payments (a `golden handshake' or `farewell gift', which may
be payable in addition to a person's contract or award entitlements)
· payments in lieu of notice; and
· payments under the General Employee Entitlements and Redundancy
Scheme (which represent termination entitlements that would
otherwise have been received from the person's employer).
12
Explanation of the Changes
Items 2, 4, 6, 8, 10, 12 and 14- Points 1064-F14, 1066A-G14, 1067G-H19,
1067L-D15, 1068-G7AQ, 1068A-E12 and, 1068B-D18 (definition of
termination payment)
Items 2, 4, 6, 8, 10, 12 and 14 repeal and substitute the definition of
termination payment in the following points of the social security rate
calculators:
· Point 1064-F14 (Disability Support Pension)
· Point 1066A-G14 (Disability Support Pension for those under
21)
· Point 1067G-H19 (Youth Allowance)
· Point 1067L-D15 (Austudy payment)
· Point 1068-G7AQ (Widow Allowance, Newstart Allowance,
Sickness Allowance, Partner Allowance, Mature Age Allowance)
· Point 1068A-E12 (Parenting Payment Single)
· Point 1068B-D18 (Parenting Payment Partnered)
The new definition of termination payment would include payments that are
one of the following:
· redundancy payments (which is a continuation of paragraph (b) of the
current definition); and
· leave payments relating to a person's employment that has been
terminated (which is a continuation of paragraph (a) of the current
definition); and
· any other payments that are connected with the termination of a
person's employment.
This definition is not exhaustive.
Examples of such termination payments could include:
· payments in respect of untaken long service leave, annual leave, sick
leave and other types of personal leave
· payments in respect of untaken maternity/paternity leave (except
payments made under the Paid Parental Leave Act 2010)
· payments made under contracts for early termination of employment
· gratuity payments (a `golden handshake' or `farewell gift', which may
be payable in addition to a person's contract or award entitlements)
· payments in lieu of notice
· payments under the General Employee Entitlements and Redundancy
Scheme (which represent termination entitlements that would
otherwise have been received from the person's employer).
13
Items 1, 3, 5, 7, 9, 11 and 13 - Points 1064-F14, 1066A-G14, 1067G-H19,
1067L-D15, 1068-G7AQ, 1068A-E12, 1068B-D18
Items 1, 3, 5, 7, 9, 11 and 13 are consequential amendments to the
amendments made by Items 2, 4, 6, 8, 10, 12 and 14 and omit the word
`redundancy' in the following points of the social security rate calculator
(which concern the definition of period to which the payment relates) and
replace it with the word `termination':
Point 1064-F14 (Disability Support Pension)
Point 1066A-G14 (Disability Support Pension for those under 21)
Point 1067G-H19 (Youth Allowance)
Point 1067L-D15 (Austudy)
Point 1068-G7AQ (Widow Allowance, Newstart Allowance, Sickness
Allowance, Partner Allowance, Mature Age Allowance)
Point 1068A-E12 (Parenting Payment Single)
Point 1068B-D18 (Parenting Payment Partnered)
Item 15 - Application
Item 15 is an application provision and provides that the amendments made
by Schedule 3 apply to payments that are made on or after the Schedule
commences - that is on the day after Royal Assent.
14
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary
Scrutiny) Act 2011
SOCIAL SECURITY LEGISLATION AMENDMENT (FAIR INCENTIVES TO
WORK) BILL 2012
This Bill is compatible with 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 Bill
The Bill amends the Social Security Act 1991 to implement income support
measures announced as a part of the 2012-13 Budget.
The Bill will enact changes to the eligibility rules for `grandfathered' Parenting
Payment recipients that will effectively close those grandfathered conditions.
The Bill will increase the Liquid Assets Waiting Period to double the maximum
reserve threshold for liquid assets to $5,000 for singles without dependants or
$10,000 for others.
The Bill will broaden the definition of termination payment for the purposes
of the Income Maintenance Period to also allow it to also include any
payments connected with the termination of a person's employment.
Human rights implications
The Bill 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 changes to the eligibility rules for `grandfathered' parenting payment
recipients will make access to parenting payment consistent for all claimants
regardless of when they first claimed payment. The justification for this is to
accelerate the closing of the grandfathered conditions for parenting payments
which will help to restore equity across the parenting payment population.
This limitation is further justified because it will encourage parents with older
children to re-enter the workforce earlier, thereby reducing long term welfare
reliance and, over time, the prevalence of intergeneration welfare
dependency. A person's access to social security is not impacted, as
15
recipients who are affected by this measure are entitled to apply for other
income support payments, such as Newstart Allowance.
The Bill will promote the right to social security by increasing the Liquid
Assets Waiting Period thresholds for Newstart Allowance, Youth Allowance,
Austudy payment and Sickness Allowance. The new thresholds will reduce
waiting times by up to five weeks for unemployed Australians and students
with modest savings or liquid assets. Around 21,000 people each year will
begin receiving payment up to five weeks earlier under this measure.
Right to education
Article 13 of the ICESCR recognises the right of everyone to education.
The changes to Grandfathered Parenting Payment recipients who are
studying will not affect a person's entitlement to Pensioner Education
Supplement. Access to this supplement will continue upon transfer to
Newstart Allowance or Youth Allowance (other) until the end of the person's
course of education.
Parents who transfer to Newstart Allowance may be eligible to receive the
Education Entry Payment which is designed to provide an incentive for
eligible recipients to improve their skills and qualifications through education
by helping to offset the costs of incidental expenses such as books and fees.
Education Entry Payment is payable once per annum as a lump-sum of $208
for eligible income support recipients.
Additionally, parents who transfer to Newstart Allowance and wish to
undertake long-term academic study, can transfer to a student payment, such
as Youth Allowance (student) or Austudy. Recipients of Newstart Allowance
who transfer to a student payment in order to undertake approved full-time
academic study may also be eligible for the Education Entry Payment.
Grandfathered parents will continue to have access to employment services
through Job Services Australia, including access to the Employment Pathway
Fund where deemed appropriate by their provider. For job seekers with
disability, Disability Employment Services provide specialist support and
assistance to help these job seekers to find and maintain meaningful
employment.
Parents moving to Newstart Allowance may also be eligible for Jobs,
Education and Training Child Care Fee Assistance (JETCCFA). JETCCFA
provides extra assistance with child care costs, including for Out of School
Hours Care, for income support parents who are working, looking for work or
getting the training and skills they need to get a job.
16
Conclusion
The Bill is compatible with human rights because it generally advances
human rights.
To the extent that it may have an adverse impact on human rights, that
impact is reasonable and for legitimate reasons.
17