SOCIAL SERVICES LEGISLATION AMENDMENT (SIMPLIFYING STUDENT PAYMENTS) BILL 2017 Explanatory Memorandum

Commonwealth of Australia Explanatory Memoranda

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SOCIAL SERVICES LEGISLATION AMENDMENT (SIMPLIFYING STUDENT PAYMENTS) BILL 2017

2016 - 2017 THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA SENATE SOCIAL SERVICES LEGISLATION AMENDMENT (SIMPLIFYING STUDENT PAYMENTS) BILL 2017 REVISED EXPLANATORY MEMORANDUM (Circulated by the authority of the Minister for Social Services, the Hon Christian Porter MP) THIS MEMORANDUM TAKES ACCOUNT OF AMENDMENTS MADE BY THE HOUSE OF REPRESENATIVES TO THE BILL AS INTRODUCED

SOCIAL SERVICES LEGISLATION AMENDMENT (SIMPLIFYING STUDENT PAYMENTS) BILL 2017 OUTLINE This Bill gives effect to a package of measures aimed at simplifying student payments. These measures were announced as part of the 2016-17 Budget. Means testing for social security benefits The Bill will simplify means testing for student payments by:  removing the exemption from the assets test for youth allowance and austudy payment recipients who are partnered to certain income support recipients;  extending the social security means test rules used to assess interests in trusts and companies to independent youth allowance and austudy payment recipients;  aligning the social security benefit income test treatment of gift payments from immediate family members with existing pension rules; and  harmonising the family tax benefit income test with the youth allowance parental income test by including tax free pensions and benefits as income for the parental income test. These measures, as announced, would have commenced from 1 January 2017. The Bill provides for a commencement date on the first 1 January or 1 July after the amending Act receives the Royal Assent. Health care cards From 1 January 2019, this Bill would make amendments to allow all students receiving income support to access an automatic issue health care card. This change would simplify and align concession card rules by ensuring that all income support recipients (student and otherwise) will automatically receive some form of concession card. Remoteness Structure Amendments are made to simplify the process for updating the Australian Statistical Geography Standard remoteness structure published by the Australian Statistician, which is used to assess eligibility for social security student payments. A new remoteness structure will come into effect automatically after its publication by the Australian Statistician, without any need for further legislative amendments. 1

Independent test for youth allowance and scholarship payments for students This Bill will reduce the period, from 18 months to 14 months, in which students from areas classified as remote or regional may earn at the rate required in order to be assessed as independent under the workforce participation provisions for youth allowance and relocation scholarship purposes. These measures, as announced, would commence on 1 January 2018. Should the Act not receive Royal Assent before 1 January 2018, it provides for a commencement date on the first 1 January or 1 July after the amending Act receives the Royal Assent. Financial impact statement MEASURE FINANCIAL IMPACT OVER THE FORWARD ESTIMATES Means testing for social security $0.778 million save over the forward estimates benefits Health care cards $0.726 million cost over the forward estimates Remoteness structure nil Independent test for youth $81.1 million cost over the forward estimates allowance and scholarship payments for students STATEMENTS OF COMPATIBILITY WITH HUMAN RIGHTS The statements of compatibility with human rights appear at the end of this explanatory memorandum. 2

SOCIAL SERVICES LEGISLATION AMENDMENT (SIMPLIFYING STUDENT PAYMENTS) BILL 2017 NOTES ON CLAUSES Abbreviations used in this explanatory memorandum In this explanatory memorandum, the Social Security Act means the Social Security Act 1991. Clause 1 sets out how the new Act is to be cited - that is, as the Social Services Legislation Amendment (Simplifying Student Payments) Act 2017. Clause 2 provides a table setting out the commencement dates of the various sections in, and Schedules to, the new Act. Clause 3 provides that each Act that is specified in a Schedule is amended or repealed as set out in that Schedule. 1

Schedule 1 - Means testing for social security benefits Schedule 1 - Means testing for social security benefits Summary The Bill will simplify means testing for student payments by:  removing the exemption from the assets test for youth allowance and austudy payment recipients who are partnered to certain income support recipients;  extending the social security means test rules used to assess interests in trusts and companies to independent youth allowance and austudy payment recipients;  aligning the social security benefit income test treatment of gift payments from immediate family members with existing pension rules; and  harmonising the family tax benefit income test with the youth allowance parental income test by including tax free pensions and benefits as income for the parental income test. These measures commence on the first 1 January or 1 July after the amending Act receives the Royal Assent. Background Youth allowance and austudy payment assets test Youth allowance (YA) and austudy payment recipients are usually subject to the benefits assets test. If a person is a member of a couple who owns their own home, the person would not be entitled to YA or austudy payment if they and their partner have assessable assets over $375,000 (as at 1 January 2017). However, YA and austudy recipients are currently exempt from assets testing if they have a partner who receives certain social security or veterans' affairs income support payments, including a pension. Because pension payments are subject to a more generous asset test than the benefits assets test, this creates an anomaly under which some people can qualify for YA and austudy payments even though they and their partner's assessable assets exceed the benefits assets test limit that applies to all other YA and austudy recipients. Under this measure, this exemption would be removed. Means test treatment of private companies and private trusts Standard social security income and assets test rules in the Social Security Act include special provisions allowing the income and assets of private trust and companies to be attributed to a person in certain circumstances, including where the person has effective control of, or was the source of the funds held by, the trust or company. These rules are in Part 3.18 of the Social Security Act. 2

Schedule 1 - Means testing for social security benefits Currently, these standard provisions do not apply to YA or austudy recipients in relation to the assets test. There are separate rules that apply, but these rules only allow trust assets (and not company assets) to be attributed and lack the detailed legal framework provided by the standard provisions. These standard provisions also do not currently apply to ABSTUDY. ABSTUDY is an administrative scheme that is regulated through the ABSTUDY policy manual. There are similar rules for ABSTUDY in the manual. This difference has no policy rationale, creates a potential inequity between individuals in similar circumstances and is a potential avenue to undermine the integrity of the means test. The measure would therefore apply the private trust and company rules for the assets test for independent YA, austudy payment and ABSTUDY recipients. (Dependent YA recipients are not subject to assets testing.) Treatment of periodic gifts and allowances from family members Currently, regular ongoing gifts from immediate family members are not assessed as income for pension payments because family support for low income family members is regarded as a positive outcome, which should not be discouraged through an income test reduction. However, regular gifts from family members are assessed for social security benefits and ABSTUDY, including for students. Assessing regular payments from parents as income for dependent youth payment recipients is particularly anomalous as the youth parental income test (PIT) already reduces the youth payment payable where a parent of the youth payment recipient has the ability to provide support. It is not logical or equitable to further reduce the dependant child's youth payment when the parent provides support consistent with these expectations. The measure would bring the social security benefit and ABSTUDY income test into line with the pension income test by exempting regular gifts from immediate family members. This will simplify the social security system for social security benefit and ABSTUDY recipients, ensure the same rules apply to pension, benefit and ABSTUDY payments and remove a disincentive for immediate family members to provide support to relatives in need. Parental income test for youth allowance The definition of adjusted taxable income for family tax benefit (FTB) differs from the definition of combine parental income for the YA PIT in that tax free pensions and benefits are included for FTB but not for the YA and ABSTUDY PIT. This difference lacks a clear policy rationale and adds unnecessary complexity to the system. This measure would harmonise means test arrangements by including tax free pensions and benefits in the YA and ABSTUDY PIT. 3

Schedule 1 - Means testing for social security benefits This change will also facilitate the re-use of FTB income details for the youth PIT. In many cases, the Department of Human Services already holds verified information about a family's adjusted taxable income for the previous financial year to calculate FTB entitlements. At present, parents are required to resubmit this information to support a youth payment claim by one of their children. Explanation of the changes Part 1 - Youth allowance and austudy payment assets test Amendments to the Social Security Act Section 547A of the Social Security Act provides that YA is not payable to a person if the value of their assets is more than the person's assets value limit (set out in section 547C) and provided they are not excluded from the application of the assets test. Section 547B then sets out who is excluded from the assets test. Under subsection 547B(1), a person is excluded from the YA assets test if they are independent but the person's partner is receiving a payment of pension, benefit or allowance that is listed in the table in Module L in the Youth Allowance Rate Calculator in Part 3.5 of the Social Security Act. Item 1 repeals subsection 547B(1) of the Social Security Act. Item 2 makes a minor consequential amendment. Section 573 provides that austudy payment is not payable to a person if the value of their assets is more than the person's assets value limit (set out in section 573B) and provided they are not excluded from the application of the assets test. Section 573A then provides that a person is excluded from the assets test if their partner is, or has received a payment listed in the table at the end of the provision. Item 3 repeals and replaces these provisions with a new section 573 which provides that an austudy payment is not payable to a person if the value of their assets is more than their assets value limit. A note is also included that directs the reader to the assets value limit in section 573B. These amendments will apply in working out whether YA or austudy payment is payable to a person in respect of days occurring on and after commencement (the application provisions in item 4 refer). Part 2 - Means test treatment of private companies and private trusts Amendments to the Social Security Act Part 3.18 of the Social Security Act contains general provisions relating to the means test treatment of private companies and private trusts and provides a system for the attribution to individuals of the assets and income of private companies and private trusts. 4

Schedule 1 - Means testing for social security benefits These general provisions are currently disregarded in working out a person's assets for the purposes of YA (section 547D refers). Instead, there are separate rules in section 547E (relation to trust assets) that apply. Under section 547D, the rules in Part 3.18 of the Social Security Act are specifically disregarded in working out the value of a person's assets for the purposes of the YA assets test. Item 5 and 6 remove references to Part 3.18 from section 547D. Item 8 repeals section 547E. Item 7 removes reference to the rules in section 547E from section 547D. There are similar rules for austudy payment (in sections 573C and 573D of the Social Security Act). The amendments made by items 9 and 10 have a similar effect for austudy payment. The overall effect of these amendments is that the general rules in Part 3.18 will apply in working out the value of a person's assets under the YA and austudy payment assets tests. These amendments will apply in relation to working out whether youth allowance or austudy payment is payable to a person in respect of days occurring on and after commencement (the application provisions in item 11 refer). Part 3 - Treatment of periodic gifts or allowances from family members Amendments to the Social Security Act Paragraph 8(8)(z) of the Social Security Act exempts from income a periodical payment by way of gift or allowance, or a periodical benefit by way of gift or allowance, from a parent, child, brother or sister of the person. As reflected in the note after paragraph (z), this general rule is reversed for social security benefits by specified provisions in the relevant rate calculators. These specific provisions are point 1067G-H21 (for YA), point 1067L-D17 (for austudy payment), point 1068-G5 (for newstart allowance) and point 1068B-D5 (for partnered parenting payment). Item 12 repeals the note at the end of paragraph 8(8)(z). Items 13 to 16 repeal the specific provisions in the rate calculators that reverse the exemption in paragraph 8(8)(z). Item 17 is an application provision. It ensures that these amendments apply in relation to working out the rate of social security benefits in respect of days occurring on or after commencement. 5

Schedule 1 - Means testing for social security benefits Part 4 - Parental income test for youth allowance Amendments to the Social Security Act For FTB, the definition of adjusted taxable income is set out in Schedule 3 to the A New Tax System (Family Assistance) Act 1999. A component of adjusted taxable income is an individual's tax free pension or benefit which is then defined in clause 7 of Schedule 3 to include social security and veterans' affairs income support payments and certain payments by the Veterans' Affairs Military Rehabilitation and Compensation Commission. For YA, combined parental income is defined in point 1067-F10 of the Social Security Act and does not include the parent's tax free pensions or benefits. Item 18 amends the definition of combined parental income so that it includes the parent's tax free pensions or benefits as worked out in accordance with clause 7 of Schedule 3 to the Family Assistance Act. Item 19 is an application provision. It provides that this amendment applies in relation to working out a person's eligibility for, or amount of, youth allowance for day that is on or after commencement. 6

Schedule 2 - Health care cards Schedule 2 - Health care cards Summary From 1 January 2019, this Bill would make amendments to allow all students receiving income support to access an automatic issue health care card (HCC). This change would simplify and align concession card rules by ensuring that all income support recipients (student and otherwise) will automatically receive some form of concession card. Background Under the current rules, recipients of youth allowance (student), austudy payment and ABSTUDY living allowance are the only income support recipients not to qualify for an automatic issue HCC. Instead, students can make a claim for a low income HCC and are subject to an income test to determine their eligibility for that card. This process is burdensome for students and costly to administer. This measure will simplify the payment system by ensuring that all income support recipients access an automatic issue HCC. The amendments commence on 1 January 2019. Explanation of the changes The legislative framework for the issue of concession cards is in Part 2A.1 of the Social Security Act. In particular Subdivision A of Division 3 sets out the qualification rules for an automatic issue HCC. Subsection 1061ZK(5) which provides that recipients of specified income support payments qualify for the automatic issue HCC. Youth allowance is mentioned but people receiving youth allowance as a new apprentice and full time students are excluded. Austudy payment and ABSTUDY living allowance are not mentioned in subsection 1061ZK(5). Subdivision B of Division 3 sets out the qualification rules for HCC's for which a claim is required. Students and new apprentices receiving youth allowance, austudy payment and ABSTUDY living allowance recipients may qualify for a low income health care card under section 1067ZO if they satisfy the health care card income test. Item 1 broadens the scope of subsection 1061ZK(5) so that the provision applies to a person who is receiving youth allowance (student) or austudy payment (or other payments currently listed). This will also cover young people whose youth allowance is being paid to a parent on their behalf as they would still be considered to be 'receiving' the payment under the Social Security Act. Item 1 also inserts a new subsection 1061ZK(6) which covers a person who is receiving their payment under the ABSTUDY scheme that includes a living allowance component or where someone else is being paid the person's ABSTUDY including living allowance (such as a boarding school). 7

Schedule 2 - Health care cards Item 2 is an application provision. It provides that these amendments apply in working out whether a person is qualified for an automatic issue HCC for a day that is on or after commencement. 8

Schedule 3 - Remoteness Structure Schedule 3 - Remoteness Structure Summary This Schedule implements a part of the 2016-17 Budget measure to simplify student payments. The Schedule simplifies the process for updating the Australian Statistical Geography Standard (ASGS) remoteness structure published by the Australian Statistician which is used to assess eligibility for student payments under the Social Security Act. The amendments simplify administration by allowing for the remoteness structure in the Social Security Act to be updated automatically after a new document is published by the Australian Statistician. This will ensure that an assessment of qualification for youth allowance and qualification for, and rate of, relocation scholarship payments is based on up-to-date geographical classification information. Background Currently, student payment recipients whose family home is in a location geographically categorised under the Remoteness Structure as Inner Regional Australia, Outer Regional Australia, Remote Australia or Very Remote Australia can access additional benefits or concessional qualification requirements under the Social Security Act that are not available to students from major city areas. Such benefits may include:  qualification for youth allowance on the basis of being independent under the concessional workforce participation arrangements, provided the students' parental income is below $150,000 per annum and they are required to live away from home to study; and  qualification for relocation scholarship payment and the rate at which it is paid. Currently, the 'Remoteness Structure' is defined in the Social Security Act to mean the Remoteness Structure described in:  the document entitled 'Statistical Geography Volume 1 Australian Standard Geographical Classification (ASGC) July 2006', published by the Australian Statistician, that was effective 1 July 2006; or  the document specified in a determination made by the Secretary to be a replacement document, provided this document is one published by the Australian Statistician. The 2006 ASGC remoteness structure is currently out of date and since January 2013 has been superseded by the ASGS 2011 remoteness structure. The ASGS remoteness structure is updated every five years, following each Census. The 2016 update from the Australian Statistician is due in January 2018. 9

Schedule 3 - Remoteness Structure This Schedule provides that the remoteness structure in the Social Security Act is updated automatically, without the need for legislative amendment, when a new ASGS or any replacement remoteness structure document is published by the Australian Statistician. This simplifies administration and ensures that an assessment of qualification for youth allowance and qualification for, and rate of, relocation scholarship payment is based on the latest available information on geographical classification. The Secretary will continue to have the ability to specify a replacement document by written determination but only in the circumstance that the Australian Statistician has notified the Secretary that the Australian Statistician will no longer be publishing replacement documents. This determination will be by a notifiable instrument, rather than a legislative instrument. The amendments made by this Schedule commence on the first 1 January or 1 July after the date of Royal Assent. Explanation of the changes Amendments to the Social Security Act Item 1 repeals subsections 1067A(10F) to (10H) and substitutes new subsections 1067A(10F) to (10J). Current subsection 1067A(10F) defines the 'Remoteness Structure' to mean the Remoteness Structure defined in:  the ASGC effective 1 July 2006; or  a document specified in a determination to be a replacement document. Under current subsection 1067A(10G) the Secretary may, by written determination, specify a replacement document, only if such document is one published by the Australian Statistician. Current subsection 1067A(10H) provides that a determination under subsection 1067A(10G) is not a legislative instrument. New subsection 1067A(10F) defines the 'Remoteness Structure' to mean the Remoteness Structure described in:  the ASGS effective from July 2011 published by the Australian Statistician and as amended from time to time;  any replacement document published by the Australian Statistician that is in effect in accordance with subsection 1067A(10G); or  any document that is determined by the Secretary in an instrument under subsection 1067A(10H) and that is in effect in accordance with subsection 1067A(10J). 10

Schedule 3 - Remoteness Structure New paragraph 1067A(10F)(a) allows for the Remoteness Structure to be the ASGS as amended from time to time so as to ensure assessment of eligibility for student payments is based on up-to-date geographical classification information. New subsection 1067A(10G) provides that a replacement document mentioned in paragraph 1067A(10F)(b) published by the Australian Statistician has effect on the first 1 January or 1 July to occur after the day of publication and then has effect as amended from time to time. New subsection 1067A(10G) also provides that the document in effect immediately before the publication of the replacement document is taken to continue to have effect until the end of the day before that 1 January or 1 July. New subsection 1067A(10H) allows the Secretary to determine a replacement document by notifiable instrument in the circumstance that the Australian Statistician has notified the Secretary that the Australian Statistician will no longer be publishing replacement documents for the remoteness structure. New subsection 1067A(10J) provides that a document determined in an instrument under subsection 1067A(10H) takes effect on the day specified in the determination and then has effect as amended from time to time. Item 2 provides that the amendments made by this Schedule apply in relation to working out a person's qualification for, or the rate of, youth allowance for a day that is on or after the commencement of this item, and in relation to working out a person's qualification for a relocation scholarship payment, and if so qualified, the amount of the relocation scholarship payment. 11

Schedule 4 - Independent test for youth allowance and scholarship payments for students Schedule 4 - Independent test for youth allowance and scholarship payments for students Summary The amendments contained in this Schedule were included as part of the 2016-2017 MYEFO and give effect to a Government election commitment to support regional students' access to education. The Schedule will allow a young person to be regarded as independent for the purposes of youth allowance, if they have supported themselves at the required rate for 14 months, rather than the current 18 month period. These amendments will also apply when assessing whether a person is independent for the purposes of relocation scholarships. These measures will commence from 1 January 2018. Should the Act not receive Royal Assent before 1 January 2018, these measures will commence on the first 1 January or 1 July after the amending Act receives Royal Assent. Background A person's rate of youth allowance may be affected by whether or not they are 'independent', with a dependent recipient's rate affected by parental income. There are a variety of bases upon which a person may be independent (under section 1067A of the Act), for example where both of the young person's parents are dead, or it is unreasonable for the young person to live at home. A young person will also be regarded as independent where they have supported themselves through paid work for a period or periods of employment over an 18 month period since leaving secondary school, earning at least the equivalent of 75% of the maximum rate of pay applicable to them ($24,042 for the 2016-17 financial year). To access this criterion, the young person must also be from a regional or remote area of Australia; their parental income must be below $150,000; they must be undertaking full-time study; and required to live away from home to study. The amendments will result in a young person being regarded as independent if they have supported themselves for a reduced period of 14 months. Students who qualify under this provision will be eligible for youth allowance as independent after 14 months, rather than the current 18 month period, provided they have earned at least the equivalent of 75% of the maximum rate of pay under Wage Level A of the transitional Australian Pay and Classification Scale or modern award generally applicable to trainees or any rate substituted by the Fair Work Commission over that period. 12

Schedule 4 - Independent test for youth allowance and scholarship payments for students This reduced timeframe will potentially allow young people to take a gap year at the end of secondary school and receive youth allowance the following year (subject to satisfying the other qualification requirements for youth allowance), rather than having to wait for a longer period and delay commencing their tertiary studies. For example, students who finished secondary school in November 2016, take a gap year in 2017 and commence tertiary studies in February 2018, could qualify for youth allowance as independent if they have earned at least $24,042 during the 14 months from November 2016 to February 2018. These amendments will also apply to Part 2.11B, including the definition of independence for relocation scholarship qualification purposes. Explanation of the Changes Item 1 limits the application of current paragraph 1067A(10)(c), setting out the earnings over 18 months rule, so that it will only apply to:  the pension rate calculator "D", which sets out the rate of disability support pension for people under the age of 21 who are not blind (Part 3.4A);  the pension rate calculator "E", which sets out the rate of disability support pension for people under the age of 21 who are blind (Part 3.4B); and  rent assistance, with the exception of section 1070G, which sets out the specific requirements for youth allowance (Part 3.7). Item 2 adds a new paragraph (d) at the end of subsection 1067A(10) such that instead of having to have a period or periods of employment over an 18 month period since they left secondary school, a person who is eligible under this provision will be regarded as independent if they have a period or periods of employment over a 14 month period, provided they earn the rate of pay set out in subparagraphs 1067A(10)(d)(i) or (ii). Under subsection 1067A(10A) a person will be eligible under paragraph 1067A(10)(d) if, at the time of their application, they meet the criteria set out under subsection 1067A(10E):  their family home is located in a regional or remote location; and  they are required to live away from home; and  they are undertaking full-time study; and  their combined parental income (as defined in point 1067G-F10 of the Youth Allowance Rate Calculator in section 1067G) for the appropriate tax year (Submodule 3 of Module F of that calculator) is less than $150,000. In addition to applying to Part 2.11 (Youth Allowance), Part 3.5 (Youth Allowance Rate Calculator) and section 1070G (Specific Requirement (Youth Allowance)), paragraph 1067A(10)(d) also applies to scholarship payments for students, set out in Part 2.11B. 13

Schedule 4 - Independent test for youth allowance and scholarship payments for students Extending the application of paragraph 1067A(10)(d) to Part 2.11B is intended to align the definition of independence for youth allowance purposes and the definition of independence for the purposes of qualifying for the relocation scholarship, as set out in section 592J of the Act. As a result, if a person is regarded as independent for the purposes of qualification for youth allowance under the workforce independence criteria, they will also be regarded as independent for relocation scholarship purposes and thus not eligible for the relocation scholarship. However, if someone is not eligible for youth allowance under paragraph 1067A(10)(d) and thus are considered dependent for youth allowance purposes, they may still meet the criteria for a relocation scholarship if they have to live away from home (see section 1067D). Item 3 amends section 1067A(10A) to provide that a person will have to meet the criteria set out in subsection 1067A(10E) before they can be regarded as independent under paragraphs 1067A(10)(b) and (d) for youth allowance purposes. Item 4 has the effect of extending the application of paragraphs 1067A(10)(b) and (d) to scholarship payments for students under Part 2.11B, including relocation scholarships provided for by section 592J of the Act. This corrects an unintended omission of these additional criteria when determining whether a person is independent for the purposes of relocation scholarship, and applies other criteria such as the remoteness criteria to this determination. Item 5 omits references to subsections 1067A(10B) and (10C) from subsection 1067A(10A), as these subsections will be repealed as a result of item 6 of these amendments. Item 6 repeals subsections 1067A(10B) to (10D). These subsections are no longer required as they were grandfathering provisions which ensured that people in specified situations retained access to the workforce independence criteria for youth allowance purposes. This included people who were receiving youth allowance before 1 July 2010 or who completed secondary school in 2008, took a gap year in 2009, commenced tertiary studies in 2010 and demonstrated their independence under these criteria before 1 January 2011. Students who would have otherwise qualified for youth allowance under these provisions, will be able to qualify as independent due to their age. Item 7 provides that these amendments will apply to claims made for youth allowance, and to working out if a person is qualified for a relocation scholarship payment at a time on or after the commencement of this item. 14

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 (SIMPLIFYING STUDENT PAYMENTS) BILL 2017 Schedule 1 - Means testing for social security benefits 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 Schedule 1 of the Bill will improve the equity, simplicity and consistency of the income support system from the first 1 January or 1 July after Royal Assent by aligning means testing rules for student payments with other welfare payments. Human rights implications This Schedule engages the following human rights: Right to social security Schedule 1 of the Bill is consistent with supporting the right to social security. Changes will be made to simplify the student payment means test and remove anomalies by:  harmonising Income assessments for Family Tax Benefits and the youth Parental Income Test, by including the value of tax free pensions and benefits for the youth Parental Income Test,  removing the assets test exemption for Youth Allowance and Austudy recipients with partners receiving certain Social Security or Veteran's Affairs income support payments,  extending the trust and company rules to all student payment recipients, and  aligning the social security benefit and ABSTUDY income test treatment of gift payments from immediate family members with existing pension rules. Harmonising the Family Tax Benefit income test and the youth Parental Income Test will improve equity and allow Family Tax Benefit income details to be automatically reused for the youth Parental Income Test. Parents will no longer be required to resubmit their income information to support a youth payment claim by one of their children. 15

Statements of compatibility with human rights The social security system uses means testing to ensure the social security system is sustainable, targeted to those most in need, encourages self-provision, and is fair. Removing the assets test exemption for Youth Allowance and Austudy recipients with partners receiving certain Social Security or Veteran's Affairs income support payments and extending the trust and company rules to all student payment recipients will assist in meeting these objectives. These changes will remove inequities under which some income support recipients with substantial levels of private income and assets get higher income support payments that other people who have similar levels of income and assets. Income support recipients affected by these changes have the capacity to be more self-reliant and it is appropriate that they use their income and assets to help support themselves. This Schedule will also remove an anomaly by extending the pension income test exemption for regular gifts from immediate family members across the social security system so that it also applies for student payments and other social security benefits. Extending this exemption will remove a disincentive for families to provide support to family members. For dependent students, the parental means test already reduces a dependant child's youth payment where a parent has the ability to provide support, and it is not logical or equitable to further reduce the youth payment when the parent provides the expected support. Conclusion The amendments in the Schedule are compatible with human rights because they do not limit access to social security. 16

Statements of compatibility with human rights Schedule 2 - Health care cards 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 Schedule 2 of the Bill will improve consistency in accessing concession cards for students with other income support recipients from 1 January 2019 by simplifying administrative arrangement for recipients of youth allowance (student), austudy payment and ABSTUDY living allowance. Human rights implications This Schedule engages the following human rights: Right to social security Schedule 2 of the Bill is consistent with supporting the right to social security. From 1 January 2019, changes will be made to simplify the payment system to allow all students receiving youth allowance (student), austudy payment and ABSTUDY living allowance access to an automatic issue Health Care Card (HCC). Under the current rules, recipients of youth allowance (student), austudy payment and ABSTUDY living allowance are the only income support recipients who are not qualified for an automatic issue HCC. Instead, these students can claim for a low income Health Care Card (LIC) if their income is below a certain limit. This process is burdensome for students and costly for Department of Human Services to administer. In most circumstances currently, student payment recipients must wait eight weeks to become eligible for a LIC or to provide proof that their income was below the relevant limit in the previous eight weeks in order to be issued a LIC. This measure will enable these students to be eligible for a HCC once they are on an income support payment. The Schedule also engages Article 11 of International Covenant on Economic, Social and Cultural Rights (ICESCR), which provides for the right of everyone to the enjoyment of the highest attainable standard of physical and mental health. Recipients of student payments will be issued automatically a HCC which provides the same Commonwealth concessions as those provided to a LIC. These concessions include access to Pharmaceutical Benefits Scheme prescriptions at the concessional rate and access to the lower threshold of the Extended Medicare Safety Net. Conclusion The amendments in this Schedule are compatible with human rights because they do not limit access to social security. 17

Statements of compatibility with human rights Schedule 3 - Remoteness Structure 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 will update the reference in the Social Security Act 1991 (the Act) so that the most current 'Australian Statistical Geography Standard' (ASGS) remoteness structure, published by the Australian Statistician is used to assess qualification for youth allowance and qualification for and the rate of payment of the relocation scholarship. Currently, the outdated Australian Standard Geographical Classification (ASGC) 2006 is used to assess qualification. This Schedule will commence on the first 1 January or 1 July after the date of Royal Assent.. Under the Act, students whose family home is in a location geographically classified as Inner Regional Australia, Outer Regional Australia, Remote Australia or Very Remote Australia can access additional benefits or concessional qualification requirements under the Act that are not available to students from major city areas. Such benefits include:  qualification for youth allowance on the basis of being independent under the concessional workforce participation criteria where the students' parental income is below $150,000 and they are required to move away from home to study, and  qualification for the relocation scholarship and the rate at which it is paid for dependent youth allowance recipients, and some independent recipients. This Schedule will simplify the process for updating the remoteness structure and administrative arrangements for student payments. 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 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 system 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 18

Statements of compatibility with human rights 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. To the extent that there is an impact on a person's right to social security by virtue of Schedule 3, the impact is limited. Using the current remoteness structure in assessing qualification for youth allowance and qualification for and the rate of the relocation scholarship may mean that, as a result of the change in their family homes' geographical 'remoteness' status, some students who were previously ineligible may qualify for youth allowance or the relocation scholarship and may qualify for a higher rate of the relocation scholarship. Conversely, some students who would have previously been eligible for youth allowance or the relocation scholarship under a previous remoteness structure, may no longer be eligible under an updated version of the remoteness structure, depending on their circumstances. The change in remoteness may occur prior to the student applying for payment or partway through a student's course. The number of students affected by this Schedule is expected to be very small. Students who are found ineligible for youth allowance under the concessional workforce participation independence criteria due to the change in remoteness, may still qualify for youth allowance as either a dependent or under one of the other independence criteria. Similarly, students who lose access to the relocation scholarship will still retain access to youth allowance (provided they continue to meet the qualification criteria). It should be noted however that students who had previously qualified for youth allowance under the concessional workforce participation independence criteria under a previous remoteness structure, will not have their qualification for youth allowance reassessed if their family home is classified as in a major city location of Australia under an updated remoteness structure. These students will retain their independent status. Right to education Article 13 of the ICESCR recognises the right of everyone to education. This Schedule may have a limited impact on a person's right to education where a person who would have been eligible for youth allowance or the relocation scholarship under a previous remoteness structure, may no longer be eligible. The impact is expected to be limited as students who will no longer be able to apply for youth allowance as an independent under the concessional workforce participation criteria, will still be able to apply for youth allowance as either a 19

Statements of compatibility with human rights dependent or under one of the other independence criteria. Similarly, students who lose access to the relocation scholarship will still retain access to youth allowance (provided they continue to meet the qualification criteria). In addition to student payments, the Australian Government provides other programmes to assist tertiary students with the cost of education:  Students who are enrolling in a Commonwealth Supported Place for a university level qualification (that is, undergraduate level) can access a HECS HELP loan to pay their student contribution amount. Students accessing this loan are required to pay their debt through the tax system when they earn above the minimum threshold for compulsory repayment.  Eligible students who are enrolling in a higher-level vocational education and training (VET) qualification are able to access VET Student Loans, a loan scheme which assists eligible students, enrolled in diploma-level and above courses at an approved VET provider, to pay their tuition fees.  FEE-HELP is a loan scheme that assists eligible fee paying students in non Commonwealth Support Places (for example, post-graduate level courses at university) pay all or part of their tuition fees.  Eligible students who access any of the above loans can borrow up to the FEE HELP limit to pay their fees and do not have to repay the loan until their income meets the minimum repayment threshold. Updating the reference in the Act so that the most current ASGS is used to assess qualification for youth allowance and the relocation scholarship, is reasonable in that access to other payments and support mechanisms to allow individuals to undertake study remains. Conclusion The Schedule is compatible with human rights. To the extent that it may have a limited adverse impact on a person's access to social security or education, the limitation is a reasonable, proportionate and necessary response to achieve the legitimate objective of ensuring the long-term sustainability of the social security system by simplifying the structure of the system. 20

Statements of compatibility with human rights Schedule 4 - Independent test for youth allowance and scholarship payments for students 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 will support regional and remote students' access to tertiary education by reducing, from 18 months to 14 months, the period young people from regional and remote areas of Australia have to earn the amount required to satisfy the workforce independence provisions for youth allowance, from 1 January 2018. Currently, students whose family home is in a regional or remote location can access youth allowance on the basis of being independent under concessional workforce participation arrangements. One way in which students can demonstrate they have supported themselves is through a period or periods of employment over 18 months since leaving secondary school, with earnings totalling at least 75 per cent of Wage Level A of the National Training Wage schedule in a modern award. This is $24,042 for 2016-17. In addition, to access these arrangements students' parental income must be below $150,000, they must be undertaking full-time study and they must be required to live away from home to study. 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 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 system 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. 21

Statements of compatibility with human rights To the extent that there is an impact on a person's right to social security by virtue of Schedule 4, the impact is limited. The reduced period of 18 months to 14 months will allow students to qualify for youth allowance four months sooner than under current arrangements. Students will be able to take a gap year at the end of secondary school, and subject to them satisfying the other qualification requirements for youth allowance, receive payment as independents the following year. This Schedule also recognises that young people who have been genuinely self- supporting through paid employment should be considered financially independent of their parents. Students who are considered independent for youth allowance purposes, do not have their rate of payment affected by parental income, as is the case for dependent recipients. It is estimated that approximately 3,700 regional and remote students will qualify for youth allowance as independent under this measure - approximately 2,500 would become eligible for payment as independent four months earlier than under current provisions and approximately 1,200 would become eligible for payment as independent who otherwise would not have met the independence criteria. There is a risk that this Schedule could disadvantage students who have difficulty gaining sufficient employment and earning the minimum amount in the reduced period of 14 months. These students may not qualify for youth allowance under the new arrangements. However, anecdotal evidence indicates that many young people meet the required earnings in a period of much less than 18 months - usually within a year - but must wait 18 months before they can qualify for youth allowance (student). Right to education Article 13 of the ICESCR recognises the right of everyone to education. This Schedule may have a limited impact on a person's right to education where a person has difficulty gaining sufficient employment and earning the minimum amount in the reduced period of 14 months. As this may result in students not qualifying for youth allowance under the new arrangements, it may impact their ability to commence or continue tertiary study for financial reasons. However, this impact is expected to be limited as students who may no longer qualify for youth allowance under these arrangements, will still be able to apply for youth allowance as either a dependent or under one of the other independence criteria. As stated above, many young people meet the required earnings within a year - however they must wait 18 months before they can qualify for youth allowance. This has resulted in students having to commence study prior to qualifying for student payments or take two gap years before commencing study and qualifying for payment. The longer students are disengaged from study after completing secondary school, such as for more than a year, the less likely they will be to 22

Statements of compatibility with human rights commence or complete tertiary study. This Schedule supports students to commence study within a suitable period of time after completing secondary school. In addition to student payments, the Australian Government provides other programs to assist tertiary students with the cost of education, including through the Higher Education Loan Program and VET Student Loans which assist students pay part or all of their tuition fees. Conclusion The Schedule is compatible with human rights. To the extent that it may have a limited adverse impact on a person's access to social security or education, the limitation is reasonable and proportionate to supporting access to education for regional and remote students. [Circulated by the authority of the Minister for Social Services, the Hon Christian Porter MP] 23

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