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Portfolio: Social Security
Commencement: The disability wage supplement amendments will commence on 1 July 1994. The amendments providing for the phased increase in the pension age for women will commence on Royal Assent. The amendments capping deemed returns from listed securities and managed investments will commence on 20 September 1993. The other amendments, including those increasing the rate of family payments and other amendments, outlined in this Digest will commence on Royal Assent.
Purpose
To:
* introduce a disability wage supplement;
* phase in the age of 65 years for women to be eligible for the aged pension;
* increase the rate of family payment by $2 per fortnight;
* cap the deemed returns from listed securities and managed investments; and
* allow greater administrative flexibility in response to changes in Immigration laws.
Background
The Background to the proposed Disability Wage Supplement will be dealt with in this section of the Digest. The background to other measures contained in the Bill will be dealt with in the Main provisions section.
The decision to introduce a Disability Wage Supplement (DWS) was announced in the 1993- 4 Budget. Under the DWS, employers will be able to employ disabled people at less than award rates where their productivity is less than a non- disabled person. The government will provide a supplementary payment similar to a part rate disability support pension (DSP). The program has the support of peak employer and employee bodies and aims to increase the employment opportunities for disabled people without their being disadvantaged.
There are a number of difficulties involved in determining the extent of disability in Australia and the effect that disabilities have on a person's employment opportunities. Australian Bureau of Statistics surveys use a wide definition of disability while that used in the Social Security Act 1991 is based on a person having at least a 20% impairment and a continuing inability to work at award wages for at least two years. Having regard to these differences, ABS figures show that in 1988, when the last survey on disability was conducted, an estimated 2.5 million people, or 15.7% of the population, had some form of disability. 1 Of people aged 15 - 59, 266 300 had a severe handicap. Department of Social Security figures show that there were 226 973 people aged between 16 and 59 in receipt of the invalid pension in 1988. In 1992, 290 341 people aged between 16 and 59 were in receipt of the DSP. 2
The focus of government actions in relation to people with disabilities since the 1980s has altered from providing specific institutions for disabled people to greater integration with the community. This can be seen from programs to close institutions for people with a mental disability and replace them with community accommodation. While the success of these schemes may be doubted, they reflect a trend which is also seen in employment opportunities for disabled people. One of the main changes in this area has been the movement away from large institutionalised `sheltered workshops' to schemes that encourage disabled people to participate in the mainstream labour force. Currently, such schemes are based on:
* finding employment at award wages through the Competitive Employment Training and Placement program;
* supported employment where the government directly employs disabled people, usually in small work groups; and
* the provision of training through special programs and mainstream programs, such as Jobstart and Skillshare.
The employment of people with disabilities was examined by the Senate Standing Committee on Community Affairs, which released its report in April 1992. The report examined the exiting schemes for assistance to help disabled people gain employment and made a number of recommendations to improve the situation. Major findings and recommendations of the Committee were:
* that adequate funding be provided to enable increased access to services for people with disabilities;
* full- time employment is not appropriate for, or may not be achievable by, all people with disabilities;
* programs be established combining work, study, recreation and other activities;
* part- time employment options be developed for disabled people unable to undertake full- time employment;
* Job search programs be examined to ascertain if specialised programs are needed for people with disabilities;
* all people with disabilities who may require assistance to move in to the workforce be identified at least six months before leaving school and arrangements be made for them to enter into training and transition programs;
* an appropriate level of funding be provided to allow enhanced services for people with disabilities in sheltered workshops;
* income support should not be based solely on medical impairment, with other factors such as language and education be taken into consideration;
* the Commonwealth government implement a wage system to meet the income needs of people with disabilities unable to work full time at or above award wages; and
* the Commonwealth direct resources towards ensuring that at least a living wage, which may be made up of part pension and part wage, should be the basis of pay received by people with disabilities in paid employment, even though this may not be an award wage.
As with all employment opportunities, those for disabled persons must be viewed in the light of prevailing economic and labour market conditions and arrangements. Increasingly, production efficiency is dependant on the most effective use of capital equipment, such as the maximum productive use of machinery. This is exemplified in the current trends towards work arrangements involving the 24 hour use of equipment and Just In Time ordering. The need to be internationally competitive applies additional pressure to ensure to ensure maximum capital usage.
The depressed labour market will also continue to marginalise the employment opportunities for disabled persons. With the large number of applicants for both skilled and unskilled jobs employment opportunities for disabled people are reduced in comparison with a labour shortage situation, particularly when the disabled applicant is not fully effective, as are those covered by this Bill.
Another potential difficulty for disabled people entering the workforce is the move to a more decentralised industrial relations system based on enterprise agreements. Under enterprise bargaining wages and profits will increase because of greater productivity. As noted above, many efficiency gains will be through the more effective use of capital equipment. It may be argued that it will be in neither the employees or employers interests when negotiating agency agreements to include provisions that encourage the employment of disabled people who cannot make 100% use of capital equipment unless there is a guarantee that the production difference will be reimbursed. The employment of disabled people at under award rates may not compensate for this difference, especially if the enterprise agreement does not contain provisions relating to the employment of disabled people.
Main Provisions
DWS
Note: The Social Security Act 1991 contains a number of Parts that contain provisions dealing with a specific benefit. Each Part is self contained and includes provisions dealing with matters such as the obligation of recipients to inform the Department of changed circumstances, how claims are to made, the grounds for discontinuing payments and bereavement payments. The provisions of this Bill dealing with matters that are reflected throughout the Act will not be dealt with in this Digest.
A new Part 2.9 will be inserted into the principal Act by clause 5.
The qualifications necessary to be eligible for DWS are contained in proposed sections 409 and 410. Proposed section 409 deals with people who have a physical, intellectual or psychiatric impairment. Such people will be eligible for DWS if the following conditions are satisfied:
* the impairment is 20% or more under the Impairment tables contained in the Principal Act;
* they have a continuing inability to work;
* they are over 16;
* they are in Australia and are an Australian resident, have 10 years residence in Australia or were born outside Australia and is a dependent of an Australian resident and became an Australian resident while being such a dependent; and
* the Secretary of the Department of Human Service has advised the Secretary of the Department of Social Security that the person is participating in the supported wage system.
Continuing inability to work is defined in the proposed section to be an inability to undertake their usual work for a period of two years and the impairment is such that they cannot undertake vocational training for this period or if they can undertake such training it is unlikely to equip the person to do work for which they are currently unskilled within two years.
Proposed section 410 contains similar provisions in respect of people who are permanently blind except that conditions relating to inability to work do not apply.
Applicants for DWS may be required to attend an interview or medical examination or to provide a medical report. Failure to comply with such a requirement will disqualify the person from receipt of DWS (proposed section 412).
If a person is qualified to receive DWS it will not be payable in a number of circumstances. This reflects current disqualification provisions in the principal Act with the additional requirement that the person may be required to attend a medical or psychiatric examination (proposed section 413).
Proposed section 432 provides that the Secretary must direct that the person undergo a medical examination unless the Secretary is satisfied:
* the claimant has impairment of 20% or more;
* the claimant is permanently blind;
* the rate of DWS would be zero.
If the claimant lives in a remote location away from a medical practitioner the Secretary may rescind the requirement for a medical examination and instead require the claimant to provide a report from a medical practitioner relating to their condition.
The calculation of the rate of DWS is dealt with in proposed section 433. The payment will be calculated by using the current Tables in the Principal Act. As a result, the amount of DWS payable will be a maximum of the DSP with the person's assets and income taken into account when calculating the rate of payment.
Pension Age
Currently aged pensions are payable to eligible women at age 60 and to eligible men at age 65. In the 1993 Budget it was announced that the age for pension entitlement would be standardised at age 65 for both men and women. Transitional provisions are included with women born prior to 1 July 1935 remaining eligible to receive the aged pension at age 60 if they satisfied other eligibility criteria. For women born after this date there will be a phasing in of eligibility to receive the aged pension. There are 9 periods for the phasing in of the age 65 requirement (See Attachment)- with people born after 31 December 1948 being eligible at age 65. A person born on 1.1. 49 would currently be 45 years of age.
Deemed Investment Returns
Under the Principal Act capital gains on listed securities and managed investment are deemed to be income for purposes of the income test on most benefits. The extension of this measure to listed securities can be seen as a major contributing factor to the current review of the income and assets tests. Generally, the returns from listed securities, such as shares, are more volatile than those from managed investments as the latter involves investment in a fund with a diverse investment so that spectacular gains in an investment will be diluted (i.e. a lower percentage increase in the funds total value) and offset against losses in other areas. Personal holding of listed securities may result in a large reduction in pension, or benefit, if there is a significant rise in the capital value of the securities in the short term even if this is not reflected in long term performance.
The Governments reason for this measure is that holders of such investments may readily access such gains and that this course should be taken rather than allowing the capital value of the investments to increase without it affecting the rate of payment of pensions and benefits.
A further complication is the method of calculating the return from such investments in the calculation of the rate of benefit payable. Such calculations are based on a formula involving 52 weeks, which is then divide to determine the periodic payment. As a result of the wording of the Principal Act if a deemed security income is included for the purposes of the income test the value of the return of such an investment that has been held for less than 52 weeks is considered to have been received for the entire 52 week period at the same rate.
Amendments to this area of the Principal Act will restrict the deemed return on such investments to a maximum of 50% of the investments value and provide that the return from an investment held for less than a year will only be taken into account for the period it has been held (clause 18).
Family Payments
Clause 38 will amend the Calculator dealing with family payments in the Principal Act to increase such payments by $2 per fortnight.
Other provisions of the Bill are a consequence of the above amendments and changes to other legislation. The most notable amendments in this area will:
* allow the Minister to declare a holder of a temporary visa to be an inhabitant of Australia, which allows access to benefits in certain circumstances. The instrument making such a declaration will be disallowable by either House of Parliament and is intended to overcome the need to legislate to reflect changes in Immigration laws. (Comment: the proposed amendment does not refer to a class or classes of visa so that it is possible that the Minister may declare individual visa holders to be inhabitants of Australia. Potentially, the may be numerous such declarations presented to Parliament.)
* clarify the power to require tax file numbers to be presented or applied for before benefits or allowances are payable.
Endnotes
1. Australian Institute of Health and Welfare, Australia's Welfare 1993, p. 283.
2. Ibid., p. 295.
C. Field I. Ireland (06 2772438)
Bills Digest Service 3 May 1994
Parliamentary Research Service
This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.
Commonwealth of Australia 1994.
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Published by the Department of the Parliamentary Library, 1994.