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Social Security Legislation Amendment (Youth Allowance Consequential and Related Measures) Bill 1998
IRS Publications Office
Ã Copyright Commonwealth of Australia 1998
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Published by the Department of the Parliamentary Library, 1998
Information and Research Services
Social Policy Group
Commencement: Generally, on 1 July 1998. However, certain provisions commence after the commencement of the Youth Allowance Act and the Budget Measures Act. A limited number of other provisions have different commencement dates.
To complete the package of measures commenced by the introduction of the Social Security Legislation Amendment (Youth Allowance) Bill 1997 . This Bill largely provides for consequential amendments necessary upon the enactment of that legislation.
The Youth Allowance Bill is intended to create the youth allowance, a new social security payment. This payment will cover unemployed people aged 16 to 20 and students until they attain the age of 25 years. The rationale is to provide an income support payment for young people, which will be available regardless of whether that person is unemployed, sick, in training or education - if that person meets certain eligibility criteria.
The Bill contains a large number of measures to transfer program elements from the Employment, Education and Youth Affairs portfolio to the Social Security portfolio.
The youth allowance legislation package intends to bring about the following changes:
- Abolition of AUSTUDY and youth training allowance; sickness allowance (for those under 21 years), and newstart allowance (for those under 21 years); and
- Creation of new social security payments to take their place including youth allowance, austudy payment, pensioner education supplement, fares allowance, and student financial supplement scheme.
This Bill must be examined in the context of the introduction of ot her legislation to amend the social security system. Such Bills include the:
- Social Security Legislation Amendment (Youth Allowance) Bill 1997;
- Social Security Legislation Amendment (Parenting and Other Measures) Act 1997;
- Social Security and Veterans Affairs Legislation Amendment (Budget and Other Measures) Bill 1997 [‘Budget Measures Bill’];
- Child Care Payments Act 1997; and
- Income Tax Assessment Act 1997.
The Bill is organised so as to enact the contents of thirteen schedul es.
Clause 2 of the Bill provides that the amending Act will commence on 1 July 1998. However sub-clauses (2)-(10) provide for different commencement dates for certain parts of the Bill. These are largely because the commencement is dependent upon the enactment of the Youth Allowance Bill (the Social Security Legislation Amendment (Youth Allowance) Bill 1997 1 and the Budget Measures Bill (the Social Security Legislation Amendment (Budget and Other Measures) Bill 1997) 2 .
A limited number of other provisions, in sub-clauses (8)-(10) have different commencement dates.
In order to create an integrated youth allowance payment, the statutory basis for the payment of the current AUSTUDY scheme is t o be transferred to enable it to be administered by the Social Security Department (DSS). This is because the AUSTUDY scheme (made to certain tertiary and older secondary students) is presently administered by the Department of Education, Training and Youth Affairs, under the Student and Youth Assistance Act 1973 (‘the Student Assistance Act ’). Given that the proposed youth allowance does not provide for students aged 25 years or more, as does the current AUSTUDY scheme, the austudy payment presented in this Bill is designed to provide for these older students.
This Schedule introduces a new Part 2.11A into the Social Security Act 1991 (‘the Social Security Act’) to create an austudy payment within that Act. This payment is intended to replace the AUSTUDY payment currently provided for within the Student Assistance Act , and principally, by the Austudy Regulations made under that Act.
Proposed section 570 indicates that this payment is to be only for students aged 25 years and older. The equivalent payment for those students aged less than 25 is contained within the amendments made to the Social Security Act by the Youth Allowance Bill.
According to the Explanatory Memorandum, the Bill has been drafted so as to:
Avoid complexity and duplication, the payment for older students has been brought into the Social Security Act , and basic rates and conditions have been aligned with those for youth allowance. Apart from this simplification measure, the payment will provide income support to this group on much the same basis as current arrangements.
However, it is important to note that it is proposed that in a number of respects the rates and conditions affecting former AUSTUDY students (under the DEETYA administered scheme) will be altered by this ‘alignment’ actio n.
The general rule proposed within subdivision B of Division 1 (‘Qualification for austudy payment’) is that the activity test is satisfied if a person is “undertaking qualifying study”.
Within proposed section 569A, subsections 569A(ii) and (iii) are of interest in providing the requirements to be met for intention to continue study.
These parts will probably be used to continue payment during the holidays where student intends to continue studying in the next year.
Under the current AUSTUDY arrangements, payments stops on 31 December and is resumed only where the student can prove re-enrolment, leaving a gap in the delivery of payments where studies are being continued.
Under the proposed regime, a person must be undertaking an approved course of education or study in order to meet the activity test. Proposed section 569B provides a definition of ‘approved course of education or study’. Courses will continue to be those determined in writing by the Minister under Student Assistance Act - so the nature of courses should be the same as that applied for AUSTUDY.
Proposed section 569G relates to progress rules for secondary students. The legislation will require ‘satisfactory progress’. Currently, the AUSTUDY Regulations only require the student to be enrolled full-time and their school to be satisfied they were doing sufficient work to satisfy the test of being ‘full-time’. However, this amendment shifts this judgement away from the school to the DSS Secretary’s policy description of ‘satisfactory progress’
Division 2 of proposed new Part 2.11A , providing for the Austudy payment, sets out the situations in which austudy payment will not be payable. This division is divided into seven different subdivisions, A to G.
Subdivision D sets out the rules relating to waiting periods. Proposed section 575, ‘waiting periods’, contains a new development, in that it applies the liquid assets test waiting period. Waiting periods have not been used or applied under the current AUSTUDY scheme. The same applies to the proposed Income Maintenance Period also provided for in this Bill.
Proposed section 575D applies the 2 year newly arrived migrant waiting period to the new austudy payment under the Social Security Act . This waiting period currently applies to AUSTUDY scheme under the Student Assistance Act . 3
Subdivision E, relating to ‘Activity test non-payment periods’ is noteworthy. Proposed section 576 relates to third and subsequent activity test breaches.
At present it appears possible for a newstart allowance recipient, subject to a rate reduction or non-payment period, to subsequ ently apply for Austudy, and then receive that payment in full, free of the rate reduction or non-payment provisions. However, it appears that the effect of the proposed sections is to make the newstart allowance work search activity test penalty provisions carry over to subsequent Austudy applications. This will preclude the making of payments under the austudy payment segment of the youth allowance, during the remainder of that existing penalty period.
Proposed Division 5 of Sche dule 1 concerns the rate of Austudy payment, and contains subdivisions relating to activity test and administrative test breach reductions in the rate of austudy payment
Activity test breach reductions in the rate of austudy payment
Proposed section 582 is noteworthy in that activity test breaches and rate reduction periods never previously applied to the AUSTUDY scheme. Currently, the most common breaches are probably those where the person no longer is undertaking a form of study that qualifies, and AUSTUDY has been paid for the period. Where this occurs, the only action taken is the recovery of the AUSTUDY payment for the period. Under the proposed arrangements, recovery will still happen, as the person is not qualified, but with the proposed amendments there will be the possibility of an additional penalty of breach or rate reduction periods.
Administrative breach reductions in the rate of austudy payment
Proposed section 583 (‘Administrative breach rate reduction period’) is similar to proposed section 582, in that the application of administrative breach rate reduction periods is new. In the past, either the claim was rejected or payment suspended or cancelled. On reactivating where qualification was subsequently met, the normal full rate otherwise payable was resumed. Now it is proposed that where payment is re-activated, a rate reduction period may also apply.
Item 7 of Schedule 1 inserts Proposed Part 3.5A into the Social Security Act. It contains the Austudy Payment Rate Calculator, within proposed section 1067L , headed ‘Rate of Austudy Payment’. This calculator comprises six modules, Modules A to F .
Maximum basic rate
The following comments are made about Module B, headed ‘ Maximum basic rate’ .
The rate structure introduces a new, lower rate regime for short-term students. This does not currently apply under the AUSTUDY scheme.
The rate structure maintains the current AUSTUDY arrangements in terms of paying a lesser rate for students who are living at home wit h parents. However, this is inconsistent with the current rate regime for newstart allowance for person aged 21 or more, where the rate regime ignores living at home with parents for those who are unemployed aged 21 or more. It is consistent with the proposed youth allowance dependency arrangements for students aged up to 24 living at home with parents.
Student Income Test
In relation to Module D , the ‘Income Test’, certain comments are relevant. At present, the student income test under AUSTUDY is included in Part 4 of the Austudy Regulations. 4
The income test considers the effect of income of the applicant and their partner (if any) upon the maximum payment rate. The Bill then proceeds to consider the effect of other payments such as termination payments, lump sum leave payments, and other leave payments. In proposed section 1067L-D6 et seq, the Bill sets out provisions to apply the ‘income maintenance period’ to austudy recipients. As with waiting periods previously commented on, income maintenance periods are not currently applied under the AUSTUDY scheme.
Remaining on the topic of student income tests, several other sections are also worthy of examination. Proposed sub-sections 1067L-D28 to 1067L-D32 , deal with the so-called ‘ordinary income free area’. The proposed free area of $230 per fortnight is the same as the current AUSTUDY free area. At present, students can earn up to $6000 in taxable income in a financial year without affecting their entitlement to the maximum rate of AUSTUDY living allowance. This amounts to an ‘income free area’ of $230 per fortnight.
At present, AUSTUDY is reduced by $1 for every $2 of taxable income over the threshold. Put another way, the current income test has a 50 cents in the dollar taper for income over the free area.
Under the proposed Bill, a different, and tighter taper is to be applied being a 50 cent in the dollar taper for income up to $80 in excess of the $230 free area, then 70 cents in the dollar for income that exceeds the free area by more than $80. This is a tougher taper for higher income amounts.
The proposed youth allowance adopts the current newstart allowance income test arrangements. This test has a free area is $60 per fortnight, then a reduction rate of 50 cents in the dollar for income from $60 to $140, then a 70 cents in the dollar reduction rate for income above this level.
The comparatively higher AUSTUDY income test free area of $230 per fortnight has its origins as an income test to facilitate part-time work, but to discourage full-time work, being a payment for full-time students.
Contrasting with this, the unemployment type payments income test arrangements have their origins in encouraging unemployed persons to take up any work opportunities and to provide a progressive payment reduction as work earnings increase.
This Schedule proposes a number of changes to the youth allowance provisions, which are to be inserted in the Social Security Act by the Youth Allowance Bill. These proposed changes arise from the operation of several factors. These include attending to certain matters omitted from the original Youth Allowance Bill 1997.
Other issues have arisen from the fact that the creation of the youth allowance is necessarily a technical and complex task because it represents a merger of five previously disparate income support payments, being payments with differing origins, purposes, policy histories and evolutions.
It can be argued that it is the intention of the government not just to rationalise and streamline Australia’s system of income support payments, but to re-engineer the payments, altering in some respects the purposes and approach with which they have previously been targeted.
Proposed section 547D is worthy of further consideration. Division 2 of Schedule 1 of the Youth Allowance Bill sets out the situations in which youth allowance is not payable. Subdivision A sets out the basic rules. Item 14 of this Bill proposes the insertion of an additional subdivision, being Subdivision AB , ‘the Assets test’, immediately after that subdivision.
Proposed section 547D sets out the general rule that the value of a person’s assets is to include the value of the assets of their partner or family members in certain circumstances. The current assets test for youth training allowance and newstart allowance does not factor in the assets of all the family members for dependent rate recipients. The AUSTUDY assets test does factor in all family member assets, so this change to the proposed youth allowance picks up the wider encompassing AUSTUDY test for dependent rate recipients.
Items 33 to 36 of Schedule 2 of the Bill also deserve close attention. These items are proposed amendments to the ‘parental income test’ set out in Schedule 2 of the Youth Allowance Bill. They relate to the operation of the ‘Youth Allowance Rate Calculator’, to be inserted in the Social Security Act at Part 3.5. In particular, the amendments affect Module F of the Calculator, which contains the parental income test. This module is divided into six submodules. The submodule affected is submodule 4 - that relates to ‘combined parental income’.
The change in the use of terms from ‘rental property’ to ‘passive business’ significantly broadens the scope of income earning situations, which will be caught by this income exclusion, eg. silent or passive business partners. This has some parallels with the Family Payment income test, which also excludes net rental property losses as an income deduction, but the proposed ‘passive business’ definitions casts a significantly wider net.
Proposed Items 39 to 46 inclusive relate to amendments to proposed Module G of the Youth Allowance Rate Calculator in the Youth Allowance Bill, which contains a family actual means test. These appear to be minor clarification amendments to the Family Actual Means Test - see Bills Digest for the Youth Allowance Bill 1997, for comment on the Family Actual Means Test.
Proposed Items 47 and 48 are clarification amendments to the Income Maintenance Period (IMP) provisions. These provisions are contained in Module H - the ‘Income test’ module of the Youth Allowance Rate Calculator in the Youth Allowance Bill. The IMP provisions were introduced for a range of social security income support payments in September 1997.
These provisions are not a waiting period, rather the IMP provisions apportion leave type payments paid on employment termination over a period and treat them as income under the income test for that period. There is no end limit to an IMP and where the rate of leave payment is low enough, part-rate Youth Allowance may be payable during the IMP.
Proposed item 50 further amends aspects of Module H - the ‘Income test’ module of the Youth Allowance Rate Calculator. These amendments mirror proposed legislative amendments for the treatment of lump sum income payments contained in the Social Security and Veterans’ Affairs Legislation Amendment (Budget and Other Measures) Bill 1997. Refer to Bills Digest No. 138 1997-98 for that Bill.
Proposed Item 51 amends the approach originally adopted in the Youth Allowance Bill dealing with the ‘partner income free area’. The proposed item provides differing income test free areas for partner income for the following partner situations:
- partner is aged less than 21 and NOT receiving an income support payment
- partner is aged 21 or more and NOT receiving an income support payment
- partner is receiving an income support payment
The original Bill had no age 21 distinctions, only distinguishing between those on, or not on, an income support payment.
These proposed sections are to ensure that amendments made in the Budget Measures Bill, which could not be reflected in the Youth Allowance Bill at the time of its introduction, “flow through consistently to encompass the new payment structure.” 5
This Schedule is divided into four Parts in order to provide for a range of different commencement dates and rules principally arising from the fact that these amendments affect a range of statutes. According to the Explanatory Memorandum: “The significance of these is merely to ensure that the various amendments flow through correctly and on dates consistent with the original measures.”
Part 4 - Hardship provisions - Amendments commencing on 1 July 1999
Proposed It ems 25 to 28 “are to reflect correctly in the relevant interpretation provisions relating to the consistent hardship rules as they will apply after 1 July 1999 (Schedule 5 of the Budget Measures Bill) the inclusion of the new payments, youth allowance and austudy payment.” 6
The effect of the items is that the ‘Income Maintenance Period’ introduced from September 1997 is to also apply to Youth Allowance. Presently AUSTUDY is not subject to any such waiting periods.
As the government has decided to transfer portfolio responsibility for AUSTUDY to the Minister for Social Security, it is necessary to ensure that all elements of the AUSTUDY scheme necessary to be retain ed are incorporated into the Social Security Act .
This Schedule proposes amendments to the Social Security Act to create a payment known as ‘pensioner education supplement’. This payment presently exists under the AUSTUDY scheme created by the Student Assistance Act . The payment is presently made, in addition to the pension, to students who are not eligible for AUSTUDY because they receive social security or veterans affairs payments, being sole parents, disabled, or carers.
This payment will not be subject to the income or assets tests. It is proposed to be subject to most of the rules that presently prevail under the AUSTUDY scheme. However some ‘simplifications’ are proposed in order to align the payment with other payments made under the Social Security Act .
Division 1 of the proposed new Part 2.24A sets out the rules for ‘Qualification for pensioner education supplement’ (PES). Subdivision B sets out the eligibility requirements relating to ‘undertaking qualifying study’.
Definition of ‘full time’ study
Proposed section 1061PF defines the ‘normal amount of full-time study’. The minimum hours of study a week requirements to constitute ‘full-time’ study, appear to represent an attempt to modify the test currently applied under the AUSTUDY scheme. Subsection (2) appears to introduce a test not previously applied to AUSTUDY, being that of a minimum of 20 hours contact a week. Currently, some full-time courses would not have 20 hours contact a week.
Proposed section 1061PH sets out progress rules for secondary students. The legislation as proposed will require ‘satisfactory progress’, ‘in the Secretary’s opinion’. The old AUSTUDY Regulations only required the applicant to be enrolled full-time and their school to be satisfied that they were doing sufficient work to satisfy the test of ‘full-time’ study. This amendment shifts this judgement away from the school to the DSS Secretary’s policy description of ‘satisfactory progress’.
Proposed section 1061PJ sets out which income support payments can attract payment of the PES. These appear to be the same range of payments as currently applies under the AUSTUDY arrangements, to qualify for the PES.
As the government has decided to transfer portfolio responsibility for AUSTUDY to the Minister for Social Security, it is necessary to ensure that all elements of the Austudy scheme are incorporated into the Social Security Act . Therefore, the amendments in Schedule 5 have been proposed, to transfer the Austudy loan scheme, known as the Austudy Supplement, into the Social Security Act . The loan scheme is now to be called the ‘Student Financial Supplement Scheme’.
Note that the former loan scheme will continue to operate for ABSTUDY recipients.
This Schedule relates to the transfer of an additional element of the Austudy scheme, the fares allowance, from the Austudy Regulations , to come within the ambit of the Social Security Act . However, this time, as compared to the approach taken in Schedule 5, the proposed amendments to the Act are merely to enable the making of disallowable instruments to contain the rules relating to the fares allowance.
In order that the introduction of the youth allowance and the austudy payment into the Social Security Act is in line with other social security payments, it is considered necessary to allow for increases in these payments in accordance with movements of the Consumer Price Index.
This Schedule therefore proposes the insertion of indexation provisions into the proposed new Parts 2.11 and 2.11A of the Social Security Act .
The introduction of the youth allowance and the repeal of the Youth Training Allowance, Benefit Rate Calculator A, and the Sickness Allowance Rate Calculator all n ecessitated proposed amendments to various rate calculator provisions of the Social Security Act . These are contained in Schedule 8.
This Schedule, which makes numerous consequential amendments to the Social Security Act , is divided into 23 Parts.
These amendments are necessary to take account of the creation of new payments (such as the youth allowance, austudy payment, and pensioner education supplement). Other consequential amendments are required because of the proposed repeal of provisions in the Student Assistance Act relating to AUSTUDY, and the proposed repeal of provisions in the Social Security Act relating to Youth Training Allowance, Benefit Rate Calculator A, and the Sickness Allowance Rate Calculator.
These proposed amendments are necessary to removal of redundant references to payments, which are intended to be repealed, such as youth training allowance, and sickness allowance.
Part 20 of the Schedule 9 contains provisions relating to debt recovery under the new payment structure. The effect of the proposed amendments is to transfer existing debts under the Student Assistance Act so that they to become subject to the debt recovery provisions contained in Part 5.2 of the Social Security Act. This Part also contains some provisions relating to waiver of debts.
The introduction of the youth allowance and the portfolio shifting of AUSTUDY involves the abolition of a number of presently existing payments. There is a need to ensure that recipients of these benef its are smoothly transferred to the categories of ‘youth allowance recipient’ or ‘austudy recipient’ without the need for lodgement of additional claims, and the need for separate official determinations to be made.
The benefits that are to be superseded include youth training allowance, sickness allowance (under 21 years), newstart allowance (under 21 years), as well as AUSTUDY.
This schedule also contains proposed provisions to ensure that:
- pensioner education supplement recipients under AUSTUDY are sm oothly transferred to similar payments under the Social Security Act ;
- persons under 21 receiving either sickness allowance or newstart allowance on 17 June 1997 will not be adversely affected by the introduction of the youth allowance scheme, in line with a government promise;
- that certain persons receiving bereavement payments, and recipients of double orphan payments under the AUSTUDY regulations are not disadvantaged by the introduction of the youth allowance scheme; and
- that family allowance recipients are not disadvantaged by introduction of the youth allowance scheme, by ensuring that families of YA recipients do not miss out on partial payments of family allowance.
This Schedule is divided into two Parts. The first part proposes consequential amendments to the Student Assistance Act , mainly relating to the repeal of the AUSTUDY scheme and of the Youth Training Allowance. The second part proposes a number of transitional provisions, which relate to persons who have lodged claims for AUSTUDY prior to the commencement date applicable to the relevant provisions of this Bill. It also relates to the transitional arrangements for the treatment of debts and debt recovery due to the Commonwealth. Part two also deals with persons who are seeking a review of decisions about payment of AUSTUDY or Youth Training Allowance prior to the commencement date applicable to the relevant provisions of this Bill.
The abolition of a number of income support payments and the creation of others, which is involved in the Youth Allowance legislation, necessitates the amendment of taxation legislation in order that the same taxation treatment of payments can contin ue to apply to the new payments and associated supplementary payments.
The legislation amended includes the:
- Income Tax Assessment Act 1936 ;
- Income Tax Assessment Act 1997 ; and
- Taxation (Interest on Overpayments and Early Payments) Act 1983 .
The final schedule of the Bill makes consequential amendments to legislation which contain references to youth training allowance or the AUSTUDY payment under the Student Assistance Act. These amendments are necessary because of the proposed repeal of thos e payments.
The Acts amended are the:
- Aged Care Act 1997
- Bankruptcy Act 1966
- Child Care Payments Act 1997
- Data-matching Program (Assistance and Tax) Act 1990
- Disability Services Act 1986
- Farm Household Support Act 1992
- Health Insurance Act 1973
- National Health Act 1953
- Registration of Deaths Abroad Act 1984
- Telecommunications Act 1997
- Veterans’ Entitlements Act 1986