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Social Security (Budget and White Paper) Amendment Bill 1994



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House: House of Representatives

Portfolio: Social Security

Commencement: The formal provisions of the Bill commence on Royal Assent. The measures contained in the Bill will commence on the day referred to in the main Provisions section of this Digest.

Purpose

This is an omnibus Bill that amends many of the programs administered by this portfolio. The main amendments relate to:

. the exclusion of the proceeds from the sale of the principal home from the operation of the liquid assets test for 12 months where certain conditions are satisfied;

. requiring people to serve only one liquid assets test waiting period in a 12 month period;

. allowing self- employment to form part of Jobsearch and Newstart activity agreements;

. advance payments of a proportion of Jobsearch or Newstart allowance;

. inserting a statutory definition of `suitable paid work' in relation to the Jobsearch and Newstart allowances;

. alteration of the treatment of subsidised housing provided to members of the Defence Forces; and

. the introduction of a category of `qualifying residence exemption' to allow holders of certain visas to be eligible for social security allowances, benefits and pensions.

Background

As there is no central theme to the Bill, the Background to each amendment will be dealt with in the Main Provisions section of this Digest.

Main Provisions

Liquid Assets Test

A `liquid assets' test, which applies to Jobsearch, Newstart and Sickness Allowances, was introduced in 1990 and provides that where a person's liquid assets exceed the maximum reserve they must, generally, wait an additional four weeks before being eligible for the benefit. The test does not apply in a number of circumstances, including:

. where the applicant has transferred from another allowance or benefit;

. where the Secretary is satisfied that its application would cause long term disadvantage or significant hardship; and

. where people have commenced formal labour market training and have been exempted from the operation of the test by the Secretary of the Department of Employment, Education and Training.

The liquid assets that will be taken into account in determining the person's reserve are cash and readily realisable assets, including:

. shares and debentures in public companies;

. amounts deposited with, or lent to, a bank or other financial institution even if the funds cannot be accessed immediately;

. amounts due and payable to the person by or on behalf of a former employer.

Eligible termination payments are not included in a person's reserves [section 14A of the Social Security Act 1991 (the Principal Act)].

The maximum reserve that may be held before the liquid assets test applies is $5000 for a single person without dependents and $10 000 in other cases. In determining a person's reserves, their partners reserves are to be included as are any liquid assets transferred to the person's or their partner's children within four weeks of the claim where no or inadequate consideration was received for the assets and the Secretary is satisfied that the dominant purpose of the transfer was to enable the person to claim the allowance.

In 1991 the Minister for Social Security explained the reason for the liquid assets test as `I do not think it is unreasonable - ....- that those people who have sufficient liquid funds should maintain themselves for a short period.' 1

The application of the liquid assets test to the proceeds of the sale of a person's principal place of residence was considered by the Administrative Appeals Tribunal (AAT) in 1993. 2 The main question for the AAT was whether section 1118 of the Principal Act, which contains general provisions relating to the assets test, applied to the liquid assets test. In summary, section 1118 provides that if a person sells their principal home and is likely, within 12 months, to use the all or part of the proceeds of the sale for the purchase of another principal home, so much of the proceeds of the sale as are likely to be so used are to be disregarded for the purpose of the assets test.

The Department argued that this provision did not apply to the liquid assets test, and that the financial hardship provision would apply to exempt the funds from the liquid assets test. This argument was rejected by the AAT which found that, having regard to the Act as a whole, the general provisions relating to the assets test apply to the liquid assets test. Consequently, the AAT ruled that the funds held by the respondent from the sale of the principal home should not be taken into account for the purpose of the liquid assets test (the facts of the case made it clear that the funds would be used to purchase another principal home within 12 months).

Schedule 1 of the Bill will amend section 14A of the Principal Act which deals with the calculation of a person's reserves. The amendment provides that if a person sells their principal home and is likely, within 12 months, to use the all or part of the proceeds of the sale for the purchase of another principal home, so much of the proceeds of the sale as are likely to be so used are to be disregarded for the purpose of the assets test (i.e. it gives legislative force to the AAT decision discussed above). The amendments also provide that if:

. after becoming eligible for benefits, a person makes a payment to discharge a debt that does not relate to their principal home or other residential property; and

. they were not obliged to make the payment and have not already made such a payment since becoming eligible for an allowance; then

. the payment made to discharge the debt is not to taken into account for the purposes of the liquid assets test.

The amendment may apply where a person makes such a payment while subject to a waiting period.

Schedule 1 of the Bill will also amend sections 519, 598 and 676 of the Principal Act, which deal with the application of the liquid assets test to Jobsearch, Newstart and Sickness Allowances, to provide that the test will not apply if during the period commencing 12 months before the person became unemployed or claimed an allowance they had served a liquid assets test waiting period. As a result, a person who has served a waiting period will not have to serve another such waiting period for 12 months.

The liquid assets test waiting period generally commences on the day on which the applicant became unemployed or incapacitated. Amendments to the provisions dealing with the waiting period provide that the waiting period will commence on the later of:

. the day the applicant became unemployed;

. if their partner is unemployed - the day their partner became unemployed; and

. if their partner is incapacitated - the day their partner became incapacitated.

Commencement: The above measures will commence on 20 March 1995 [subclause 2(2)].

Activity Agreements

People claiming or in receipt of Jobsearch or Newstart allowance may be required to enter into activity agreements in order to be eligible to receive or continue to receive the allowance. If so required, the person will have to enter into such an agreement and satisfy the Secretary that they are taking reasonable steps to comply with the agreement to be eligible for the Job search allowance. The nature of the agreements is dealt with in section 525B of the Principal Act. Agreements are to require the person to undertake one or more of a number of the activities listed in the proposed section and approved by the Secretary. These are:

. job search;

. vocational training course;

. training that would help in the search for work;

. paid work experience;

. measures to address any disadvantage the person may face in the labour market, other than undertaking work in return for the allowance;

. participation in a CES labour market program;

. participation in a rehabilitation program; or

. an activity proposed by the person.

In making an agreement the Secretary is to have regard to the persons ability to comply with the agreement and is to have regard to their education, skills, experience, age, physical condition and the state of the labour market in the locality where they reside.

It was announced in the Working Nation statement that long term unemployed and those at risk of long term unemployment would be able to develop self- employment opportunities for a maximum of 12 months or establish and participate in community based co- operative enterprises.

Schedule 4 of the Bill will introduce provisions allowing activity agreements to deal with the development of self- employment or the development of, or participation in, group and co- operative enterprises. In relation to Jobsearch, section 525B of the Principal Act will be amended to allow activity agreements to deal with these categories of employment, subject to proposed sections 525D and 525E.

Proposed section 525D provides that a Jobsearch activity agreement is not to require a person to develop self- employment unless:

. they have been in receipt of a Jobsearch, Newstart or Youth Training allowance in the six months preceding the agreement;

. the Secretary of the Department of Employment, Education and Training is satisfied that the activity will be commercially viable at the end of 12 months operation and is likely to provide the person with sustainable employment with income at least equal to the person's basic rate of benefit.

The agreement is not to:

. required the person to undertake the activity for more than 12 months;

. provide for the development of self- employment if the person has had a previous self- employment agreement unless the Secretary has determined there are special circumstances; or

. provide for the development of self- employment if at any time during the preceding six months the person was required to develop a different self- employment opportunity.

Proposed section 525E deals with Jobsearch activity agreements and the development of group and co- operative enterprises. The requirements regarding such agreements are the same as for self- employment agreements with the exception that the activity must be likely to provide the person with skills, training or experience that will enable them to obtain paid employment at an income at least equal to their basic benefit.

Proposed sections 607A and 607B deal with Newstart self- employment and group or co- operative enterprise agreements. The provisions are the same as those for Jobsearch agreements.

Commencement: 20 March 1995 [subclause 2(5)].

Advance Payments - Jobsearch and Newstart

The option for people to take an advance payment of part of future Jobsearch or Newstart allowance was announced in the Working Nation statement. The option is designed to allow long term unemployed, or those at risk of long term unemployment, to access $500 to help general job search activities, or $1000 if the activity relates to their activity agreement. The funds may be used to purchase equipment or clothing that will help the person gain employment and will only be available to those who would not be in financial hardship as a result of the advance. 3

Proposed section 570A deals with qualification for advance payment of Jobsearch allowance. Subject to the disqualification provisions (see below), a person will be eligible for an advance if they are eligible for Jobsearch and:

. at all times during the qualification period (see below) they were in receipt of Jobsearch, Newstart or sickness allowance;

. the Secretary is satisfied that the money will be used for a permitted purpose (i.e. where the payment is $500 or less - to help to search for work or participate in activities related to finding work; or, if the payment exceeds $500 - to help comply with a job search activity or a case management activity agreement); and

. the Secretary is satisfied that the person will not suffer financial hardship as a result of reduced payments due to the advance.

The qualification period will be 3 months preceding the application where the application is for $500 or less and 6 months preceding the application where the application is for more than this amount.

A person will not be eligible for an advance if:

. the application is for less than $250;

. the person is subject to reductions in payments due to a previous advance; or

. the person owes a debt to the Commonwealth that is recoverable under the Principal Act.

Advances are made on condition that the money will be spent as specified in the application for the advance (proposed section 570H).

The amount of advance that may be paid to a person who has been on a Jobsearch, Newstart or sickness allowance for less than 6 months before the application will be the lesser of:

. the amount applied for;

. $500; and

. 14% of the applicants fortnightly rate of benefit (less any remote area allowance) multiplied by 13 (i.e. 14% of the persons six monthly benefit) (proposed section 570J).

Proposed section 570K contains similar provisions that deal with the situation where the applicant has been in receipt of a relevant allowance for 6 months or more. The differences in the provisions is that in calculating the maximum amount that may be advanced the $500 figure is replaced by $1000 and the multiplier of 13 is replaced by 26 so that the deduction is over a 12 month period.

Advances of Newstart allowance are dealt with in proposed sections 653A to 653L and are the same as the provisions dealing with advances of Jobsearch.

Part 3 of Schedule 5 of the Bill deals with the repayment of an advance by deduction from future benefits. The basic amount of the payment that will be deducted from each fortnightly payment of a person's benefit will be:

. where the advance did not exceed $500 - the amount of the advance divided by 13; or

. where the advance exceeded $500 - the amount of the advance divided by 26.

A person may request that a larger amount be deducted from their benefit, but the Secretary is to refuse the request if satisfied that such payments would result in severe financial hardship.

A person may also request that the deduction be reduced because of severe financial hardship. If the Secretary is satisfied that due to unforeseen or exceptional circumstances the person would suffer severe financial hardship if the normal rate of deduction continued the Secretary may determine that for a period there should be no deduction or a lesser deduction. The Secretary may review such a determination at any time but is not to increase the deduction unless satisfied that the person would not suffer severe financial hardship as a result of the increase.

If the person ceases to be eligible for Jobsearch or Newstart allowance and an amount of an advance payment remains unpaid, that amount will be a debt due to and recoverable by the Commonwealth. The debt may be recovered by deduction from other social security payments; by consent from another person's social security payment; by legal proceedings; or by garnishee notice (proposed section 1224E).

Commencement: 20 March 1995 [subclause 2(6)].

Activity Test

To be eligible for Jobsearch or Newstart allowance, a person must satisfy the activity test and, if required to enter into an activity agreement, enter into the agreement and take reasonable steps to comply with the agreement. To satisfy the activity test, the person must be actively seeking and willing to undertake work that is, in the Secretary's opinion, suitable for the person; or undertaking a suitable training, rehabilitation etc. program. What comprises suitable employment is not currently defined in the Principal Act. However, suitable employment is defined in the Guide to the Administration of the Social Security Act, which `describes Departmental procedure developed and authorised by the Secretary to the Department of Social Security under the Act;' 4 The Guide defines suitable paid work as

"Broadly, suitable paid work is considered to be work:

. that is within a client's capacity to perform;

. that pays at least the award wage or, in the absence of an award, the going wage for such employment;

. where the conditions and amenities are of the standard usually applicable to that type of employment;

and as well as full time employment may include:

. casual, short term, temporary, part time work; and/or

. work on a Commonwealth Employment Program; and/or

. work which involves living away from a client's normal place of residence.

A client would not be expected to accept a position in the following circumstances:

. employment which is not covered by an industrial award, agreement etc., unless it carries remuneration at least equivalent to the recognised or ruling rate for such employment;

. employment that involves direct contact with or exposure to dangerous or toxic material or substances where there is a known risk to health or safety, eg asbestos;

. enlistment in the Defence Force;

. employment that would involve living away from home if the client

- is under the age of 18 years; or

- is residing with a partner or dependent children; or

- is pregnant; or

- is an Aboriginal (sic) living on a settlement mission (community); and

unless the person is accustomed to undertaking such employment notwithstanding personal or family circumstances:

. employment involving living away from home in any case where the conditions and amenities attached to the employment do not reach the standards usually applicable to that type of employment;

. casual, short term. temporary or part time employment which involves living away from the normal place of residence

- if an acceptable standard of accommodation is not available;

- if the client has an established home and the weekly cost of maintaining that home plus the temporary accommodation exceeds 30% of the anticipated gross weekly wage;

- if the client is married (or living in a de facto relationship basis) or has dependent children and the family would be required to move to accept work." 5

Proposed subsection 522(2A) contains the statutory definition of the circumstances where work will be considered not to be suitable for Jobsearch recipients. This will be where the Secretary is of the opinion that:

. the person lacks the skills, qualifications or experience necessary to perform the work;

. the person has an illness, disability or injury that would be aggravated by the work;

. the conditions are such that they would be a risk to health or safety and performing the work in those conditions would breach a Commonwealth, State or Territory occupational health or safety law;

. the work would involve the person being self- employed;

. the work is covered by an award but the employer will only employ the person if they enter into an agreement that would reduce or abolish an award right;

. the work is not covered by an award and the remuneration offered is lower than the minimum rate for comparable work that is covered by an award;

. commuting between work and home would be unreasonably difficult - i.e. the distance involved is an unreasonable commuting distance; public transport is not available; public transport is available but the one way journey would normally exceed 90 minutes; or the cost of commuting would exceed 15% of the remuneration for the work. However, if the Secretary is of the opinion that a substantial number of people who live in the same area commute in these circumstances, the work will not be unsuitable; or

. for any other reason the work is unsuitable.

Section 522 of the Principal Act will be amended to provide a definition of when a person will be taken not to have taken reasonable steps to comply with a job search requirement. This will be where a main reason for the failure to comply involved a matter that is within the person's control or the circumstances that prevented the person complying were reasonably foreseeable.

The Bill will also insert the same provisions in respect of the Newstart allowance.

Commencement: 28th day after the Bill receives the Royal Assent [subclause 2(7)].

Assessable Fringe Benefits

The family payment and other benefits where a parental income test applies are subject to income and means tests. Amendments introduced by the Social Security Legislation Amendment Act (No. 2) 1993 provided that the value of certain fringe benefits over $1000 and supplied by their employer or an associate of the employer is to be taken into account for the purposes of the income and assets tests. Fringe benefits that are included for the income and assets tests include the provision of a car; school fees; subsidised loans; and the provision of subsidised housing. The amendments were designed to enable the provision of fringe benefits to be treated in the same way as wages and salary for the purposes of social security benefits.

During debate on the amendments in 1993, the main concern raised by the Opposition was the potential effect on members of the Defence Forces, where subsidised housing is common. The Opposition moved an amendment to exempt members of the Defence Forces from the application of the fringe benefit rules, but this was defeated in the Senate. Under the fringe benefits rules, the value of the housing benefit is calculated by subtracting from the deemed value of the accommodation (which is calculated according to a Table in the Principal Act and varies according to the type of accommodation provided and its location) the amount of rent paid. Where this is a positive amount, that is the value of the housing fringe benefit. The amendments applied to payments made on or after 1 January 1994.

On 2 June 1994, the Ministers for Social Security and Defence Science and Personnel announced that the application of the fringe benefits test for members of the Defence Forces would be altered. The Ministers Joint Statement reads:

`However, the Government recognises that the treatment under the Social Security test runs across long standing ADF policy to treat personnel at the same rank on a similar basis with regard to housing and provide subsidies which standardise housing costs, irrespective of their location.'

`The change will have effect from the next family payment payday which is 9 June.'

This will be achieved by setting a standardised deemed value of the accommodation at $80 per week, so that if a member of the Defence Forces pays $80 or more rent a week they will be not receive a housing fringe benefit. The $80 figure is currently the lowest for most accommodation, which currently has a maximum deemed value of $140 per week for a house with 3 or more bedrooms in a metropolitan location.

Schedule 7 of the Bill will introduce the new means for calculating the value of housing fringe benefits for members of the Defence Forces. The amendments will insert a new Table for the calculation of the deemed value of a housing fringe benefit for members of the Defence forces. The value of houses, flats and home units will be deemed to be $80 per week, with other units of accommodation valued at $25 per week.

Commencement: Royal Assent or, if Royal assent is not received before 9 December 1994, on that day [subsections 2(8) and 2(9)]. Subsection 9(2) provides that the amendment applies to all payments that fall due on or after the commencement day.

Qualifying Australian Residence

To be eligible to receive Australian social security benefits a person must satisfy residency requirements, which vary with the nature of the benefit or allowance claimed. The two major categories relating to residence are that the person is a resident of Australia (i.e they reside in Australia and satisfy one of the eligibility criteria - section 7 of the Principal Act) or has satisfied the qualifying residence requirements (i.e. has been an Australian resident for 10 continuous years or has 10 years aggregate residency with at least one period of a minimum of 5 years).

Schedule 2 will amend section 7 of the Principal Act to insert a category of `qualifying residence exemption', which will apply where the person resides in Australia and holds a visa of a class determined by the Minister to be an approved visa for social security purposes. Such a declaration will be disallowable by either House of Parliament. Such a person will satisfy the residence eligibility criteria for the following benefits and allowances:

. disability support pension;

. age pension;

. wife pension;

. carer pension;

. sole parent pension;

. widowed person allowance;

. widow B pension;

. disability wage supplement;

. Jobsearch allowance;

. Newstart allowance;

. mature age allowance;

. sickness allowance;

. special benefit.

Commencement: 1 January 1995 [subclause 2(3)].

References

1. Senate, Hansard, 5 June 1991. p.4366.

2. Re Secretary Department of Social Security and Gelders, (1993) 17 AAR 235.

3. Working Nation, p. 156.

4. Department of Social Security, Guide to the Administration of the Social Security Act, p. FORE- 1.

5. Ibid., p. 12- 26.

C. Field (Ph. 06 2772439)

Bills Digest Service 13 September 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.