Income support eligibility and work disincentives
Eligibility conditions for unemployment payments
Income testing
Working credit
Employment income nil rate periods
Seasonal worker preclusion period
Seasonal horticultural seasonal work trial
Key provisions

Date introduced: 23 March 2017
House: House of Representatives
Portfolio: Social Services
Commencement: Parts 1 and 2 of Schedule 1 on 1 July 2017; Part 3 of Schedule 1 on 1 July 2020.

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page, or through the Australian Parliament website.

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the Federal Register of Legislation website.

All hyperlinks in this Bills Digest are correct as at March 2017.

Purpose of the Bill

The purpose of the Social Services Legislation Amendment (Seasonal Worker Incentives for Jobseekers) Bill 2017 (the Bill) is to amend the Social Security Act 1991 (the SS Act), the Farm Household Support Act 2014 and the Veterans’ Entitlements Act 1986 (VE Act) to provide for an income test incentive aimed at encouraging job seekers on income support to undertake seasonal horticultural work.

The measures are part of a two-year trial program commencing 1 July 2017 to encourage jobseekers to undertake seasonal horticultural work such as fruit-picking. Under the measure, participants will be able to earn up to $5,000 from specified horticultural seasonal work during the 12 months after they join the trial program, without that income affecting their income support payment rate under the income test. Up to 7,600 job seekers who have been in receipt of Newstart Allowance or Youth Allowance (Other) for at least three months will be eligible to participate in the trial.[1]

The program will be run by employment services providers who will receive a ‘Provider Seasonal Work Incentive Payment’ of $100 a week for up to six weeks a year for each participant they place with eligible farmers.[2] Participants will be eligible for a travel allowance of $300 if they undertake horticultural work that is more than 120 kilometres from their home.[3]

Commencement

Parts 1 and 2 of the Bill, the main provisions, commence on 1 July 2017. Part 3, which repeals the amendments made by Parts 1 and 2, commences on 1 July 2020 so that it is clear that the trial has a start date and an end date.

History of the Bill

The provisions in the Bill were first proposed in Schedule 12 of the Social Services Legislation Amendment (Omnibus Savings and Child Care Reform) Bill 2017 (the Omnibus Bill).[4] The Government was unable to secure the support of the Senate for some of the measures in the Omnibus Bill and has decided to attempt to legislate some of the measures via separate Bills.[5]

On 22 March 2017, the Senate passed a motion to vary the routine of business in the Senate in order to consider two Bills proposing amendments similar to some of those in the Omnibus Bill: the Social Services Legislation Amendment Bill 2017 (a new Bill) and the Family Assistance Legislation Amendment (Jobs for Families Child Care Package) Bill 2016 (which was already before the House of Representatives).[6] The motion stated that once these Bills had been finally considered the Social Services Legislation Amendment (Omnibus Savings and Child Care Reform) Bill 2017 would be discharged from the notice paper.[7] The Omnibus Bill was discharged from the Senate Notice Paper on 23 March 2017.[8]

Background

The measure was announced in the 2016–17 Mid-Year Economic and Fiscal Outlook (MYEFO).[9]

A trial of such an income test incentive for jobseekers was proposed by the Nick Xenophon Team (NXT) in the context of debate over changes to the income tax rates for working holiday makers (the ‘backpacker tax’).[10] The NXT secured support for its proposal as part of an agreement to support the backpacker tax legislation (the Income Tax Rates Amendment (Working Holiday Maker Reform) Bill 2016 (No. 2).[11] NXT MP Rebekha Sharkie stated:

We need to address the work force shortage that our local growers experience during harvest time. With the uncertainly surrounding a backpacker tax, we have developed a seasonal regional employment strategy for Government that will encourage unemployed people to take on short term fruit picking work and assist the horticulture and viticulture industries to address the ever challenging issue of finding enough hands to get fruit into the packing shed. This is a win-win for farmers and for local employment.

Our plan gives unemployed Australians the opportunity to ‘taste’ work in primary production without fear of losing unemployment benefits. We are assisting farmers to access a wider pool of casual labour though the Job Active program, which for many unemployed Australians could likely lead to on-going work on the land.[12]

Committee consideration

At the time of writing, the Bill had not been referred to any Committees.

Senate Standing Committee for the Scrutiny of Bills

At the time of writing, the Senate Standing Committee for the Scrutiny of Bills had not considered the Bill. The Committee did not have any comments on Schedule 12 of the Omnibus Bill.[13]

Previous committee consideration

The Omnibus Bill was referred to the Senate Community Affairs Legislation Committee for inquiry and report by 20 March 2017. The Committee was granted an extension and reported on 21 March 2017.[14] Details of the inquiry are available from the inquiry homepage.[15]

The Committee recommended the Bill be passed.[16] The Committee did not refer to the seasonal worker incentives measure in Schedule 12 in its report.[17]

Policy position of non-government parties/independents

It is unclear what the position of the Opposition is on the Bill.

It is expected that NXT Members and Senators support the Bill as they proposed the measure and secured the Government’s support for it.

Australian Greens Senators, in their dissenting report on the Omnibus Bill, stated they ‘believe that this measure has some merit and could be explored further for those on Newstart and Youth Allowance (Other) payments but have concerns that it is limited to one industry’.[18]

Position of major interest groups

The Australian Council of Social Service (ACOSS) is ‘broadly supportive’ of the measure but stated that it should be broadened to apply to all people in receipt of an unemployment payment. ACOSS has recommended an ‘income bank’ of $4,000 that accrues over time to ‘enable all receiving an unemployment payment to undertake casual or sporadic work without incurring a sharp or total loss of payment’.[19]

The Australian Council of Trade Unions (ACTU) stated that it held no substantial objections to the proposed trial program but was ‘concerned about the underlying issue of worker exploitation in the agriculture sector especially amongst temporary work visa holders’.[20] The ACTU stated that the ‘Government must take action to end the exploitation in this industry and, if this program goes ahead, ensure that job seekers are not exposed to exploitation and abuse’.[21]

The National Social Security Rights Network (NSSRN) suggested that incentives such as that proposed in the trial ‘have generally been unsuccessful in the past ... because there are other far more significant factors affecting the take up of work’.[22] The NSSRN also suggested that the program would be a departure from the ‘very fundamental principles of payment according to need and can therefore lead to inequity’.[23] The NSSRN stated it could support the measures as a trial, provided it is rigorously evaluated.[24]

Financial implications

According to the Explanatory Memorandum to the Bill, the measure is expected to cost $27.5 million over the forward estimates.[25]

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible.[26]

Parliamentary Joint Committee on Human Rights

At the time of writing, the Parliamentary Joint Committee on Human Rights had not considered the Bill. The Committee did not comment on Schedule 12 of the Omnibus Bill.[27]

Key issues and provisions

Income support eligibility and work disincentives

Eligibility conditions for unemployment payments

The qualification criteria for Newstart Allowance require that an individual be considered unemployed and meet the activity test.[28] The qualification criteria for Youth Allowance require an individual to meet the activity test but an individual undertaking full-time work of at least 35 hours a week is considered to have not met the activity test.[29] This means that for both payments, an individual undertaking full-time work would normally be disqualified.

The activity test for Newstart Allowance and Youth Allowance (Other) requires claimants to look for and take up any offers of suitable paid work (unless an exemption from activity test requirement applies).[30]

Suitable paid work includes seasonal work, though certain types of seasonal work might be considered unsuitable if the person has to commute for more than 90 minutes.[31] If a recipient has indicated they would be prepared to live away from home for work or are accustomed to undertaking employment away from home, then they would be expected to take up employment opportunities outside their local area. Different types of employment are considered unsuitable for different types of recipients—for example, those with caring responsibilities.[32]

Income testing

Income testing is intended to target income support to those without the means to support themselves. Income over certain thresholds reduces payments rates, and income over a certain amount means that a person receives a zero rate or is ineligible for payment. While the income test is necessary for targeting payments to those in need, it can also act as a disincentive to work as the withdrawal of income support partly offsets any increased income from working. When combined with income tax, income test withdrawals can significantly reduce the amount of disposable income gained from undertaking paid work (the combined effect of income support reductions and income tax is known as an effective marginal tax rate).

Newstart Allowance recipients can earn $104 a fortnight before their payment rate is affected.[33] Fortnightly rates of Newstart are reduced by 50 cents for every dollar of income between $104 and $254, and by 60 cents in the dollar for every dollar of income over $254 in a fortnight. Single parents have a different income test—their fortnightly rates reduce by 40 cents for every dollar of income over $104.

Single Newstart Allowance recipients with no children will not receive any payment if their fortnightly income is over $1,036.34. Single principal carers of dependent children will not receive any payment if their fortnightly income is over $1,576.00.

Youth Allowance (Other) recipients can earn up to $143 per fortnight before their payment rate is affected.[34] Fortnightly rates of Youth Allowance (Other) are reduced by 50 cents for every dollar of income between $143 and $250, and by 60 cents for every dollar of income over $250 per fortnight. A single Youth Allowance (Other) recipient living away from their family home will not receive any payment if their fortnightly income is over $901.67.[35]

If a person is a member of a couple, their partner’s income can also affect their payment rates.

Working credit

The Working Credit scheme allows Newstart Allowance and Youth Allowance (Other) recipients to build up credits during periods when little or no income is earned which can reduce the amounts that are counted under the income test when earned income increases.[36] Recipients typically accrue one credit for each dollar of difference between $48 and their income in each fortnight. For example, if an individual has no income in a fortnight they can accrue 48 credits; if they earn $40 they can accrue eight credits and if they earn $48 or more they cannot receive credits in that fortnight. Newstart Allowance recipients can accrue a maximum of 1,000 credits (so $1,000 of income can be excluded from the income test if they do take up work). Youth Allowance (Other) recipients can accrue 3,500 credits.

The Working Credit scheme is intended as an incentive for payment recipients to take up work, including short-term work such as seasonal work. It works to reduce the disincentive effect of high effective marginal tax rates.

Employment income nil rate periods

Another incentive for income support recipients to take up short-term or seasonal work is the Employment Income Nil Rate Period. Where a Newstart Allowance or Youth Allowance (Other) recipient’s payment is reduced to nil due to employment income they can still be considered a benefit recipient for a set period of time known as an ‘employment income nil rate period’.[37] If the person’s income falls during this period, and they become eligible for some income support again, they can recommence payment without having to reapply and serve a waiting period. An employment income nil rate period can last for up to six fortnights after the fortnight during which the payment was reduced to nil (in effect this means a nil rate period can last for six or seven fortnights).

Seasonal worker preclusion period

People claiming income support payments who have undertaken seasonal or intermittent work (or whose partner has undertaken such work) in the six months prior to making a claim may be subject to a ‘seasonal worker preclusion period’ (SWPP).[38] The SWPP applies to a range of working-age income support payments, including Newstart Allowance and Youth Allowance (Other).[39] The SWPP is a period during which a person is not eligible to receive a social security payment—it is calculated based on the amount of earnings a person or their partner earned, the number of weeks spent undertaking seasonal/intermittent work and any intervening weeks.

The SWPP only affects those lodging new claims for affected payment if they are single and earned income above Average Weekly Ordinary Time Earnings (or a member of a couple who earned more than twice Average Weekly Ordinary Time Earnings) and the income was earned during a period of seasonal or intermittent work that ended in the six months before lodging a claim.[40]

Exemptions from the SWPP can be granted where a person was in receipt of income support for a continuous period exceeding 12 months on the day before they commenced intermittent work (does not apply to seasonal work). Exemptions can also be granted if the person is undertaking certain employment services or rehabilitation activities. SWPPs can be waived if the claimant is in severe financial hardship and the hardship is a result of unavoidable or reasonable expenditure.[41]

Seasonal horticultural seasonal work trial

The measures proposed in the Bill are aimed at alleviating some of the disincentives to take up seasonal work built into the design of income support payments for jobseekers. Primarily, the measure will remove some of the disincentive effect of the income test by allowing jobseekers to earn income without losing part of their income support payment. Secondly, it will allow Youth Allowance (Other) recipients to work full-time hours without losing eligibility for the payment.

The trial is, in effect, providing an enlarged Working Credit balance to a select group of income support recipients who are willing to undertake seasonal work. This will provide a significant incentive for eligible jobseekers to take up seasonal work.

A study by Roger Wilkins and Andrew Leigh on the effects of the Working Credit program estimated that it has positive effects on the employment participation of people receiving income support and the income of these people (Wilkins and Leigh note that the way the program was implemented and the data available make it difficult to credibly evaluate the causal effects of the program).[42] However, the study estimated that there were ‘ambiguous—or possibly zero—effects on exits from the income support system’.[43]

The measures in the Bill have, however, not been framed as measures that will encourage jobseekers to move off welfare. Instead, the Minister has stated that ‘the measure responds to concerns about the ability of the Australian horticulture industry to attract sufficient numbers of seasonal workers’.[44] As such, the measure is intended to boost labour supply rather than encouraging people to move from welfare and into work.

It is unclear whether trial participants will be affected by the SWPP.[45] Only those who become ineligible for their Newstart Allowance or Youth Allowance (Other) payment during the trial period could be affected by the SWPP as it only affects new claims. It could affect those who earn a significant amount of income while participating in the trial over a long period so that their payment rate is reduced to zero under the income test (after accounting for the proposed $5,000 exemption) and receive a zero rate for longer than the permissible employment income nil rate period (six or seven fortnights). It is unlikely that such a circumstance would arise during the trial period.

Key provisions

Item 2 adds the ‘seasonal work living away and travel allowance’ to the list of amounts excluded from the definition of income at subsection 8(8) of the SS Act. This is the payment of $300 for those who move 120 kilometres or more to participate in the trial program. The amendment will mean that this amount is not included in the social security income test.

As noted above, the qualification criteria for Youth Allowance require an individual to meet the activity test but an individual undertaking full-time work of at least 35 hours a week is considered to have not met the activity test.[46] Item 3 inserts proposed subsection 541(3A) into the SS Act so that a person in receipt of Youth Allowance will not be disqualified for undertaking full-time work of 35 hours a week or more if that work is qualifying seasonal horticultural work (as defined at proposed subsection 1073K(6) inserted by item 7) and the income earned, derived or received from that work is being disregarded under the income test (under proposed subsection 1073K(2) inserted by item 7).

Item 7 inserts proposed Division 1AC—seasonal horticultural work income exemption, which consists of proposed section 1073K, into Part 3.10 of the SS Act. To qualify for the exemption, the Secretary of the Department of Social Services must be satisfied that a person is placed in qualifying seasonal horticultural work under the program known as the ‘Seasonal Horticultural Work Program’ in 2017–18 or 2018–19. If the person qualifies for the income test exemption, they will have the first $5,000 of any ordinary income earned, derived or received by the person under that program disregarded when working out their payment rate. The exemption applies for up to 12 months from the first day of the instalment period (payment fortnight) that includes the day the person is placed in the program. However, the $5,000 exemption is respective to each of the financial years of the program and a person eligible in both years cannot transfer any unused balance from their total from the first year over to the second year.

Proposed subsection 1073K(3) provides for this exemption to also apply in relation to the person’s partner (for example, under the partner income test if the partner is also receiving an income support payment).

Proposed subsection 1073K(5) states that qualifying payments for the seasonal horticultural work income exemption are Newstart Allowance and Youth Allowance (Other).[47]

Proposed subsections 1073K(6) and (7) provide for the Secretary of the Department of Employment to determine, by legislative instrument, what kinds of seasonal work are to be considered qualifying seasonal horticultural work.

Part 3 of the Bill (items 10–18) will repeal all of the amendments made by the Bill on 1 July 2020.

[1]. Youth Allowance (Other) is paid to jobseekers aged 16–21 and Newstart Allowance is paid to jobseekers aged 22 and over. Youth Allowance (Student) is paid to full-time students and apprentices and has different eligibility criteria. Department of Human Services (DHS), ‘Youth Allowance’, DHS website, 3 January 2017; Explanatory Memorandum, Social Services Legislation Amendment (Seasonal Worker Incentives for Jobseekers) Bill 2017, p. 3.

[2]. Department of Social Services, Department of Education and Training and Department of Employment, Submission to Senate Community Affairs Legislation Committee, Inquiry into the Social Services Legislation Amendment (Omnibus Savings and Child Care Reform) Bill 2017, submission no. 7, 3 March 2017, p. 12.

[3]. Ibid.

[4]. Parliament of Australia, ‘Social Services Legislation Amendment (Omnibus Savings and Child Care Reform) Bill 2017 homepage’, Australian Parliament website.

[5]. M Cormann (Minister for Finance) and C Porter (Minister for Social Services), New Social Services Amendment Bill secures $2.4 billion in Budget savings, media release, 22 March 2017.

[6]. G Brandis, ‘Business: rearrangement’, Senate, Debates, (proof), 22 March 2017, p. 7.

[7]. Ibid.

[8]. Parliament of Australia, ‘Social Services Legislation Amendment (Omnibus Savings and Child Care Reform) Bill 2017 homepage’, op. cit.

[9]. S Morrison (Treasurer) and M Cormann (Minister for Finance), Mid-year economic and fiscal outlook 2016–17, p. 195.

[10]. N Xenophon and R Sharkie, Relax dole rules to give Aussies a chance to work on farms, media release, 20 September 2016.

[11]. N Xenophon and R Sharkie, A win for NXT’s seasonal workers incentive trial and Aussie job seekers, media release, 28 November 2016.

[12]. N Xenophon and R Sharkie, Relax dole rules to give Aussies a chance to work on farms, op. cit.

[13]. Senate Standing Committee for the Scrutiny of Bills, Scrutiny digest, 2, 2017, The Senate, Canberra, 15 February 2017, p. 26.

[14]. Senate Community Affairs Legislation Committee, ‘Social Services Legislation Amendment (Omnibus Savings and Child Care Reform) Bill 2017’, Inquiry homepage.

[15]. Ibid.

[16]. Senate Community Affairs Legislation Committee, Social Services Legislation Amendment (Omnibus Savings and Child Care Reform) Bill 2017 [Provisions], The Senate, March 2017, p. ix.

[17]. Ibid.

[18]. Australian Greens Senators, Dissenting report, Senate Community Affairs Legislation Committee, Social Services Legislation Amendment (Omnibus Savings and Child Care Reform) Bill 2017 [Provisions], The Senate, March 2017, p. 52.

[19]. Australian Council of Social Service (ACOSS), Submission to Senate Community Affairs Legislation Committee, Inquiry into the Social Services Legislation Amendment (Omnibus Savings and Child Care Reform) Bill 2017, submission no. 13, 3 March 2017, p. 5.

[20]. Australian Council of Trade Unions (ACTU), Submission to Senate Community Affairs Legislation Committee, Inquiry into the Social Services Legislation Amendment (Omnibus Savings and Child Care Reform) Bill 2017, submission no. 11, 3 March 2017, p. 10.

[21]. Ibid.

[22]. National Social Security Rights Network, Submission to Senate Community Affairs Legislation Committee, Inquiry into the Social Services Legislation Amendment (Omnibus Savings and Child Care Reform) Bill 2017, submission no. 9, 3 March 2017, p. 6.

[23]. Ibid.

[24]. Ibid.

[25]. Explanatory Memorandum, Social Services Legislation Amendment (Seasonal Worker Incentives for Jobseekers) Bill 2017, p. 2.

[26]. Ibid., p. 7.

[27]. Parliamentary Joint Committee on Human Rights, Report, 2, 2017, The Senate, Canberra, 21 March 2017, pp. 50–53.

[28]. Social Security Act 1991, sections 593 and 595.

[29]. Ibid., subsection 541(3).

[30]. DSS, ‘3.2.8.10 mutual obligation requirements for NSA/YA job seekers overview’, Guide to social security law, version 1.229, DSS website, 4 January 2016.

[31]. DSS, ‘3.2.8.60 unsuitable work’, Guide to social security law, version 1.229, DSS website, 1 July 2015.

[32]. Ibid.

[33]. DHS, ‘Income test for Newstart Allowance, Partner Allowance, Sickness Allowance and Widow Allowance’, DHS website, 20 March 2017.

[34]. DHS, ‘Personal income test for Austudy and Youth Allowance’, DHS website, 20 March 2017.

[35]. Ibid.

[36]. DHS, ‘Working Credit’, DHS website, 29 September 2016.

[37]. DSS, ‘3.1.12 employment income nil rate period’, Guide to social security law, version 1.230, DSS website, 20 March 2017.

[38]. DSS, ‘1.1.S.455 SWPP’, Guide to social security law, version 1.230, DSS website, 20 March 2017.

[39]. DSS, ‘3.1.7.10 who is affected by an SWPP’, Guide to social security law, version 1.229, DSS website, 9 November 2016.

[40]. DSS, ‘1.1.S.455 SWPP’, op. cit.

[41]. DSS, ‘3.1.7.10 who is affected by an SWPP’, op. cit.

[42]. R Wilkins and A Leigh, ‘Effects of temporary in-work benefits for welfare recipients: examination of the Australian Working Credit programme’, Fiscal Studies, 33(3), 2012, p. 367.

[43]. Ibid.

[44]. C Porter, ‘Second reading speech: Social Services Legislation Amendment (Omnibus Savings and Child Care Reform) Bill 2017’, House of Representatives, Debates, 8 February 2017, p. 221.

[45]. Concern about the potential impact was raised by the National Social Security Rights Network. See National Social Security Rights Network, Submission to Senate Community Affairs Legislation Committee, Inquiry into the Social Services Legislation Amendment (Omnibus Savings and Child Care Reform) Bill 2017, submission no. 9, 3 March 2017, p. 6.

[46]. Subsection 541(3), Social Security Act 1991 (Cth).

[47]. Youth Allowance (Other) means for recipients other than Australian Apprentices or full-time students.

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