Bills Digest No. 107, 2012–13

13 May 2013

Social Security Legislation Amendment (Disaster Recovery Allowance) Bill 2013

Michael Klapdor
Social Policy Section 

Date introduced: 20 March 2013

House: House of Representatives

Portfolio: Emergency Management

Commencement: 1 October 2013

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill's home page, or through http://www.aph.gov.au/Parliamentary_Business/Bills_Legislation. When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the ComLaw website at http://www.comlaw.gov.au/.

Purpose of the Bill

The purpose of the Social Security Legislation Amendment (Disaster Recovery Allowance) Bill 2013 (the Bill) is to amend the Social Security Act 1991 (the SS Act)[1], the Social Security (Administration) Act 1999 (the SS Admin Act)[2] and the Income Tax Assessment Act 1936 (ITA Act 1936)[3] to create a new income support payment for individuals affected by a major disaster.

Currently, two types of payment may be made to persons who have been affected by major disasters. The first is a single lump sum payment known as the Australian Government Disaster Recovery Payment (AGDRP). The second is by way of ex gratia payments made on an ad hoc basis to those requiring ongoing assistance following major disasters.

The new income support payment, the Disaster Recovery Allowance (DRA) will formalise the payment of ongoing assistance following major disasters which has, until now, been by way of ex gratia payments and is separate from the AGDRP. It is intended that either, or both, DRA and the AGDRP could be activated in the event of a disaster, depending on the nature and effect of the particular disaster event.

Background

Australian Government Disaster Recovery Payment

The AGDRP is a lump sum payment which can be made available to those persons who are adversely affected by a major disaster. Section 36 of the SS Act empowers the Minister for Emergency Management (currently the Attorney-General) to determine, in writing, which events are to be considered ‘major disasters’. Section 1061L of the SS Act states that the Minister may determine, in writing, in relation to a major disaster, the circumstances in which persons are to be taken to be ‘adversely affected’ by the disaster.

The AGDRP was announced in the 2006–07 Budget and replaced the previous Disaster Relief Payment.[4] The Disaster Relief Payment was very similar but the rate of payment was tied to pension, family tax benefit and rent assistance rates (depending on the person’s circumstances), and the definition of ‘adversely affected’ was contained within the SS Act. The AGDRP amended the qualification requirements in the SS Act and increased the amounts that could be paid. The rate was set at $1000 per qualified adult and $400 for each child in their care. However, the Minister for Emergency Management may determine another rate for a financial year.[5]

The changes brought in with the introduction of the AGDRP essentially left only a very basic framework for the payment within the SS Act. The SS Act sets out, for all other payments under the SS Act, the relevant qualification requirements for that payment and the method for determining the rate of payment. However, the provisions relating to the AGDRP allow for the qualification requirements and rates of payment to be decided by the Minister at any time by a written determination. According to subsection 1061P(6) of the SS Act, determinations in relation to the AGDRP are not subject to the disallowance provisions of the Legislative Instruments Act 2003 (LIA).[6] The changes resulted in a much more flexible and discretionary payment, able to be adapted to the particular circumstances of those dealing with major disaster events.[7]

Disaster Income Recovery Subsidy (DIRS)

In the aftermath of the Queensland floods in January and February 2009 and the Black Saturday bushfires in Victoria in February of that year, then Prime Minister Kevin Rudd announced an ‘income support recovery assistance program’ for individuals who had lost their main source of income, including small businesses and farmers, as a direct result of these disasters.[8] This new form of disaster assistance was in the form of an ex-gratia ‘Newstart-like payment’ that would be paid up to the maximum rate of Newstart Allowance for a period of 13 weeks with the possibility of an extension if necessary. The new payment, later referred to as the ‘Income Recovery Subsidy’[9] or ‘Disaster Income Recovery Subsidy’[10] was paid in addition to the primary Commonwealth payment made to individuals in the wake of disasters, the lump-sum AGDRP.

The Income Recovery Subsidy and the AGDRP differ in purpose. The AGDRP is intended to assist those affected by disasters with immediate costs. In comparison, the Income Recovery Subsidy is intended to provide ongoing support for those no longer able to earn an income as a direct result of a disaster event. As an ex gratia payment, the Income Recovery Subsidy was more flexible in terms of eligibility and much easier to process than those income support payments that might otherwise be paid under social security law such as Special Benefit and Newstart Allowance. Subsequent disasters, including floods in November 2010 and Cyclone Yasi in early 2011, again saw the subsidy (formally referred to as Disaster Income Recovery Subsidy) offered to those in need.[11] An Income Recovery Subsidy was also payed to 20 claimants following the suspension of live cattle exports to Indonesia in June 2011.[12]

The Disaster Income Recovery Subsidies (or Income Recovery Subsidies) paid in the wake of various disasters since the Queensland floods of January 2009 were not legislated for and have been paid as ex gratia payments. The Bill proposes to allow for payments to be made in similar circumstances but under a legislative scheme.

Ex gratia payments

The decision to make ex gratia payments is made by the Prime Minister and/or Cabinet with the basis of their authority to do so emanating from the Government’s executive powers under section 61 of the Constitution.[13] The Government can call upon the ex gratia power to deliver financial relief quickly at short notice. For this reason, it is the most appropriate response for groups of people affected by a common set of circumstances and for unexpected events.[14]

The power to make ex gratia payments provides flexibility to Government to be able to offer assistance to those in need quickly. A circular published by the Department of Finance and Deregulation advises that ex gratia payments are generally only looked at ‘after consideration of all the other available schemes’, and whether or not ‘… the desired outcome can be achieved through existing government legislative provisions’.[15] Ministers propose ex gratia payments for authorisation by the Prime Minister and/or Cabinet and the relevant agency is responsible for determining eligibility criteria, amounts to be paid, number of possible recipients and means of delivering the payments.[16]

One drawback of payments made via the executive’s discretionary powers is that they are not subject to the range of accountability measures that apply to payments made under legislation, as the Commonwealth Ombudsman noted in a report on executive schemes:

The very flexibility that is the key advantage of executive schemes can pose risks to people’s rights in terms of program accountability and review of decisions. Government agencies are subject to a range of checks and balances, but the accountability framework assumes that they are exercising powers conferred by legislation. If they are not, many of the core safeguards do not apply.[17]

The Ombudsman is the only administrative law agency that can review decisions made under executive schemes; however, it is unable to require that a decision is changed and can only make recommendations to the relevant agency and minister.

Another drawback to payments made through an executive scheme is that access to information about the payment is much more limited compared to legislative schemes. The rules establishing these schemes are not subject to the same kinds of publication and tabling requirements as legislative instruments are and the details of such schemes may not be readily available online.

Decisions to pay the DIRS

The Australian Government monitors disaster situations as they unfold, working closely with state and territory authorities, to determine what immediate and long-term support may be needed. The DIRS has been considered a form of long-term support and is activated when there have been a large number of people who have lost their income as a result of a disaster. In determining whether or not to activate the subsidy, the Commonwealth considers:

·         state/territory responses to the disaster

·         the full range of Commonwealth and state/territory measures made available to the affected community

·         the number of people affected

·         the degree to which the nature or extent of the disaster is unusual

·         the overall severity of the impact on the local economy, including the number of industries affected and the degree and

·         the overall severity of the impact on the community as a whole, including the proportion of the community affected and the degree of the disaster’s impact.[18]

For the purposes of assessing eligibility, claimants have had to demonstrate a reduction in their total income which can include: wages, similar kinds of income payments, or profits from a business (if self-employed).[19] Although conditions for the DIRS have varied for different disaster events, the payment has, in many cases, been income tested so that a person does not qualify if their income at the time they receive the payment is higher than the standard income test cut-off points for Newstart Allowance.[20] Currently this is $853.84 per fortnight for each member of a couple; $935.67 per fortnight for a single person; or $1429.25 per fortnight for a single principal carer with dependent children.[21]

The DIRS has been paid as a fortnightly payment by the Department of Human Services at a rate equivalent to the maximum rate of Newstart or Youth Allowance (depending on the age of the recipient). It has not been paid to those already receiving an income support payment such as Newstart Allowance, age pension or service pension.

Unlike other legislation-based income support payments payable by the Department of Human Services, the DIRS has been paid to all Australian residents and foreign nationals living or working in Australia. Foreign nationals who are not permanent residents in Australia are usually ineligible for welfare payments (with some exceptions in special circumstances) and most migrants have to wait for two years before they are eligible for payments such as Newstart Allowance. The DIRS has been payable to eligible foreign nationals living or working in Australia at the time of the disaster—that is people who are on permanent visas (but who have not yet met the residency waiting period) and people who are on temporary skilled visas or temporary family visas.[22]

DIRS expenditure and recipients

The DIRS has been paid to those affected by a variety of different disasters over recent years with amounts varying significantly depending on the size of the disaster. The AGDRP continues to be the main Commonwealth cash payment provided in disaster situations with the DIRS being a more targeted form of assistance. The Queensland Floods of November 2010–February 2011 saw $61.5 million paid out to 53 440 claimants of the subsidy ($465 million was paid as AGDRP payments to around 400 000 people).[23] Tropical Cyclone Yasi saw $8 million paid as DIRS payments to 5689 people.[24] In total, in 2010–11, 61 888 people received subsidies, worth over $73 million.[25] The DIRS was not activated in 2011–12 but has been offered following some recent disasters including the severe storms and flooding in northern NSW in March 2013 and floods in Queensland in January 2013.[26]

Ex gratia payments for New Zealanders

Another use of ex gratia payments following disaster events is the payment of lump sums to New Zealand citizens in Australia on what are known as ‘non protected’ Special Category Visas (SCVs) (subclass 444). ‘Non protected’ refers to those New Zealanders who have come to Australia on SCVs since 26 February 2001—pre-2001 SCV holders (referred to as ‘protected’) are entitled to similar benefits as Australian permanent residents under social security law.

These ex gratia payments have made available funds equivalent to the AGDRP to New Zealanders who would otherwise be ineligible for this kind of assistance. This ex gratia payment has usually being activated at the same time as the AGDRP to ensure the large number of New Zealanders in Australia do not miss out on assistance when they are affected by a disaster. In 2011–12, around 202 ‘non protected’ SCV holders were granted lump sum payments following disasters, worth approximately $232 000 in total.[27]

Non-protected SCV holders would usually have been entitled to the DIRS as it has been paid to foreign nationals living and working in Australia, regardless of visa-type, so long as they met the other qualification requirements.

Committee consideration

Senate Selection of Bills Committee

The Senate Selection of Bills Committee resolved that the Bill not be referred to committee for inquiry and report.[28]

Senate Standing Committee for the Scrutiny of Bills

At the time of writing this Bills Digest the Standing Committee for the Scrutiny of Bills had not published any comments about the Bill.

Parliamentary Joint Committee on Human Rights

At the time of writing this Bills Digest the Parliamentary Joint Committee for Human Rights had not published any comments about the Bill.

Policy position of non-government parties/independents

The Opposition’s spokesperson on emergency management, Senator Gary Humphries, has expressed criticism of the Bill stating the proposed DRA ‘seems little more than an elaborate reiteration of existing assistance under the Disaster Income Recovery Subsidy’.[29] Some of Senator Humphries’ criticisms are discussed below in the ‘Key issues and provisions’ section below.

Financial implications

The Explanatory Memorandum for the Bill states that the implementation costs of the proposed amendments are estimated at $1.7 million over five years.[30] The costs of the DRA itself will be dependent on the number and scale of future disasters.

Expenditure on the DIRS has varied greatly—in 2010–11, expenditure totalled around $73 million but in 2011–12 the subsidy was not activated at all.[31] As such, it is difficult to estimate the impact of the new payment on the Budget. The Attorney-General noted in his second reading speech that ‘with the changing climate, conditions will become more extreme and disasters will happen more frequently’.[32] If, as the Government anticipates, disaster events happen more frequently and more severely in the future, then expenditure on disaster events is likely to increase over time.

Special appropriations

The Explanatory Memorandum states that the DRA will be treated as a special appropriation, contingent on a relevant disaster event occurring.[33]

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.[34] The Government considers that the Bill is compatible.

Key issues and provisions

There is one Schedule to the Bill with two parts. The first part proposes amendments to the SS Act and the SS Admin Act to create the Disaster Recovery Allowance and the relevant conditions for payment. The second part proposes amendments to the ITA Act 1936 to establish how the DRA will be treated under tax law.

Part 1—Disaster Recovery Allowance

Major disaster declaration

Items 1 and 2 of Part 1 of the Bill insert relevant definitions into subsection 23(1) of SS Act. Disaster Recovery Allowance means Disaster Recovery Allowance under Part 2.23B of the SS Act. Part 2.23B major disaster means a disaster in respect of which a determination is in force under section 36A of the SS Act.

Item 3 inserts proposed section 36A into the SS Act to allow the Minister for Emergency Management to make a written determination than an event is a Part 2.23B major disaster. Section 36 of the SS Act provides for the Minister to determine than an event is a major disaster where that event has such significant impact on individuals that a government response is required. This existing provision is typically called upon to provide for the payment of the AGDRP. Proposed section 36A differs from section 36 in terms of the criteria it sets for the Minister to make a major disaster declaration. The primary differences in the criteria are:

·         the proposed section requires the Minister be satisfied as to the impact of the disaster on industry or a geographical area rather than on individuals. In particular, the proposed section states that the Minister must have regard to the number of workplaces that are disrupted—rather than the number of individuals affected

·         the proposed section requires the Minister to be satisfied that the disaster has such a significant impact on one or more industries that it requires a government response in the form of income support rather than a general government response (as set out in existing section 36) and

·         the proposed section states that the Minister can only declare an event to be a Part 2.23B major disaster if that event is of national significance and occurs in Australia while section 36 allows a major disaster to be declared for events occurring both in or outside Australia.

Under the proposed amendments, a disaster could be declared either a major disaster under section 36 of the SS Act (so as to activate the AGDRP) or a Part 2.23B major disaster (so as to activate the DRA) or separate declarations under each section may be made in relation to the same disaster (so that both payments are payable). Allowing for different types of major disasters to be determined by the Minister allows for different kinds of assistance to be targeted at those affected depending on their actual needs.

Proposed subsection 36A(6) of the SS Act states that a determination made under the proposed section 36A is not a legislative instrument. According to the Explanatory Memorandum this is because the determination will be administrative (rather than legislative) in character.[35]

Disaster Recovery Allowance

Item 6 of Part 1 of the Bill inserts new Part 2.23B into the SS Act setting out the qualification requirements, rates of payment and other conditions for the proposed payment, the DRA.

Qualification

The basic qualification criteria for the DRA are set out in proposed section 1061KA. A person claiming DRA must satisfy all of the following:

·         is at least 16 years of age and not a dependent child or young person (as set out in proposed subsection 1061KA(2))[36]

·         is an Australian resident or the holder of a visa that is eligible for Special Benefit by a determination made under section 729(2)(f)(v)—a range of temporary visa subclasses[37]

·         an event has been determined as a Part 2.23B major disaster[38]

·         the Minister has made a determination under section 36A of the SS Act that:

–        one or more industries are affected by the event and one or more areas are affected by the event, and the person derives income from one of those industries in one of those areas[39] or

–        one or more areas are affected by the event and either the person derives income from one of those areas by working in one of those areas or the person resides in one of those areas, or both[40]

·         is not in receipt of a social security entitlement[41] or other payment determined by the Minister[42]

·         meets any other requirement set out by the Minister in a written determination.[43]

Under proposed section 1061KB of the SS Act a person covered by an assurance of support[44], who would otherwise be eligible for the DRA, will not qualify for the DRA if they are able to receive adequate support from their ‘assurer’. An assurance of support is required of some migrants who are considered likely to access income support, particularly those in the family reunion category.[45] These migrants must have an Australian resident, their ‘assurer’, who assumes financial responsibility for the migrant and takes responsibility for the repayment of any recoverable social security payment paid to the ‘assuree’. Assurance of support periods vary depending on the visa subclass the migrant has been granted and range from two to ten years. The new section essentially means that migrants who are able to receive income support from their assurer following a disaster will not be eligible for a DRA, even if they have lost their main source of income.

Rate of payment

Proposed section 1061KC sets out provisions for setting the rate of payment of the DRA. It states that a method for working out the fortnightly rate must be set out by the Minister for Emergency Management via a legislative instrument.[46] The proposed section does not specify any amounts except by limiting the maximum fortnightly rate to the maximum rate of Newstart Allowance or, for those under 22 years of age, Youth Allowance. The maximum rates for these payments differ depending on a person’s circumstances, as set out in the table below:

Table 1: Newstart Allowance, maximum basic rate, per fortnight, as at 20 March 2013

Family circumstances

Newstart rate

Clean Energy Supplement*

Total (maximum basic rate)

single, 22 or over, no children

$497.00

$8.40

$505.40

single, 22 or over, with children

$537.80

$9.10

$546.90

single, aged 60 or over, after nine continuous months on payment

$537.80

$9.10

$546.90

partnered (each)

$448.70

$7.60

$456.30

single principal carer granted exemption for foster caring / relative (non-parent) caring under a court order / home schooling / distance education / large family

$683.50

$11.60

$695.10

*Amendments to the SS Act by the Clean Energy (Household Assistance Amendments) Act 2011 mean that the Clean Energy Supplement is included in the calculation of the maximum basic rate of Newstart Allowance, while other supplementary payments such as Pharmaceutical Allowance and Rent Assistance are not.

Source: Department of Human Services (DHS), A guide to Australian Government payments 20 March–30 June 2013, DHS, 2013: http://www.humanservices.gov.au/spw/corporate/publications-and-resources/resources/co029-1303en.pdf

Table 2: Youth Allowance, maximum basic rate, per fortnight, as at 20 March 2013*

Family circumstances

Youth Allowance rate

single, under 22 years, no children required to live away from home

$407.50

single, with children

$533.80

partnered (each), no children

$407.50

partnered (each), with children

$447.40

single job seeker, principal carer granted exemption for foster caring / relative (non-parent) caring under a court order / home schooling / distance education / large family

$683.50

* Youth Allowance recipients will not begin to receive their Clean Energy Supplement payment until January 2014.

Source: Department of Human Services (DHS), A guide to Australian Government payments 20 March–30 June 2013, DHS, 2013.

According to the Explanatory Memorandum, the Minister’s discretion in proposed subsection 1061KC(2):

… could provide for [DRA] to be income threshold tested and set out a [sic] rate reduction rules based on individuals’ post-disaster income. This could be used to ensure that recipients were encouraged to return to work when possible.[47]

In addition, it should be noted that proposed subsection 1061KC(3) provides that the fortnightly rate of DRA may be nil. Proposed subsections 1061KC(4) and (5) operate to allow the Minister to determine that DRA is to be paid at a rate less than the maximum Newstart or Youth Allowance rates.

Maximum duration of payment

Proposed section 1061KD provides that a person’s DRA is payable for a period of 13 weeks. If a person is still in need of income support after this date they will need to qualify for another payment such as Special Benefit or Newstart Allowance. The Bill does not appear to provide for an extension of that time. The Explanatory Memorandum is silent on this issue. On its face the Bill provides that a person would be unable to receive a DRA for longer than 13 weeks in regards to the same disaster event.

The Income Recovery Subsidy ex gratia payments made in the wake of the Victorian bushfires in February 2009 were extended for an additional 13 weeks due to the fact that some farmers and small-businesses were not fully operational and some employees had been unable to return to their work at the end of the first payment period.[48] Legislating a maximum duration of payment for the DRA will remove some of the flexibility that applied to the equivalent ex gratia payments made in the past. While the income support system should be able to meet the needs of those without income in the wake of a disaster, the DRA will not be as flexible to the particular circumstances of some disaster recovery efforts as the system of ex gratia payments were.

DRA not considered a social security payment

Proposed section 1061KE states that the DRA should not be considered a social security payment for the purposes of the SS Act, or any other act, where provision of another benefit would be precluded by receipt of a social security payment. The DRA is a special payment only paid following serious disaster events, does not provide ongoing income support, and is only a minimal level of financial assistance. This means the DRA recipients are not entitled to any of the other benefits that are available to persons receiving a social security payment.

Time limit for making claims

Item 7 of Part 1 of the Bill inserts new subdivision FAA into Division 1 of Part 3 of the SS Admin Act to set a time limit for claims for the Disaster Recovery Allowance. Proposed subsection 27AA(1) requires claims for the DRA to be lodged within six months of the major disaster declaration made under proposed section 36A of the SS Act. However, proposed subsection 27AA(2) allows the Secretary (or their delegate) to accept claims lodged after six months where there are special circumstances applying to the person’s claim that justify a late lodgement. This provision allows some discretion about accepting claims that have been lodged outside the six month limit, depending on the person’s circumstances.

Exception from general residency requirements

Item 8 of Part 1 of the Bill inserts proposed subsection 31(1B) into the SS Admin Act to exempt claimants of the DRA from the general residency requirements which are located in section 29 of that Act. The same exception currently applies to the AGDRP and allows for the DRA to be paid to those who would not normally meet the residency requirements for income support payments, such as temporary visa holders.

Social Security Appeals Tribunal (SSAT) cannot review section 36A disaster declarations

Item 9 of Part 1 of the Bill inserts a reference to declarations made under proposed section 36A in the list of decisions that the Social Security Appeals Tribunal (SSAT) cannot review at section 144 of the SS Admin Act. The amendment would mean that determinations of a Part 2.23B major disaster by the Minister for Emergency Management, under the proposed section 36A, cannot be appealed at the SSAT. These ministerial determinations set out the relevant industries and/or areas affected by a major disaster which qualify for payment of the DRA.

It is possible that cases will arise where individuals feel they have been unfairly excluded for qualification for the DRA, either by living just outside the qualifying area or deriving an income from an industry they believe has been affected by a disaster but has not been included in the written determination. These people will not be able to appeal the decision made by the Minister to not include certain areas or industries in his declaration, or seek redress in any other form as, although these determinations are legislative instruments, they are not subject to the disallowance provisions of section 42 of the LIA. This is consistent with for the treatment of determinations providing for qualification for the AGDRP.

The Explanatory Memorandum states the proposed amendments excluding these determinations from review by the SSAT is required in order ‘to ensure that the Minister can offer assistance to people impacted by a disaster in a responsive and efficient manner, without the potential uncertainty or delay of review’.[49] It goes on to say that the purpose of the SSAT is to provide individuals with a review process for decisions made by DHS in regards to a personal claim for social security payment, while a determination under proposed section 36A is a ‘high level policy decision made as part of an overall government strategy’.[50] While such determinations do not fit the usual grounds of SSAT appeals (which are primarily in regard to administrative decisions), the ongoing lack of accountability for disaster determinations to the Parliament or any review body remains an issue of concern.

Fraud and debt recovery provisions

Establishing the DRA as a payment under social security legislation will mean that the fraud, debt recovery and review provisions under the SS Act and SS Admin Act will apply. Compared to ex gratia payments, payments under social security law are subject to a range of fraud detection, overpayment and debt recovery provisions. These provisions give significant powers to government agencies to pursue those who have fraudulently claimed payments or higher rates of payment than they may be entitled to, to recover debts, and, if considered necessary, prosecute individuals who have contravened the law.

Also, including the DRA in social security legislation provides individuals with access to established review processes and protections including the power to appeal decisions made by the Department of Human Services (in regards to their personal claims or payments). As noted in the previous section, the Minister’s determinations made under proposed section 36A—which activate the DRA, establish qualifying areas/industries and set the method for working out payment rates—will not be open to appeal or review. However, decisions made under that determination by the Department of Human Services and decisions under proposed Part 2.23B of the SS Act can be appealed or reviewed in the same way as other social security payments. This means that while the higher level decision to declare a Part 2.23 major disaster is not subject to review, claimants can still appeal decisions made in regards to their claim such as the level of payment, whether overpayments have been made or whether certain amounts are recoverable.

Lack of clarity

The shift from the ex gratia DIRS in the wake of disasters to a payment paid under social security law will provide significant benefits in terms of standardising the payment type and allowing the administering departments to put in place standard procedures that can be implemented quickly and effectively in response to disaster events. Also, making this kind of payment subject to the existing fraud and debt recovery provisions as well as review and protection procedures will enable the payment to be fairly targeted at those in need, reduce fraudulent claims and provide more options to those who disagree with decisions in regards to their entitlement to assistance.

However, despite creating a basis for this new payment in social security law, key details in terms of eligibility, payment rates and income testing are not included in the legislation and are subject to determination by the Minister for Emergency Management. At the same time, activation of the payment itself remains at the discretion of the minister with no detailed criteria set out as to what particular situations should require the DRA’s activation and how the need for a ‘government response in the form of income support’ is determined as opposed to a more general need for a ‘government response’. The legislative framework for this new payment is very much a frame only; the key provisions relating to activation, qualification and payability remain outside the SS Act and will be contained in determinations that are not disallowable by the Parliament.

The Opposition spokesperson on emergency management, Gary Humphries, highlighted the lack of clarity in regards to these key criteria as an issue of particular concern, saying:

I call on the recently-appointed Emergency Management Minister to detail exactly the criteria that must be met prior to a small-business, farmer or employee being eligible to receive this assistance. I further urge him to outline, in detail, the process for activating the Disaster Recovery Allowance so as not to create another situation, as seen under the government’s handling of the AGDRP, where affected communities face confusion when seeking its activation.[51]

The lack of detail in regards to means testing in the Bill is notable given that the Minister clearly stated in his second reading speech that some form of income testing would apply:

While we are committed to supporting disaster-affected workers getting back on their feet, we do not want to create a disincentive for people to go back to work. For this reason the Disaster Recovery Allowance will be subject to reductions. This will ensure that recipients are encouraged to return to work when possible, restoring that normality to their lives.[52]

No detail as to how these reductions might apply is provided in the proposed provisions. The method used to calculate payment rates will be crucial in determining who receives assistance and how much they receive (particularly in situations where one partner in a couple continues to receive income but the other has lost their main source of income). Means testing would also be one of the more difficult aspects of the administration of the payment due to the difficulties faced by those recovering from a disaster in being able to provide appropriate paperwork and details on income/assets. The AGDRP is not means tested.

The lack of detail on such matters, while providing flexibility to the Government to respond to particular disaster events in a more nuanced way, partly undermines the stated intention of standardising this form of disaster assistance.[53]

Part 2—Tax treatment of Disaster Recovery Allowance

Part 2 of the Bill amends the ITA Act 1936. Item 11 proposes to add the DRA to the list of benefits considered ‘rebatable benefits’ under the Beneficiary Tax Offset scheme at subsection 160AAA(1) of the ITA Act 1936. This means that the DRA will be treated in the same way as other ‘rebatable benefits’ such as Newstart Allowance and Youth Allowance.

The Beneficiary Tax Offset effectively extinguishes the tax liability of those whose only income is in the form of these rebatable benefits. DRA recipients will have the tax liability of the DRA component of their income effectively extinguished but pay marginal tax rates on other components of their taxable income (meaning that the DRA could impact on a person’s tax liability by increasing the marginal rate they are required to pay on their total income).

The DIRS payments which the DRA is intended to replace were given tax exempt status and the AGDRP is also not considered taxable income.[54] Speaking on a Bill to exempt from income tax the DIRS payment made to those affected by Cyclone Yasi in 2011, the then Assistant Treasurer, Bill Shorten, said:

The last thing needed by people who have lost everything, who are barely scraping by financially, is to worry about paying income tax on their disaster subsidy.

Any payment received by a taxpayer as replacement for lost salary, wages or other income — such as the Subsidy — is usually taxable. However, like in the Victorian Bushfires, the Government believes people should receive the full benefit of this type of disaster payment, which is why we are introducing this legislative amendment.[55]

While the DRA closely resembles other rebatable benefits such as allowance payments in terms of payment rates, it is unclear why the payment has not maintained the tax-exempt status of its ex gratia predecessor.

Members, Senators and Parliamentary staff can obtain further information from the Parliamentary Library on (02) 6277 2500.

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ISSN 1328-8091

[1].              The text of the Social Security Act 1991 can be viewed at: http://www.comlaw.gov.au/Details/C2013C00081/Download

[2].              The text of the Social Security (Administration) Act 1999 can be viewed at: http://www.comlaw.gov.au/Details/C2013C00127/Download

[3].              The text of the Income Tax Assessment Act 1936 can be viewed at: http://www.comlaw.gov.au/Details/C2013C00040/Download

[4].              See P Yeend, Families, Community Services and Indigenous Affairs and Other Legislation (2006 Budget and Other Measures) Bill 2006, Bills Digest, no. 151, 2005–06, Parliamentary Library, Canberra, 2006, viewed 10 April 2013, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22legislation%2Fbillsdgs%2F9NYJ6%22

[5].              Sections 1061M and 1061P of the Social Security Act 1991.

[6].              Delegated legislation is required to be laid before each House, thereby becoming subject to parliamentary scrutiny and to the Parliament’s ultimate power of veto. Under section 38 of the Legislative Instruments Act 2003, legislative instruments must be tabled in each House within six sitting days following registration on the Federal Register of Legislative Instruments, even in cases where the instrument is not disallowable. Unless laid before each House within this time limit, a legislative instrument ceases to have effect. Notably, subsection 1061P(6) of the Social Security Act 1991 provides that although the Minister’s determinations in relation to AGDRP are legislative instruments, they are not disallowable. The text of the Legislative Instruments Act 2003 can be viewed at: http://www.comlaw.gov.au/Details/C2013C00162

[7].              Explanatory Memorandum, Families, Community Services and Indigenous Affairs and Other Legislation (2006 Budget and Other Measures) Bill 2006, p. 6, viewed 23 April 2013, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22legislation%2Fems%2Fr2561_ems_b3725d1f-68ae-47b7-89f4-7affd758ae6f%22

[8].              K Rudd (Prime Minister), ‘Condolences: Victorian Bushfire Victims’, House of Representatives, Debates, 10 February 2009, p. 717, viewed 9 April 2013, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22chamber%2Fhansardr%2F2009-02-10%2F0007%22

[9].              J Macklin (Minister for Families Housing Community Services and Indigenous Affairs), Income recovery subsidy extended in Victoria bushfire areas, media release, 7 August 2009, viewed 24 April 2013, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressrel%2F6ZUV6%22

[10].              J Gillard (Prime Minister), W Swan (Deputy Prime Minister), J Dempsey (Queensland Minister of Police and Community Safety), N Roxon (Federal Minister for Emergency Management) and J Ludwig (Federal Minister Assisting on Queensland Flood Recovery), Clean-up grants for severely-affected small businesses and primary producers in Queensland activation of the disaster income recovery subsidy, joint media release, 2 February 2013, viewed 24 April 2013, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressrel%2F2209815%22

[11].              Australian Government, ‘New South Wales floods (November–December 2010)’, Disaster Assist website, 2011, viewed 10 April 2013, http://www.disasterassist.gov.au/PreviousDisasters/StateandTerritories/Pages/NSW/NewSouthWalesfloods(NovemberDecember2010).aspx and Australian Government, ‘Tropical Cyclone Yasi (February 2011), Disaster Assist website, 2011, viewed 10 April 2013, http://www.disasterassist.gov.au/Currentdisasters/StateandTerritories/Pages/QLD/TropicalCycloneYasi(February2011).aspx

[12].              Department of Human Services (DHS), Annual report 2011–12, DHS, Canberra, 2012, p. 112, viewed 10 May 2013, http://www.humanservices.gov.au/corporate/publications-and-resources/annual-report/resources/1112/

[13].              The text of the Commonwealth of Australia Constitution Act can be viewed at: http://www.comlaw.gov.au/Browse/Results/ByTitle/Constitution/Current/Co/0

[14].              Department of Finance and Deregulation, Submission to the Standing Committee on Legal and Constitutional Affairs, Senate review of government compensation, 11 June 2010, viewed 24 April 2013, http://www.finance.gov.au/financial-framework/discretionary-compensation/finance-submission.html

[15].              Australian Government, Discretionary compensation and waiver of debt mechanisms, Finance circular, no. 2009/09, Department of Finance and Deregulation, Canberra, 2009, p. 39, viewed 16 April 2013, http://www.finance.gov.au/publications/finance-circulars/2009/docs/FC-2009-09.pdf

[16].              Ibid., p. 40.

[17].              Commonwealth Ombudsman, Executive schemes, Report no. 12, Commonwealth Ombudsman, Canberra, August 2009, pp. 3–4, viewed 16 April 2013, http://www.ombudsman.gov.au/files/investigation_2009_12.pdf

[18].              Australian Government, Disaster Income Recovery Subsidy (DIRS), Fact sheet, Disaster Assist website, 2011, viewed 16 April 2013, http://www.disasterassist.gov.au/FactSheets/Pages/DisasterIncomeRecoverySubsidyDIRS.aspx

[19].              Ibid.

[20].              The cut-off is the maximum amount a person can have in income and still receive some level of Newstart Allowance.

[21].              Department of Human Services (DHS), ‘Income test for newstart allowance, partner allowance, sickness allowance and widow allowance’, DHS website, viewed 24 April 2013, http://www.humanservices.gov.au/customer/enablers/income-test-allowances

[22].              See, for example, the eligibility conditions for the Disaster Income Recovery Subsidy payable in respect of the Queensland Tropical Cyclone Oswald and associated flooding (January 2013), Disaster Assist website, 2011, viewed 17 April 2013, http://www.disasterassist.gov.au/Currentdisasters/StateandTerritories/Pages/QLD/QueenslandTropicalCycloneOswaldJanuary2013.aspx

[23].              As at 16 December 2011. Australian Government, ‘Queensland floods (November 2010–February 2011’, Disaster Assist website, 2011, viewed 16 April 2013, http://www.disasterassist.gov.au/Currentdisasters/StateandTerritories/Pages/QLD/Queenslandfloods(November2010February2011).aspx

[24].              Australian Government, ‘Tropical Cyclone Yasi (February 2011)’, op. cit.

[25].              Senate Legal and Constitutional Affairs Committee, Answers to Questions on notice, Attorney-General’s Portfolio, Budget Estimates 2011–12, 26 May 2011, Question no. 104, viewed 17 April 2013, http://www.aph.gov.au/Parliamentary_Business/Committees/Senate_Committees?url=legcon_ctte/estimates/bud_1112/ag/index.htm

[26].              Attorney-General’s Department, Annual report 2011–12, Attorney-General’s Department, Canberra, 2012, p. 162, viewed 10 May 2013, http://www.ag.gov.au/Publications/AnnualReports/AnnualReport201112/Pages/default.aspx; M Dreyfus (Attorney-General and Minister for Emergency Management) and K Carr (Minister for Human Services), Australian Government providing disaster income support for NSW storm and flooding victims, media release, 18 March 2013, viewed 17 April 2013, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressrel%2F2307698%22; K Carr (Minister for Human Services) and J Ludwig (Minister Assisting on Queensland Flood Recovery), Qld flood assistance payments tops $100 million, media release, 21 February 2013, viewed 17 April 2013, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressrel%2F2245623%22

[27].              Attorney-General’s Department, op. cit., p. 161.

[28].              Senate Selection of Bills Committee, Report No. 4 for 2013, The Senate, Canberra, 21 March 2013, viewed 17 April 2013, http://www.aph.gov.au/Parliamentary_Business/Committees/Senate_Committees?url=selectionbills_ctte/reports/2013/rep0413.htm

[29].              G Humphries, Minister plays dress-up with existing disaster assistance, media release, 20 March 2013, viewed 17 April 2013, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressrel%2F2314277%22

[30].              Explanatory Memorandum, Social Security Legislation Amendment (Disaster Recovery Allowance) Bill 2013, p. 3, viewed 30 April 2013, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22legislation%2Fems%2Fr5005_ems_c285500b-4fbc-4d70-ba9b-d0b88ff849e0%22

[31].              Senate Legal and Constitutional Affairs Committee, Answers to Questions on notice, Attorney-General’s Portfolio, Budget Estimates 2011–12, 26 May 2011, Question no. 104, op. cit.

[32].              M Dreyfus (Attorney-General and Minister for Emergency Management), ‘Second reading speech: Social Security Legislation Amendment (Disaster Recovery Allowance) Bill 2013’, House of Representatives, Debates, 20 March 2013, p. 2711, viewed 18 April 2013, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22chamber%2Fhansardr%2F8143f75e-7f37-4128-8d3b-e62455d99a32%2F0032%22

[33].              Explanatory Memorandum, Social Security Legislation Amendment (Disaster Recovery Allowance) Bill 2013, op. cit., p. 3.

[34].              The Statement of Compatibility with Human Rights can be found at page five of the Explanatory Memorandum to the Bill.

[35].              Explanatory Memorandum, Social Security Legislation Amendment (Disaster Recovery Allowance) Bill 2013, op. cit., p. 8.

[36].              Proposed paragraphs 1061KA(1)(a) and (d) of the Social Security Act 1991.

[37].              Proposed paragraph 1061KA(1)(b) of the Social Security Act 1991.

[38].              Proposed paragraph 1061KA(1)(c) of the Social Security Act 1991.

[39].              Proposed subsection 1061KA(3) and proposed paragraph 1061KA(1)(e) of the Social Security Act 1991.

[40].              Proposed subsection 1061KA(4) and proposed paragraph 1061KA(1)(e) of the Social Security Act 1991.

[41].              Proposed paragraph 1061KA(1)(g) of the Social Security Act 1991.

[42].              Proposed paragraph 1061KA(1)(h) of the Social Security Act 1991. Proposed subsection 1061KA(5) empowers the Minister to prescribe payments under this paragraph. Proposed subsection 1061KA(7) provides that although such determinations are legislative instruments, section 42 of the Legislative Instruments Act 2003 does not apply and the determinations are not disallowable.

[43].              Proposed paragraph 1061KA(1)(i) of the Social Security Act 1991. Proposed subsection 1061KA(6) empowers the Minister to prescribe requirements under this paragraph. Proposed subsection 1061KA(7) provides that although such determinations are legislative instruments, section 42 of the Legislative Instruments Act 2003 does not apply and the determinations are not disallowable.

[44].              Subsection 23(1) of the Social Security Act 1991 defines the term assurance of support.

[45].              Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA), ‘9.4.1.10 Introduction to the AoS Scheme’, Guide to Social Security Law, FaHCSIA website, viewed 23 January 2013, http://guidesacts.fahcsia.gov.au/guides_acts/ssg/ssguide-9/ssguide-9.4/ssguide-9.4.1/ssguide-9.4.1.10.html

[46].              Proposed subsection 1061KC(2) of the Social Security Act 1991.

[47].              Explanatory Memorandum, Social Security Legislation Amendment (Disaster Recovery Allowance) Bill 2013, op. cit., p. 10.

[48].              J Macklin (Minister for Families, Community Services and Indigenous Affairs) and B Shorten (Parliamentary Secretary for Victorian Bushfire Reconstruction), Income recovery subsidy extended in Victoria Bushfire areas, joint media release, 7 August 2009, viewed 19 April 2013, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressrel%2F6ZUV6%22

[49].              Explanatory Memorandum, Social Security Legislation Amendment (Disaster Recovery Allowance) Bill 2013, op. cit., pp. 11–12.

[50].              Ibid., p. 12.

[51].              G Humphries, op. cit.

[52].              M Dreyfus, op. cit.

[53].              Ibid.

[54].              See the table at section 11–15 of the Income Tax Assessment Act 1997, under ‘welfare’.

[55].              B Shorten (Assistance Treasurer and Minister For Financial Services and Superannuation), Ensuring disaster payments are income tax exempt, media release, 24 February 2011, viewed 23 April 2013, http://www.treasurer.gov.au/DisplayDocs.aspx?doc=pressreleases/2011/035.htm&pageID=003&min=brs&Year=&DocType=0