BILLS DIGEST NO. 120, 2014–15              15 June 2015

Social Services Legislation Amendment (Youth Employment and Other Measures) Bill 2015

Michael Klapdor and Matthew Thomas
Social Policy Section 

Date introduced: 28 May 2015

House:  House of Represenatives

Portfolio: Social Services

Commencement:  various dates as set out in the table at clause 2 of the Bill.

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 ComLaw website.

List of abbreviations

Abbreviation

Definition

ACOSS

Australian Council of Social Service

CPI

Consumer Price Index

FTB-A

Family Tax Benefit Part A

FTB-B

Family Tax Benefit Part B

LIFS

Low Income Family Supplement

LIS

Low Income Supplement

No. 1 Bill

Social Services and Other Legislation Amendment (2014 Budget Measures No. 1) Bill 2014

No. 2 Bill

Social Services and Other Legislation Amendment (2014 Budget Measures No. 2) Bill 2014

No.4 Bill

Social Services and Other Legislation Amendment (2014 Budget Measures No. 4) Bill 2014

No. 5 Bill

Social Services and Other Legislation Amendment (2014 Budget Measures No. 5) Bill 2014

No. 6 Bill

Social Services and Other Legislation Amendment (2014 Budget Measures No. 6) Bill 2014

NSA

Newstart Allowance

PPS

Parenting Payment Single

Seniors Supplement Bill

Social Services and Other Legislation Amendment (Seniors Supplement Cessation) Bill 2014

SS Act

Social Security Act 1991

Purpose of the Bill

The purpose of the Social Services Legislation Amendment (Youth Employment and Other Measures) Bill 2015 (the Bill) is to amend the Social Security Act 1991 (SS Act),[1] the Social Security (Administration) Act 1999,[2] the Income Tax Assessment Act 1936,[3] the Taxation Administration Act 1953[4] and the Farm Household Support Act 2014[5] to:

•       extend the application of an ‘ordinary waiting period’ of seven days to recipients of Parenting Payment and Youth Allowance (Other) (Youth Allowance for a person who is not undertaking full-time study and is not a new apprentice). The ordinary waiting period currently applies to Newstart Allowance (NSA) and Sickness Allowance recipients. The changes will apply from 1 July 2015

•       raise the eligibility age for NSA and Sickness Allowance from 22 to 25 years from 1 July 2016. The age requirement for Youth Allowance will also be adjusted up from the current ceiling age of 21 years to 24 years

•       introduce a new four-week waiting period for new claimants of Youth Allowance (Other) and Special Benefit (a payment for those in financial hardship who are unable to receive any other income support) who are aged under 25 years (from 1 July 2016).

•       abolish the Low Income Supplement (from 1 July 2017)

•       pause indexation of the income free areas for all working age allowances (other than student payments) and for Parenting Payment Single (PPS) from 1 July 2015 and

•       pause indexation of the income free areas and other means test thresholds for student payments (from 1 January 2016).

Background

Following the 2014–15 Budget, the Government introduced to the Parliament two omnibus Bills that contained all the legislative amendments required to implement the Budget measures that fell within the Social Services portfolio. The first of these Bills was the Social Services and Other Legislation Amendment (2014 Budget Measures No. 1) Bill 2014 (the No. 1 Bill) and, the second, the Social Services and Other Legislation Amendment (2014 Budget Measures No. 2) Bill 2014 (the No. 2 Bill).[6]

The Government was unable to secure the passage of either of these Bills through the Senate and both were discharged from the Notice Paper in the Senate on 28 October 2014. Subsequently, the Government reintroduced measures from the No. 1 Bill and the No. 2 Bill in four new Bills:[7]

•       the Social Services and Other Legislation Amendment (Seniors Supplement Cessation) Bill 2014 (the Seniors Supplement Bill)[8]

•       the Social Services and Other Legislation Amendment (2014 Budget Measures No. 4) Bill 2014 (the No. 4 Bill)[9]

•       the Social Services and Other Legislation Amendment (2014 Budget Measures No. 5) Bill 2014 (the No. 5 Bill)[10] and

•       the Social Services and Other Legislation Amendment (2014 Budget Measures No. 6) Bill 2014 (the No. 6 Bill).[11]

A majority of the more contentious measures from the No. 1 Bill and the No. 2 Bill were included in the No. 4 Bill. These measures included a proposed six-month payment exclusion period for job seekers qualifying for Newstart Allowance (NSA), Youth Allowance or Special Benefit aged under 30, increasing the qualifying age for NSA and Sickness Allowance from 22 to 25 years, imposing limitations on eligibility for Family Tax Benefit-Part B (FTB-B) and changes to the indexation of Family Tax Benefit payment rates and allowance income-free areas.

The No. 4 Bill remains before the Senate and most of its measures do not appear to be supported by Labor, the Greens, or a majority of the crossbench Senators.[12] Only the No. 6 Bill has being passed by the Parliament. The No. 6 Bill included measures to cease indexation of the Clean Energy Supplement (and rename it the Energy Supplement), pause indexation of assets test limits and free areas for all payments, change portability arrangements for student payments and Disability Support Pension, include untaxed superannuation income in the income test for the Commonwealth Seniors Health Card, remove Relocation Scholarships for students relocating within and between major cities, remove a supplementary amount paid to large families receiving Family Tax Benefit Part A (FTB-A), change the income test for FTB-A, and reduce the primary earner income limit for FTB-B from $150,000 per annum to $100,000 per annum.[13]

The current Bill reintroduces some of the No. 4 Bill measures and introduces a number of 2015–16 budget measures (some of which delay or modify measures from the No. 4 Bill).

Structure of the Bills Digest

The Bills Digest is structured so as to firstly provide general information on the response of non-government parties and interest groups, committee consideration, financial implications and on the Statement of Compatibility with Human Rights. Each Schedule is then analysed separately as each provides for distinct measures. Where the measure is similar to one previously proposed, only summary information is provided and any significant differences with the previous Bills are noted. For those Schedules providing for a significantly revised measure (Schedule 3) or a new measure (Schedule 4), more detailed background information and analysis of the provisions is provided.

Committee consideration

Senate Community Affairs Legislation Committee

The Bill has been referred to the Senate Community Affairs Legislation Committee for inquiry and report by 15 June 2015. The link to the inquiry homepage is here.[14]

Policy position of non-government parties/independents

In regards to the most controversial measure in the Bill, the new four-week waiting period for job-seekers under the age of 25, the Labor Opposition and the Australian Greens are opposed.[15] Shadow Minister for Families and Payments, Jenny Macklin, and Shadow Minister for Employment and Workplace Relations, Brendan O’Connor stated in a media release:

Labor will oppose Tony Abbott’s latest cut, just as we opposed last year’s attempt to leave young jobseekers with nothing to live on for six months.

Whether for one month or six, Labor will not support a measure which pushes young people into poverty and hardship.

Australians don’t want a country which leaves young people with nothing to live on. This legislation represents an abandonment of young people by their Government.[16]

Independent Senator Nick Xenophon was quoted as saying he did not understand the policy rationale for the waiting period measure. Australian Motoring Enthusiast Party Senator Ricky Muir reportedly stated that ‘there was no justification for the measure and the waiting period should be wound back completely’.[17] Palmer United Partly leader Clive Palmer indicated that the changed policy was a ‘move in the right direction’ but has previously stated that he is opposed to any waiting period for income support.[18] Liberal Democratic Party senator David Leyonhjelm indicated he would support the measure but other crossbench Senators have yet to indicate a clear position.[19]

The changes to the age requirements for Youth Allowance, NSA and Sickness Allowance are also opposed by the Opposition and the Greens.[20]

Position of major interest groups

The Australian Council of Social Service (ACOSS) stated that it was regrettable that the income support waiting period measure for young people had only been modified, rather than reversed, and that ‘[t]here was no justification for this measure’.[21] Other community sector and welfare groups have restated their opposition to extended waiting periods for young people to access income support, including the National Welfare Rights Network, the Brotherhood of St Laurence and Mission Australia. Gerard Thomas from Welfare Rights argued that the measure would lead to greater levels of welfare dependency, not less, stating: ‘Many people wouldn’t be able to survive four weeks without a pay cheque. Why is it any different for young people?’[22]

The positions of major interest groups on most of the measures included in the Bill (other than the abolition of the Low Income Supplement) were canvassed in the Senate Committee inquiries into the No. 1 and No. 2 Bills.[23]

Financial implications

Estimates of the financial impact of the measures are reported in the Explanatory Memorandum to the Bill. Total savings arising from the measures over the forward estimates period (2014–15 to 2018–19):

•       Schedule 1—Ordinary waiting periods: $274.8 million

•       Schedule 2—Age requirements for NSA, Sickness Allowance and Youth Allowance: $517.0 million

•       Schedule 3—Income support waiting periods: $173.3 million

•       Schedule 4—Low Income Supplement: $42.9 million and

•       Schedule 5—Indexation: $134.8 million.[24]

Those measures which were announced in the 2014–15 Budget and have since been delayed or modified have reduced the savings anticipated in that budget. The 2015–16 budget papers reported that the delayed commencement of the change to age requirements for certain payments (Schedule 2) will cost $171.1 million over five years.[25] The changes to the exclusion period requirements (Schedule 3) will cost $1.8 billion over five years.[26]

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.[27]

As at the time of writing the Parliamentary Joint Committee on Human Rights is yet to release its comments on this Bill and the Statement of Compatibility, however in four of its five reports this year the Committee has raised concerns regarding the right to social security recognised in Article 9 of the International Covenant on Economic, Social and Cultural Rights. Under Article 9 the removal of a pre-existing social security right is subject to stringent scrutiny.[28]

The Committee examined the measures as introduced in the No. 1 and No. 2 Bills and had found that the exclusion period measure, as previously proposed, was ‘incompatible with the right to social security and right to an adequate standard of living’.[29] The Committee also found that the exclusion period change and the proposed changes to the qualifying age for Newstart Allowance and Sickness Allowance were ‘incompatible with the rights to equality and non-discrimination on the basis of age’.[30]

The Statement of Compatibility for the current Bill insists that while the exclusion period and age change measures will limit these same rights, the limitations are reasonable, ‘proportionate to the policy objective’ and for ‘legitimate reasons’.[31]

Schedule 1—Ordinary waiting periods

This Schedule amends the SS Act to make changes to the ordinary waiting period requirements.

These changes:

•       extend the ordinary waiting period of seven days to recipients of Parenting Payment and Youth Allowance (Other) (Youth Allowance for a person who is not undertaking full-time study and is not a new apprentice). The ordinary waiting period currently applies to NSA and Sickness Allowance recipients

•       provide for the current exception to the ordinary waiting period to apply on the basis that a person is in ‘severe financial hardship’ and that the person is experiencing a ‘personal financial crisis’, making it a more stringent test and

•       clarify that the ordinary waiting period is to be served after certain other relevant waiting periods or preclusions have ended.

The measure will commence on 1 July 2015.

The above amendments were originally proposed in Schedule 6 of the No. 1 Bill. The amendments were then proposed in Schedule 3 of the No. 4 Bill, with no changes having been made other than delaying the commencement date of the measure from 1 October 2014 to 1 January 2015.

For a brief analysis of the measure as originally proposed, see pages 22 to 24 of the Bills Digest for the No. 1 Bill.[32]

Differences from the previous Bills

The current Bill makes two substantive changes to the measure. Firstly, it excludes claimants of Widow Allowance from the ordinary waiting period, thereby implementing a 2015–16 Budget measure.[33] There are a relatively small number of Widow Allowance recipients (23,771 persons as at December 2014) and the payment is only available to those born on or before 1 July 1955.[34] Judging by the anticipated cost of the measure ($0.9 million over four years), it is not expected that there will be many new claimants in coming years. In the absence of an explanation for this change, it is reasonable to assume that the Government does not believe that a bereaved person should be forced to rely on their own resources before receiving assistance from the taxpayer. The relatively minimal costs involved may also have played a role in the decision.

The second difference in this Bill is that it sets out additional circumstances in which a person may meet the definition of experiencing a personal financial crisis. In the No. 1 and No. 4 Bills, these circumstances were to be set out in a legislative instrument. In this Bill, item 5 of Schedule 1 sets out two specific sets of circumstances which, in addition to the person being in severe financial hardship, will mean that a person is experiencing a personal financial crisis and is thus exempt from the ordinary waiting period. These two specific circumstances are:

•       if the person was subjected to domestic violence at some point in the four weeks prior to the day they qualified for their payment and

•       if the person is in severe financial hardship because they had incurred unavoidable or reasonable expenditure in the four weeks prior to the day they qualified for their payment.

The amendments still provide for the Secretary to set out other circumstances in a legislative instrument that will mean a person meets the definition of experiencing a personal financial crisis if they are also in severe financial hardship. It is unclear why the specific circumstances of domestic violence and unavoidable or reasonable expenditure are to be set out in the SS Act rather than in a legislative instrument as originally intended. The impact the extension of the ordinary waiting period to Parenting Payment could have on women escaping domestic violence was raised in the Senate Committee inquiry into the No. 1 and No. 2 Bills.[35] The concern was that a complex hardship test would act as a barrier to these women receiving urgently needed support.[36] Including domestic violence as a specific circumstance in the new sections of the Act may be a response to these concerns.

Schedule 2—Age requirements for various Commonwealth payments

This Schedule amends the SS Act and the Farm Household Support Act 2014 to raise from 22 to 25 years the eligibility age for NSA and Sickness Allowance from 1 July 2016. This will result in the age requirement for Youth Allowance being adjusted up from the current ceiling age of 21 years to 24 years.

These measures were originally proposed by Schedule 8 of the No. 2 Bill and intended to start on 1 January 2015. They were then proposed in Schedule 6 of the No. 4 Bill, with no changes having been made.

The Bill makes no significant change to the measures. It simply introduces a new commencement date—that is, 1 July 2016.

For a brief analysis of the measures, see pages 33 to 36 of the Bills Digest for the No. 2 Bill.[37]

Schedule 3—Income support waiting periods

This Schedule amends the SS Act to introduce a four week waiting period for new claimants of Youth Allowance (Other)(refers to Youth Allowance paid to job seekers, not Youth Allowance paid to students and apprentices) and Special Benefit who are under 25 years of age from 1 July 2016.[38]

The waiting period is to be applied to all new claimants who are determined to be the most work-ready, that is, those claimants who are assessed as being eligible for Stream A services under jobactive employment services arrangements. Those young people with barriers to employment (people classified as eligible for Stream B or C services) will be exempt.[39]

During the four week waiting period, new claimants will be obliged to participate in a RapidConnect Plus rapid activation strategy.[40] This strategy will require participants to undertake a number of additional job search activities as a precondition for receiving payment after the waiting period has been served. If participants fail to complete the required activities, this could result in their application for income support lapsing and their being forced to reapply.[41]

Background

This measure revises a 2014–15 budget measure that would have imposed six monthly payment exclusion periods on a majority of new claimants of NSA and Youth Allowance (other) under the age of 30 years from 1 January 2015.[42] The legislative amendments that were required to implement that measure were originally proposed by Schedule 9 of the No. 2 Bill and then Schedule 7 of the No. 4 Bill, with no differences between the amendments of those two Bills. For further details and a brief analysis of the measure that was originally proposed, see pages 36 to 42 of the Bills Digest for the No. 2 Bill.[43]

The proposed six-month exclusion period was one of the most contentious welfare measures from the 2014–15 Budget. Labor, the Greens and the Palmer United Party (PUP) were all critical of it, with Labor and the Greens voting against the No. 2 Bill, and PUP Leader, Clive Palmer not voting in the division on the No. 2 Bill in the House of Representatives. A majority of the crossbench Senators were reported to have expressed concerns regarding the proposed exclusion period or to be opposed to it.[44] In the face of this resistance to the proposal (along with strong opposition from much of the community sector) the then Social Services Minister, Kevin Andrews, is said to have told the crossbench that, while the Government ideally wanted a six-month exclusion period, ‘one month would be better than what we’ve got now’.[45]

The revised measure has three key differences:

•       the initial waiting period is four-weeks rather than six-months

•       there is no periodic exclusion period arrangement after the initial waiting period—the previous proposal would apply a six-month no-payment exclusion period after every six-months an individual aged under-30 years was in receipt of NSA or Youth Allowance (Other). Wage subsidies paid at income support rates and via employers would be available to individuals who worked during the exclusion period and

•       those with a history of gainful work immediately prior to claiming a payment will not be eligible for a reduced waiting period (under the previous proposal, the waiting period could have been reduced by one month for each previous year of gainful work, up to a maximum of five months’ discount).

Key provisions

Income support waiting period for Youth Allowance (Other) claimants

Subsection 23(1) of the SS Act is a dictionary of terms used in the Act. Items 1–4 of Schedule 3 insert a new definition of income support waiting period for Youth Allowance (Other) and Special Benefit and amend the current definition of waiting period to include the new income support waiting period.

Section 549 of the SS Act provides for income support to not be paid to a person who is qualified for Youth Allowance (Other) for the time in which that person is subject to a waiting period. Existing waiting periods for Youth Allowance include a Liquid Assets Waiting Periods (for those with significant cash or other readily realisable assets—the period varies depending on the level of assets) and the Newly Arrived Resident’s Waiting Period (two years for new Australian residents).[46] Schedule 1 of the Bill will also add the ordinary waiting period for Youth Allowance (Other) claimants. Item 5 inserts the new income support waiting period (paragraph 549(2)(aaa)) into the list of waiting periods that may apply to Youth Allowance claimants at subsection 549(2).

Item 6 inserts new sections 549CAA and 549CAB into the SS Act. New subsection 549CAA(1) provides for the new income support waiting period to apply to a person who is qualified for Youth Allowance but is not a new apprentice or studying full-time. As such, the waiting period is to apply to people who are qualified for Youth Allowance (other) and not to people who are qualified for other forms of Youth Allowance.

As noted above, under Schedule 2 of the Bill, the maximum age at which a person is to be eligible for Youth Allowance is to be increased to 24 years. Hence, it is intended that the new income support waiting period will only apply to eligible people under the age of 25 years.

New subsection 549CAA(2) provides that a person is not subject to the income support waiting period if:

•       they qualified for an income support payment other than Youth Allowance (other) or Special Benefit on the day before they qualified for Youth Allowance (other)—this is to ensure that a person who transfers from another payment to Youth Allowance (other) will not be subject to the waiting period—or

•       an exemption from the income support waiting period under new section 549CAB applied to the person on their start day or

•       in the six months prior to their start day they had already served a four-week income support waiting period.

New subsection 549CAA(4) provides for a person’s income support waiting period to end on the earliest of the following:

•       four weeks after it started

•       the day before the person turns 25 years of age

•       the day before an exemption (as specified in new section 549CAB) applies to them or

•       the beginning of the four week income support waiting period for Special Benefit if the person moves from that payment to Youth Allowance (other).

Where a person transitions from other forms of Youth Allowance to Youth Allowance (Other) new subsection 549CAA(5) provides for the income support waiting period to commence on the day they qualified for Youth Allowance (Other). Similarly, when a person transitions from Youth Allowance (Other) to another form of Youth Allowance, under new subsection 549CAA(6) their waiting period ends on the day before the transition takes place.

New subsection 549CAB specifies those categories of person who are to be exempt from the waiting period. People are exempt where they are:

•       the parent of an FTB child and qualified to be paid FTB for that child

•       the principal carer of a child

•       either in State care or have been released from State care in the previous 12 months

•       not required to satisfy the activity test for 15 days or more for specified reasons[47]

•       assessed as requiring employment services or disability services determined by the Minister[48] or

•       fall within another exemption category determined by the Minister by legislative instrument.[49]

Item 7 amends new subsection 549CB(2), as inserted by Schedule 1 to the Bill, to provide for the income support waiting period to precede the ordinary waiting period. As such, under the Bill, the ordinary waiting period follows all other exclusion periods to which the person is subject.

Income support waiting period for Special Benefit claimants

Item 9 inserts new sections 739AA and 739AB into the SS Act. These new sections essentially replicate the above amendments for Youth Allowance claimants, but in relation to Special Benefit claimants.

Comment

The revised income support waiting period proposal is less contentious than the previous six-month exclusion period proposal. This is to be expected, as the measure is to be applied to a smaller number of income support claimants and is far less severe. Nevertheless, the measure does not appear to have the support of Labor, the Greens, or a majority of the Senate crossbenchers.[50] Much of the community sector is also opposed to the measure.[51]

Generally speaking—and as was the case with the proposed six-month exclusion period—the measure has been criticised on two main grounds. Firstly, it is argued that it is unjustified, and, secondly, that it will still cause financial hardship.[52] These arguments are considered below.

Rationale for the measure

According to the Government, the new waiting period measure ‘will set the clear expectation that young people must make every effort to maximise their chances of successfully obtaining work’.[53] As such, the waiting period measure appears to be premised on the notion that many young people are either choosing, or likely to choose, to rely on government-provided income support, rather than attempting to find work. According to this argument, it is necessary to provide a disincentive to stop young people from becoming disengaged and reliant on government-provided support. The Government has chosen to create such a disincentive by withholding unemployment benefits and thereby forcing young people to increase their efforts to find work.

There are three main issues associated with this rationale.

First, there is no substantive evidence to suggest that young Australians lack the will to work. A number of surveys of young people show that a majority want to work or to work more hours, but face a number of barriers to their doing so.[54] These include a lack of available jobs, particularly entry-level positions and full-time work opportunities; not having the relevant experience, skills or qualifications required or the opportunity to acquire experience or training; and, employers who are unwilling to hire younger people.[55] Unemployment among young Australians is significantly higher than that for the population as a whole, and has been rising since 2008 and the global financial crisis.[56]

Second, where young people are in receipt of income support, they must comply with the general requirements under the activity test, as well as other participation requirements, if they are to remain eligible for their payment.[57] In terms of job search requirements and monitoring, Australia’s eligibility criteria for unemployment benefits are some of the strictest in the OECD.[58]

Third, the low rate at which NSA and Youth Allowance (other) are paid is likely to provide sufficient incentive for many young people to find and accept work. This is the intention of these payments, whose low rates and strict eligibility criteria are calculated to provide clear financial and practical incentives for people to work or engage in training to boost their employability.

Risks and unintended consequences

Despite the fact that the waiting period has been significantly reduced, and is now to be applied only once to claimants rather than on an on-going basis, it has been argued that four weeks without access to income support would still place many young people in severe financial hardship. National Welfare Rights Network Policy Officer, Gerard Thomas, has insisted that the measure would ‘lead to greater levels of welfare dependency, not less’.[59]

As has been noted in relation to the previous waiting period proposal, withdrawing access to income support could have the unintended consequence of detracting from some young people’s ability to find and gain paid employment.[60] Some have argued that the low level at which NSA and Youth Allowance are paid (for NSA a base rate of $519.20 per fortnight for a single person with no children; for Youth Allowance a base rate of $426.80 per fortnight for a single person with no children aged 18 and over, living away from their parents’ home) already restricts recipients’ capacity to find paid work.[61] If young people subject to the proposed new waiting period are unable or unwilling to call upon family support or the assistance of charities, then they could lack sufficient means to find a job. Further, if they have no savings or other means of support, these young people would be more likely to be preoccupied with the immediate needs of paying for food and rent than with finding paid employment.

Policy experiment

A third point worth making in relation to the imposition of an up-front waiting period as proposed is that, in international terms, this is a novel measure. To some extent this is to be expected, as welfare arrangements differ substantially across nation states and Australia’s arrangements are quite unique.

The New Zealand requirement for some claimants of working age payments to undertake pre-benefit activities within a 28-day period has been compared to a one-month waiting period.[62] However, claimants who successfully complete the requisite activities within 28 days can receive their payments earlier and all eligible recipients will receive back pay to the relevant commencement date.[63] If there could be said to be a ‘usual practice’ where it comes to withholding access to income support, it is to place time limits on receiving income support benefit.[64]

As such, in the absence of overseas precedents, it is unclear what the outcomes of the measure will be.

Schedule 4—Low Income Supplement

Schedule 4 will abolish the Low Income Supplement and the Low Income Family Supplement (LIS/LIFS).[65] These payments provide an annual lump sum payment worth up to $300 to a small number of lower-income households who have not received the same level of assistance as other low-income families have from tax cuts or social security payments introduced to offset the average expected cost impact of the carbon price implemented by the Gillard Government in 2012.[66] The measure was announced in the 2015–16 Budget, will commence on 1 July 2017 and is expected to save $42.9 million over four years.[67] In 2012–13 there were 7,615 LIS recipients.[68]

Background

The LIS was introduced as part of the Gillard Government’s Clean Energy Household Assistance package which was aimed at offsetting some of the indirect cost impacts of the carbon price introduced from 1 July 2012. The package accompanied tax cuts, particularly the tripling of the tax free threshold (from $6,001 to $18,201 for 2012–13), and included:

•       new supplementary payments for income support and family assistance payments—the Clean Energy Supplement (now known as the Energy Supplement)

•       a supplementary payment for single income families who did not benefit from the tax cuts as much as dual-earner families—the Single Income Family Supplement

•       a supplementary payment for households who have not benefited from the tax cuts or income support supplements to the same extent as other low income households—the LIS

•       an annual payment for people with Commonwealth concession cards who rely on certain medical equipment to cover the expected average impact of the carbon price on electricity prices—the Essential Medical Equipment Payment and

•       a one-off, lump sum payment paid prior to the introduction of the carbon price to recipients of payments that would attract the Clean Energy Supplement—the Clean Energy Advance.[69]

The Clean Energy Supplement was equivalent to a 1.7 per cent increase in payment rates, higher than the anticipated impact of the carbon price (an increase in the Consumer Price Index (CPI) of 0.7 per cent in 2012–13) and the actual impact.[70] Clean Energy Supplement rates were to be indexed to movements in the CPI to maintain its real value over time. The Single Income Family Supplement and LIS were paid at a maximum annual rate of $300. This rate was intended to broadly reflect the amount of tax cuts provided to low income households who did not receive transfer payments.[71]

The LIFS was not included in the original package of payments; it was introduced at a later date to ensure that some Family Tax Benefit recipient families received enough assistance to cover the anticipated average cost impact of the carbon price.[72] It was aimed at families who had not received a payment attracting the Clean Energy Supplement or Clean Energy Advance for at least 13 weeks in the previous financial year and who would also not have benefited from the new tax free threshold to the same extent as other low income families. As the Bills Digest for the Bill which provided for the LIFS noted, the LIS was ‘new territory’ for the Government and it was difficult at the time to be certain that all the households it wanted to compensate for the carbon price regime would be adequately compensated.[73] Due to discrepancies between the way the social security system assesses income and targets assistance, and the way the tax system assesses income and tax liabilities, there are a small number of households who will miss out (or partly miss out) on compensation delivered only via the main social security and family assistance payments or via changes to marginal tax rates.[74] The LIFS covered a group of low-income households who would have otherwise missed out on the full benefits available under the Household Assistance package as it was originally designed. The LIS/LIFS was payable at the end of the financial year starting from 2012–13. As the LIFS commenced from 1 January 2013, no families were affected by its slightly delayed introduction compared to the LIS.

Coalition commitment to keeping compensation package

At the 2013 Election, the Coalition committed to abolishing the carbon price while keeping the tax cuts, social security and family assistance payments that formed the Household Assistance package. The then Leader of the Opposition stated repeatedly: ‘We get rid of the carbon tax, we keep the tax cuts, the pension increases, the benefit increases’.[75] Speaking on the Bill to repeal the carbon price after winning Government, Prime Minister Abbott stated: ‘… families and pensioners will keep the tax cuts and the benefit increases already provided. The carbon tax will go, but the carbon tax compensation will stay so that every Australian should be better off’.[76]

However, the Government has since made changes to the Household Assistance compensation measures. In the 2014–15 Budget, the Government announced that it would rename the Clean Energy Supplement the ‘Energy Supplement’ and would cease indexation of the payment. This measure was implemented via the Social Services and Other Legislation Amendment (2014 Budget Measures No. 6) Act 2014 and means that the Clean Energy Supplement will decline in real value over time.[77]

The current Bill seeks to further trim the carbon price compensation package by abolishing the LIS/LIFS.

Eligibility for the LIS/LIFS

To be eligible for the LIS/LIFS adjusted taxable income must be below:

•       $30,000 for a single person without a dependent child

•       $45,000 for couples without a dependent child or

•       $60,000 for a single person or a couple with a dependent child.[78]

An individual claiming the LIS/LIFS must have had a tax liability of less than $300 for the previous financial year, including those not required to pay any tax. There must also have been 13 weeks or more in the previous financial year in which the person did not receive an Energy Supplement attached to a government payment other than Family Tax Benefit (any pension or allowance).[79] The LIFS cannot be paid to an individual if they or their partner have received a LIS.

Comment

While the LIS/LIFS is a relatively small payment to a relatively small number of households and administratively complex, it was an important component of the Household Assistance package which ensured households at the same income level would receive similar levels of compensation for the introduction of carbon pricing. With the carbon price removed, it is questionable whether or not the LIS/LIFS is needed. However, abolishing the payment is inconsistent with the Government’s pre-election commitment.

Provisions

Social Security Act 1991

Items 1 and 2 of Schedule 4 remove references to the LIS and the definition of LIS from subsection 23(1) of the SS Act.

Item 3 repeals Division 3 of Part 2.18A of the SS Act which provides for payment of the LIS/LIFS. The Division sets out the qualification requirements and payment rate of the LIS/LIFS.

Items 4–7 remove further references to the LIS in the SS Act.

Social Security (Administration) Act 1999

Items 8–16 remove provisions and references relevant to the administrative processing of LIS claims in the Social Security (Administration) Act 1999.

Other amendments

Items 17–19 repeal and omit sections from the Income Tax Assessment Act 1936 and the Taxation Administration Act 1953 relating to requirements for LIS claimants to provide their Tax File Number.

Savings provisions set out at item 22 ensure that the LIS/LIFS can be paid for those eligible in the 2016–17 financial year or earlier years despite the amendments proposed by the Bill.

Schedule 5—Indexation

Schedule 5 will:

•       pause indexation of the income test free areas for all working age allowances (other than student payments) and for Parenting Payment Single (PPS) for three years from 1 July 2015 and

•       pause indexation of the income test free areas and other means test limits for student payments for three years from 1 January 2016.

If passed, indexation for the income test free areas for non-student payment allowances and PPS will recommence on 1 July 2018, and indexation of the income test free areas and means test limits for student payments will recommence on 1 January 2019. These means test levels are usually adjusted once a year (on either 1 January or 1 July) in line with movements in the CPI. Pausing indexation (that is, not adjusting the amounts) is a simple way of finding budget savings without directly cutting benefits or limiting eligibility. The threshold amounts will decline in real value over time and savings arise as payment rates are reduced as recipients’ income and assets gradually increase beyond the relevant thresholds.

Similar measures were proposed in Schedule 3 of the No. 1 Bill and Schedule 1 of the No. 2 Bill. The measures were then proposed in Schedule 1 of the No. 4 Bill with the only change being the delayed commencement of the non-student payment measures from 1 July 2014 to 1 July 2015. The Bill makes one substantive change to the measures as proposed in the No. 4 Bill. It delays commencement of the student payment amendments from 1 January 2015 to 1 January 2016.

For a brief analysis of the measure as originally proposed see pages 11 to 14 of the Bills Digest for the No. 1 Bill, and pages 11 to 13 of the Bills Digest for the No. 2 Bill.[80]

The measures will freeze indexation of the assets test value limit for Youth Allowance for a person who is not considered independent—this is commonly referred to as the Family Assets Test limit as the limit applies to the total assets belonging to the person and their family members—from 1 January 2016.[81] However, a 2015–16 budget measure will see the Family Assets Test abolished from 1 January 2016 and a new means test which assesses family income-only will apply to dependent Youth Allowance claimants.[82] Legislation providing for this new means test has not been tabled at the time of writing.

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

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[1].              Social Security Act 1991 (Cth), accessed 4 June 2015.

[2].              Social Security (Administration) Act 1999, accessed 4 June 2015.

[3].              Income Tax Assessment Act 1936 (Cth), accessed 4 June 2015.

[4].              Taxation Administration Act 1953 (Cth), accessed 4 June 2015.

[5].              Farm Household Support Act 2014 (Cth), accessed 4 June 2015.

[6].              Parliament of Australia, ‘Social Services and Other Legislation Amendment (2014 Budget Measures No. 1) Bill 2014 homepage’, Australian Parliament website, accessed 4 June 2015; Parliament of Australia, ‘Social Services and Other Legislation Amendment (2014 Budget Measures No. 2) Bill 2014 homepage’, Australian Parliament website, accessed 4 June 2015.

[7].              See: M Klapdor, The 2014–15 social services budget Bills: a quick guide, Research paper series, 2014–15, Parliamentary Library, Canberra, 2014, accessed 9 June 2015.

[8].              Parliament of Australia, ‘Social Services and Other Legislation Amendment (Seniors Supplement Cessation) Bill 2014 homepage’, Australian Parliament website, accessed 4 June 2015.

[9].              Parliament of Australia, ‘Social Services and Other Legislation Amendment (2014 Budget Measures No. 4) Bill 2014 homepage’, Australian Parliament website, accessed 4 June 2015.

[10].              Parliament of Australia, ‘Social Services and Other Legislation Amendment (2014 Budget Measures No. 5) Bill 2014 homepage’, Australian Parliament website, accessed 4 June 2015.

[11].              Parliament of Australia, ‘Social Services and Other Legislation Amendment (2014 Budget Measures No. 6) Bill 2014 homepage’, Australian Parliament website, accessed 4 June 2015.

[12].              See M Klapdor and L Buckmaster, Social Services and Other Legislation Amendment (2014 Budget Measures No. 4) Bill 2014, Bills digest, 49, 2014–15, Parliamentary Library, Canberra, 2014, pp. 7–8, accessed 4 June 2015.

[13].              L Buckmaster and M Klapdor, Social Services and Other Legislation Amendment (2014 Budget Measures No. 6) Bill 2014, Bills digest, 45,
2014–15, Parliamentary Library, Canberra, 2014, accessed 11 June 2015.

[14].              Senate Community Affairs Legislation Committee, Inquiry into the Social Services Legislation Amendment (Youth Employment and Other Measures) Bill 2015, The Senate, 2015, accessed 9 June 2015.

[15].              J Ireland, ‘Month’s wait for under-25 dole “still too long”’, The Canberra Times, 14 May 2015, p. 6, accessed 5 June 2015.

[16].              J Macklin (Shadow Minister for Families and Payments) and B O’Connor (Shadow Minister for Employment and Workplace Relations), Abbott Government launches latest attack on young people, media release, 28 May 2015, accessed 5 June 2015.

[17].              J Ireland, ‘Month’s wait for under-25 dole “still too long”’, op. cit.

[18].              Ibid.

[19].              Ibid; A Smethurst, ‘Senate lines up on reform: benefit cuts opposed’, The Herald Sun, 14 May 2015, p. 6, accessed 12 June 2015.

[20].              Macklin, op. cit.; R Siewert (Australian Greens spokesperson on Families and Community Services), Government pushes on and introduces harsh social services measures despite opposition, media release, 28 May 2015.

[21].              Australian Council of Social Service (ACOSS), ACOSS on Budget 2015: better direction but lower income earners still doing the heavy lifting, media release, 12 May 2015, accessed 5 June 2015.

[22].              J Ireland, ‘Month’s wait for under-25 dole “still too long”’, op. cit.

[23].              See submissions to and report of the Senate Community Affairs Legislation Committee, Inquiry into the Social Services and Other Legislation Amendment (2014 Budget Measures No. 1) Bill 2014 and Social Services and Other Legislation Amendment (2014 Budget Measures No. 2) Bill 2014, The Senate, Canberra, accessed 5 June 2015.

[24].              Explanatory Memorandum, Social Services Legislation Amendment (Youth Employment and Other Measures) Bill 2015, p. 2, accessed 15 June 2015.

[25].              Australian Government, Budget measures: budget paper no. 2: 2015–16, p. 158, accessed 4 June 2015.

[26].              Ibid., p. 159.

[27].              The Statement of Compatibility with Human Rights can be found at page 29 of the Explanatory Memorandum to the Bill.

[28].              The Bills raising concerns have been the Family Tax Benefit (Tighter Income Test) Bill 2014 and the Higher Education and Research Reform Bill 2014 in the Parliamentary Joint Committee on Human Rights’ Eighteenth report of the 44th Parliament, 10 February 2015; the Omnibus Repeal Day (Spring 2014) Bill 2014 in the Committee’s Nineteenth report of the 44th Parliament, 3 March 2015; the Seafarers Rehabilitation and Compensation and Other Legislation Amendment Bill 2015 Twentieth report of the 44th Parliament, 18 March 2015; and the Norfolk Island Legislation Amendment Bill 2015; the Safety, Rehabilitation and Compensation Amendment (Improving the Comcare Scheme) Bill 2015, and the Social Services Legislation Amendment Bill 2015 in the Twenty-second report of the 44th Parliament, 13 May 2015, accessed 11 June 2015.

[29].              Parliamentary Joint Committee on Human Rights, Twelfth report of the 44th Parliament, The Senate, September 2014, p. 73, accessed 11 June 2015.

[30].              Ibid., p. 79.

[31].              Explanatory Memorandum, Statement of Compatibility with Human Rights, Social Services Legislation Amendment (Youth Employment and Other Measures) Bill 2015, p. 8, 12, accessed 11 June 2015.

[32].              P Yeend and L Buckmaster, Social Services and Other Legislation (2014 Budget Measures No. 1) Bill 2014, Bills digest, 14, 2014–15, Parliamentary Library, Canberra, 2014, pp. 22–24, accessed 4 June 2015.

[33].              Australian Government, Budget measures: budget paper no. 2: 2015–16, op. cit., p. 153.

[34].              Australian Government, ‘DSS Demographic December 2014’, data.gov.au website, accessed 11 June 2015.

[35].              P Davidson (Senior Adviser, Australian Council of Social Services), Evidence to the Senate Community Affairs Legislation Committee, Inquiry into the Social Services and Other Legislation Amendment (2014 Budget Measures No. 1) Bill 2014 and Social Services and Other Legislation Amendment (2014 Budget Measures No. 2) Bill 2014, 20 August 2014, p. 3, accessed 5 June 2015.

[36].              Ibid.

[37].              C Ey, M Klapdor, M Thomas and P Yeend, Social Services and Other Legislation Amendment (2014 Budget Measures No. 2) Bill 2014, Bills digest, 16, 2014–15, Parliamentary Library, Canberra, 2014, pp. 33–36.

[38].              Special Benefit is a discretionary payment provided to those in financial hardship who are not able to receive any other form of income support. See Department of Human Services (DHS), ‘Special benefit’, DHS website, accessed 11 June 2015.

[39].              See Department of Employment, Request for tender for employment services 2015–2020, Department of Employment, 2014, pp. 33–34, accessed 4 June 2015.

[40].              Australian Government, Budget measures: budget paper no. 2: 2015–16, op. cit., p. 159.

[41].              DHS, ‘Budget 2015–16: growing jobs and small business – youth employment strategy – revised waiting period for youth income support’, DHS website, accessed 4 June 2015.

[42].              Australian Government, Budget measures: budget paper no. 2: 2014–15, p. 210, accessed 9 June 2015.

[43].              C Ey, M Klapdor, M Thomas and P Yeend, op. cit.

[44].              See D Crowe, ‘New Senate threat to welfare reforms’, The Australian, 2 July 2014, p. 1, accessed 4 June 2015; S Balogh, ‘I’ve been on dole, don’t delay payments: Muir’, The Australian, 23 October 2014, p. 4, accessed 4 June 2015.

[45].              J Ireland, ‘Kevin Andrews says welfare reform a “two-term exercise”’, The Sydney Morning Herald, (online edition), 21 October 2014, accessed 4 June 2015. The position of many community sector organisations was outlined in submissions and evidence given to the Senate Community Affairs Committee inquiry into the No. 1 and No. 2 Bills. In a joint statement on the 2014–15 Budget’s social security changes, a number of community organisations called upon the Parliament to reject the measures proposed in the No. 4 Bill, including the proposed six-month exclusion period for jobseekers on Newstart, Youth Allowance and Special Benefit. Australian Council of Social Service (ACOSS), Joint sector statement on budget social security changes, media release, 27 August 2014, accessed 4 June 2015.

[46].              See DHS, ‘Liquid assets waiting period’ and ‘Newly arrived resident’s waiting period’, DHS website, accessed 11 June 2015.

[47].              These reasons are listed at page 21 of the Explanatory Memorandum. Under Section 601 of the SS Act recipients of working age payments are required to comply with the activity test (or, participation requirements) in order to qualify for payment. This means that a person must be actively seeking and willing to undertake paid work that is suitable for that person. The work sought cannot be confined to areas in which the jobseeker has qualifications or experience; it must generally be in a variety of fields. The general job search activity test applies at all times unless other specific activities are required or the person is exempt from the activity test (if they are sick, injured or unable to meet their activity test requirements because of a personal crisis).

[48].              According to the Explanatory Memorandum it is intended that only a person who is ‘job ready’ will be subject to the income support waiting period. As such, it is reasonable to assume that participants in Disability Employment Services and people who are classified as Stream B or C under the new jobactive employment services arrangements will be specified in the legislative instrument. Stream B and C job seekers are those assessed as requiring greater assistance to obtain employment or as having vocational issues and/or other forms of disadvantage. See Department of Employment, Request for tender for employment services 2015–2020, Department of Employment, 2014, pp. 33–34, accessed 4 June 2015.

[49].              A legislative instrument can be subject to disallowance if either a Senator or Member of the House of Representatives moves a motion of disallowance within 15 sitting days of the day that the legislative instrument is tabled. The motion to disallow must be resolved or withdrawn within a further 15 sitting days of the day that the notice of motion is given. However, it should be noted that if there is no notice of motion to disallow a legislative instrument, then there is no debate about its contents.

[50].              On 14 May 2015, Senator Rachel Siewert moved ‘that the Senate calls on the Government to drop its ideological attack on young job seekers by withdrawing the budget measure that forces young people under 25 to wait one month before being able to access income support’. The motion was supported by a majority of the Senate. See: Australia, Senate, ‘Family and Community Services—Access to Income Support’, Journals, SJ 94, 14 May 2015, pp. 2604–05, accessed 9 June 2015. See also: J Macklin (Shadow Minister for Families and Payments), Abbott’s cut to young job seekers still unfair, media release, 13 May 2015, accessed 9 June 2015; J Ireland, ‘Federal budget 2015: young unemployed will still go hungry, say agencies’, The Sydney Morning Herald, (online edition), 13 May 2015, accessed 9 June 2015.

[51].              See for example J Ireland, ‘Federal budget 2015: young unemployed will still go hungry, say agencies’, op. cit.; Australian Council of Social Service (ACOSS), Budget analysis 2015–16, ACOSS, Strawberry Hills, NSW, 2015, accessed 9 June 2015.

[52].              See ACOSS, op. cit., p. 18.

[53].              Australian Government, Budget 2015: growing jobs and small business, p. 27, accessed 9 June 2015.

[54].              P Cameron and R Denniss, Hard to get a break? Hours, leave and barriers to re-entering the Australian workforce, Institute paper, 13, The Australia Institute, November 2013; Mission Australia, Youth survey 2014, Mission Australia, Sydney, 2013; N Herault, W Kostenko, G Marks and R Zakirova, ‘The effects of macroeconomic conditions on the education and employment outcomes of youth’, Australian Journal of Labour Economics, 15(1), 2012, pp. 17–36; S Burrows, ‘Youth unemployment in the Illawarra region’, Journal of Australian Political Economy, 65, 2010, pp. 89–106, accessed 12 June 2015.

[55].              Ibid.

[56].              Australian Bureau of Statistics (ABS), Labour Force, Australia, May 2015, cat. no. 6202.0, ABS, Canberra, 2015, accessed 12 June 2015. As Table 17 shows, as at July 2009, the end of the global financial crisis, the rate of unemployment among those aged 15 to 24 years was 11.9%. At May 2015, the rate was 12.9%. This is over twice the rate (5.8%) for the working age population as a whole (15 to 64 year olds) (Table 3).

[57].              See footnote 47.

[58].              D Venn, Eligibility criteria for unemployment benefits: quantitative indicators for OECD and EU countries, OECD Social, Employment and Migration working papers, 131, OECD, Paris, 2012, accessed 9 June 2015.

[59].              J Ireland, ‘Federal budget 2015: young unemployed will still go hungry, say agencies’, op. cit.

[60].              C Ey, M Klapdor, M Thomas and P Yeend, op. cit., p. 43.

[61].              See J Sloan, ‘Newstart needs a boost’, The Drum, ABC website, 31 October 2011 and J Westacott (Chief Executive, Business Council of Australia), Sharing prosperity: Brotherhood of St Laurence Sambell Oration, speech, 23 November 2011. For current payment rates, see: Department of Human Services (DHS), A guide to Australian Government payments, DHS, 2015, pp. 24—26, accessed 9 June 2015.

[62].              See K Andrews (Minister for Social Services), New Zealand waiting period for benefits, media release, 23 September 2014, accessed 12 June 2015.

[63].              New Zealand, Work and Income (WINZ), ‘Pre benefit activities’, WINZ website, accessed 12 June 2015; Senate Community Affairs Legislation Committee, Official committee Hansard, 23 October 2014, pp. 96–99, accessed 15 June 2015.

[64].              In the US, for example, time limits have been in place at the state level since the 1990s and, in 1996, a 60-month time limit was imposed on federally funded assistance for most families under the Personal Responsibility and Work Opportunity Reconciliation Act. See M Farrell, S Rich, L Turner, D Seith and D Bloom, Welfare time limits: an update on state policies, implementation and effects on families, The Lewin Group and MDRC, April 2008, accessed 4 June 2015.

[65].              The Low Income Family Supplement (LIFS) is an administrative name for the Low Income Supplement (LIS) as it is paid to Family Tax Benefit recipients and to one member of a couple if eligible.

[66].              P Yeend and L Buckmaster, Clean Energy (Household Assistance Amendments) Bill 2011, Bills digest, 58, 2011–12, Parliamentary Library, Canberra, 2011, p. 28, accessed 2 June 2015.

[67].              Australian Government, Budget measures: budget paper no. 2: 2015–16, op. cit., p. 162.

[68].              Senate Community Affairs Committee, Answers to Questions on Notice, Social Services Portfolio, Additional Estimates 2013–14, 27 February 2014, Question 350, Attachment A, accessed 2 June 2015.

[69].              P Yeend and L Buckmaster, op. cit., pp. 5–7.

[70].              P Yeend and L Buckmaster, op. cit., pp. 14; Treasury, Strong growth, low pollution: modelling a carbon price, Treasury, Canberra, 2011,
pp. 8–9, accessed 3 June 2015; T Colebatch, ‘Carbon tax inflation fears evaporate’, The Sydney Morning Herald, (online edition), 24 July 2013, accessed 3 June 2015.

[71].              Treasury and the Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA), Review of the Clean Energy Future Household Assistance Package, Treasury and FaHCSIA, April 2013, p. 13, accessed 4 June 2014.

[72].              Ibid., p. 16.

[73].              P Yeend, Social Security and Other Legislation Amendment (2012 Budget and Other Measures) Bill 2012, Bills digest, 154, 2011–12, Parliamentary Library, Canberra, 2012, p. 22, accessed 12 June 2015.

[74].              Ibid., p. 20.

[75].              T Abbott (Leader of the Opposition), Address to the NSW Liberal Party State Council: speech, Central Coast, media release, 1 June 2013, accessed 4 June 2015.

[76].              T Abbott (Prime Minister), ‘Second reading speech: Clean Energy Legislation (Carbon Tax Repeal) Bill 2013’, House of Representatives, Debates, 13 November 2013, p. 74, accessed 4 June 2014.

[77].              Social Services and Other Legislation Amendment (2014 Budget Measures No. 6) Act 2014 (Cth), accessed 4 June 2014.

[78].              Department of Human Services (DHS), A guide to Australian Government payments, op. cit., p. 41.

[79].              Ibid.

[80].              P Yeend and L Buckmaster, op. cit.; C Ey, M Klapdor, M Thomas and P Yeend, op. cit.

[81].              See DSS, ‘4.2.8.20 dependent YA – family assets test and limits’, Guide to Social Security Law, DSS website, accessed 4 June 2015.

[82].              See M Klapdor, ‘Family payments’, Budget review 2015–16, Research paper series, 2014–15, Parliamentary Library, Canberra, 2015, accessed 4 June 2015.