BILLS DIGEST NO. 31, 2015–16              14 October 2015

Social Services Legislation Amendment (More Generous Means Testing for Youth Payments) Bill 2015

Michael Klapdor
Social Policy Section 

Date introduced: 10 September 2015

House:  House of Representatives

Portfolio: Social Services

Commencement:  Sections 1 to 3 commence on Royal Assent. Schedule 1, items 1 to 18 and 20 commence on 1 January 2016; Part 2 of Schedule 1 commences on 1 July 2016; and Part 3 of Schedule 1 on 1 January 2017.
Schedule 1 Item 19 will not commence as the Social Services Legislation Amendment (Youth Employment and Other Measures) Bill 2015 did not pass the Senate.[1]

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.

Purpose of the Bill

The purpose of the Social Services Legislation Amendment (More Generous Means Testing for Youth Payments) Bill 2015 (the Bill) is to amend the Social Security Act 1991[2] (the SS Act) and the Social Security (Administration) Act 1999[3] (the SS Admin Act) to:

•       remove the family assets test and the family actual means test from the Youth Allowance means testing arrangements, from 1 January 2016

•       align the parental income test exemptions for Youth Allowance with current arrangements for Family Tax Benefit Part A (FTB-A), from 1 January 2016

•       not include maintenance income paid to parents in the Youth Allowance parental income test assessment, from 1 January 2016

•       introduce a new maintenance income test as part of the Youth Allowance parental income test to assess child support paid to a parent, from 1 January 2017 and

•       include all dependent children who qualify for Family Tax Benefit in the ‘family pool’ for the Youth Allowance parental income test, not just those children who are senior secondary school children aged 16 or more, from 1 July 2016.

Background

The measures were announced in the 2015–16 Budget as part of the Families Package.[4] In his second reading speech, the Minister for Social Services, Scott Morrison, stated that the measures:

… were adopted following an examination of issues by an Interdepartmental Committee on Access to Higher Education for Regional and Remote Students at the urging of Senator Bridget McKenzie and her backbench colleagues, who have been pressing us to do more to improve access to education for regional and remote students.[5]

No reports or details of this committee have been published but Senator McKenzie held a number of public forums in regional areas with representatives from the Department of Education and Training and the Department of Social Services between July and September 2015.[6] Senator McKenzie stated that participants at these forums had discussed a range of issues affecting regional and remote students’ access to higher education:

These included the hefty cost of relocating to study (between $15,000-$20,000 a year), distance, lack of affordable accommodation, and trouble accessing and the adequacy of student assistance.

…

Desperate parents tapping into their retirement savings to support their child, students working up to four jobs to make ends meet (leaving little time to study), students opting to study close-by rather than at the institute that offers the best course, no public transport, and internet access were among the many issues raised not only at the forums but also through emails and social media.[7]

Further background information to the measures can be found in the ‘Key issues and provisions’ section of this Bills Digest.

Committee consideration

Senate Standing on Community Affairs

On 10 September 2015, the Senate Selection of Bills Committee referred the Bill to the Senate Community Affairs Legislation Committee for inquiry and report by 9 November 2015.[8] Details of the inquiry are available on the Committee’s website.[9]

Senate Standing Committee for the Scrutiny of Bills

The Committee considered the Bill in the Alert Digest of 16 September 2015 but had no comment to make on the Bill.[10]

Policy position of non-government parties/independents

At the time of writing, the Opposition, minor parties and independents had not stated their position on the measures contained in the Bill.

Position of major interest groups

The Australian Council of Social Service (ACOSS) stated that the measures will result in a ‘welcome easing of high effective tax rates for some parents’ but will also result in a ‘weakening of the integrity of these payments by allowing parents with high income who engage in common tax avoidance techniques to qualify for income support’.[11] In their Budget Analysis, ACOSS found that the measure will extend income support ‘to dependent young people in families who use private trusts and negative gearing to avoid tax by removing long-standing restrictions’.[12]

Financial implications

According to the Explanatory Memorandum to the Bill, the changes will cost an estimated $262.7 million over the forward estimates.[13]

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.[14]

Parliamentary Joint Committee on Human Rights

The Parliamentary Joint Committee, in its twenty-eighth report of the 44th Parliament has deferred consideration of the Bill.[15]

Youth Allowance/ABSTUDY—overview

Youth Allowance is an income support payment for young people aged 16–21 who are looking for work, full-time tertiary students aged 18–24, full-time apprentices aged 16–24 and, in special circumstances, young people attending school.[16] To be eligible, job-seekers must meet certain activity requirements (looking for work or undertaking training or vocational education) while students and apprentices must be enrolled full-time in approved courses or recognised apprenticeships.

ABSTUDY is a scheme that helps Aboriginal and Torres Strait Islander Australians who are studying or undertaking an apprenticeship with their costs, and includes allowances and other benefits.[17] Payments and rates depend on the person’s study load, age, where they are living and what course they are studying. One of the payments, the ABSTUDY Living Allowance, is similar to Youth Allowance for students in that it is paid at the same rate and applies similar means testing arrangements. The ABSTUDY scheme is an administrative scheme and is not provided for by any legislation. However, the means testing arrangements are aligned with those legislated for Youth Allowance.[18] The Budget measure announced changes to both Youth Allowance and to ABSTUDY Living Allowance means testing—and as a result, it should be noted that the legislative amendments proposed in the Bill will reflect similar changes to the ABSTUDY means testing arrangements. While the following analysis will only refer to Youth Allowance, the changes should be read as applying also to the means testing arrangements for ABSTUDY Living Allowance.

The Bill makes a number of changes to the way in which the means of the parents of some Youth Allowance claimants is assessed. Where a Youth Allowance claimant is not considered ‘independent’ of their parents, that is, they are still considered to be supported financially by their parents, then the income and assets of their parents are assessed in determining eligibility for and the payment rate of Youth Allowance.

Independent/dependent

Being considered independent affects a person’s eligibility for and payment rate of youth allowance. Dependency means financial dependence on parents/guardians. A dependent person will have their parents’/guardians’ income and assets taken into account in determining eligibility (see below).

A person can be considered independent if they meet one of the following criteria:

•       are aged 22 or more and a full-time student or Australian Apprentice

•       have supported themselves through employment (full-time work for 18 months in a two year period)

•       are or have been legally married or in a registered relationship

•       are living in a de facto relationship with another person as a member of a couple for at least 12 months (six months in special circumstances)

•       have, or have had, a dependent child

•       have a partial capacity to work as determined by a Job Capacity Assessment (job seekers only)

•       are at least 18 years old, had full-time employment of at least 30 hours per week for at least 12 months, not living in the home of a parent, not receiving financial support from a parent/guardian on a long-term basis, and considered to be specially disadvantaged in respect to education or employment

•       are unable to live at home

•       have parents who cannot exercise their responsibilities

•       are a refugee without parents living in Australia

•       are an orphan and have not been legally adopted or

•       are in state care, or only stopped being in state care because of their age.[19]

Students who had to move away from home to study from areas classified as inner regional, outer regional, remote and very remote can be assessed as independent if, since leaving school, they:

•       have earned at least 75 per cent of Wage Level A of the National Training Wage Schedule included in a modern award, in an 18-month period or

•       have worked part-time (at least 15 hours each week) for at least two years.[20]

Their parents must also have earned less than $150,000 in the most recent tax year (or current tax year if income has changed substantially) to meet this component of the independence test.

Means tests

Multiple means tests currently apply to Youth Allowance, determining both eligibility and payment rates: a family means test (if not independent), a personal income test, a partner income test and a personal assets test. If considered dependent, the family means and the personal income tests apply. If considered independent, the personal income, partner income and personal assets tests apply. The test that results in the lowest payment rate applies. A liquid assets test also applies and determines whether or not a special waiting period applies before the claimant’s payment commences.

Parental means test

If not independent, a family means test applies. This test takes one of three forms: a parental income test, family assets test or family actual means test (applies in cases where the income or assets test does not reflect a family’s actual means—such as where they have significant investments in family trusts). The test that produces the lowest rate, or precludes eligibility applies.

Under the parental income test, the payment rate is reduced by 20 cents for every dollar of the parents’ adjusted taxable income over $50,151 for the relevant tax year (usually the financial year ending on 30 June of the calendar year immediately before the calendar year in which the payment is to be made).[21] This includes taxable income, any adjusted employer provided benefits, target foreign income, net investment losses, reportable superannuation contributions, and maintenance received by either parent less maintenance amounts paid out.[22]

Under the family assets test, no payment can be made if family’s assets exceed $642,000 (a 75 per cent discount on farm/business assets applies to the family assets test). The assets of all family members are included—this includes the person’s parents and other children in the family except independent children and the partners of dependent Youth Allowance recipients (who may live with the family). The family’s principal home is excluded from the assets test. The family assets test does not apply to parents or their partners who receive an income support payment, an ABSTUDY Living Allowance, a Farm Household Allowance, or who are holders of a Low Income Health Care Card.[23]

The family actual means test is aimed at parents who may receive income from sources other than a wage or salary or who have assessable income which may not accurately reflect their capacity to pay the costs of education because of their ability to minimise their taxable income.[24] It is only applied where either one or both of a dependent Youth Allowance claimant’s parents meet one of the family actual means test categories of ‘designated parents’. A parent is considered a designated parent if:

•       in the base tax year, they had an interest in a trust, private company or unlisted public company

•       in the base tax year, they were self-employed, except as a sole trader who was mainly or wholly engaged in a primary production owned by the person

•       in the base tax year, they were a partner in a partnership

•       in the base tax year, they derived $A2,500 of income, or more, that does not consist only of income from a pension or similar payment from a source in Norfolk Island or overseas

•       in the base tax year, they derived income from a salary or wage and claimed a tax deduction for a business loss (for that year or previous year) that does not consist only of a total net investment loss or net passive business loss

•       have a current interest of $2,500 or more in any assets located outside Australia and its external territories or

•       entered Australia under a permanent visa or entry permit visa in a business skills category in the last 10 years before 1 January in the calendar year in which a Youth Allowance payment period ends.[25]

The base tax year is the financial year ending on 30 June of the calendar year immediately before the calendar year in which the payment is to be made.

Under the family actual means test, the spending and savings of all current family members in the base tax year are assessed and a formula applied to provide an equivalent family income that can be assessed in a similar way to the parental income test. In some cases, the family’s actual means can be assessed for the tax year after the base tax year (where there has been a reduction in a family’s means since the base tax year). A family’s actual means includes any spending on a home (including purchase, mortgage repayments, rates and utility bills), spending on transport (including purchases, running costs and public transport costs), education costs, general living expenses and other costs such as expenditure on investments, fringe benefits and tax deductible business expenditure not necessary for carrying on the business. It also includes any savings such as bank accounts, retained profits, or superannuation contributions.[26] Amounts that are not included as part of a family’s actual means include prior year savings, the sale of assets, windfall gains, business spending, spending on maintenance or child support payments, and business spending.[27]

The formula used to work out the family’s equivalent income works as follows: halving the family’s gross actual means (spending plus savings minus any deductions), adding the marginal tax rate and Medicare levy that would notionally apply to the amount, doubling the resulting amount and then adding the total net investment loss or net passive business loss of each parent (if any). The resulting amount is the family’s equivalent income to be used for assessment purposes. For every dollar of this equivalent income above $50,151, the Youth Allowance rate is reduced by 20 cents (as occurs with the parental income test).[28]

Multi-child households

A special formula is used to calculate rate reductions under the parental income test and the family actual means test, where parental income (or equivalent income worked out under the family actual means test) exceeds the threshold level for receiving the maximum payment and the claimant has parental income in common with any other person receiving one of the following payments:

•       Youth Allowance

•       ABSTUDY living allowance

•       ABSTUDY Group 2 school fees allowance (means-tested component)

•       additional boarding allowance under Assistance for Isolated Children or

•       Family Tax Benefit (FTB) (for a child aged 16 or older who is a full-time secondary student).[29]

The formula apportions the total amount of income over the threshold across all the dependent children in receipt of the above payments (the family pool). The maximum payment rates for each of the payments paid to children in the family pool are totalled, and the proportion that Youth Allowance represents of this total is worked out. The proportion that the maximum rate of Youth Allowance represents of the total payments to the family pool is the proportion of parental income (or equivalent income) that is assessed under the parental income test or family actual means test for the Youth Allowance claimant.[30]

There is no limit on the number of children who can be included in the family pool under these provisions.

Personal income test

For students and apprentices:

•       gross income over $427 up to $512 per fortnight reduces payment by 50 cents in the dollar and

•       income over $512 per fortnight reduces payment by 60 cents in the dollar.

For jobseekers:

•       gross income over $143 up to $250 per fortnight reduces payment by 50 cents in the dollar and

•       income over $250 per fortnight reduces payment by 60 cents in the dollar.[31]

Partner income test

Where dependent Youth Allowance claimants are in a couple relationship, the claimant’s partner is exempt from the partner income test. The partner income test only applies to independent Youth Allowance claimants who are members of a couple (where the partner is not a dependent Youth Allowance recipient). Under the partner income test, an individual’s rate of Youth Allowance is reduced by 60 cents for each dollar of fortnightly income that exceeds the ‘partner income free area’.[32] The partner income free area is the income cut-out point at which either Newstart Allowance or Youth Allowance would no longer be payable to that person under the personal income test for those payments. The cut-out point will vary depending on the partner’s circumstances, as set out in Table 1.

Table 1: Partner income free area under the Youth Allowance partner income test

If the partner is …

And has …

Then the partner income free area is the amount of the partner's income, rounded up to the nearest dollar, beyond which …

NOT receiving a social security benefit,

NOT turned 22,

Youth Allowance would not be payable to the partner if the partner were qualified for Youth Allowance and were not undertaking full-time study. The cut out point for job seeker Youth Allowance recipients is used even where the partner is a student.

turned 22,

Newstart Allowance would not be payable to the partner if the partner were qualified for Newstart Allowance.

turned age pension age,

Newstart Allowance would not be payable to the partner if the partner were qualified for Newstart Allowance.

Note: The partner is assumed to be qualified for Newstart Allowance even though the person is above the upper age limit for that payment. In such a case the rate of Newstart Allowance is assumed to include the applicable amount of pension supplement payable to persons of age-pension age.

receiving a social security benefit,

-

the benefit would not be payable to the partner.

Source: Department of Social Services (DSS), ‘4.2.2 Benefits income test and limits’, Guide to social security law, version 1.215, released 21 September 2015, DSS website, last updated 17 August 2015, accessed 16 September 2015.

Personal assets test

If considered independent, a personal assets test applies. Under the personal assets test, an individual is not eligible for Youth Allowance if they have assets (including vehicles, appliances, household items, real estate separate from their own primary residence, bank accounts and financial investments) with a total value over the limits set out in Table 2.

Table 2: Assets test limits for Youth Allowance

Family situation

Homeowner

Non-homeowner

Single

$202,000

$348,500

Couple (combined)

$286,500

$433,000

Source: DHS, ‘Income and assets test for Youth Allowance’, DHS website, 13 April 2015, accessed 16 September 2015.

Liquid assets test

A liquid assets test of $5,500 for singles and $11,000 for couples or singles with dependants applies. Individuals with liquid assets (assets such as savings or investments which can be readily realised) valued over these thresholds have to serve a Liquid Assets Waiting Period before they can receive any payment (the period is calculated based on the value of the assets but cannot exceed 13 weeks).[33]

Key issues and provisions

Removing the family assets test and family actual means test

The Bill proposes removing any assessment of a dependent Youth Allowance claimant’s assets or their family’s means other than parental income from 1 January 2016. This means that eligibility and payment rates of Youth Allowance for claimants considered dependent will no longer assess the value of the claimant’s assets, their family’s assets nor their family’s actual means. The family assets test and family actual means test currently apply in order to target Youth Allowance at recipients whose families do not have adequate means to support them. However, the family means test and the assessment of independence/dependence has long been an area of contention with various groups arguing that the tests are too restrictive, should not apply at all, or act as a barrier to higher education for some groups of students, particularly those from regional and rural areas.[34] Groups representing regional families have proposed introducing a non-means tested payment for rural students who need to move away from home to study (which could be paid in addition to Youth Allowance), or allowing for 100 per cent of farm and business assets to be excluded from the family assets test.[35] Alternatively, the NSW Farmers’ Association has previously suggested treating all rural and remote students who leave home as independent automatically.[36]

By abolishing the family assets test and family actual means test, the Bill will provide greater access to Youth Allowance and higher payment rates to dependent young people whose families have low adjusted taxable incomes but significant assets or means that fall outside the income test. This will be of significant benefit to farm families who often have relatively high levels of assets (in terms of land, machinery, stock and vehicles) but low incomes. However, it will also benefit wealthy families whose financial arrangements (via family trusts or business structures) mean that their wealth is not reflected in the level of income assessed under the parental income test. Dependent children in such families will be able to access government income support, despite the fact that their families could comfortably provide financial support. The family actual means test was introduced by the Labor Government in 1996 primarily to respond to ‘community concerns that a small number of students get Austudy even though their families clearly have financial resources well in excess of the take-home pay of the Austudy target group’ (Austudy was the main payment for all young people in higher education before Youth Allowance was introduced in 1998 and Austudy became payable only to students over the age of 25 years).[37] Then Minister for Employment, Education, Training and Youth Affairs, Amanda Vanstone, explained further in 1997:

… the actual means test was introduced by Labor in 1996, I believe, to try to ensure that those people who have the capacity to rearrange their assets and income so as to bypass an ordinary asset or income test would not be able to nonetheless get Austudy.

…

The stories are legion in universities around Australia of the sons of surgeons, for example, who might have incomes that you and I and others would regard as quite substantial, nonetheless being able to get Austudy. I would not imagine that there was a person in this place who has not heard of one Austudy rort or another.[38]

It would appear that concerns about such ‘rorting’ have diminished. Rather, the Minister described these tests as a ‘significant regulatory burden’ on the 30,000 families subject to the family actual means test and the 200,000 families subject to the family assets test.[39] The Minister stated that removing the two tests will provide ‘extra support to families as their children move into young adulthood’—removing the family assets test will allow an additional 4,100 Youth Allowance claimants to qualify for the first time while removing the family actual means test will allow an additional 1,200 Youth Allowance claimants to qualify for the first time and increase the payment rates of 4,860 students by $2,000 a year (it is unclear if this is an average figure).[40]

The amendments will also mean that dependent Youth Allowance claimants will not face a personal assets test, only the personal income and parental income test. It is unclear why the personal assets test will not be applied to these claimants, given that it would only exclude young people with significant assets (single non-homeowners would need to have assets over $348,500 to be excluded by the personal assets test).

Main provisions

Item 1 repeals the family actual means test definitions at section 10B of the SS Act.

Item 2 repeals and substitutes subsection 547B(2) so that a person considered not independent is excluded from the application of the Youth Allowance assets test (both the family assets test and the personal assets test).

Item 3 repeals the family assets test limit at paragraph 547C(a) as the limit will no longer apply to any claimants.

Item 4 removes references to a person being independent for the purposes of the different asset test limit amounts at subparagraphs 547C(b)(i), (c)(i), (d(i) and (e)(i) as only independent claimants will be subject to the assets test.

Item 6 repeals and substitutes section 547D so that the Youth Allowance asset tests will only include the value of the partner’s assets where the claimant is a member of a couple, in certain circumstances, but will no longer include the value of any family assets under any circumstances.

Item 7 repeals section 547G which provides for the treatment of farm and business assets under the family assets test. Section 547G is made redundant by the item 6.[41]

Items 8, 9, 10 and 15 amend point 1067G-A1 and repeal Module G of the Youth Allowance rate calculator at section 1067G to remove the family actual means test, and references to the test, from the Youth Allowance rate calculator.

Removing parental income test exemptions

The Bill will remove exemptions from the parental income test for Youth Allowance claimants with a parent who qualifies for a Low Income Health Card or is in receipt of a New Enterprise Incentive Scheme allowance. The Minister stated in his second reading speech that this will align the exemptions for the Youth Allowance parental income test with the existing arrangements for Family Tax Benefit Part A (which excludes those in receipt of an income support payment or who have an employment income nil-rate period of up to six fortnights).[42]

The Low Income Health Care Card is provided to those who have a low income but do not qualify for an automatic issue Health Care Card (provided to those in receipt of certain allowance payments such as Newstart Allowance and those who receive the maximum rate of Family Tax Benefit Part A). For those with dependent children, income must, in the eight weeks prior to applying for the card, be below $919 per week if single or $953 per week for couples (combined, with one dependent child), plus $34 for each additional dependent child.[43] The New Enterprise Incentive Scheme assists jobseekers who are interested in running a small business and is part of the jobactive employment services scheme.[44] Participants are paid an allowance for 39 weeks of a business operation, equivalent to the single, no children rate of Newstart Allowance.[45] The rate of the allowance is unaffected by any revenue from their business but may be affected by other income.

While it is possible that some Low Income Health Care Card holders and New Enterprise Incentive Scheme allowance recipients will have income over the Youth Allowance parental income free area of $50,151 per year, it is likely to only be a small group that would have income at a level that would significantly impact on their child’s Youth Allowance eligibility or rate (due to the eligibility requirements and nature of the New Enterprise Incentive Scheme). The main reason for no longer excluding these two groups from the parental income test appears to simply be making the income test more consistent with the Family Tax Benefit Part A income test.

Main provisions

Item 12 repeals paragraph 1067G-F3(e) of the SS Act which provides for those whose parents qualify for a Low Income Health Care Card to be exempt from the parental income test.

Item 16 repeals table item 11 in Module L of the Youth Allowance Rate Calculator at section 1067G.[46] Paragraph 1067G-F3(a) exempts those whose parents are in receipt of payments listed at Module L from the parental income test. Repealing table item 11 in Module L, which refers to the New Enterprise Incentive Scheme allowance, will mean that Youth Allowance claimants whose parents are recipients of the New Enterprise Incentive allowance will no longer be exempt from the parental income test.

Adding Family Tax Benefit children to the family pool for Youth Allowance

As described above, the Youth Allowance family means test applies a formula to apportion the total parental income to each dependent child in receipt of one of the following payments:

•       Youth Allowance

•       ABSTUDY living allowance

•       ABSTUDY Group 2 school fees allowance (means-tested component)

•       additional boarding allowance under Assistance for Isolated Children or

•       Family Tax Benefit (FTB) (for a child aged 16 or older who is a full-time secondary student).

The use of this formula is a way of acknowledging that the total amount of parental income is used to support multiple children, and an attempt to apply an equivalent assessment of the income of families supporting multiple young people as applies to families supporting just one young person. Currently, these family pool arrangements only take account of children over the age of 16, who might legitimately qualify for Youth Allowance or ABSTUDY themselves, or who might also qualify their parents for Family Tax Benefit. The Bill proposes to make two key changes to this arrangement, to apply from 1 July 2016:

•       to expand the family pool to include younger children who qualify their parent/guardian for FTB and

•       to ensure that the notional amounts assigned to each child take account of the level of care provided to that child (where there are shared care arrangements in place).

The Bill will mean that all FTB children and ‘regular care children’ will be included in the family pool, not just those considered ‘secondary school FTB children’. FTB children are those that qualify their parent or guardian for FTB, and to be an FTB child the parent or guardian must have care of the child for at least 35 per cent of the time (when care is shared between two or more individuals).[47] A regular care child is a child in the care of an individual for at least 14 per cent but less than 35 per cent of the time—individuals with a regular care child will not be eligible for the main components of FTB but they may be eligible for Rent Assistance, a Health Care Card and child care payments if the person pays childcare fees.[48] Where a Youth Allowance claimant’s only relevant sibling is a regular care child, the amount of FTB worked out for that child as part of the family pool arrangements will be the Rent Assistance payable in respect of that child.

The changes will mean that more Youth Allowance claimants will be eligible for the payment and some will receive a higher payment rate—this is because the total parental income can be apportioned amongst all children in the family, not just those aged 16 or over who qualify for one of the payments listed above. For affected Youth Allowance claimants, a small amount of their parental income will be assessed under the parental income test. The Minister stated that 13,700 families will become eligible for an increase in their payment rates—with an average increase of $1,100 per year.[49] Around 5,800 families who currently miss out on a payment (either Youth Allowance or one of the other relevant payments) will become eligible for a payment—with an average benefit of $1,300 a year.[50]

Main provisions

Item 22 repeals points 1067G-F31 and 1067G-F32 of the SS Act, which provide for secondary school FTB children to be included in the family pool, and substitutes proposed points 1067G-F31, 1067G-F32, 1067G-F33, 1067G-F34 and 1067G-F35 to include all FTB and regular care children in the family pool and sets out how the FTB rates are to be calculated in respect of these children. The rate used will be the maximum FTB-A rate worked out using step 1 of the method stated at clause 3 of Part 2 in Schedule 1 of the A New Tax System (Family Assistance) Act 1999—this is the rate unadjusted for income or other factors which may affect the person’s FTB-A. If the only relevant sibling to be included in the family pool is a regular care child however, then the rate used will be that worked out under step 1 of the method statement at clause 28A of Schedule 1 of the A New Tax System (Family Assistance) Act 1999 (which works out the Rent Assistance payable to an individual with a regular care child).

Maintenance income

The Bill proposes two changes to the way maintenance income (child support and payments made to a former partner following a divorce or separation) is assessed under the parental income test for dependent Youth Allowance. The first change is to repeal, from 1 January 2016, the current arrangements—which includes any maintenance paid to the parent for the upkeep of a child of the parent if the parent has care of the child and any maintenance paid by a former partner of the parent—in the parental income amount assessed under the parental income test. The second change is to introduce a separate maintenance income test which will assess only the child support paid in respect of the Youth Allowance claimant in the parental income test for Youth Allowance. The new test will apply from 1 January 2017 and is based on the maintenance income test for FTB.[51] It is unclear why there is a one year gap between the repeal of the existing arrangements and the introduction of the new test.

While the current arrangements allow for the total income of the parent(s) to be assessed under the parental income test, including maintenance paid in respect of other children or spousal maintenance (alimony), this runs against the aims of the family pool arrangements outlined above—where it is recognised that some forms of income are paid for the specific purpose of supporting another dependent child. The proposed new arrangements will align the treatment of maintenance income in respect of dependent Youth Allowance claimants with the treatment of maintenance income in respect of the FTB payments to dependent children. It will also ensure that only maintenance paid in respect of the Youth Allowance claimant will be assessed for the purposes of the parental income test.

The change is beneficial and ensures consistency for the treatment of maintenance income under the means test applicable to benefits paid in respect of dependent children. The Department of Social Services estimates that the repeal of the current arrangements for assessing maintenance income from 1 January 2016 will see an increase in payments for 3,800 ABSTUDY and Youth Allowance claimants, with an average increase of $900 per year.[52] However, when the new arrangements commence from 1 January 2017, 850 payment recipients will see a reduction in their payment rates.[53]

Main provisions

Item 14 repeals point 1067G–F21 of the SS Act, which currently provides for any maintenance income paid to the parent of a dependent Youth Allowance recipient to be included in the amount of income assessed under the parental income test.

Item 24 substitutes step 8 of the method statement at point 1067G–A1 so that dependent Youth Allowance claimants will have the impact of the parental income test worked out according to the method statement set out in proposed Module E, which is inserted by item 25. Currently, Module F is used for this purpose. Module E incorporates the parental income test result worked out in Module F, but sets up a method for also applying the new maintenance income test and ensuring that where the maintenance income test applies, it cannot reduce a claimant’s payment rate by more than the difference between the maximum and base rate of FTB-A for those aged 16 or over. The amount of this difference, currently $176.26 per fortnight, will be known as the MIT reducible amount. This method reflects an aspect of the FTB-A maintenance income test which ensure that the impact of the test cannot result in a recipient’s payment rate falling below the base rate of FTB-A.

Under the new method statement for working out the impact of the parental income test on a dependent Youth Allowance claimant’s payment:

•       the maintenance income test component will only apply if the parental income test result worked out using Module F (the current parental income test arrangements) is less than the MIT reducible amount. If the parental income test result is equal to or more than the MIT reducible amount, then the claimant’s payment rate will be reduced by the parental income test result or

•       if the maintenance income test applies, the result will be added to the parental income test result to form a notional reduction. If the notional reduction is less than or equal to the MIT reducible amount, then the notional reduction is used to reduce the claimant’s payment rate. If the notional reduction is more than the MIT reducible amount, the MIT reducible amount will be used to reduce the claimant’s payment rate.

Items 26–36 amend various parts of Module F to reflect the terminology used in the method statement at Module E, particularly to replace references to person’s reduction for parental income with parental income test result.

Item 37 inserts the new maintenance income test as Module GA. The maintenance income test operates in a similar way to the FTB maintenance income test at clause 20 of Schedule 1 of the A New Tax System (Family Assistance) Act 1999.[54] The test differs from that which applies to FTB in that it only assesses the maintenance income paid in respect of the Youth Allowance claimant, and excludes any maintenance income paid to the same parent(s) for any other children.

Other provisions

Items 38–45 amend the SS Admin Act to provide for how the Department of Human Services should assess the amount of maintenance income a person is in receipt of (using estimates for payments in the current financial year based on information provided by the parent such as their child support assessment) and how determinations in regards to the amount of Youth Allowance to be paid can be revised based on new information in regards to maintenance income received or following an internal review to be conducted at the end of the financial year. In part, these amendments are intended to replicate the reconciliation process for FTB, where a recipient’s income estimates provided for the year are reconciled against their actual income (usually based on their tax return).[55] The reconciliation process can result in a favourable determination, where it is found they should have received a higher payment rate, or an adverse determination, where it is found that the person received an overpayment and a debt is raised against them.

Concluding comments

The Bill will provide easier access to Youth Allowance for those young people deemed as dependent on their parents. It will be of particular benefit to those whose families have significant asset holdings but relatively low incomes such as farming families. However, the changes will also mean that young people from some high wealth families, who structure their finances in ways that minimise their tax liabilities, will also be able to access income support. While the stated aim of the measures is to provide additional support to students from families from rural and regional areas, a much broader group of students and young people will be able to benefit from the changes.

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

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[1].              The Social Services Legislation Amendment (Youth Employment and Other Measures) Bill 2015 passed the House of Representatives on 24 June 2015 and was negatived in the Senate on 9 September 2015. Parliament of Australia, ‘Social Services Legislation Amendment (Youth Employment and Other Measures) Bill 2015 homepage’, Australian Parliament website, accessed 6 October 2015.

[2].              Social Security Act 1991 (Cth), accessed 25 September 2015.

[3].              Social Security (Administration) Act 1999 (Cth), accessed 25 September 2015.

[4].              Australian Government, Budget measures: budget paper no. 2: 2015–16, p. 156, accessed 25 September 2015.

[5].              S Morrison, ‘Second reading speech: Social Services Legislation Amendment (More Generous Means Testing for Youth Payments) Bill 2015’, House of Representatives, Debates, 10 September 2015, p. 9741, accessed 14 October 2015.

[6].              B McKenzie, Wangaratta forum next on McKenzie’s agenda, media release, 16 July 2015, accessed 6 October 2015.

[7].              B McKenzie, Now time to ensure regional students get fair access to higher education, media release, 21 September 2015, accessed 6 October 2015.

[8].              Senate Selection of Bills Committee, Report, 11, 2015, The Senate, Canberra, 10 September 2015, p. 1, accessed 11 September 2015.

[9].              Senate Community Affairs Legislation Committee, Inquiry into the Social Services Legislation Amendment (More Generous Means Testing for Youth Payments) Bill 2015, The Senate, Canberra, 10 September 2015, accessed 11 September 2015.

[10].              Senate Standing Committee for the Scrutiny of Bills, Alert digest, 10, 2015, The Senate, Canberra, 16 September 2015, p. 7, accessed 1 October 2015.

[11].              J Phillips, T Boyd-Caine, R Evans, P Davidson, E Livesey and P Dorsch, Budget analysis 2015–16, Australian Council of Social Service (ACOSS), Sydney, 2015, p. 19, accessed 25 September 2015.

[12].              Ibid.

[13].              Explanatory Memorandum, Social Services Legislation Amendment (More Generous Means Testing for Youth Payments) Bill 2015, p. 1.

[14].              The Statement of Compatibility with Human Rights can be found at page 18 of the Explanatory Memorandum to the Bill.

[15].              Parliamentary Joint Committee on Human Rights, Twenty-eighth Report of the 44th Parliament, 17 September 2015, p. 2, accessed 13 October 2015.

[16].              Department of Human Services (DHS), ‘Youth Allowance’, DHS website, 21 September 2015, accessed 25 September 2015.

[17].              DHS, ‘ABSTUDY’, DHS website, 21 September 2015, accessed 25 September 2015.

[18].              Department of Social Services (DSS), ABSTUDY policy manual, DSS, Canberra, 1 July 2015, p. 6, accessed 25 September 2015.

[19].              DSS, ‘3.2.5.10 Qualification for YA & DSP as an independent young person’, Guide to social security law, version 1.215, released 21 September 2015, DSS website, last updated 9 February 2015, accessed 7 October 2015.

[20].              DSS, ‘3.2.5.80 YA & DSP – Self-supporting through paid employment’, Guide to social security law, version 1.215, released 21 September 2015, DSS website, last updated 1 July 2015, accessed 7 October 2015.

[21].              The base tax year: Social Security Act 1991 section 1067G–F5.

[22].              DSS, ‘4.2.8.10 Dependent YA – parental income test and limits’, Guide to social security law, version 1.215, released 21 September 2015, DSS website, last updated 17 August 2015, accessed 13 October 2015.

[23].              DSS, ‘4.2.8.20 Dependent YA – family assets test and limits’, Guide to social security law, version 1.215, released 21 September 2015, DSS website, last updated 21 September 2015, accessed 13 October 2015.

[24].              DSS, ‘4.2.9.10 Family actual means test – designated parents’, Guide to social security law, version 1.215, released 21 September 2015, DSS website, last updated 10 November 2014, accessed 7 October 2015.

[25].              Ibid.

[26].              DSS, ‘4.2.9.20 Family actual means test – actual means’, Guide to social security law, version 1.215, released 21 September 2015, DSS website, last updated 1 July 2013, accessed 16 September 2015.

[27].              DSS, ‘4.2.9.30 Family actual means test – amounts not included in the family actual means test’, Guide to social security law, version 1.215, released 21 September 2015, DSS website, last updated 17 August 2015, accessed 16 September 2015.

[28].              DSS, ‘4.2.9.40 Family actual means test – application of the test’, Guide to social security law, version 1.215, released 21 September 2015, DSS website, last updated 11 August 2014, accessed 13 October 2015. The family actual means free area is the same as the parental income free area: currently, $50,151.

[29].              Ibid.

[30].              Ibid.

[31].              DHS, ‘Personal income test for ABSTUDY, Austudy and Youth Allowance’, DHS website, last updated 22 September 2015, accessed 13 October 2015.

[32].              Ibid.

[33].              DHS, ‘Liquid assets waiting period’, DHS website, 29 June 2015, accessed 25 September 2015.

[34].              See, for example, Chapter 3 of the Senate Rural and Regional Affairs and Transport References Committee, Rural and regional access to secondary and tertiary education opportunities, The Senate, Canberra, December 2009, pp. 51–86; and Chapter 9 of the House of Representatives Standing Committee on Primary Industries and Regional Services, Time running out: shaping regional Australia’s future: report of the inquiry into infrastructure and the development of Australia’s regional areas, House of Representatives, Canberra, 2000, pp. 255–286, both accessed 21 September 2015.

[35].              Senate Rural and Regional Affairs and Transport References Committee, op. cit., pp. 282–283; House of Representatives Standing Committee on Primary Industries and Regional Services, op. cit., pp. 79–80.

[36].              NSW Farmers’ Association, Submission to Senate Rural and Regional Affairs and Transport References Committee, Inquiry into rural and regional access to secondary and tertiary education opportunities, August 2009, p. 15, accessed 21 September 2015.

[37].              J Faulkner, ‘Austudy regulations’, Senate, Debates, 19 October 1995, p. 2109, accessed 21 September 2015.

[38].              A Vanstone, ‘Answer to Question without notice: Austudy [Questioner: B Harradine]’, Senate, Debates, 5 February 1997, p. 140, accessed 21 September 2015.

[39].              S Morrison, op. cit.

[40].              S Morrison, op. cit.

[41].              Explanatory Memorandum, op. cit., p. 5.

[42].              DSS, ‘3.1.1.10 Calculating a rate of FTB – overview’, Guide to social security law, version 1.215, released 21 September 2015, DSS website, last updated 12 August 2013, accessed 24 September 2015.

[43].              DSS, ‘3.9.1.70 Low income HCC – assessment of income’, Guide to social security law, version 1.215, released 21 September 2015, DSS website, last updated 21 September 2015, accessed 24 September 2015.

[44].              Department of Employment, ‘Jobactive’, Department website, 10 September 2015, accessed 6 October 2015.

[45].              Department of Employment, ‘Self-employment—New Enterprise Incentive Scheme (NEIS)’, Department website, accessed 24 September 2015.

[46].              Module L relates to the table of pensions, benefits, allowances and compensation in Part 3.5 of the Youth Allowance Rate Calculator.

[47].              DSS, ‘2.1.1.10 FTB child’, Family assistance guide, version 1.181, released 21 September 2015, DSS website, last updated 1 July 2015, accessed 24 September 2015.

[48].              DSS, ‘2.1.1.13 Regular care child’, Family assistance guide, version 1.181, released 21 September 2015, DSS website, last updated 11 May 2015, accessed 24 September 2015.

[49].              S Morrison, op. cit.

[50].              S Morrison, op. cit.

[51].              DSS, ‘3.1.7.10 Maintenance income test – general provisions’, Family assistance guide, version 1.181, released 21 September 2015, DSS website, last updated 1 July 2015, accessed 25 September 2015.

[52].              DSS, ‘Means testing arrangements for youth payments: 2015 Budget’, DSS, Canberra, 2015, p. 2, accessed 25 September 2015.

[53].              Ibid.

[54].              A New Tax System (Family Assistance) Act 1999, accessed 13 October 2015.

[55].              DSS, ‘6.4.1 Overview of reconciliation’, Family assistance guide, version 1.181, released 21 September 2015, DSS website, last updated 1 July 2015, accessed 25 September 2015.