SOCIAL SECURITY AND VETERANS' AFFAIRS LEGISLATION AMENDMENT (PAYMENT PROCESSING) BILL 1998
1998
© Commonwealth of Australia 1998
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Australia
MEMBERSHIP OF THE COMMITTEE
Members in the 38th Parliament
| Senator Sue Knowles, Chairman |
LP, Western Australia |
| Senator Andrew Bartlett, Deputy Chair |
AD, Queensland |
| Senator Kay Denman |
ALP, Tasmania |
| Senator Alan Eggleston |
LP, Western Australia |
| Senator Michael Forshaw |
ALP, New South Wales |
| Senator Ross Lightfoot |
LP, Western Australia |
Participating Members in the 38th Parliament
| Senator Eric Abetz |
LP, Tasmania |
| Senator Bob Brown |
Greens, Tasmania |
| Senator Mal Colston |
Ind, Queensland |
| Senator Barney Cooney |
ALP, Victoria |
| Senator the Hon Rosemary Crowley |
ALP, South Australia |
| Senator Chris Evans |
ALP, Western Australia |
| Senator the Hon John Faulkner |
ALP, New South Wales |
| Senator Brenda Gibbs |
ALP, Queensland |
| Senator Brian Harradine |
Ind, Tasmania |
| Senator Sue Mackay |
ALP, Tasmania |
| Senator Dee Margetts |
GWA, Western Australia |
| Senator Shayne Murphy |
ALP, Tasmania |
| Senator Belinda Neal |
ALP, New South Wales |
| Senator Kay Patterson |
LP, Victoria |
| Senator the Hon Margaret Reynolds |
ALP, Queensland |
| Senator Sue West |
ALP, New South Wales |
| Senator John Woodley |
AD, Queensland |
Members in the 39th Parliament
| Senator Sue Knowles, Chairman |
LP, Western Australia |
| Senator Andrew Bartlett |
AD, Queensland |
| Senator Kay Denman |
ALP, Tasmania |
| Senator Alan Eggleston |
LP, Western Australia |
| Senator Chris Evans |
ALP, Western Australia |
| Senator Ross Lightfoot |
LP, Western Australia |
Participating Members in the 39th Parliament
| Senator Bob Brown |
Greens, Tasmania |
| Senator Mal Colston |
Ind, Queensland |
| Senator Brian Harradine |
Ind, Tasmania |
| Senator Meg Lees |
AD, South Australia |
| Senator Dee Margetts |
GWA, Western Australia |
| Senator John Woodley |
AD, Queensland |
1. THE INQUIRY
1.1 The Social Security and Veterans' Affairs Legislation Amendment (Payment
Processing) Bill 1998 was introduced into the House of Representatives
on 25 June 1998. On 1 July 1998, the Senate, on the recommendation
of the Selection of Bills Committee (Report No. 9 of 1998), referred
the provisions of the Bill to the Committee for report by 13 August 1998.
The changed sitting pattern for the Senate and intervening Federal election
delayed the presentation of this report. Following the commencement of
the new Parliament, the Senate, on 12 November 1998, referred the
provisions of the Bill to the Committee for report by 24 November
1998. The reporting date was subsequently extended to 30 November
1998.
1.2 The Committee considered the Bill at a public hearing on 18 August
1998. Details of the public hearing are referred to in Appendix 2. The
Committee received 3 submissions relating to the Bill and these are listed
at Appendix 1.
2. THE BILL
2.1 The Social Security and Veterans' Affairs Legislation Amendment (Payment
Processing) Bill 1998 gives effect to two 1997 Budget initiatives to pay
most social security and veterans' affairs payments fortnightly in arrears
and to simplify the date of effect provisions. The amendments, aimed at
providing consistency and simplification, are due to commence on 1 July
1999.
2.2 The payment of social security payments fortnightly in arrears will
change all payday-based social security payments (that is all social security
pensions and all payments aligned with the family allowance payday) into
daily rate period-based payments similar to the current arrangements for
the payment of social security benefits such as Newstart allowance. Further
amendments will enable daily rate calculations to be determined for all
social security payments that are period-based to ensure that a person's
exact entitlement is able to be determined in respect of a period. The
transition from payday to period-based payment will involve no delay or
loss of payment for people affected by the change. [1]
The Minister stated that this initiative `will substantially reduce overlapping
entitlements and non-recoverable excess payments because of efficiencies
gained by reducing processing times'. [2]
2.3 The element of choice will be introduced so that recipients of payments
will be able to choose the day on which they want to be paid. This will
allow recipients to tailor the flow of their social security income to
suit their expenditure patterns and circumstances.
2.4 The Bill also amends the date of effect provisions of the Social
Security Act to simplify the provisions by providing consistent treatment
across payment types. The date of effect provisions govern the commencement,
cessation and variation of social security payments. These provisions
will be amended to generally ensure that the date of an event or a change
in circumstances necessitating a change in that person's rate of payment
or requiring the payment to be cancelled or suspended will be from the
actual date of the event or change in circumstances.
2.5 The minimum period in which recipients of payments must notify such
change in their circumstances will be reduced from 14 to 7 days –
the notification period – for the majority of recipients of currently
payday-based payments. However, a longer period of up to 28 days will
be given to people who, in special circumstances, either because of the
type of event or change in circumstances or because of the individual
circumstances of the person concerned, require a longer period in which
to report to Centrelink. [3] Common notifiable
events include changing address, commencement of employment, an increase
in income, marriage or partnering, separation or death of a partner, birth
or death of a child and absence from Australia. These changes may have
the effect of reducing or increasing the amount of entitlement due to
the recipient.
2.6 The explanatory memorandum states that `the changes will achieve
greater efficiency, equity and accuracy in the reassessment of customers'
income support payments when an event or change in circumstances requires
a reassessment determination to be made'. [4]
This capacity to process payment variations closer to the date of event
should overcome the inconvenience of having to make payments in arrears,
and/or recover overpayments.
2.7 The Bill makes similar changes to the payment of pensions and income
support supplement made under the Veterans' Entitlements Act.
3. ISSUES
3.1 In referring the Bill, the Selection of Bills Committee commented
that clarification was required regarding the number and circumstances
of people likely to be positively or adversely affected by the change
to payment fortnightly in arrears and discussion was needed regarding
the reduction of the notification period from 14 to 7 days.
Change in payment to fortnightly in arrears
3.2 The Australian Pensioners' and Superannuants' Federation (APSF) commented
that older people were having difficulty grasping the significance of
the change due to its complexity and sensed a degree of apprehension and
uncertainty that they will somehow be financially disadvantaged by the
changes. The APSF suggested that it is important that these misunderstandings
are addressed with timely and easily understood information about the
change. [5]
3.3 The APSF also commented that while the availability of choice of
payday was positive, it doubted, at least in the early stages, that large
numbers of older people would choose to switch from the current payment
arrangements. Many social events and other activities, such as community
transport for the housebound and less mobile, are currently scheduled
around the Thursday when pensions are paid. APSF asked that in the
future there should be no attempt to compulsorily or arbitrarily move
pensioners onto specific paydays if it was not their free choice. [6]
3.4 The Department of Social Security (DSS) [7]
estimated the number of recipients to receive increases or decreases in
payment from this proposal. In 1999-00 there would be 741,000 payment
increases and 864,000 payment decreases with these figures rising to 750,000
and 875,000 respectively in 2000-01. However, DSS noted that payment decreases
are the result of the reduced processing time and a reduction in the number
of associated excess payments. It explained that:
Under the current payday-based system some customers with the same circumstances
are treated differently depending upon a number of factors. These factors
include the day on which the customer qualifies for a payment, ceases
qualification or transfers to another payment, the day on which the payday
occurs and when the customer notifies Centrelink of a change in circumstances…the
proposed payment in arrears system is more responsive to the circumstances
of customers. Together with the proposed date of effect rules, the proposed
payment in arrears system will provide greater equity between customers,
ensure consistency between different payment types and provide customers
with their correct entitlement. [8]
3.5 The Department of Veterans' Affairs (DVA) advised that it makes income
support payments to approximately 390,000 people. However, the financial
circumstances of the veteran community receiving income support payments
are relatively stable and generally less likely to change than those of
a younger client group. The payment of pensions fortnightly in arrears
by DVA is likely to have its greatest impact on approximately 115,000
income support recipients who are not receiving the maximum rate of service
pension or income support supplement. [9]
3.6 DVA outlined the adverse and positive affects this change will have
upon its pension recipients. Those who will be adversely affected by the
change include recipients of new grants of service pension or income support
supplement and those receiving an increase of pension. In these cases
the person will be paid the exact number of days of pension that has accrued
from the day of grant or the increase of pension will commence from the
date of event or the date of notification. Currently a person is paid
a full fortnightly instalment of the pension or increased rate of pension.
Under the new arrangements people will be paid only for that part of the
fortnight for which they are eligible. The positive affect is a reverse
of this situation. Currently where a pension is reduced, cancelled or
suspended, the whole fortnightly payment is reduced, cancelled or suspended
on the next pension payday. The change will only affect the number of
days during the fortnight for which a reduced rate or no rate is due.
[10]
Reduction in notification period from 14 to 7 days
3.7 The APSF does not, at this stage, support the reduction in the notification
period. It noted that the complex nature of much social security policy
means that people need to discuss their arrangements with staff from Centrelink's
Financial Information Service. However, the difficulties in accessing
Centrelink's phone system, as noted in the National Manager Communication's
memo, were raised as concerns that some people could be financially disadvantaged,
although Centrelink's efforts in working to overcome current difficulties
and delays in accessing its services were acknowledged. APSF suggested
that, while it can see `great potential' in the service, `only when these
access and service difficulties are resolved satisfactorily would it be
wise, sensible and responsible policy to reduce notification periods'.
[11]
3.8 DSS noted that 14 day notification periods were a legacy of when
communication was based predominantly on mail – meaning that the
system is comparatively slow in responding to changes in the circumstances
of customers. DSS commented that a majority of customers already notify
changes within 7 days and emphasised that the reduced notification period
would simplify processing and result in a speedier payment of benefit.
[12]
3.9 Centrelink acknowledged that from time to time the demand for Call
Centre services outstrips its capacity to meet customer needs at the point
that customers first decide to advise a change or inquire about their
payments. The Committee was advised that Centrelink's Call Centre Support
has implemented strategies to increase capacity to meet demand and reduce
the need for customers to make multiple attempts before they are successful.
These included: extending opening hours; increasing staff resources; `phone
only' days; and using technologies to move some of the demand away from
peak call load periods. [13]
3.10 The Department indicated that customers who need to report income
changes regularly will be most affected by the change. DSS estimated the
number of occasions customers would be affected by the changes. In 1999-00
there would be 1,128,000 payment increases and 653,000 payment decreases
rising to 1,145,000 and 663,500 respectively in 2000-01. These figures
do not correspond on a one-to-one basis with actual customers, since some
individuals may be affected a number of times during a year and others
not at all. DSS commented that while the estimates show more people receiving
increases than decreases, because the average amounts received in each
`favourable' case are significantly less than the amounts deducted more
quickly in `unfavourable' cases, the overall result is expected to be
a savings in outlays. [14]
3.11 DVA advised that it has given special consideration to the effect
of this change on its income support payments:
- pensioners will be encouraged to notify DVA by phone of changes in
circumstances. Because of the comparatively smaller number of income
support recipients, DVA does not have , nor does it expect, the same
volume of phone correspondence as Centrelink;
- in cases of the death of a partner the notification period will be
14 weeks during which time the surviving pensioner will receive no less
than the amount of pension that the couple was receiving before the
death of the pensioner's partner;
- in exceptional circumstances, such as the person being unable to notify,
being overseas or isolated, the notification period may be extended
up to 28 days at the discretion of the Secretary; and
- prior to the change of the notification period, DVA will proceed with
an education program and a joint communication strategy with DSS to
educate and inform income support recipients about the new procedures.
[15]
3.12 DVA assured the Committee that it was `aiming not only to rationalise
and simplify our policies and procedures but also to ensure that the veteran
community benefits from the implementation of these policy programs'.
[16]
4. RECOMMENDATION
4.1 The Committee reports to the Senate that it has considered the Social
Security and Veterans' Affairs Legislation Amendment (Payment Processing)
Bill 1998 and recommends that the Bill proceed.
Senator Sue Knowles
Chairman
November 1998
DISSENTING REPORT - AUSTRALIAN LABOR PARTY and
AUSTRALIAN DEMOCRATS
SOCIAL SECURITY AND VETERANS' AFFAIRS LEGISLATION
AMENDMENT (PAYMENT PROCESSING) BILL 1998
1. The proposed changes:
The Social Security and Veterans ' Affairs Legislation Amendment (Payment
Processing) Bill 1998 seeks to make a number of changes to the social
security and veterans' affairs payment systems.
Under the Bill, the way in which pensions and family allowance are paid
will be changed from payday based payment, on alternate Thursdays, to
payment in arrears, generally for a 14 day period. This would make the
payment of pensions consistent with the way in which other social security
benefits and allowances are paid and would mean that pensioners will be
paid the equivalent of one day's worth of pension for each day on which
they qualify for it.
The Bill also provides for a uniform set of rules for determining the
date of effect of decisions affecting social security entitlements. Currently,
these rules vary across payment types. As a general rule, the Bill would
provide that pensioners and allowance recipients who notify Centrelink
of a change of circumstances, which affect their social security entitlement,
within the time allowed by the Act would be advantaged by doing so. Under
the proposals, prompt notification of a change of circumstances leading
to a reduction in entitlement may mean that certain excess amounts paid
after the change would not be recovered. If they notify Centrelink of
a change of circumstances leading to an increase in entitlement and do
so within seven days, the increase in their entitlement will be backdated
to the date of the change. Under the current provisions entitlement can
only be increased as from the date of notification.
Currently, most pensioners and recipients of parenting payment, youth
allowance and the Austudy payment have 14 days in which to notify Centrelink
of a change of circumstances that might affect their entitlement. The
Bill seeks to reduce this period to 7 days.
2. Issues:
We support some aspects of the Bill, for example the simplification of
the date of effect rules. We also think it is reasonable that a person
who notifies of a change of circumstances that results in an increased
social security entitlement, should have that entitlement increased from
the day their circumstances changed, provided that they advised Centrelink
of the change within the allowed time.
However, we do have some misgivings about the provisions under which
pensions will be paid fortnightly in arrears. The intention here is that
pension and family allowance paydays will be spread across the fortnight
and the old concept of pension and family allowance Thursday pay days
will disappear.
The Bill does not seek to compel existing pensioners to change their
paydays or new pensioners to select a day other than the traditional pension
Thursday. Rather, it leaves this as a matter of choice for them. Of course
some may choose to do so to avoid the long bank queues associated with
pension Thursdays or for other reasons. However, we agree with the Australian
Pensioners and Superannuants Federation that there should be no compulsion
now or in the future in this regard. There are good reasons for pensioners,
particularly age pension recipients, to stay with the current arrangements.
As the AP&SF said in their submission:
`It also needs to be acknowledged that there is a range of other activities
that are organised on pension pay day. For example, Local councils may
offer community buses or community transport to take housebound older
people and older people with less mobility to supermarkets to do their
shopping, pay bills etc. Organised social events and activities are also
scheduled around the Thursdays when pensions are paid.'
Some concern has been expressed to AP&SF that these current arrangements,
`which meet the needs of many frail and perhaps less mobile age pensioners,
could be reduced in time or become less accessible over time if payment
days were spread over the week. It is important to be aware of this issue
and to ensure that there is no reduction in these important activities,
which offer assistance, but also avenues for friendship and social contact
for isolated older people'. (Submission No. 3, page 1).
There is, of course, a significant motivation on the part of the Government,
to persuade pensioners and family allowance recipients to change their
paydays. This is because the extent of the savings they expect to be produced
by this measure depends upon spreading paydays across the fortnight.
They say that there will be a one-off saving of $90 million in 1999-2000.
This is because some years have more days of the week of a certain kind
than others and 1999-2000 has 27 family allowance pay day Thursdays. Spreading
paydays across the fortnight would mean that fewer payments are made on
the 27th payday. As the Department of Social Security pointed out in its
evidence, this is merely an accounting exercise, as there would be more
paydays of other kinds in the out years. It would mean lower expenditure
in 1999-2000 but exactly the same expenditure over an eleven-year cycle
(Mr Leeper, CA 104).
The Government also says that this measure will produce ongoing savings
of $18 million a year as a result of making period- based over payday-
based payments. These savings are to be produced by reducing overlapping
entitlements and non-recoverable excess payments because of efficiencies
gained by reducing processing times (Minister's Second Reading Speech).
Because all pensions are now paid on the same day, the lead up time to
process this two and a half million payments is considerable. When a person
notifies Centrelink of a change of circumstances resulting in a decrease
in entitlement and does so within the time allowed, it may nevertheless
be too late to alter their entitlement for that fortnight if the processing
of their payment is already under way. If pension payments are spread
across the fortnight, the lead up time to process each day's payments
would be much shorter and advice of changes in circumstances is more likely
to be taken into account in determining entitlement for the fortnight
in question.
In giving its evidence the Department of Social Security was not prepared
to guarantee that people would not be compelled to change their preferred
payday. Instead they said that:
`The only constraint that we will really have is that members of a couple
would need to have the same payday, otherwise one event could affect each
person differentially, which would be quite inequitable. Apart from that
constraint and the fact that we would like to move a substantial proportion
of the minimum rate family payment recipients away from that payday Thursday,
we believe that it can be quite open to people to chose as and when they
wish.' (Mr Leeper, CA 105).
Although, as we have said, we have some misgivings about this aspect
of the Bill, we also see its advantages and on balance we would not oppose
it.
On the other hand, we are opposed to the measures which reduce the time
allowed for pensioners to notify Centrelink of changes in circumstances
from 14 to 7 days. Such measures could only compound the very considerable
difficulties pensioners are already facing in their dealings with Centrelink.
It has become increasingly apparent that Centrelink is unable to meet
customer demand. Many thousands of people have had great difficulty reaching
Centrelink by telephone. In the discussion paper of August 1998, `Balancing
the Risks: Providing information to customers in a self assessment income
support system', the Commonwealth Ombudsman said:
`Centrelink has acknowledged that it is currently able to answer only
one-third of the calls made to its call centres each day.' (note 7, page
10)
There has been some acknowledgment of these problems by Centrelink itself
(Submission No.3, page 2).
For many elderly or disabled pensioners, a personal visit to a Centrelink
office within 7 days may be impractical or a cause of considerable inconvenience.
While it is possible to provide relevant information to Centrelink in
writing, this takes more time and may be difficult for some pensioners.
In these circumstances, we believe that 14 days is a reasonable period
to allow pensioners to notify Centrelink of relevant changes.
We understand that Centrelink has taken steps to improve customer telephone
access (Submission No. 1, page 11) but we are not satisfied that the current
level of service is approaching the point where it would be appropriate
to make the existing notification requirements more onerous.
With the recent Centrelink announcement that it will be reducing its
staff by 5000 staff members between July 1997 and 2002, we have grave
concerns about the ability of Centrelink to provide an adequate level
of service in the future.
In its evidence, the Department of Social Security said that retaining
the notification period at 14 days while introducing those beneficial
measures which allow backdating of an increase in entitlement to the date
of the relevant change of circumstances, provided that Centrelink was
informed of the change within the notification period, would add another
$33 million in program costs (Mr Leeper, CA 104). However, it is important
to note that combined social security savings from the Bill are expected
to be $45.6 million in 2000-01, comprising $18.873 million from the change
to payments in arrears and $26.754 million from changes to the date of
effect rules. This means that the Bill would produce net savings even
if the beneficial measures were introduced while the notification periods
were retained at 14 days.
Conclusion:
Having considered the Social Security and Veterans' Affairs Legislation
Amendment (Payment Processing) Bill, we are of the view that the provisions
reducing the time within which customers must notify of relevant changes
from 14 to 7 days should be amended so that the 14 day notification periods
are retained.
However, we are not opposed to the remaining provisions of the Bill.
Senator Kay Denman (ALP, Tasmania)
Senator Chris Evans (ALP, Western Australia)
Senator Andrew Bartlett (AD, Queensland)
APPENDIX 1 - SUBMISSIONS RECEIVED BY THE COMMITTEE
| 1 |
Department of Social Security
- Additional Information, dated 25 August 1998
|
| 2 |
Department of Veterans' Affairs |
| 3 |
Australian Pensioners' & Superannuants'
Federation |
APPENDIX 2 - PUBLIC HEARING
A public hearing was held on the Bill on 18 August 1998 in Senate
Committee Room 2S1.
Committee Members in attendance
Senator Sue Knowles (Chairman)
Senator Kay Denman
Senator Michael Forshaw
Senator Ross Lightfoot
Witnesses
Australian Pensioners' & Superannuants' Federation via
teleconference
Ms Sarah Fogg, Executive Officer
Mr Gerard Thomas, Policy Officer
Department of Social Security
Mr Geoff Leeper, Executive Director, DSS
Mr Andrew Herscovitch, Assistant Secretary, Disability and Carer Programs
Branch, DSS
Mr John Wadeson, General Manager, The Gateway, Centrelink
Mr Gordon McCormick, Director, Payment Cycles Project Team, DSS
Department of Veterans' Affairs
Mr Bob Hay, Branch Head Income Support
Mr Trevor Hughes, Director, Income Support Policy
Ms Marion Springer, Assistant Director, Income Support Policy
FOOTNOTES
[1] Explanatory memorandum, p.3.
[2] Minister's Second Reading Speech, House
of Representatives Hansard, 25.6.98, p.5290.
[3] Explanatory memorandum, pp.19-20.
[4] Explanatory memorandum, p.21.
[5] Submission No.3, p.1.
[6] Submission No.3, p.2.
[7] At its public hearing in August 1998 the
Committee took evidence on this Bill from the Department of Social Security.
As a result of changes to the Administrative Arrangements in October 1998
following the Federal election, social security matters were transferred
to the new Department of Family and Community Services.
[8] Submission No.1, pp.3-4.
[9] Submission No.2, p.2.
[10] Submission No.2, pp.2-3.
[11] Submission No.3, p.2; Committee Hansard,
18.8.98, p.CA101.
[12] Committee Hansard, 18.8.98, pp.104-5.
[13] Submission No.1, p.11.
[14] Submission No.1, pp.12-13.
[15] Submission No.2, p.3.
[16] Committee Hansard, 18.8.98, p.103