Chapter 1

Chapter 1

Introduction

Referral of the bill

1.1        The Families, Housing, Community Services and Indigenous Affairs and Other Legislation Amendment (Budget and Other Measures) Bill 2010 (the bill) was introduced into the House of Representatives on 20 October 2010 by the Minister for Families, Housing, Community Services and Indigenous Affairs, the Hon Jenny Macklin MP.[1]

1.2        On 28 October 2010, the Senate adopted the Selection of Bills Committee Report No. 13 of 2010 and referred the provisions of schedules 2 and 3 of the bill to the Community Affairs Legislation Committee (the committee) for inquiry and report by 22 November 2010.[2]

1.3        After examination of the bill, the committee determined that the focus of the inquiry should be on schedule 2, particularly because of the time critical nature of these provisions.

Conduct of the inquiry

1.4        In accordance with usual practice, the committee advertised the inquiry in The Australian and on the internet. In addition, the committee contacted a number of organisations in writing alerting them to the inquiry and inviting them to make a submission. The committee received 10 submissions, listed at Appendix 1.

1.5        The committee held a public hearing in Canberra on 15 November 2010. A list of witnesses who attended the hearing can be found at Appendix 2.

1.6        The committee notes the short period of time between referral of the inquiry, lodgement of the submissions and the public hearing. The committee appreciates the effort required to meet this timeframe, and thanks those organisations and individuals that made contributions to the committee's inquiry.

1.7        The committee would also like to thank the Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA) for their assistance and prompt response to questions on notice arising from the public hearing on 15 November 2010.

Overview of the bill

1.8        The purpose of schedule 2 of the bill is to amend the Social Security Act 1991 (the Act) to introduce a requirement for ongoing residence in Australia to qualify for the disability support pension (DSP), bringing the DSP into line with other workforce age payments.[3] The main purpose of the DSP is to assist recipients with the cost of living in Australia, and to support their engagement in workforce age activities that lead to greater levels of social and economic participation.[4] The amendments are intended to prevent payment of the DSP to people who live permanently overseas but return to Australia every thirteen weeks in order to retain their pension.[5] The bill is scheduled to commence on 1 January 2011.[6]

Main provisions of the bill

Residency requirement

1.9        The Act states that in order to qualify for the DSP, a person must be a resident at the time they apply for the DSP.[7]

1.10      Sections 1 to 4 of schedule 2 of the bill propose to amend the Act so that instead, the person is required to be an "Australian resident", or show ongoing residency, to continue to qualify for the DSP.

1.11      Subsection 7(2) of the Act defines an Australian resident as a person who:

(a)        resides in Australia; and

(b)        is one of the following:

(i)       an Australian citizen;

(ii)       the holder of a permanent visa;

(iii)      a special category visa holder who is a protected [special category visa] holder.[8]

1.12      Subsection 7(3) of the Act requires certain factors to be considered when determining whether or not a person resides in Australia. These include elements of a person's lifestyle in Australia such as the type of accommodation used; the nature of family relationships; the extent of employment, financial ties and assets; and the frequency and duration of a person's travel outside of Australia.[9]

1.13      The proposed ongoing residency requirement will not apply to recipients whose DSP is portable under an international social security agreement; nor will the new requirement apply to disability support pensioners who were grandfathered from certain portability changes made in 2000 and 2004.[10]

1.14      FaHCSIA informed the committee that there are 19 countries with which Australia has international social security agreements that include the DSP.[11] A list of these agreements can be found at Appendix 3.

Terminally ill overseas disability support pensioner

1.15      Sections 5 and 6 of schedule 2 of the bill define an "Australian resident disability support pensioner" and a "terminally ill overseas disability support pensioner". The bill proposes different portability status for these two categories of the DSP as follows:

1.16      To qualify as a "terminally ill overseas disability support pensioner" a person must meet the requirements of section 1218AA of the Act, which requires all of the following:

(a)        the person is severely disabled;[13] and

(b)        the person is receiving DSP; and

(c)        the person is terminally ill; and

(d)        the person's absence from Australia is or will be permanent; and

(e)         the purpose of the person's absence is:

(i)        to be with or near a family member of the person; or

(ii)        to return to the person's country of origin.[14]

1.17      The DSP may also be paid for the duration of overseas study, so long as the study can be credited towards the recipient's full time Australian course.[15]

"Grandfather" exemptions

1.18      Several past amendments to the Act, in 2000 and 2004,[16] included "grandfather" provisions to exempt existing recipients of the DSP from the effects the amendments would otherwise have had on their portability. Pensioners who had made lifestyle or travel decisions based on previous legislation were thereby not affected by those amendments. Section 8 of schedule 2 of the bill proposes that these exemptions be maintained.

Issues raised regarding the bill

1.19      A number of submitters expressed various concerns about the impact the proposed ongoing residency requirements would have on DSP recipients. These concerns particularly focussed on:

DSP recipients already residing overseas

1.20      Under the proposed amendments, there will be a requirement for ongoing residency in Australia to receive the DSP, unless a DSP recipient is exempted from this requirement.

1.21      FaHCSIA advised the committee:

Centrelink data indicate that there are approximately 1,000 DSP recipients who take 3 or more return trips overseas each year. DSP recipients in this cohort will be affected by this measure if they are found not to be residing in Australia.[19]

1.22      It was suggested by some submitters that some DSP recipients may have chosen to live overseas as it was easier, and less expensive, than attempting to contend with the cost of living in Australia on a pension.[20] In other cases, the committee heard that returning to Australia may have major mental health impacts for some DSP recipients.[21]

1.23      Some submitters called for a greater level of discretion in the bill to cater for individual circumstances.[22] A number of possible exemptions were suggested such as a "grandfather" exemption for those living overseas before the proposed commencement of the bill on 1 January 2011.[23] Pensioners who may have made lifestyle or travel decisions based on previous legislation would thereby not be affected by the amendments.  

1.24      The National Welfare Rights Network (NWRN) called for a greater level of discretion for DSP recipients requiring an extended portability period:

In the past when such significant changes have been introduced in relation to portability there have been grandfathering provisions provided to protect those who have made decisions prior to a legislative change. There continue to be protections for those on disability support pension who are deemed severely disabled and were overseas on a permanent basis prior to the changes on 1 July 2004. It is unfair that the group impacted by these impending changes will have fewer protections.[24]

1.25      FaHCSIA informed the committee that the DSP is intended to support people with the cost of living in Australia, in line with other workforce age pensions.[25] FaHCSIA provided information to the committee which shows other workforce age pensions include portability of up to 13 weeks.[26] Payments made to DSP recipients living overseas do not therefore fulfil the intended purpose of the pension,[27] consistent with the government's agenda to encourage participation rehabilitation for people with a disability:

As to government priorities for disabilities, the government has a strong agenda in the disabilities area to support people with a disability to address barriers and to encourage participation rehabilitation which would have physical and economic benefits for the individual and the taxpayer as well as social benefits and positive life outcomes. Increasing participation rates across areas has been identified in both the intergenerational report and the tax review as crucial for economic development and sustainability.[28]

DSP recipients where carer spends extended periods overseas

1.26      The committee also explored the challenges for DSP recipients dependent on a carer where the carer is required, in the course of their employment, to spend extended periods of time overseas. Under the proposed amendments in schedule 2, the DSP recipient travelling with a carer would lose entitlement to the DSP if the DSP recipient was deemed to be no longer resident in Australia. One submitter outlined that this would also be detrimental to carers by restricting the ability of carers to travel overseas.[29]

1.27      Mr Hugh Borrowman and Ms Suzanne Marley described their situation to the committee. They are legal guardians of their 27 year old son who is classified as "severely disabled" under the Act.[30] As part of his career, Mr Borrowman is required to periodically live overseas. As Mr Borrowman's son has no independent living capacity, he necessarily accompanies Mr Borrowman and Ms Marley on these trips.[31] Mr Borrowman explained how the proposed amendments could impact him, and his family:

I would like to invite you to consider what the alternatives are for people in our situation. Is it to give up our son’s care to the state? Clearly, that is not a possibility...Is it not to follow the career option that I have chosen? I do not know how that squares with modern sentiments about carers in our community, as exemplified in my submission and in the Carer Recognition Bill 2010, which includes ‘the fundamental principle that all carers should have the same rights, choices and opportunities as other Australians’. Should DFAT, the defence forces, BHP, anybody operating in an international environment add a rider to their job ad saying, ‘Carers need not apply’?[32]

1.28      Mr Borrowman went on to suggest the use of a legal guardianship order to qualify for an exemption to the ongoing residency requirement as a possible solution to the issue facing his family.

1.29      Mr Borrowman and Ms Marley proposed that the bill allow for severely disabled DSP recipients with a legal guardian to be exempt from the residency requirement. They outlined that guardianship orders are determined independently by Australian courts, and it would only be necessary for DSP recipients with no independent living capacity intending to spend extended periods of time overseas with a carer to apply for a guardianship order.[33] Mr Borrowman and Ms Marley outlined that the exemption would only apply for the intended period of travel overseas:

It would be a simple matter to insert an additional exemption to cover persons subject to a guardianship order issued by a competent judicial authority...There would be no additional cost to the Commonwealth through such an exemption: by definition, affected persons would already be receiving DSP - it does not create a new category of recipient. And on this model, because the assessment of guardianship is carried out independently by the courts, there is an existing compliance mechanism in place.[34]

1.30      FaHCSIA argued that many DSP recipients have a non-formal care arrangement and applying for a guardianship order may place an undue burden on carers to formalise what, in many cases, may be a fragile care arrangement.[35] FaHCSIA further argued that using guardianship orders in this manner may be contrary to the principles of state and territory guardianship tribunals, as tribunals seek to encourage the use of non-formal arrangements to provide the least restrictive outcome for the person with a disability.[36]

1.31      FaHCSIA went on to state that using guardianship orders would create administrative complexities for Centrelink and as a result would not be an effective compliance mechanism.[37] As guardianship orders are a state and territory-based responsibility, there are different types of orders across jurisdictions; therefore it would be difficult for Centrelink to make consistent and equitable assessments at a national level.[38] Furthermore, guardianship orders are granted for a limited time which would require Centrelink to track variations to guardianship orders of DSP recipients living overseas.[39]

1.32      The committee was concerned by the issues raised by Mr Borrowman. The committee is of the view that FaHCSIA and the Minister continue to examine ways in which to address this situation. 

Human rights

1.33      The National Ethnic Disability Alliance (NEDA) expressed concern that the proposed amendments are contrary to the United Nations (UN) Convention on the Rights of Persons with Disabilities ratified by the Australian Government in 2008, and the freedom of movement guaranteed to all Australians:

On the Department of Immigration and Citizenship website, one comes across the five freedoms guaranteed to all Australians. This includes the freedom of movement, including the quote: ‘We can leave and return to Australia at any time.’ While it may not be intentional, the amendments as proposed restrict this freedom in a negative way. Human rights are firm on the basis of the UN Convention on the Rights of Persons with Disabilities—and I would like to raise the question at this point as to whether the amendments conform with the rights as embedded in the convention.[40]

...

I do not think that people with disabilities who are recipients of the DSP are necessarily in a position to make the same choices that other people have in their lives. So in that respect I do not think people on disability support pension should have an additional restriction on their rights and freedoms. In that sense I do believe that there is a difference when it comes to the residency requirements, especially if living overseas would mean a substantive improvement in quality of life for that person. Given that difference in terms of the limitations on options, I do think that is a justifiable distinction.[41]

1.34      FaHCSIA stated that matters relating to breaches of human rights law on the rights of people with a disability had not been raised with them in the course of discussions relating to the bill.[42]

1.35      The committee notes that the Australian social security system is a non-contributory system, unlike most other countries, where payments are tied to the contributions a person makes during their working life.[43] Further:

A person does not have to have paid taxes to be eligible but at the same time paying taxes does not create an entitlement. Our system is also a residence based system; that is, the person needs to be a permanent resident and residing in Australia for most benefits.[44]

Equity with the age pension

1.36      NEDA suggested that the proposed amendments limiting the portability of the DSP was not consistent with other pension categories, namely the age pension:

The amendments are inconsistent with other approaches the Australian government takes for other population groups. For instance, they do not apply to aged pensioners. In no way is NEDA proposing that the amendments should therefore be applied to aged pensioners. Quite to the contrary, the view that is put forward here is that the approach taken should be one to support human rights and quality of life, especially for those whose quality of life is already compromised due to disability, ill health or age related restrictions.[45]

1.37      Mr Borrowman explained how the inability of a DSP recipient with a congenital intellectual disability to participate in the workforce is comparable to an age pensioner:

People of the sort I am talking about have reached a threshold condition of a congenital intellectual disability, like an age threshold of the age pension. That is never going to change. It cannot go backwards. They are not going to get better. That is why I say that that category of people is more analogous to people who are on an age pension. They are not going to be reintegrated into the workforce. They are not going to get better.[46]

1.38      FaHCSIA outlined that the term "severely disabled" is used in relation to assessment for social security agreements and it is for people who will not be able to work for more than 8 hours per week in the coming two years.[47]

1.39      The committee was advised that:

FaHCSIA does not know the number of the people who are severely disabled who have the potential to get into jobs and be rehabilitated to join the workforce. However, there are currently around 90,000 people with an intellectual disability receiving the DSP who would generally be assessed as being severely disabled. This group of DSP recipients have permanent life long impairments that will not improve.[48]

1.40      Prior to the amendments made by the Family and Community Services and Veterans' Affairs Legislation Amendment (2003 Budget and Other measures) Act 2003, severely disabled DSP recipients were granted an unlimited portability period, while DSP recipients without a severe disability were given a 26 week portability period.[49] DSP recipients with a severe disability were acknowledged as a separate category for portability entitlements.

1.41      FaHCSIA defined the DSP as a 'workforce age payment' and informed the committee that the DSP had been so defined by the Hon Senator Kay Patterson, then Minister for Family and Community Services, in 2003[50] when she described the DSP as being:

...in line with the government's overall welfare reform strategy which aims to engage people of work force age in activities in Australia that will lead to greater levels of economic and social participation.[51]

1.42      FaHCSIA argued that whilst the participation prospects of certain DSP recipients are generally constrained, 'the main purpose of the DSP is to assist people with the cost of living in Australia and to support their social and economic participation'.[52] FaHCSIA outlined that in addition to the increased payment levels for DSP recipients, these principles are supported through Australian Disability Enterprises; the Supported Wage Scheme; Disability Employment Services; and the National Disability Agreement.[53]

1.43      FaHCSIA further outlined that there were risks involved in offering portability to a category as broad as those defined as "severely disabled" under the Act:

People who may be severely disabled may be severely disabled for a short period of time and may have some capacity for participation and can, therefore, be assisted and perhaps have some access to work. The issue is, of course, if you grant unlimited portability to a group of people that may include a very broad category of people, it may be difficult for us to continue to monitor their improvement or whether or not they are still eligible for disability payments and/or for extended portability. One of the reasons for the 2004 changes was that there was a growing number of people who were perhaps coming into those categories and the government was looking to assist them into work at that stage.[54]

1.44      The committee acknowledges that the "severely disabled" category covers a broad range of people; some of whom are in that category temporarily while undertaking rehabilitation, and others who will remain severely disabled for the rest of their lives. The committee considers there is a need for further work to be undertaken on the definition of "severely disabled" to recognise this distinction. The committee is of the view that FaHCSIA should examine the feasibility of distinguishing between those who have the potential to be rehabilitated to work in the future; and those who due to the nature of their disability will never be able to participate in work.

Retrospectivity

1.45      The amendments in schedule 2 of the bill are scheduled to commence on 1 January 2011.[55] The Senate Scrutiny of Bills Committee noted if the bill passes after 1 January 2011 then the provisions in schedule 2 will commence retrospectively and 'the provisions of the bill are designed to be detrimental to some people and their possible retrospective commencement therefore attracts the Committee's attention'.[56]

1.46      The committee notes that the Minister for Families, Housing, Community Services and Indigenous Affairs has advised the Scrutiny of Bills Committee:

If passage in 2010 does not happen, the commencement would not be retrospective.

Despite the public announcement of the measure...I would not intend the measure to apply retrospectively (with adverse effect) should passage be delayed. In that event, I would intend to move an amendment delaying commencement of the measure to the day after Royal Assent.[57]

1.47      The Scrutiny of Bills Committee noted, therefore, 'that there is no intention for the provision to apply retrospectively with adverse effect, which addresses its concerns'.[58]

Other issues raised during the inquiry

1.48      In addition to the concerns raised specifically regarding the impact of the changes proposed in the bill, issues were also raised regarding the government's savings estimates, as well as consultation on and communication of the changes proposed in schedule 2. 

Estimated savings to government

1.49      The changes proposed in the bill have been estimated to result in savings to government of $3 million.[59]

1.50      FaHCSIA informed the committee that the figure of $3 million only included savings which were within the FaHCSIA portfolio: '...in the current costing model we do not include any government programs or the add-on costs or the other costs that are outside our portfolio'.[60]

1.51      Ms Sibylle Kaczorek, Executive Officer of NEDA, raised concern about FaHCSIA's calculation of the savings, and particularly whether the department had included additional costs which might be incurred if recipients of the DSP currently residing outside Australia decided to return to Australia permanently:

Now I would like to address the question of false accounting. NEDA would be interested to hear how the projected figure of $3 million in savings is calculated, as we do not believe that the figure is correct. In fact, we believe that the changes, if accepted, would create an additional cost to taxpayers. We believe that what has been forgotten in the costing is the additional expenses for people on the DSP who are residing in Australia. This may include a combination of things, which I will list—and I might warn you that this list is rather long. We question whether the costing includes consideration for carer allowance; carer payment; utility allowance; rail concessions; national partnership agreement concessions such as the reciprocal transport concessions or compensation through Treasury for concessions on services such as municipal and water rates, utilities, motor vehicle registration and public transport; the National Mental Health and Disability Employment Strategy; Australian Disability Enterprises; Disability Employment Network; postal concessions for the blind; print disability services; disability parking permit scheme; National Companion Card; rent assistance and public housing; and home and community care services. This list could probably be extended even further.[61]

1.52      The NRWN also flagged potential costs as a result of the changes:

There are additional costs if someone returns to Australia because the rate payable would be higher than the rate which is payable when they are overseas. There are also costs associated with them accessing health services. Similarly, there are pharmaceuticals and those sorts of things and even concessions that, in a way, they do not have access to because they are overseas.

...

A lot of the clients that we see who are going backwards and forwards between other countries and Australia have got new families and often dependants and there are the issues that will raise if all of a sudden there is no payment of disability support pension to the primary person who is an Australian citizen; there will be more applications for residency for spousal visas and also visas for children to come to Australia and the associated support that will go hand in hand with that, because these people are disability support pensioners, so there is the issue of whether or not there will be that capacity for a spouse to actually earn money and those types of things. We see that there will be longer-term costs that have not necessarily been factored in.[62]

1.53      Ms Kate Beaumont, Vice-President of the NRWN, raised further concern about the potential for other costs to government as a result of:

...a high number of appeals in this area because we only have to look at the Administrative Appeals Tribunal cases related to portability, residence and returning residence, which causes quite a headache for Centrelink and also people challenging decisions that are made because they regard that, as they are an Australian citizen or they have Australian residency, they should be eligible for all of the payments and things like that. We can see that there will be those sorts of costs.[63]

1.54      FaHCSIA acknowledged that 'there are certainly potential savings'[64] to government elsewhere, for example medical and pharmaceutical expenditure, which might arise if some current recipients of the DSP choose to permanently reside outside Australia as a result of the change to the residency requirements proposed in the bill.[65] The department went on:

...it is a common perception that if a person [is] living overseas on a disability they save the Australian taxpayer money in terms of medical costs. We found that if a DSP recipient were given unlimited portability their access to Australian pharmaceutical benefits, the PBS and the MBS, was substantially reduced. However, if they were only leaving Australia under portability provisions—that is the 13-week arrangement—there was no real change in their usage patterns.[66]

1.55      In response to questions on notice, FaHCSIA advised:

The measure is expected to save the Government $8.4 million over the forward estimates period. The assumptions used are based on 2007/08 Centrelink data, which shows that approximately 1,000 DSP recipients made more than 3 trips outside Australia in that financial year. Out of this group, 154 spent less than 8 weeks in Australia. 

FaHCSIA administered savings are based on the assumption that 150 DSP recipients (or 15 % of the DSP population who travel overseas regularly each year) will chose [sic] to remain overseas and will have their payment cancelled. It is assumed that once this provision is enacted the number of people choosing to remain overseas and cancelled from payment will reduce to 15 people each year over the out years. 

The costing assumptions and estimates were agreed with the Department of Finance and Deregulation.[67]

Recommendation 1

1.56      The Department of Families, Housing, Community Services and Indigenous Affairs establish a mechanism to monitor the ongoing cost impact of the changes contained in this bill.

Consultation and communication

1.57      During the course of the inquiry, some submitters expressed concern about the way in which the changes to the DSP proposed in the bill were communicated to those likely to be affected.[68] One submitter was particularly concerned that:

...there are DSP recipients that are completely unaware of this proposed change. There were a couple of media releases in March. If they were overseas at the time, they possibly may not have read an Australian paper that day. Sure enough it was in the budget, if you knew where to go looking for it.[69]

1.58      The NRWN was similarly concerned:

I do not think that very many people affected by these rules would be aware of them. We have made some efforts to contact one of our clients who is a blind pensioner who lives in Indonesia to inform him through his brother about these impending changes. That is just one out of essentially 1,000 or so people that, according to FaHCSIA, would be affected by these changes. I do not think there is a great deal of awareness. Whilst there were the media statements from the minister and a media story in March which got a little bit of publicity, most people would not be aware of the implications of these changes or when they are due to start.[70]

1.59      FaHCSIA informed the committee that there had 'not been any formal consultation on the initiative' but that information on the proposed changes had been made public by way of two media releases:

There was a much earlier media release–in March of this year–by the minister for FaHCSIA...So, there have been two media releases–one in March and one in October...[71]

1.60      FaHCSIA went on to state that the department had not received any requests for consultation.[72]

1.61      The committee notes that the Minister's media release on 20 October 2010 advised that:

From January 2011 only DSP recipients permanently residing in Australia will be able to continue to receive the DSP except under limited and specific circumstances. This change will bring DSP into line with other workforce age payments.[73]

1.62      The media release also stated that the 13 week temporary absence rule would remain 'to allow DSP recipients to legitimately travel overseas for short periods' and that:

The legislation will not affect any disability support pensioner who has portability under an international social security agreement, is grandfathered from changes introduced in 2001 or 2004, or is entitled to portability because they are severely disabled and terminally ill and overseas to be cared for by a family member.[74]

1.63      In response to a question on notice, the department informed the committee that DSP recipients currently residing outside Australia would be advised of the new residency requirement:

The proposed residency changes will affect approximately 1,000 DSP recipients who have been identified as having a high likelihood of residing overseas. The identification of this group is based on a “presence test”, which measures length of time spent overseas.

All DSP recipients identified in this process will be sent a letter by Centrelink informing them of the changes to the residency rules for DSP. The letter will invite the recipient to contact Centrelink if they want more information about the changes. Centrelink also plans to contact all customers identified in this process by telephone. Centrelink has a range of publications and communication products which will be used to inform DSP recipients about the changes to the legislation.

Any recipient who is formally reviewed will be invited to discuss their personal situation and reasons for their long overseas absences with a specialist Centrelink review officer prior to any review outcomes being implemented.  A customer who is overseas when Centrelink contacts them will be given time to discuss their personal situation directly with Centrelink in Australia at the end of their 13 week portability period.

DSP recipients found to be not residing in Australia and who have their payment cancelled by Centrelink will be entitled to the normal customer appeal mechanisms, including having the decision reviewed by a Centrelink Authorised Review Officer (ARO) in the first instance and then by the Social Security Appeals Tribunal (SSAT) and Administrative Appeals Tribunal (AAT).[75]

1.64      The committee was concerned by the evidence it received regarding consultation on the changes proposed in the bill. Consultation by the department was not effective, and did not involve those affected by or with an interest in the change to the residency requirement.

1.65      The committee suggests that FaHCSIA develop effective consultation processes, subject to budget constraints, to ensure in the future that relevant stakeholders are appropriately engaged. 

Conclusion

1.66      The committee notes that the changes proposed in schedule 2 of the bill are consistent with the purpose of disability support pension, which is to assist people with the cost of living in Australia, and is designed to engage people of workforce age in activities in Australia that will lead to greater levels of economic and social participation. 

1.67      As discussed earlier, the committee was concerned by the issues described by Mr Borrowman. The committee suggests that FaHCSIA and the Minister look for ways to resolve this situation.

Recommendation 2

1.68      The committee recommends that the bill be passed.

Senator Claire Moore

Chair

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