Introduction
1.1
The measures in the Social Services and Other Legislation Amendment (Simplifying Income Reporting and Other Measures) Bill 2020 (bill) are intended to simplify the way income support recipients report their employment income to Services Australia. Currently, recipients who earn employment income must make a calculation to report their, or their partner's, earnings based on the number and value of shifts they have worked in a fortnight. The measures in the bill will make it possible for income support recipients to report the gross value of what they have been paid, as it appears on their payslip.
1.2
The ongoing expansion of the payroll information collected through the Single Touch Payroll (STP) administered by the Australian Taxation Office (ATO) will enhance these initiatives. From September 2020, it will be possible for Services Australia to use data collected by the ATO via the STP to prefill payroll information into income support recipients' fortnightly reports.
1.3
The bill implements the Budget 2019-20 measure 'changing the Social Security Income Assessment Model' and is estimated to result in savings of $2.1 billion over four years exclusively through improved payment accuracy.
Proposed changes to the income assessment model
Introduction of a paid assessment model
1.4
Income support is paid fortnightly, and each fortnight's rate is determined by the income support recipient's previous two week's earnings. At the end of every fortnight, income support recipients report their earningse for the previous two weeks to Services Australia and this determines the amount of income support they will receive the next day.
1.5
As noted above, under the current earned assessment model, income support recipients report what they have earned each fortnight. This requires them to calculate their employment income based on the value of the shifts they have worked, not what they have actually been paid.
1.6
Under the paid assessment model proposed in the bill, from 1 July 2020, income support recipients will report the gross income that has been paid to them during the fortnight as it appears on their payslip.
1.7
The measures in the bill will affect recipients who report income on Jobseeker payment, Parenting Payment (Single and Partnered), ABSTUDY, Austudy, Youth Allowance, Special Benefit, Age Pension, Carer Payment, Disability Support Pension and Farm Household Allowance.
Interaction with the STP
1.8
The STP is a new system for employers to report income, tax and superannuation information to the ATO each time an employee is paid. Except for a small number of employers who are eligible for temporary exemptions or who are eligible for quarterly reporting until 2021 (such as micro businesses with 1–4 employees), most employers have transitioned or are in the process of transitioning to the STP.
1.9
From July 2019, the ATO commenced sharing STP data with Services Australia for employees who are customers of Services Australia. This data includes the salary and wages, tax, lump sum payments and allowances in Year to Date format on or before the pay day of the employee. From 1 July 2020, the ATO will commence collecting an expanded set of income data from employers. Full implementation of collection of this expanded data set will commence on 1 July 2021 and will be mandatory for all employers, except micro employers with 1–4 employees using a low or no cost STP solution.
1.10
The expanded data set includes the disaggregation of gross income, the collection of Child Support Agency deduction and garnishee amounts and a cessation reason.
Easier and more accurate income reporting
1.11
Under the amendments in the bill, Services Australia will use the employer reported STP payroll information to prefill payroll information into income support recipients' fortnightly reports, in a similar way to how the ATO prefills tax returns. Income recipients will be prompted to review, confirm or update the STP data, before it is used to assess their entitlements.
1.12
Subject to the passage of the bill, from July 2020, Services Australia will begin to prefill the name of the organisation associated with the payroll payment until employers begin reporting the expanded data set to the ATO.
1.13
Where a recipient works for an employer who is not covered by STP, they will continue to have to report their income, using their payslip.
1.14
The combination of the paid assessment model and the use of STP payroll information will make it easier for income support recipients to report their employment income and will improve the accuracy of income reported.
Provisions of the bill
1.15
The bill amends five separate Acts: Social Security Act 1991 (Social Security Act), Social Security (Administration) Act 1999 (Social Security Administration Act), Veterans’ Entitlements Act 1986 (Veterans' Entitlements Act), A New Tax System (Family Assistance) (Administration) Act 1999 (Family Assistance Act) and Student Assistance Act 1973 (Student Assistance Act).
1.16
It contains one Schedule in three Parts:
Part 1 – Simplifying income reporting
1.17
Part 1 of the bill replaces the current rules used to assess employment income under social security law by:
amending the Social Security Act to insert new employment income attribution rules, including a special employment attribution rule for income received on a monthly basis or in a lump sum;
amending the Social Security Act and Veteran's Entitlements Act to ensure members of the pension bonus scheme are not adversely affected by the new employment income attribution rules; and
making a number of minor consequential amendments to the Social Security Act, Social Security Administration Act and Veterans' Entitlements Act to reflect that, under the new rules, income is assessed when received, rather than on an earned, derived or received basis.
1.18
Part 1 also includes extensive application and savings provisions to define how these amendments will apply in the payment instalment period when the bill commences.
Part 2 – Exchange of information relating to taxation information
1.19
Part 2 of the bill ensures that taxation information, primarily data from the STP system, can be used to assess employment income under social security law by:
amending the Social Security Administration Act, Family Assistance Act and Student Assistance Act to insert provisions relating to the obtaining, recording, disclosure or use of information relating to taxation information; and
amending the Social Security Administration Act, Student Assistance Act and Family Assistance Act to allow use of automated computer programs to obtain taxation data.
1.20
The Explanatory Memorandum states that these amendments do not facilitate the use of computer programs to make decisions about a person’s eligibility for or rate of a social security payment or provide for the automation of debt recovery.
Part 3 – Other amendments
1.21
Part 3 of the bill provides for the assessment of certain non-remunerative lump sum amounts by:
inserting a new section in the Social Security Act to provide for the assessment of certain lump sum payments made in arrears of periodic payments; and
making a number of minor consequential amendments to the definition of 'ordinary income' to include certain income amounts.
1.22
Part 3 also includes an application provision to clarify that the new section applies to lump sums received on or after the commencement of the bill.
Conduct of the inquiry
1.23
The Senate referred the provisions of the bill to the Senate Community Affairs Legislation Committee (committee) for inquiry and report by 20 February 2020.
Evidence
1.24
Details of the inquiry, including a link to the bill and associated documents were placed on the committee's website. The committee wrote to relevant organisations inviting submissions to the inquiry by 14 February 2020.
1.25
The committee received eight submissions, which were published to the committee's website. The committee held a public hearing in Melbourne on Monday 17 February 2020. Lists of submitters and witnesses are included at Appendices 1 and 2.
1.26
The committee thanks all those who contributed to the inquiry.
Note on references
1.27
References to the committee Hansard are to the proof transcript. Page numbers may vary between the proof and official Hansard transcript.
Legislative scrutiny
1.28
The Senate Standing Committee for the Scrutiny of Bills and the Parliamentary Joint Committee on Human Rights made no comment in relation to the bill.
Matters raised by submitters and witnesses
1.29
Submitters were broadly supportive of the bill, noting that the measures in it would simplify reporting obligations, help ensure income support recipients receive the rate of payment they are entitled to and help reduce the number of social security overpayments. The Australian Council of Social Service (ACOSS) stated that it welcomes the bill, because shifting the reporting of income to when it is received as opposed to when it is earned it will simplify the reporting of income and remove the guess work involved in the current system.
1.30
Submitters discussed the complexity of the current system and noted government statistics regarding the significant rate of corrections of reported income due to mistakes being made in estimating and reporting income.
1.31
However, submitters and witnesses raised a range of matters in relation to the passage of and implementation of the bill, which they consider need to be addressed if the anticipated benefits of the measures are to be realised. These matters are discussed below.
Consultation and user testing
1.32
A key concern for submitters was the need to ensure that the new reporting system is robust and will work for everyone who needs to use it. A number of submitters and witnesses commented on the timeframe for consideration of the bill, and expressed concern that this had limited their ability to examine the measures in the bill in detail and provide considered comments on the practical implications of them.
1.33
A particular concern was the need to ensure that the new reporting processes take account of the needs of diverse and vulnerable income support recipients. Submitters and witnesses also noted the importance of ensuring the changes will meet the needs of income support recipients who receive irregular or one off payments.
1.34
Submitters highlighted the importance of undertaking comprehensive consultation and user-testing, both with a range of income support recipients and with the organisations that support them, to guard against unintended consequences and ensure appropriate steps are identified to ameliorate and potential risks. Submitters noted that this was important if the full benefits of the change are to be realised and also to restore trust in the use of automation and data sharing in the social security system.
1.35
Ms Charmaine Crowe told the committee that ACOSS would 'like to see the system tested on a large number of people in different circumstances who live in different areas of Australia, with different access to online forms of communication' and different access to Services Australia. Ms Crowe also noted the importance of having access to a comprehensive set of worked examples to illustrate how different payment scenarios would be reported under the new measures.
1.36
Mr Daniel Turner, representing the National Social Security Rights Network (NSSRN), stressed the importance of being able to provide feedback on the various reporting platforms to be used to ensure that people will not be at risk of making simple mistakes resulting in the reporting of potentially incorrect information.
1.37
The multi-agency government submission advised that 'work has been undertaken to identify the needs and challenges for both recipients and staff' and that this would inform the development of a suite of supporting resources to address both technical and behavioural changes. These resources will include worked examples to assist people to understand how to report their income.
1.38
Services Australia described the current user testing of screen flows and letters:
We have multiple channels for customer experience testing. We've probably done four iterations now on the letter. It's been a really great process; we've actually gone from co-design to co-creation, with getting customers to actually write it in plain English that speaks to them. So we've gone through the use of diagrams to written examples, and tested all of those out with the customers to make sure that it hits the mark.
1.39
Services Australia also described a range of enhancements that it is making ahead of the 1 July 2020 implementation date, in response to feedback from the user testing sessions:
We've had some great feedback from customers about: 'Could you bold this word?' or 'Could you reorder the screens? It doesn't make sense to me if you flow it that way.' So we've done that. We've also made sure that within the screens we've got links to those support tools…We'll have a bot available so people can get some more personalised information by asking a question.
Implementation
1.40
The measures in the bill are intended to commence from 1 July 2020. Some submitters and witnesses questioned the rationale for the proposed commencement date and whether it would be possible to defer commencement of the measures by a quarter to allow for a longer period of consultation and user-testing. ACOSS told the committee:
We think that there is no need to rush this bill. We need to see that comprehensive testing of the new scheme before it commences so that we can guard against any issues or problems that may exist in the scheme or that haven't been detected.
1.41
In response to questions on notice, the Department of Social Services set out the rationale for a 1 July 2020 commencement date and stated:
Work undertaken by Services Australia with income support recipients to date shows that a staged implementation of the measure would best support individuals through the change to income reporting. Commencement on 1 July 2020, along with comprehensive supports prior and following implementation will allow recipients time to engage with the changes and adjust to reporting when paid. Having recipients report what they have received before prefilling will assist them to understand the basis of reporting before they have the benefit of STP prefilled data.
1.42
Further, DSS advised that the 'roll out of communication and supports by Services Australia is dependent on the passage of legislation and Services Australia will be unable to engage with recipients more broadly until the legislation is passed'.
1.43
During the transition to the paid assessment model, income support recipients with ongoing employment will need to undertake a one-time calculation to ensure that their income is not double counted. Submitters and witnesses expressed concern that income support recipients would find this process confusing, resulting in reporting errors.
1.44
The departments advised that the bill has been drafted to make this transition as simple as possible and that a range of supports will be available to assist people during this period:
A specially designed calculator will also help people work out what they should report. The transition calculator will be available online along with examples of how to report, frequently asked questions and video messages. Messages advising of the changed requirements will also be included in the regular Services Australia income reporting tools during the transition, such as the online portal and the app.
1.45
Witnesses also stressed the need to ensure that income support recipients are aware of the need to check any pre-filled data when they report their income. Witnesses highlighted the need for processes for the correction of errors to be easy to access, both for employers and income support recipients, and not result in payment delays. The Australian Unemployed Workers Union called for greater clarity regarding the resolution of discrepancies in reporting, particularly errors in reporting by employers, and what this would look like in practical terms for income support recipients. The Community and Public Sector Union (CPSU) expressed concern that the length of time taken to identify income discrepancies currently is too long. The CPSU submitted that the public needs to have confidence that, under the proposed changes, discrepancies between income earned and income reported will be identified promptly and their size and frequency will be substantially reduced.
1.46
Witnesses proposed that Services Australia should alert income support recipients of any discrepancies between information they have supplied and the STP data. Mr Daniel Turner, representing the NSSRN, said
… at the very least, when an income support recipient provides information that is inconsistent with prefilled information, Services Australia should alert the income recipient of the discrepancy. The recipient should be notified that the information they supply will be relied on in place of the prefilled data and, if it is subsequently found to be incorrect, then this may give rise to an overpayment and potential criminal penalties. Ideally this alert would be accompanied by an offer of support by Centrelink to resolve the discrepancy between the prefilled information and what the payment recipient believes to be the correct information.
1.47
Ms Borwick also explained that, while recipients can currently only update or correct their record over the phone or face to face, Services Australia is looking at enhancements to help improve that process in response to feedback it has received during the user testing.
Communicating the changes
1.48
The committee heard evidence regarding the importance of ensuring income recipients are supported to understand the new reporting process. Some submitters noted that recipients may have formed the false impression that the implementation of STP data sharing between the ATO and Services Australia would replace the need for them to check and report their income. NSSRN and ACOSS expressed the view that effective communication of the ongoing responsibility for income support recipients to report their income will be as important as communicating the new income reporting processes.
1.49
Submitters stressed the need for information and supports to be targeted to the particular needs of recipients. Anglicare Australia highlighted the need for assistance pathways for people who have barriers such as low literacy, physical and psychosocial disabilities, complex needs or are in crisis. ACOSS noted the need for communication strategies to take account of the particular needs and challenges of people living in rural and remote areas; those with poor access to Services Australia, particularly Aboriginal and Torres Strait Islander and culturally and linguistically diverse communities.
1.50
Submitters and witnesses also emphasised the need to use multiple channels of communication noting that the planned communication initiatives appear to be via online means. ACOSS cautioned that this would be unsuitable for many people and recommended that other, non-online, communication channels also be used such as letters, television and radio.
1.51
The committee heard that recipients will be notified via a bulk mail-out to about 600 000 recipients and targeted messaging in advance of the changes. Messages would also be included in the reporting channels during the transition period. Services Australia advised that the letter would explain the changes and would include worked examples to assist people, as well as guiding them to additional information.
1.52
Services Australia explained that a range of information and support would be provided through existing channels that income support recipients are familiar with. Ms Borwick told the committee that close to 90 per cent of Services Australia's customers use the online applications and the voice system.
1.53
The multi-agency government submission advised that $30 million funding over the three years to 2019-20 has been provided to Services Australia to support both recipients and Services Australia staff transition to the new income reporting model. The departments explained that recipients will be notified of the changes ahead of 1 July 2020 and during the transition period.
1.54
Training would also be provided for all Services Australia staff from payment line and payment support staff to those staff who provide specialist services such as social workers and Indigenous service officers to ensure that they understand and are able to explain the change to customers.
1.55
Services Australia also explained the use of Indigenous radio and factsheets translated into ten different languages would help communicate the changes Aboriginal and Torres Strait Islander and culturally and linguistically diverse communities.
Privacy
1.56
The committee heard evidence that highlighted the need for close consideration of privacy issues under the Social Security Act. The Accountable Income Management Network submitted that insufficient attention has been given to the erosion of individual privacy and data rights in relation to the data-sharing mechanisms in the bill. ACOSS submitted that people's right to privacy must be strengthened under social security law. ACOSS noted that the bill will expand the sharing of private information and recommended that disclosure of people's private information without their explicit, informed consent, should not be permitted under social security law.
1.57
At the same time, submitters and witnesses noted the government's powers under the Social Security Act often meant that it was better placed to access accurate information about a person's income and argued that the responsibility for gathering this information should shift from income support recipients to government. Ms Crowe from ACOSS explained that there is a question about getting the balance right between the government's ability to ensure information is sufficient and correct and acknowledging the powers that the government has to release information about people's circumstances.
Review
1.58
Submitters and witnesses highlighted the importance of reviewing the practical operation of the measures to identify any unintended consequences and remedy them. Victoria Legal Aid and ACOSS recommended that the legislation be reviewed 12 months after implementation to ensure that it is operating in the best interests of income support recipients. Ms Charmaine Crowe from ACOSS told the committee:
I think that's a responsible way for the government to move forward with this. Let's not forget that hundreds of thousands of people will be affected by this piece of legislation in any given year. It would be prudent for government to do a comprehensive review of the legislation in a year's time to ensure that it is operating fairly and correctly and that people really are at the centre of this legislation.
1.59
Some submitters emphasised the importance of the findings of any such review being implemented:
My concern is that testing and reviews and how much people are held to hose can be fairly weak once a bill has been passed. So if we could actually write that in in some way—that there needs to be ongoing review, ongoing testing, much greater leniency in terms of working through any issues raised and review at the end of the time as well—that would be ideal.
1.60
Mr Bennett from the Department of Social Services explained that there have been no discussions regarding a review period and that rather than having a specific review period, the department would monitor the system going forward.
Conclusion
1.61
The Social Services and Other Legislation Amendment (Simplifying Income Reporting and Other Measures) Bill 2020 will change the way that income support recipients report their employment income to Services Australia. It will remove the need for income support recipients to calculate the value of the shifts they have completed each fortnight and allow them to report their income when it is paid to them by their employer, referring directly to their payslip.
1.62
This change will remove one of the most problematic aspects of income reporting: the need for income support recipients to keep track of, calculate and report their earnings before they are paid. The current system can involve multiple calculations and a risk that the recipient will incorrectly report the income they earned from the previous fortnight, resulting in the under payment or overpayment of income support payments. Allowing recipients to report income when it is paid to them will make it easier for individuals to accurately report their income and significantly improve the accuracy of income reporting. This reduction in complexity will be of particular benefit to those income support recipients engaged in irregular or intermittent employment.
1.63
The proposed change in reporting model will be supported by the transition to the Single Touch Payroll, which will enable an income support recipient's employment income, along with the name of their employer, to be prefilled in their report to Services Australia. While recipients will still need to check the accuracy of these details, this initiative should help to simplify the process of income reporting.
1.64
Evidence to this inquiry indicates broad support for the measures and an appreciation of the benefits that will flow from their implementation. However, the committee notes that this support is predicated on adequate consultation and user-testing taking place prior to the commencement of the proposed changes to ensure that their practical implementation meets the needs of all income support recipients. The committee makes particular note of the concerns raised regarding the need to ensure that the measures meet the needs of a diverse range of income support recipients, particularly those who face challenges in accessing the social security system and Services Australia.
1.65
The committee recommends that further targeted consultation and user testing is undertaken prior to the commencement of the simplified income reporting system to ensure that the measures, and associated information and supports, are capable of meeting the needs of all income support recipients.
1.66
The committee also notes evidence received regarding the need to review the implementation of the measures in the bill to ensure that the anticipated benefits are being achieved and to identify and address any unintended consequences. The committee notes the assurance from the Department of Social Services that there will be ongoing monitoring of the system. However, the committee considers that there is merit in undertaking a formal review to gain an understanding of income recipients' understanding and engagement with the system and the extent to which the information and supports provided to assist them are meeting their needs.
1.67
The committee recommends that the government give a commitment to initiate a review of the implementation of the simplified income reporting measures within 12 months of commencement of the legislation and that a report of the review be tabled in the parliament.
1.68
The committee recommends that the Senate pass the bill.
Chair