CHAPTER 1

Introduction

Reference

1.1        On 19 June 2012, the Senate referred the provisions of the Social Security Legislation Amendment (Fair Incentives to Work) Bill 2012 (the bill) to the Senate Education, Employment and Workplace Relations Legislation Committee (the committee) for inquiry and report by 22 August 2012.[1] 

Conduct of inquiry

1.2        The committee advertised in The Australian on 4 June 2012, calling for submissions by 23 July 2012.  Details of the inquiry were also made available on the committee's website.[2]

1.3        The committee also contacted a number of organisations inviting submissions to the inquiry. Submissions were received from 37 individuals and organisations, as detailed in Appendix 1.

1.4        A public hearing was held in Melbourne on 9 August 2012. The witness list for the hearing is at Appendix 2.

Purpose of the bill

1.5        The bill was introduced in the House of Representatives by the Hon. Bill Shorten MP, Minister for Financial Services and Superannuation and the Minister for Employment and Workplace Relations on 31 May 2012. It seeks to implement measures relating to Parenting Payment, the liquid assets test and the definition of termination payments in line with announcements in the 2012–13 Budget. 

1.6        The bill has three objectives.  Broadly, the bill proposes to:

• amend the Social Security Act 1991 to remove transitional arrangements for certain Parenting Payment recipients (Schedule 1);
• amend the Social Security Act 1991 to increase the liquid assets limit for certain income support applicants (Schedule 2); and
• amend the definition of 'termination payment' in the Social Security Act 1991 as it relates to income maintenance periods (Schedule 3).[3]

1.7        According to the Financial Impact Statement, Schedule 1 measures would save $727.9 million over four years and the Schedule 2 measure would cost $36 million over four years.[4]

Key provisions of the bill

Removal of grandfathering provisions

1.8        Schedule 1 of the bill seeks to remove 'grandfathering' provisions, established on 1 July 2006, with the result that from 1 January 2013, eligibility for parenting payment for all recipients would cease when the child of a partnered parent turns 6 years old, or when the child of a single parent turns 8 years old.[5] Parents no longer eligible for parenting payment would be moved to Newstart Allowance. For those coming from Parenting Payment (PP) Single this means a lower rate of payment and similar activity requirements. (PP Partnered is the same payment rate as Newstart). There are also other financial consequences, which are discussed in Chapter 2.

1.9        Previously, 'grandfathered' recipients could receive parenting payment until their youngest child turned 16 years old if the child was in their care before 1 July 2011. Changes passed by Parliament on 9 May 2012 reduced this age to 12 years. The government's stated intention is that these further changes would encourage parents with school age children to return to the workforce earlier and ensure that all parents are treated equally.[6]

1.10      Currently, more than two thirds of parents in receipt of parenting payment cease to receive PP once their youngest child turns 6 (or 8 in the case of single parent families). However, one third of recipients of PP, all of whom began claiming PP before 1 July 2006, are currently eligible for PP until their child turns 12. The bill proposes to remove this distinction. If passed, this proposal will eventually affect all 147 000 grandfathered PP recipients. On 1 January 2013, just under 63 000 recipients would be affected (of which the majority are PP Single).

Liquid assets limit

1.11      Schedule 2 of the bill would amend the Liquid Assets Waiting Period thresholds to allow newly unemployed Australians and new students to retain more of their savings when they commence looking for work or studying. Currently, people claiming Newstart Allowance, Youth Allowance, Sickness Allowance and Austudy Payment who have liquid assets above a maximum reserve amount ($2500 singles without dependents or $5000 otherwise) must in most cases wait 13 weeks before receiving income support. The bill proposes to double, from 1 July 2013, the maximum reserve amount to $5000 for singles without dependents and $10 000 for others, resulting in reducing waiting times for around 21 000 applicants each year by up to five weeks.[7]

Definition of 'termination payment'

1.12      Schedule 3 of the bill proposes to revise the technical definition of 'termination payment' for the purposes of the Income Maintenance Period, such that termination payments would include payments that are redundancy payments, leave payments and other payments connected with termination of employment.  The effect of this change would be to clarify that any payments made to an employee at the termination of their employment is considered in determining the Income Maintenance Period.[8]

Compatibility with human rights

1.13      The explanatory memorandum contains a Statement of Compatibility with Human Rights (the Statement), which acknowledges the implications of the bill on the right to social security under Article 9 of the International Covenant on Economic, Social and Cultural Rights (ICESCR) and the right to education under Article 13 of the ICESCR.  The Statement concludes that the bill is compatible with human rights and that any adverse impact the bill may have on those rights is reasonable and for legitimate reasons.[9]

1.14      The Australian Council of Social Service (ACOSS) wrote to the Parliamentary Joint Committee on Human Rights ('Human Rights committee') arguing that the intention of the bill to cease parenting payments when a single parent's child turns 8 years old is a violation of human rights. On 21 June 2012, the Human Rights committee held a hearing in relation to the bill, during which evidence was received from ACOSS, the Australian Human Rights Centre in the University of New South Wales, the National Council for Single Mothers and their Children, the National Welfare Rights Centre, and the Department of Education, Employment and Workplace Relations (the department).[10]

1.15      The Human Rights committee has not finalised its consideration of the bill.

Other inquiries

1.16      The Senate Education, Employment and Workplace Relations References Committee is currently inquiring into the adequacy of the allowance payment system for jobseekers and others, the appropriateness of the allowance payment system as a support into work and the impact of the changing nature of the labour market. This inquiry will consider, in particular, the adequacy of Newstart Allowance. Submissions closed on 3 August 2012, and the committee will report by 1 November 2012.[11]

Acknowledgement

1.17      The committee thanks those individuals and organisations who contribution to the inquiry by preparing written submissions and giving evidence at the hearing.

Notes on references

1.18      References in this report to the Hansard for the public hearing are to the Proof Hansard. Please note that page numbers may vary between the proof and the official transcripts.

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