Explanatory Memorandum
Circulated By the Authority of the Minister for Families, Housing, Community Services and Indigenous Affairs, the Hon Jenny Macklin MPSchedule 4 - Notice of payments of recompense for personal injuries
Summary
The 2010-11 Budget measure , Streamline the Notification Processes for Compensation Recipients, is introduced by this Schedule. The new provisions require payers of compensation, such as insurance companies, to notify Centrelink of proposed payments of compensation. Centrelink will then use this information to determine the social security entitlements of the compensation recipient or their partner. This will reduce the risk of individuals incurring unnecessary debt to the Commonwealth and receiving income support payments to which they or their partner are not entitled.
Background
The social security law provides that people who receive compensation do not also receive income support from the Australian Government for the same period of time. The principle is that, if a person is compensated for an injury, they should use those resources to meet their daily expenses rather than rely on taxpayer-funded payments.
Currently, social security recipients are required to notify Centrelink when they or their partner are to receive a compensation payment. The new provisions will streamline the notification process for compensation payments to social security recipients or their partners, to ensure they receive their correct entitlements.
Organisations that pay compensation, such as insurance companies or statutory authorities, will now need to advise Centrelink directly before a compensation payment is made to a social security recipient or partner. The new requirement applies to lump sum payments as well as ongoing periodic payments.
This change helps ensure that the responsibility for the provision of income for injured people is not shifted from the insurance and compensation sector to the Commonwealth through the social security system.
The amendments made by this Schedule commence on the day on which the Bill receives Royal Assent, and apply from whichever is the later of 1 October 2011 and the Royal Assent date of commencement.
Explanation of the changes
The measure seeks to amend the social security law to make it a legal requirement that compensation payers (for example, insurance companies) and statutory authorities notify Centrelink before compensation payments are made to individuals.
Amendments to the Social Security Act
Item 1 amends subsection 17(1) of the Social Security Act by adding recompense to the list of terms defined in section 17.
Item 2 inserts the words 'Division 4 of' into subsection 17(6) of the Social Security Act to provide a more precise description of the part of the Act affected by that subsection.
Item 3 inserts new subsections 17(7), (7A), (7B) and (7C) after subsection 17(6). New subsection 17(7) inserts a comprehensive definition of the term recompense to ensure that as many types of payment as possible fall within the scope of the definition. The definition covers payments made for personal injury in the form of: a payment of damages; a payment under a Commonwealth, State or Territory scheme of insurance or compensation, including a payment under a contract entered into under such a scheme; a payment in settlement of a damages claim or a claim under such an insurance scheme; and any other compensation or damages claim. The payments can be either lump sum or a series of payments, and made within or outside Australia.
New subsection 17(7A) provides that new paragraph 17(7)(d) does not apply if the recipient had contributed towards the payment through, for example, insurance premiums.
New subsection (7B) provides that a payment for compensation for personal injury suffered as a result of the commission of an offence is not within the definition of recompense in the Social Security Act.
New subsection (7C) is to avoid any doubt that the definition of compensation appearing elsewhere in the section does not apply to new subsection (7), (7A) or (7B).
Headings in the section are also amended to assist readers.
Item 4 substitutes a new heading for Part 3.14 of the Social Security Act.
Item 5 inserts new subsection 1160(1A) before subsection 1160(1), which provides for notice to be given to the Secretary before payments of recompense are made, changed or stopped.
Item 6 inserts new Division 2A - Notice of payment for personal injury after Division 2 of Part 3.14 of the Social Security Act.
New section 1167A makes provision for notice of payment of recompense by a payer.
New subsection 1167A(1) generally provides that a notice of payment must be made to the Secretary, in a form approved by the Secretary, at least 14 days before a payment is made, being a lump sum payment of recompense for a personal injury; or the first payment of a number of periodic payments; or arrears of periodic payments. The note draws attention to the consequences of failing to provide a notice of a payment.
New subsection 1167A(2) generally provides for a notice to be provided for a change of periodic payments at least 14 days before the changed payment is made. The note draws attention to the consequences of failing to provide notice of a payment.
New subsection 1167A(3) generally provides for a notice of final payment to be made at least 14 days before that payment is made. The note draws attention to the consequences of failing to provide notice of a payment.
However, new subsections 1167A(1), (2) and (3) do not apply if alternative notification arrangements are in force by agreement between the person giving notice and the Secretary under new subsection 1167(3A).
New subsections 1167A(3A), (3B), (3C) and (3D) provide for notification agreements as an alternative notice arrangement to that provided by subsection (3).
New subsection 1167A(3A) provides that a person is covered by the subsection if the person has entered into a notification agreement which covers relevant payments and is in force.
New subsection 1167A(3B) provides that a notification agreement must include the kinds of payments covered by the agreement and the requirements for notifying the Secretary of the making of payments.
New subsection 1167A(3C) provides that notification agreements will remain in force until the earlier of two dates - namely, the date specified in the agreement or, if the Secretary determines that the person has failed to comply with the agreement, the day on which notice of the Secretary's determination is given to the person.
New subsection 1167A(3D) excludes a decision of the Secretary under new subsection 1167A(3B) or (3C) from the operation of Part 4 of the Social Security (Administration) Act 1999, which provides for merits review of decisions under the social security law and certain other laws. It is not appropriate for decisions relating to agreements between large corporations and the Secretary to be subject to the merits review process, which has been created to provide efficient and economical review of decisions relating to social security and other entitlements for natural persons.
New subsection 1167A(4) provides for an alternative operation of new subsections 1167A(1), (2) and (3), in the circumstances outlined in the table, to ensure that the exercise of power is within the limits of the Constitution of Australia. New subsection 1167A(5) provides that new subsection 1167A(4) does not limit the effect of new subsections 1167A(1), (2) and (3).
New subsections 1167A(6) and (7) provide that new section 1167A does not apply to State insurance within the area of State insurance protected by paragraph 51(xiv) of the Constitution.
New section 1167B provides for a notice of the proposed payment of recompense by an insurer, who is liable under a contract of insurance to indemnify a payer, to be made to the Secretary. New subsections 1167B(1), (2), (3), (3A), (3B), (3C) and (3D) provide a similar scheme to that provided in the relevant subsections of new section 1167A.
New section 1167C provides for the content of notices. New subsection 1167C(1) provides that the Secretary may approve a form of notice of a proposed recompense payment. The notices will require the provision of personal information about the person who has suffered the injury or any person who is acting on behalf of the injured person. The personal information required about a person who is acting on behalf of the injured person is not expected, in the majority of cases, to be as comprehensive as the personal information required from, or in relation to, an injured person. New subsection 1167C(2) permits different forms of notice for different kinds of proposed recompense payment. New subsection 1167C(3) provides that forms of notice for periodic payments may require information about other periodic payments.
New section 1167D provides that duplicate notices of payment are not required. If the indemnifying insurer has given notice, then the payer is not required to give notice. In addition, the reverse applies.
Item 7 inserts new sections 1184EA and 1184EB before section 1184F.
New section 1184EA provides that, if: a person fails to give notice as required under new section 1167A or 1167B; one or more of the compensation affected payments are made; and the total amount of the payments exceeds the amount of compensation affected payments which it is reasonable to suppose would have been payable if the required notice had been given; then there is a debt due to the Commonwealth by the person required to give notice. The note to the section provides information on the sections of the Social Security Act dealing with debt.
New subsection 1184EB(1) provides that payment of a debt due by a person under new section 1184EA also discharges a debt due by another person under new section 1184EA in relation to the same compensation affected payments. A debt due by a debtor under new section 1184EA or another person under this Division or Part 5.2 of the Social Security Act in relation to the same compensation affected payments is also discharged. New subsection 1184EB(2) provides that other payments may provide for the recovery of the full amount of a debt under this Division except in relation to new section 1184EA.
Item 8 provides for the application of new Division 2A of Part 3.14, and new sections 1184EA and 1184EB, of the Social Security Act. The application provisions make sure that the new requirements, which will potentially have an adverse effect on some customers, do not apply retrospectively to payments of recompense made before commencement of these changes.
Subitem 8(1) provides that the provisions inserted by this Schedule apply in relation to payments of recompense made on or after the commencing day ('post-commencement payments') irrespective of whether the liability, or the decision, to make the payments was incurred or made before, on or after the commencing day.
Subitem 8(5) provides that the commencing day is the later of 1 October 2011 or the day this Schedule commences (which is the day of Royal Assent).
Subitem 8(2) provides that subitems 8(3) and (4) apply if one or more periodic payments of recompense for a personal injury are made before the commencing day ('pre-commencement payments') and one or more post-commencement payments are to be made in relation to the personal injury.
Subitem 8(3) provides that new paragraphs 1167A(1)(b) and 1167B(1)(b) apply as if the first of the post-commencement payments is the first payment in a number of periodic payments of recompense for the injury.
Subitem 8(4) provides that, if the first of the post-commencement payments is either: of a different amount to the amount of the last pre-commencement payment that was made before the commencing day (the 'final pre-commencement payment); or is for a longer or shorter period than the period for which the final pre-commencement payment was made; then new subsections 1167A(2) and 1167B(2) apply to the first post-commencement payment as if the final pre-commencement payment had been the subject of a notice under new Division 2A of Part 3.14 of the Social Security Act.
Item 9 adds the words 'or recompense' to subsection 1184K(1) so that the Secretary will have the same discretion in relation to payments of recompense as is provided in relation payments for compensation.
Items 10 and 11 add new paragraph 1222(1)(baa), which will include debts under new section 1184EA in Chapter 5 - Overpayments and debt recovery of the Social Security Act, and specify those debts in the recovery methods table in subsection 1222(2).
Item 12 adds new section 1184EA to the overseas application list of provisions in section 1230B.
Item 13 adds new subsection 1230(3A) and provides that debts under new section 1184EA are recoverable by legal proceedings or garnishee.