House of Representatives

Explanatory Memorandum

Circulated By the Authority of the Minister for Families, Housing, Community Services and Indigenous Affairs, the Hon Jenny Macklin MP

Schedule 1 - Clean energy payments under the social security law

Summary

The Clean Energy Household Assistance Package will provide financial assistance through increased Government payments to assist families, veterans, allowees, pensioners, carers, and self-funded retirees for increases in the cost of living arising from the introduction of a carbon price on 1 July 2012.

The financial assistance provided by this Schedule will be delivered through social security payments that are equivalent to permanent increases of 1.7 per cent to the rates of relevant payments. The amendments in this Schedule provide for assistance to be delivered in a lump sum clean energy advance before commencement of the carbon pricing scheme, paid from May to June 2012. Ongoing, permanent clean energy supplements will be paid from the end of the clean energy advance lump sum period, as a distinct component of the person's rate of social security payment, in line with regular payment cycles.

Background

Clean energy advances

Part of the Schedule makes amendments to the social security law to provide for lump sum clean energy advances payable to people in receipt of social security payments before the commencement of the carbon pricing scheme. The clean energy advance period will cover a period of six to 18 months, depending on the type of social security payment received and which clean energy advance period applies.

Generally, the clean energy advance provisions in the Bill apply from 14 May 2012, with most payments being made over the period 14 May to 30 June 2012. The clean energy advance will include:

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the expected additional Consumer Price Index impact of carbon pricing (0.7 per cent); and

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an additional increase amount above the Consumer Price Index impact (one per cent).

The clean energy advance would be paid in respect of the period from 1 July 2012 until the normal payment indexation arrangements begin to deliver Consumer Price Index increases related to carbon pricing. This period differs for different social security payments:

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For pensions (other than disability support pension for people who are under 21 and do not have dependent children), seniors supplement and most qualified allowances, the period is 1 July 2012 to 19 March 2013. Pensioners (including those paid a transitional rate as part of the 2009 pension reforms but not including pension PP (single) recipients), part-pensioners, seniors supplement recipients (including self-funded retirees who are eligible for a Commonwealth Seniors Health Card) and any social security recipient over pension age will all receive the same clean energy advance.

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For youth allowance, austudy and disability support pension for people who are under 21 and do not have dependent children, an initial clean energy advance will cover the entire 2012-13 financial year.

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For youth allowance, austudy and disability support pension for people who are under 21 and do not have dependent children, a second clean energy advance will be provided in July 2013, in respect of the period 1 July 2013 to 31 December 2013, as Consumer Price Index increases would only begin to reflect the impact of carbon pricing for these payments from 1 January 2014.

Clean energy supplements

Once normal indexation begins to deliver Consumer Price Index increases in respect of carbon pricing for a particular payment, the additional increases to social security payments will be paid as clean energy supplements.

Ongoing clean energy supplements will start to be paid from the end of the clean energy advance lump sum period for each payment type. The clean energy supplements will be a distinct component of a person's rate of social security payment, similar to the existing pension supplement for pensioners. The clean energy supplements will be permanent, and indexed by the Consumer Price Index so they maintain their value in real terms over time.

People will generally be able to choose whether to receive their clean energy supplement fortnightly, or as a quarterly payment in arrears. Self-funded retirees with a Commonwealth Seniors Health Card will receive the clean energy supplement quarterly, in line with the payment of their seniors supplement.

Indexation

The expected additional impact on the Consumer Price Index from carbon pricing (0.7 per cent) will be permanently included in the clean energy supplement (plus an additional one per cent increase). Part 4 contains amendments to the Social Security Act that provide for the expected impact of the carbon price on indexation (0.7 per cent) to be transferred from the indexation on maximum basic rate and pension supplement of certain social security payments to the clean energy supplement. The maximum basic rate and the pension supplement will continue to be indexed in accordance with usual indexation arrangements. The clean energy supplement will also be indexed to maintain its real value over time.

Explanation of the changes

Part 1 - Clean energy advance

Division 1 - Main amendment

Amendments to the Social Security Act

Item 1 inserts a new Part 2.18A into Chapter 2 of the Social Security Act to provide for clean energy payments. New Part 2.18A creates two new social security payments, the clean energy advance and the clean energy supplement. The new Part also sets out the qualification, payability and rate rules for both the clean energy advance and the clean energy supplement.

Division 1 - Clean energy advances

Subdivision A - Qualifying for clean energy advances

New section 914 sets out the qualification rules for people in receipt of social security payments (other than austudy, youth allowance and disability support pension for people who are under 21 years of age and who do not have a dependent child) for the clean energy advance.

New subsection 914(1) provides that, if, on a day between 14 May 2012 and 30 June 2012, a person receives one of the payments listed in new subsection 914(4), their rate of payment is greater than nil, and they are in Australia, the Secretary may determine that the person is qualified for a clean energy advance.

New subsection 914(2) provides that, if, on a day between 1 July 2012 and 19 March 2013, a person receives one of the payments listed in new subsection 914(4), their rate of payment is greater than nil, and they are in Australia, the Secretary may determine that the person is qualified for a clean energy advance.

New subsection 914(3) provides that, if the Secretary makes a determination under new subsection 914(2), the determination must specify the first day on which the person satisfies new paragraphs 914(2)(a) and (b), and the first day during the period that the person is in Australia, disregarding any temporary absence that is less than 13 weeks.

These provisions mean that people who are temporarily overseas at the commencement of the clean energy period will receive the clean energy advance when they return to Australia. If they have been overseas for less than 13 weeks, they will be entitled to the full advance amount. However, if they have been overseas for more than 13 weeks, they will receive a pro-rated advance amount.

The social security payments (the clean energy qualifying payments) listed in new subsection 914(4) are:

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age pension;

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benefit PP (partnered) (otherwise known as parenting payment partnered);

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bereavement allowance;

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carer payment;

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disability support pension (other than for a person who is under 21 with no dependent children);

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newstart allowance;

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pension PP (single) (otherwise known as parenting payment single);

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partner allowance;

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seniors supplement;

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sickness allowance;

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special benefit, where the rate of that benefit is worked out as if the person were qualified for newstart allowance;

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widow allowance;

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widow B pension;

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wife pension.

New section 914A sets out the qualification rules for people in receipt of austudy, youth allowance, disability support pension for a person who is under the age of 21 without a dependent child, and special benefit where the rate is determined by reference to youth allowance.

New subsection 914A(1) provides that, if, on a day between 14 May 2012 and 30 June 2012, a person receives one of the payments listed in subsection 914A(5), their rate of payment is greater than nil, and they are in Australia, the Secretary may determine that the person is qualified for a clean energy advance.

New subsection 914A(2) provides that, if, on a day between 1 July 2012 and 30 June 2013, a person receives one of the payments listed in new subsection 914A(5), their rate of payment is greater than nil, and they are in Australia, the Secretary may determine that the person is qualified for the first clean energy advance.

New subsection 914A(3) provides that, if, on a day between 1 July 2013 and 31 December 2013, a person receives one of the payments listed in new subsection 914A(5), their rate of payment is greater than nil, and they are in Australia, the Secretary may determine that the person is qualified for the second clean energy advance.

New subsection 914A(4) provides that, if the Secretary makes a determination under new subsections 914A(2) and (3), the determination must specify the first day on which the person satisfies new paragraphs (a) and (b) of the relevant subsection, and the first day during the period the person is in Australia, disregarding any temporary absence that is less than 13 weeks.

The social security payments (the clean energy qualifying payments) listed in new subsection 914A(5) are:

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austudy payment;

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disability support pension for a person who is under 21 with no dependent children;

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special benefit, where the rate of that benefit is worked out as if the person were qualified for austudy payment or youth allowance;

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youth allowance.

Generally, people receiving a nil rate of social security payment at the commencement of the clean energy advance period will not qualify for a clean energy advance. People may, however, qualify for a pro-rated clean energy advance if their rate increases above nil at some stage during the 2012-13 year.

New section 914B provides that, in certain circumstances, a nil rate of social security payment can be disregarded when determining a person's qualification for a clean energy advance under new section 914 or 914A.

New subsection 914B(1) provides that, if, at the time the Secretary makes a determination under new sections 914 or 914A regarding qualification, a person's rate of clean energy qualifying payment is nil merely because they are receiving quarterly pension supplement or because they have received an advance of pharmaceutical allowance, the person is not precluded from qualifying for a clean energy advance.

New subsection 914B(2) provides that, for the purposes of sections 914 and 914A, if a social security payment is taken to be payable to a person because of the operation of subsection 23(1D), the person is deemed to have a payment rate that is greater than nil. This provision is inserted to ensure that people in receipt of Defence Force Income Support Allowance, who have a nil rate of social security payment, will still qualify for a clean energy advance under the social security law.

New section 914C provides that a person will only be able to be paid, at most, two clean energy advances. A person will qualify for only one clean energy advance if they qualify under new section 914 or new subsection 914A(1) or (2), no matter how many times during the relevant clean energy advance period (as defined in subsection 23(1)) the person satisfies the qualification criteria. A person will also only qualify for one clean energy advance if they qualify under new subsection 914A(3), no matter how many times in the clean energy advance period) they meet those criteria. A person may qualify for a clean energy advance under new section 914 or for a first clean energy advance under new subsection 914A(1) or (2) and then a second clean energy advance under new subsection 914A(3).

This section provides that people who come on and off social security payments during the 2012-13 year (for example, due to fluctuating employment income), will not receive a new clean energy advance every time they come back onto a payment.

As their clean energy supplement will not start until 1 January 2014, there are two clean energy advance periods for people in receipt of youth allowance, austudy or disability support pension for people under 21 and without dependent children. These people will receive one clean energy advance relating to the period 1 July 2012 to 30 June 2013 and a second advance relating to the period 1 July 2013 to 30 December 2013. A person who receives a clean energy advance for the first period and remains on, or transfers to, one of these payment types before or during the second clean energy advance period will receive a second clean energy advance.

Note 1 advises the reader that additional limitations on the payability of clean energy advance may apply as a result of new section 918.

Note 2 at the end of new section 914C confirms for the reader the fact that, despite the rule against multiple clean energy advance payments, a person may qualify for a top-up payment of clean energy advance if there is a change in their circumstances during the clean energy advance period. These top-up payments are set out in Subdivision C of the new Part 2.18A.

Subdivision B - Amount of a clean energy advance

New section 914D sets out how a clean energy advance is to be calculated for a person, depending on their circumstances and the particular social security payment that they receive.

New subsection 914D(1) provides that, when the Secretary determines that a person is qualified for a clean energy advance (on the decision day), the Secretary must also determine the amount of clean energy advance that is payable to the person (the recipient). The note at the end of new subsection 914D(1) confirms for the reader that the clean energy advance will be paid in a single lump sum as soon as is reasonably practicable after the decision day, as provided for in new section 47D of the Social Security Administration Act. New section 47D is inserted into the Social Security Administration Act by item 23 of Schedule 10 to this Bill.

New subsection 914D(2) provides that the amount of the clean energy advance will be the clean energy advance daily rate multiplied by the number of advance days rounded up to the nearest $10. Clean energy advance daily rate means the rate as worked out for the person's circumstances under new section 914E and the number of advance days means the number of days worked out under new section 914F.

New section 914E sets out the various methods of calculating a person's clean energy advance daily rate. A person's clean energy advance daily rate will depend on the type of payment that the person receives.

New subsection 914E(1) provides that a person's clean energy advance daily rate is worked out in accordance with the table at the end of the subsection. The table cross-references the various clean energy advance qualifying payments with the relevant subsection of new section 914E, which sets out how the clean energy advance daily rate is calculated for a person in receipt of that particular payment.

The note at the end of new subsection 914E(1) signposts the definitions of recipient and decision day in new subsection 914D(1).

New subsection 914E(2) sets out the method for calculating the clean energy advance daily rate for people in receipt of age pension, bereavement allowance, disability support pension (other than for a person who is under 21 years and who does not have a dependent child), wife pension, carer payment, widow B pension, seniors supplement and any payment where the person is over pension age. A person's clean energy advance daily rate is worked out by calculating 1.7 per cent of the sum of twice the maximum basic rate set out in Rate Calculator A for a person who is partnered (as at 1 July 2012) and the combined couple rate of pension supplement (as at 1 July 2012). This figure is then rounded up or down to the nearest $5.20, rounding up where the result is not a multiple of $5.20 but is a multiple of $2.60. An amount of $5.20 is then added to this figure, which compensates for the lack of indexation that would have occurred if the clean energy advance was paid as an increase to payments rather than as a lump sum.

The calculation produces an annual figure for a combined couple, which is then adjusted to take account of the particular person's circumstances by applying the percentages in the table at the end of new subsection 914E(2) that correspond with the person's relationship status. The percentage adjusted figure is then rounded up or down to the nearest multiple of $2.60, rounding up if the figure is not a multiple of $2.60 but is a multiple of $1.30. The final figure is an annual figure, which is then divided by 364 to obtain a daily rate.

The reference in subparagraph 914E(2)(a)(i) to maximum basic rate under Pension Rate Calculator A for a person who is partnered means the maximum basic rate specified in table item 2 of the table at the end of point 1064-B1 in Rate Calculator A, as indexed.

The note at the end of new subsection 914E(2) confirms for the reader that the subsection covers payments in Pension Rate Calculators A, B and C, seniors supplement, recipients of other payments who are over pension age and people who have their rate of payment calculated by reference to clause 146 of Schedule 1A to the Social Security Act.

New subsection 914E(3) sets out the method for calculating the clean energy advance daily rate for people who have not reached pension age and are in receipt of pension PP (single), or in receipt of newstart allowance or youth allowance where that person's rate is calculated by reference to pension PP (single). A person's clean energy advance daily rate is worked out by calculating 1.7 per cent of the sum of the maximum basic rate set out in the Pension PP (Single) Rate Calculator (as at 1 July 2012) and the pension supplement basic amount (as at 1 July 2012). This figure is then rounded up or down to the nearest $2.60, rounding up where the result is not a multiple of $2.60 but is a multiple of $1.30). An amount of $5.20 is then added to this figure to compensate for the lack of indexation that would have occurred if the clean energy advance was paid as an increase to payments rather than as a lump sum. The final figure is an annual figure which is then divided by 364 to obtain a daily rate.

New subsection 914E(4) sets out the method for calculating the clean energy advance daily rate for people who have not reached pension age and are in receipt of benefit PP (partnered), newstart allowance, sickness allowance, partner allowance, special benefit related to newstart allowance, or widow allowance. A person's clean energy advance daily rate is worked out by calculating 1.7 per cent of the maximum basic rate as at 1 July 2012 set out in the relevant rate calculator payable to the person based on that person's particular circumstances. This figure is then rounded up or down to the nearest 10 cents, rounding up where the result is not a multiple of 10 cents but is a multiple of 5 cents. An amount of 20 cents is then added to this figure, which compensates for the lack of indexation that would have occurred if the clean energy advance was paid as an increase to people's payments rather than as a lump sum. The final figure is a fortnightly figure, which is then divided by 14 to obtain a daily rate.

The reference to 'a person whose circumstances on that day would be or were the same as the recipient's circumstances on the advance qualification day' in subparagraph 914E(4)(a)(ii) is intended to reflect the various maximum basic rates that are set out in the different rate calculators. The rate calculators have various maximum basic rates that apply to a person depending on their living arrangements, age, relationship status and length of time they have been in receipt of social security payments. This paragraph is inserted so that the calculation of a person's clean energy advance daily rate is done with reference to the maximum basic rate that applies for that person, on that day, taking into account all the variables available within the rate calculator. The different rate calculators have different variables, and consideration must be given to the recipient's circumstances as they are on the advance qualification day to determine which maximum basic rate applies to the recipient.

New subsection 914E(5) sets out the method for calculating the clean energy advance daily rate for people in receipt of disability support pension for people who are under 21 years who do not have a dependent child. A person's clean energy advance daily rate is worked out by calculating 1.7 per cent of the sum of the maximum basic rate and youth disability supplement, as at 1 July 2012, set out in the relevant rate calculator and rounding this figure up or down to the nearest $2.60, rounding up where the result is not a multiple of $2.60 but is a multiple of $1.30. An amount of $5.20 is then added to this figure, which compensates for the lack of indexation that would have occurred if the clean energy advance was paid as an increase to people's payments rather than as a lump sum. The final figure is an annual figure, which is then divided by 364 to obtain a daily rate.

The reference to 'a person whose circumstances on that day would be or were the same as the recipient's circumstances on the advance qualification day' in subparagraph 914E(5)(a)(ii) is intended to reflect the various maximum basic rates that are set out in the different rate calculators. The rate calculators have various maximum basic rates that apply to a person depending on their living arrangements, age, and relationship status. This paragraph is inserted so that the calculation of a person's clean energy advance daily rate is done with reference to the maximum basic rate that applies for that person, on that day, taking into account all the variables available within the rate calculator. Consideration must be given to the recipient's circumstances as they are on the advance qualification day to determine which maximum basic rate applies to the recipient.

New subsection 914E(6) sets out the method for calculating the clean energy advance daily rate for people in receipt of youth allowance (other than those whose rate has youth disability supplement added or whose rate is calculated by reference to pension PP (single)), austudy and special benefit related to youth allowance. A person's clean energy advance daily rate is worked out by calculating 1.7 per cent of the maximum basic rate, as at 1 July 2012, set out in the relevant rate calculator based on that person's particular circumstances. This figure is then rounded up to the nearest 10 cents, rounding up where the result is not a multiple of 10 cents but is a multiple of 5 cents. An amount of 20 cents is then added to this figure, which compensates for the lack of indexation that would have occurred if the clean energy advance was paid as an increase to payments rather than as a lump sum. The final figure is a fortnightly figure, which is then divided by 14 to obtain a daily rate.

The reference to 'a person whose circumstances on that day would be or were the same as the recipient's circumstances on the advance qualification day' in subparagraph 914E(6)(a)(ii) is intended to reflect the various maximum basic rates that are set out in the different rate calculators. The rate calculators have various maximum basic rates that apply to a person depending on their living arrangements, age, relationship status and length of time they have been in receipt of social security payments. This paragraph is inserted so that the calculation of a person's clean energy advance daily rate is done with reference to the maximum basic rate that applies for that person, on that day, taking into account all the variables available within the rate calculator. The different rate calculators have different variables, and consideration must be given to the recipient's circumstances as they are on the advance qualification day to determine which maximum basic rate applies to the recipient.

New subsection 914E(7) sets out the method for calculating the clean energy advance daily rate for people in receipt of youth allowance who also receive youth disability supplement. A person's clean energy advance daily rate is worked out by calculating 1.7 per cent of the sum of the maximum basic rate and youth disability supplement, as at 1 July 2012, set out in the relevant rate calculator based on that person's particular circumstances. This figure is then rounded up to the nearest 10 cents, rounding up where the result is not a multiple of 10 cents but is a multiple of five cents. An amount of 20 cents is then added to this figure, which compensates for the lack of indexation that would have occurred if the clean energy advance was paid as an increase to payments rather than as a lump sum. The final figure is a fortnightly figure, which is then divided by 14 to obtain a daily rate.

The reference to 'a person whose circumstances on that day would be or were the same as the recipient's circumstances on the advance qualification day' in subparagraph 914E(7)(a)(ii) is intended to reflect the various maximum basic rates that are set out in the different rate calculators. The rate calculators have various maximum basic rates that apply to a person depending on their living arrangements, age, relationship status and length of time they have been in receipt of social security payments. This paragraph is inserted so that the calculation of a person's clean energy advance daily rate is done with reference to the maximum basic rate that applies for that person, on that day, taking into account all the variables available within the rate calculator. The different rate calculators have different variables, and consideration must be given to the recipient's circumstances as they are on the advance qualification day to determine which maximum basic rate applies to the recipient.

New section 914F sets out how the number of advance days is worked out to enable the clean energy advance to be calculated. Where a person qualifies for a clean energy advance before 1 July 2012, the number of advance days is the number of days in the person's clean energy advance period that are on or after 1 July 2012. Where the person qualifies after 1 July 2012, the number of advance days is the number of days remaining in the clean energy advance period on and from the person's advance qualification day. The term advance qualification day is defined by item 2 of this Schedule.

Subdivision C - Top-up payments of clean energy advance

New Subdivision C of new Part 2.18A provides for the Minister to determine, by legislative instrument, the circumstances in which top-up payments of clean energy advance may be paid to people where they have a change of circumstances during the clean energy advance period that would result in the person not being appropriately assisted for the anticipated increased energy costs.

The operation of this Subdivision will mean that, if the person's change of circumstance during the clean energy advance period results in:

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the person starting to receive a different clean energy qualifying payment that is paid at a higher rate than their previous clean energy qualifying payment (for example, a person who moves from newstart allowance to the age pension if they reach age pension age during 2012-13);

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the person starting to receive the same clean energy qualifying payment at a higher rate (for example, where a person separates from their partner during the year and moves from a partnered to single rate);

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the person starting to receive a different clean energy qualifying payment that has a longer clean energy advance period (for example, where a person changes from newstart allowance to austudy); or

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the person not being able to receive the entire advance amount because of a multiple entitlement exclusion;

the person will receive an additional amount of clean energy advance equivalent to the difference between the higher and lower advance amounts for the number of days remaining in the advance period.

This may happen more than once during a clean energy advance period, and may result from people switching from, to or between payments under the Social Security Act, Veterans' Entitlements Act and the Military Rehabilitation and Compensation Act.

Due to the numerous and complex interactions between the relevant payments under the Social Security Act, Veterans' Entitlements Act and Military Rehabilitation and Compensation Act, the circumstances under which top-ups will be payable will be determined by legislative instrument. This will reduce the complexity of the legislation, and will optimise the ability of Centrelink to provide timely top-up payments for a wide range of circumstances. The legislative instrument will be made in writing, by the Minister and will be subject to disallowance by the Parliament.

The terms entitled, entitlement, qualified and qualification for ( and any variation of those words) used in new section 914G are intended to cover the differing words used in the various Acts to express when an individual meets the criteria for a clean energy advance or a top-up payment. The terms are not intended to limit the authority set out in new subsection 914G(1) only to those cases where an Act or scheme specifies that a person is 'entitled' to, or 'qualified' for, a clean energy advance or top-up payment. It is intended that the words entitled, entitlement, qualified and qualification (or any variation of those words) used in this section are to be given their ordinary and plain English meaning.

Division 5 - Multiple qualification exclusions

Division 5 of new Part 2.18A, containing new section 918, provides for a legislative instrument-making power to ensure that the clean energy advance is only paid to people who ought to receive it. It provides the Minister with the ability to specify that people are not able to receive a clean energy bonus under the social security law if they have already received a clean energy bonus under other legislation, such as the Veterans' Entitlements Act, or under an administrative scheme such as ABSTUDY. Clean energy bonus is defined by new subsection 918(3), mentioned below.

A definition of clean energy bonus is inserted into section 23(1) by item 2 below as any payment under any Act or scheme that uses the words 'clean energy'. This will include the clean energy advance and clean energy supplement.

For example, a person who switches from a payment under the Veterans' Entitlements Act to a payment under the Social Security Act would qualify for a further clean energy advance that would cover the same clean energy advance period. This may result in the person receiving much greater assistance than is necessary. It would be more appropriate to provide this person with a top-up payment rather than a further clean energy advance.

Similarly, a person who receives a clean energy advance because they are receiving ABSTUDY (which is an administrative scheme and not a legislative payment) and who switches to newstart allowance during the clean energy advance period, would qualify for a new clean energy advance. This may result in the person receiving much greater assistance than is necessary. It would be more appropriate to provide this person with a top-up payment rather than a further clean energy advance.

Additionally, there are some people who may receive payments under more than one Act and, if they receive a clean energy supplement under more than one Act, they may receive much greater assistance than is necessary.

Due to the numerous and complex interactions between the payments under the various Acts and schemes, the circumstances under which a clean energy bonus will not be payable to a person will be determined by legislative instrument.

New subsection 918(1) provides that the Minister may determine that, in certain circumstances, people are not entitled to a clean energy bonus under the social security law.

New subsection 918(2) provides that the circumstances determined by the Minister under subsection 918(1) must relate to a person's entitlement to, or receipt of, one or more of the following payments:

(a)

a clean energy bonus under the Social Security Act;

(b)

a clean energy bonus under the Military Rehabilitation and Compensation Act;

(c)

a clean energy bonus under the Veterans' Entitlements Act;

(d)

a clean energy bonus under a scheme (however described), whether or not the scheme is provided for, by, or under an Act.

The terms qualified and qualification for ( and any variation of those words) used in section 918 are intended to cover the differing words used in the various Acts to express when an individual meets the criteria for a clean energy bonus. The terms are not intended to limit the authority set out in subsections 918(1) and (2) to only those cases where an Act or scheme specifies that a person is 'entitled' to a clean energy bonus. It is the intention that the words qualified and qualification for (and any variation of those words) used in this section are to be given their ordinary and plain English meaning.

New subsection 918(3) provides that any instrument made in accordance with subsection 918(1) is to have effect according to its terms, irrespective of any other provision within the Social Security Act.

Division 2 - Other amendments

Amendments to the Social Security Act

Items 2, 3, 4, 5, 6, 7, 8 and 9 insert new definitions into subsection 23(1) of the Social Security Act.

Advance qualification day for a person who qualifies for a clean energy advance before 1 July 2012 means the day the determination is made. For a person who qualifies after 1 July 2012, the advance qualification day will be the day specified in the determination. The note at the end of the definition of advance qualification day confirms for the reader that the advance qualification day for a person who qualifies after 1 July 2012 will be the day the person first meets all the qualification criteria, and that temporary absences from Australia (absences of less than 13 weeks) will be disregarded for the purpose of determining qualification.

Clean energy advance means the lump sum payment that is calculated for the person by applying the rules set out in Subdivisions A and C of Division 1 of new Part 2.18A, which is inserted by item 1.

Clean energy advance daily rate means the rate calculated for the person by virtue of new section 914E.

There are three different clean energy advance periods, depending on a person's circumstances. The clean energy advance period for people in receipt of social security payment, other than austudy, youth allowance or disability support pension for a person who is under 21 with no dependent children, means the period starting on 1 July 2012 and ending on 19 March 2013. For people in receipt of austudy, youth allowance or disability support pension for a person who is under 21 without dependent children, there are two different clean energy advance periods. The first commences on 1 July 2012 and ends on 30 June 2013, and the second commences on 1 July 2013 and ends on 31 December 2013.

Clean energy bonus is defined as any payment known as a clean energy advance, or any increase, using the words 'clean energy', to a person's rate of payment paid under either the Social Security Act, or any other Act or scheme administered by the Commonwealth.

A clean energy payment will include a clean energy advance.

A person's clean energy qualifying payment means the social security payments listed in new subsections 914(4) and 914A(5). A person must receive one of these payments on the advance qualification day to qualify for a clean energy advance. The particular clean energy qualifying payment that a person receives will determine the person's clean energy advance period.

The number of advance days means the number of days remaining in the clean energy period as determined in new section 914F.

Item 10 inserts a new section 1224 into Part 5.2 of Chapter 5 of the Social Security Act. This new provision sets out when a clean energy advance is a debt to the Commonwealth. In broad terms, a debt would only arise where some or all of the clean energy qualifying payment was incorrectly paid, and therefore some or all of the clean energy advance was incorrectly paid, because a relevant individual knowingly made a false or misleading statement or knowingly provided false or misleading information. This is similar to the debt rules for the economic stimulus payments that were linked to certain social security payments in relation to 14 October 2008. The relevant rules are set out in new subsections 1224(1), (2) and (3).

Where an individual is paid a clean energy advance, a low income supplement or an essential medical equipment payment because of a determination made under Part 3 of the Social Security Administration Act, the determination is later changed, revoked, set aside or superseded by another determination, and a reason for the determination needing to be changed was that a relevant individual knowingly made a false or misleading statement or knowingly provided false or misleading information, and if, apart from that statement or information, the payment would not have been paid, then the amount of the payment made is a debt. The relevant rules are set out in new subsections 1224(1), (2) and (3).

New subsection 1224(4) states that, with the exception of section 1224AA of the Social Security Act (relating to misdirected cheques), other provisions in relation to the raising of social security debts do not apply to clean energy advances.

Amendments to the Social Security Administration Act

Item 11 inserts a new section 12K into the Social Security Administration Act to confirm that a person does not need to make a specific claim for a clean energy advance, and advances will be paid automatically to qualified people. Qualification for a clean energy advance depends on a person's circumstances and is based on information that is already known to the Secretary.

Part 2 - Clean energy supplement

Division 1 - Supplement payable from 20 March 2013

Amendments to the Social Security Act

Item 12 inserts a new section 20B into the Social Security Act, which establishes the clean energy pension rate. The clean energy pension rate is worked out by calculating 1.7 per cent of the total of twice the maximum basic rate under Pension Rate Calculator A for a person who is partnered and the combined couple rate of pension supplement (as at 20 March 2013), and rounding the result up or down to the nearest multiple of $5.20 (rounding up if the result is not a multiple of $5.20 but is a multiple of $2.60).

The reference to the maximum basic rate under Pension Rate Calculator A for a person who is partnered means the amount set out at table item 2 in Table B - maximum basic rates at the end of point 1064-B1 in Module B as indexed.

Note 1 at the end of new section 20B confirms for the reader that this rate will be indexed every six months in line with Consumer Price Index increases as set out in sections 1191 to 1194. Note 2 at the end of new section 20B confirms that the clean energy pension rate is an annual rate.

Items 13, 14, 15 and 16 insert definitions into subsection 23(1) of the Social Security Act.

Clean energy pension rate means the rate established by new section 20B, inserted by item 12 above.

Clean energy supplement for a person means the amount of clean energy supplement that is added to a person's rate of payment according to the relevant rate calculator for that person's particular social security payment.

Clean energy (under pension age) rate means the clean energy (under pension age) rate calculated for a person under the relevant clean energy supplement Module of the person's rate calculator for the person's social security payment.

Clean energy (youth disability) rate means the rate calculated for a person under point 1067G-BA6 of the Youth Allowance Rate Calculator.

Item 17 repeals section 1061UB and substitutes a new section 1061UB to provide for a new rate of seniors supplement, which includes a component of clean energy supplement equal to the rate of clean energy supplement that the person would have received if they were in receipt of age pension.

A person's daily rate of seniors supplement is calculated as follows:

Step 1: apply the applicable percentage in the table at the end of the section to the combined couple rate of minimum pension supplement;

Step 2: round the result of step 1 up or down to the nearest $2.60;

Step 3: work out the clean energy pension rate that would apply to a person if that person were receiving age pension and apply the applicable percentage in the table at the end of this section;

Step 4: round the result of step 3 up or down to the nearest $2.60;

Step 5: add the results of step 2 and step 4;

Step 6: divide the result of step 5 by 364 to calculate the daily rate.

Note 1 at the end of new section 1061UB is inserted to direct the reader to the definition of combined couple rate of minimum pension supplement in subsection 20A(2) of the Social Security Act. Note 2 at the end of new section 1061UB is inserted to direct the reader to the definition of clean energy pension rate in new section 20B.

Item 18 inserts a new step 1B into the method statement immediately after step 1A at point 1064-A1, and item 19 inserts into step 4 of the method statement a reference to the new step 1B. New step 1B provides for a clean energy supplement to be added to a person's rate of payment as calculated by Pension Rate Calculator A.

Item 20 inserts a new module C into Pension Rate Calculator A, which sets out how a person's clean energy supplement is to be calculated.

Point 1064-C1 provides that a clean energy supplement is to be added to a person's rate of pension if the person is in Australia, or is temporarily absent from Australia for a period of no more than 13 weeks.

Point 1064-C2 provides that the clean energy supplement module does not apply if the person has elected to receive their clean energy supplement quarterly.

Point 1064-C3 provides that a person's clean energy supplement is worked out by applying the percentage table at the end of point 1064-C3 to the clean energy pension rate and rounding the result up or down to the nearest $2.60 (rounding up where the result is not a multiple of $2.60 but is a multiple of $1.30).

The application of the percentage table at the end of the point means that a person who is not a member of a couple receives an amount of clean energy supplement that is 66.33 per cent of the clean energy pension rate, and that a person who is partnered receives a clean energy supplement that is 50 per cent of the clean energy pension rate. Members of an illness or respite care separated couple, or a person whose partner is in gaol, will receive a clean energy supplement that is 66.33 per cent of the clean energy pension rate (that is, the same rate as a single person).

The note at the end of point 1064-C3 signposts the definition of clean energy pension rate in new section 20B.

Item 21 inserts a new step 3 into the method statement immediately after step 2A at point 1065-A1 and item 22 inserts into step 4 of the method statement a reference to the new step 3. New step 3 provides for a clean energy supplement to be added to a person's rate of payment as calculated by Pension Rate Calculator B.

Item 23 inserts a new module C into Pension Rate Calculator B, which sets out how a person's clean energy supplement is to be calculated.

Point 1065-C1 provides that a clean energy supplement is to be added to a person's rate of pension if the person is in Australia, or is temporarily absent from Australia for a period of no more than 13 weeks.

Point 1065-C2 provides that the clean energy supplement module does not apply if the person has elected to receive their clean energy supplement quarterly.

Point 1065-C3 provides that a person's clean energy supplement is worked out by applying the percentage table at the end of point 1065-C3 to the clean energy pension rate and rounding the result up or down to the nearest $2.60 (rounding up where the result is not a multiple of $2.60 but is a multiple of $1.30).

The application of the percentage table at the end of the point means that a person who is not a member of a couple receives an amount of clean energy supplement that is 66.33 per cent of the clean energy pension rate, and that a person who is partnered receives a clean energy supplement that is 50 per cent of the clean energy pension rate. Members of an illness or respite care separated couple, or a person whose partner is in gaol, will receive a clean energy supplement that 66.33 per cent of the clean energy pension rate (that is, the same rate as a single person).

The note at the end of point 1065-C3 signposts the definition of clean energy pension rate in new section 20B.

Item 24 inserts a new step 2 into the method statement immediately after step 1A at point 1066-A1 and item 25 inserts into step 4 of the method statement a reference to the new step 2. New step 2 provides for a clean energy supplement to be added to a person's rate of payment as calculated by Pension Rate Calculator C.

Item 26 inserts a new module C into Pension Rate Calculator C, which sets out how a person's clean energy supplement is to be calculated.

Point 1066-C1 provides that a clean energy supplement is to be added to a person's rate of pension if the person is in Australia, or is temporarily absent from Australia for a period of no more than 13 weeks.

Point 1066-C2 provides that a person's clean energy supplement is worked out by applying the percentage table at the end of point 1066-C2 to the clean energy pension rate and rounding the result up or down to the nearest $2.60 (rounding up where the result is not a multiple of $2.60 but is a multiple of $1.30).

The application of the percentage table at the end of the point means that a person who is not a member of a couple receives an amount of clean energy supplement that is 66.33 per cent of the clean energy pension rate, and that a person who is partnered receives a clean energy supplement that is 50 per cent of the clean energy pension rate. Members of an illness or respite care separated couple, or a person whose partner is in gaol, will receive a clean energy supplement that is 66.33 per cent of the clean energy pension rate (that is, the same rate as a single person). As people who are in receipt of bereavement allowance or widow allowance are not members of a couple, their rate of clean energy supplement will be 66.33 per cent of the rate that two members of a couple would receive.

The note at the end of point 1066-C2 signposts the definition of clean energy pension rate in new section 20B.

Item 27 inserts a new step 1B into the method statement immediately after step 1A at point 1068-A1. New step 1B provides for a clean energy supplement to be added to a person's rate of payment as calculated by Benefit Rate Calculator B.

Item 28 inserts a new module C into Benefit Rate Calculator B, which sets out how a person's clean energy supplement is to be calculated.

Point 1068-C1 provides that a clean energy supplement is to be added to a person's rate of benefit if the person is in Australia, or is temporarily absent from Australia for a period of no more than 13 weeks. New module C will not apply to the calculation of a person's rate if that person is receiving quarterly clean energy supplement.

Point 1068-C2 provides that, if a person has reached pension age, then their clean energy supplement will be 1/26 of the amount worked out by applying the percentage table at the end of the point to the clean energy pension rate and rounding the result up or down to the nearest multiple of $2.60 (rounding up if the result is not a multiple of $2.60 but is a multiple of $1.30).

The note at the end of new point 1068-C2 signposts the definition of clean energy pension rate in new section 20B.

New point 1068-C3 provides that, if a person has not reached pension age, the person's clean energy supplement is the person's clean energy (under pension age) rate as provided for in new point 1068-C4 below.

New point 1068-C4 provides that a person's clean energy (under pension age) rate is worked out by calculating 1.7 per cent of the maximum basic rate that applies for that particular person's living circumstances on 20 March 2013, rounded up or down to the nearest multiple of 10 cents (rounding up where the result is not a multiple of 10 cents but is a multiple of five cents).

The note at the end of point 1068-C4 confirms for the reader that the various rates of clean energy supplement worked out under this module will be indexed each six months in line with the Consumer Price Index, as set out in sections 1191 to 1194.

The reference to 'a person whose circumstances on that day were the same as the recipient's current circumstances' in paragraph 1068-C4(a) is intended to reflect the various maximum basic rates that are set out in the rate calculator. The rate calculator has various maximum basic rates that apply to a person depending on their living arrangements, age, relationship status and length of time they have been in receipt of social security payments. This paragraph is inserted so that the calculation of a person's clean energy supplement is done with reference to the maximum basic rate that applies for that person, on that day, taking into account all the variables available within the rate calculator. Consideration must be given to the recipient's circumstances as they are on the particular day to determine which maximum basic rate applies to the recipient.

Item 29 inserts a new step 1B into the method statement immediately after step 1A at point 1068A-A1, and item 30 inserts into step 4 of the method statement a reference to the new step 1B. New step 1B provides for a clean energy supplement to be added to a person's rate of payment as calculated by Pension PP (Single) Rate Calculator.

Item 31 inserts a new module BB into Pension PP (Single) Rate Calculator, which sets out how a person's clean energy supplement is to be calculated.

New point 1068A-BB1 provides that a clean energy supplement is to be added to a person's rate of pension if the person is in Australia, or is temporarily absent from Australia for a period of no more than 13 weeks. New module BB will not apply to the calculation of a person's rate if that person is receiving quarterly clean energy supplement.

Point 1068A-BB2 provides that, if a person has reached pension age, then their clean energy supplement will be the amount worked out by applying the percentage table at the end of the point to the clean energy pension rate and rounding the result up or down to the nearest multiple of $2.60 (rounding up if the result is not a multiple of $2.60 but is a multiple of $1.30).

The note at the end of new point 1068A-BB2 signposts the definition of clean energy pension rate in new section 20B.

New point 1068A-BB3 provides that, if a person has not reached pension age, the person's clean energy supplement is the person's clean energy (under pension age) rate as provided for in new point 1068A-BB4 below.

New point 1068A-BB4 provides that a person's clean energy (under pension age) rate is worked out by calculating 1.7 per cent of the sum of the maximum basic rate and the pension supplement basic amount on 20 March 2013, rounded up or down to the nearest multiple of 10 cents (rounding up where the result is not a multiple of 10 cents but is a multiple of five cents).

The note at the end of point 1068A-BB4 confirms for the reader that the various rates of clean energy supplement worked out under this module will be indexed each six months in line with the Consumer Price Index, as set out in sections 1191 to 1194.

Item 32 inserts a new step 2B into the method statement immediately after step 2A at point 1068B-A2, and item 33 inserts a new step 2B into the method statement immediately after step 2A at point 1068B-A3. New step 2B provides for a clean energy supplement to be added to a person's rate of payment as calculated by Benefit PP (Partnered) Rate Calculator.

Item 34 inserts a new module DB into Benefit PP (Partnered) Rate Calculator, which sets out how a person's clean energy supplement is to be calculated.

New point 1068B-DB1 provides that a clean energy supplement is to be added to a person's rate of benefit if the person is in Australia, or is temporarily absent from Australia for a period of no more than 13 weeks. New module DB will not apply to the calculation of a person's rate if that person is receiving quarterly clean energy supplement.

Point 1068B-DB2 provides that, if a person has reached pension age then their clean energy supplement will be 1/26 of the amount worked out by applying the percentage table at the end of the point to the clean energy pension rate and rounding the result up or down to the nearest multiple of $2.60 (rounding up if the result is not a multiple of $2.60 but is a multiple of $1.30).

The note at the end of new point 1068B-DB2 signposts the definition of clean energy pension rate in new section 20B.

New point 1068B-DB3 provides that, if a person has not reached pension age, the person's clean energy supplement is the person's clean energy (under pension age) rate as provided for in new point 1068B-DB4 below.

New point 1068B-DB4 provides that a person's clean energy (under pension age) rate is worked out by calculating 1.7 per cent of the maximum basic rate that applies for a person's particular living circumstances on 20 March 2013, rounded up or down to the nearest multiple of 10 cents (rounding up where the result is not a multiple of 10 cents but is a multiple of five cents).

The note at the end of point 1068B-DB4 confirms for the reader that the various rates of clean energy supplement worked out under this module will be indexed each six months in line with the Consumer Price Index, as set out in sections 1191 to 1194.

The reference to 'a person whose circumstances on that day were the same as the recipient's current circumstances' in subparagraph 1068B-DB4(a)(ii) is intended to reflect the various maximum basic rates that are set out in the rate calculator. The rate calculator has various maximum basic rates that apply to a person depending on their relationship status. This paragraph is inserted so that the calculation of a person's clean energy supplement is done with reference to the maximum basic rate that applies for that person, on that day, taking into account all the variables available within the rate calculator. Consideration must be given to the recipient's circumstances as they are on the particular day to determine which maximum basic rate applies to the recipient.

Item 35 inserts a new subparagraph 146(4)(a)(ia) after subparagraph 146(4)(a)(i) of Schedule 1A. The new subparagraph provides that the provisional annual payment rate that is calculated under subclause 146(4) is to include a clean energy supplement amount as determined by new subclause 149(5), which is inserted by item 36 below.

Item 36 inserts a new subclause 149(5) after subclause 149(4). New subclause 149(5) provides that, if subclauses 147(1) or (2) are relevant to the calculation of a person's rate of payment, then an amount of clean energy supplement is to be added to the person's rate of payment. The amount of clean energy supplement is to be calculated by reference to Module C of Pension Rate Calculator A as if the person's rate of payment were calculated using that rate calculator. It is intended that a person to whom clause 146 of Schedule 1A applies will receive the same rate of clean energy supplement as a person whose rate is calculated under Pension Rate Calculator A.

Note 1 at the end of subclause 149(5) confirms that a clean energy supplement is to be added to a person's total rate of payment calculated by reference to paragraph 146(4)(a).

Note 2 at the end of subclause 149(5) confirms for the reader that Division 2 of the new Part 2.18A in relation to quarterly clean energy supplement is to apply to a person to whom clause 146 applies. That is, if a person elects to receive their clean energy supplement on a quarterly basis, then clean energy supplement is not to be included in a person's fortnightly instalment of pension.

Note 3 at the end of subclause 149(5) confirms that the order of reduction in section 1210 is to apply to a person's rate of pension, and that section 43 of the Social Security Administration Act will also apply. The effect of these two provisions for people to whom clause 146 applies is that, if their rate of pension would be reduced because of the application of the income or assets test such that they would receive less than the full amount of clean energy supplement but more than zero, then the rate of clean energy supplement will be increased to the full amount.

Amendments to the Social Security Administration Act

Item 37 repeals subsection 48B(3) and substitutes a new subsection 48B(3). New subsection 48B(3) provides that a person's instalment of seniors supplement is worked out by calculating a daily rate for each day in the test period that the person qualified for the payment and adding all the qualifying days together to arrive at an instalment amount.

Division 2 - Supplement payable from 1 January 2014

Amendments to the Social Security Act

Item 38 inserts a new step 1A into the method statement immediately after step 1 at point 1066A-A1, and item 39 inserts into step 5 of the method statement a reference to the new step 1A. New step 1A provides for a clean energy supplement to be added to a person's rate of payment as calculated by Pension Rate Calculator D for people in receipt of disability support pension who are under 21 and who do not have a dependent child.

Item 40 inserts a new module BA into Pension Rate Calculator D, which sets out how a person's clean energy supplement is to be calculated.

New point 1066A-BA1 provides that a clean energy supplement is to be added to a person's rate of pension if the person is in Australia, or is temporarily absent from Australia for a period of no more than 13 weeks. New module BA will not apply to the calculation of a person's rate if that person is receiving quarterly clean energy supplement.

New point 1066A-BA2 provides that a person's rate of clean energy supplement is their clean energy (under pension age) rate as worked out by new point 1066A-BA3 below.

New point 1066A-BA3 provides that the annual clean energy rate is 1.7 per cent of the sum of the person's maximum basic rate and youth disability supplement, worked out for 1 January 2014, rounded up or down to the nearest $2.60 (rounding up where the amount is not a multiple of $2.60 but is a multiple of $1.30). The maximum basic rate that applies will depend on the person's circumstances as at 1 January 2014.

The note inserted at the end of point 1066A-BA3 is to advise the reader that the clean energy rate is to be indexed every 12 months in accordance with Consumer Price Index increases. This is provided for in sections 1191 to 1194 of the Social Security Act.

The reference to 'a person whose circumstances on that day were the same as the recipient's current circumstances' in subparagraph 1066A-BA3(a)(ii) is intended to reflect the various maximum basic rates that are set out in the rate calculator. The rate calculator has various maximum basic rates that apply to a person depending on their living arrangements, age, relationship status and length of time they have been in receipt of social security payments. This paragraph is inserted so that the calculation of a person's clean energy supplement is done with reference to the maximum basic rate that applies for that person, on that day, taking into account all the variables available within the rate calculator. Consideration must be given to the recipient's circumstances as they are on the particular day to determine which maximum basic rate applies to the recipient.

Item 41 inserts a new step 2A into the method statement immediately after step 2 at point 1066B-A1, and item 42 inserts into step 5 of the method statement a reference to the new step 2A. New step 2A provides for a clean energy supplement to be added to a person's rate of payment as calculated by Pension Rate Calculator E for people in receipt of disability support pension who are blind, under 21 and who do not have a dependent child.

Item 43 inserts a new module BA into Pension Rate Calculator E, which sets out how a person's clean energy supplement is to be calculated.

New point 1066B-BA1 provides that a clean energy supplement is to be added to a person's rate of pension if the person is in Australia, or is temporarily absent from Australia for a period of no more than 13 weeks. New module BA will not apply to the calculation of a person's rate if that person is receiving quarterly clean energy supplement.

New point 1066B-BA2 provides that a person's rate of clean energy supplement is their clean energy (under pension age) rate as worked out by new point 1066B-BA3 below.

New point 1066B-BA3 provides that the annual clean energy rate is 1.7 per cent of the sum of the person's maximum basic rate and youth disability supplement, worked out for 1 January 2014, rounded up or down to the nearest $2.60 (rounding up where the amount is not a multiple of $2.60 but is a multiple of $1.30). The maximum basic rate that applies will depend on the person's circumstances as at 1 January 2014.

The note inserted at the end of point 1066B-BA3 is to advise the reader that the clean energy rate is to be indexed every 12 months in accordance with Consumer Price Index increases. This is provided for in sections 1191 to 1194 of the Social Security Act.

The reference to 'a person whose circumstances on that day were the same as the recipient's current circumstances' in subparagraph 1066B-BA3(a)(ii) is intended to reflect the various maximum basic rates that are set out in the rate calculator. The rate calculator has various maximum basic rates that apply to a person depending on their living arrangements, age, relationship status and length of time they have been in receipt of social security payments. This paragraph is inserted so that the calculation of a person's clean energy supplement is done with reference to the maximum basic rate that applies for that person, on that day, taking into account all the variables available within the rate calculator. Consideration must be given to the recipient's circumstances as they are on the particular day to determine which maximum basic rate applies to the recipient.

Item 44 inserts a new step 1A into the method statement immediately after step 1 at point 1067G-A1. New step 1A provides for a clean energy supplement to be added to a person's rate of payment as calculated by the Youth Allowance Rate Calculator.

Item 45 inserts a new module BA into Pension Rate Calculator E, which sets out how a person's clean energy supplement is to be calculated.

New point 1067G-BA1 provides that a clean energy supplement is to be added to a person's rate of benefit if the person is in Australia, or is temporarily absent from Australia for a period of no more than 13 weeks. New module BA will not apply to the calculation of a person's rate if that person is receiving quarterly clean energy supplement.

New point 1067G-BA2 provides that a person's rate of clean energy supplement is their clean energy (under pension age) rate as worked out by new point 1066B-BA3 below.

New point 1067G-BA3 provides that the annual clean energy rate is 1.7 per cent of the person's maximum basic rate, worked out for 1 January 2014, that applies depending on the person's circumstances rounded up or down to the nearest 10 cents (rounding up where the amount is not a multiple of 10 cents but is a multiple of five cents).

The note inserted at the end of point 1067G-BA3 is to advise the reader that the clean energy rate is to be indexed every 12 months in accordance with Consumer Price Index increases. This is provided for in sections 1191 to 1194 of the Social Security Act.

The reference to 'a person whose circumstances on that day were the same as the recipient's current circumstances' in subparagraph 1067G-BA3(a)(ii) is intended to reflect the various maximum basic rates that are set out in the rate calculator. The rate calculator has various maximum basic rates that apply to a person depending on their living arrangements, age, relationship status and length of time they have been in receipt of social security payments. This paragraph is inserted so that the calculation of a person's clean energy supplement is done with reference to the maximum basic rate that applies for that person, on that day, taking into account all the variables available within the rate calculator. Consideration must be given to the recipient's circumstances as they are on the particular day to determine which maximum basic rate applies to the recipient.

New point 1067G-BA4 provides that, if a person's maximum basic rate of youth allowance is worked out by reference to the pension PP (single) rate, their clean energy supplement is to be worked out under Module BB of the Pension PP (Single) Rate Calculator.

New point 1067G-BA5 provides that, if youth disability supplement is added to a person's rate of payment, their rate of clean energy supplement is to be worked out by point 1067G-BA6 below.

New point 1067G-BA6 provides that a person's rate of clean energy supplement is 1.7 per cent of the sum of the relevant maximum basic rate and youth disability supplement, rounded to the nearest multiple of 10 cents (rounding up where the result is not a multiple of 10 cents but is a multiple of five cents).

Item 46 inserts a new step 1B into the method statement immediately after step 1A at point 1067L-A1, and item 47 inserts into step 5 of the method statement a reference to the new step 1B. New step 1B provides for a clean energy supplement to be added to a person's rate of payment as calculated by the Austudy Rate Calculator.

Item 48 inserts a new module BB into Austudy Rate Calculator, which sets out how a person's clean energy supplement is to be calculated.

New point 1067L-BB1 provides that a clean energy supplement is to be added to a person's rate of benefit if the person is in Australia, or is temporarily absent from Australia for a period of no more than 13 weeks. New module BB will not apply to the calculation of a person's rate if that person is receiving quarterly clean energy supplement.

Point 1067L-BB2 provides that, if a person has reached pension age, then their clean energy supplement will be 1/26 of the amount worked out by applying the percentage table at the end of the point to the clean energy pension rate and rounding the result up or down to the nearest multiple of $2.60 (rounding up if the result is not a multiple of $2.60 but is a multiple of $1.30).

The note at the end of new point 1067L-BB2 signposts the definition of clean energy pension rate in new section 20B.

New point 1067L-BB3 provides that, if a person has not reached pension age, the person's clean energy supplement is the person's clean energy (under pension age) rate as provided for in new point 1067L-BB4 below.

New point 1067L-BB4 provides that a person's clean energy (under pension age) rate is worked out by calculating 1.7 per cent of the maximum basic rate that applies for a person's particular living circumstances on 1 January 2014, rounded up or down to the nearest multiple of 10 cents (rounding up where the result is not a multiple of 10 cents but is a multiple of five cents).

The note at the end of point 1067L-BB4 confirms for the reader that the various rates of clean energy supplement worked out under this module will be indexed every 12 months in line with Consumer Price Index, as set out in sections 1191 to 1194.

The reference to 'a person whose circumstances on that day were the same as the recipient's current circumstances' in subparagraph 1067L-BB4(a)(ii) is intended to reflect the various maximum basic rates that are set out in the rate calculator. The rate calculator has various maximum basic rates that apply to a person depending on their living arrangements, age, relationship status and length of time they have been in receipt of social security payments. This paragraph is inserted so that the calculation of a person's clean energy supplement is done with reference to the maximum basic rate that applies for that person, on that day, taking into account all the variables available within the rate calculator. Consideration must be given to the recipient's circumstances as they are on the particular day to determine which maximum basic rate applies to the recipient.

Part 3 - Quarterly clean energy supplement

Division 1 - Main amendments

Amendments to the Social Security Act

Item 49 inserts Division 2 into new Part 2.18A, which was inserted by item 1 of this Schedule. New Division 2 relates to payment of quarterly clean energy supplement.

New section 915 provides that a quarterly clean energy supplement is payable to a person for each day that an election is in force under subsection 915A(1) or subsection 1061VA(1) for the social security payment that the person is receiving. An election under subsection 1061VA(1) is an election by that person to receive the pension supplement quarterly.

New section 915A sets out how a person can elect to receive quarterly clean energy supplement instead of having their clean energy supplement added to their fortnightly instalment of social security payment.

New subsection 915A(1) provides that all social security recipients can elect to receive their clean energy supplement quarterly even if they do not receive the quarterly pension supplement. In this case, the person would receive their clean energy supplement as a separate social security payment. The election is to be made in a manner or way approved by the Secretary.

The note at the end of new subsection 915A(1) confirms for the reader that, where Part 2.25C applies to a person, they can make an election to receive the pension supplement quarterly, which will cause their clean energy supplement to be payable quarterly. A person who has elected to receive the pension supplement quarterly will automatically receive the clean energy supplement quarterly.

New subsection 915A(2) provides that an election will come into force as soon as practicable after it is made.

New subsection 915A(3) provides that an election to receive the clean energy supplement quarterly will cease if a person ceases to receive a social security payment calculated using a rate calculator that has a clean energy supplement module.

New subsection 915A(4) provides that a person can revoke an election at any time in a manner or way approved by the Secretary and the revocation will come into effect as soon as practicable after it happens.

New section 915B provides for the rate of quarterly clean energy supplement.

New paragraph 915B(1)(a) provides that, where the rate calculator for the person's particular social security payment (the main rate) produces an annual figure, the person's daily rate of quarterly clean energy supplement will be 1/364 of the clean energy supplement as determined by the relevant rate calculator.

New paragraph 915B(1)(b) provides that, where the rate calculator for the person's main rate produces a fortnightly figure, the person's daily rate of quarterly clean energy supplement will be 1/14 of the clean energy supplement as determined by the relevant rate calculator.

Subsection 915B(2) provides that new subsection 1210(3A) inserted by item 79 of this Schedule may apply to alter a person's daily rate of quarterly pension supplement.

Amendments to the Social Security Administration Act

Item 50 inserts a new section 48D after section 48C.

The following amendments provide that people who elect to receive their clean energy supplement quarterly will be paid in arrears for each quarter.

New subsection 48D(1) provides that quarterly clean energy supplement is to be paid by instalments.

New subsection 48D(2) provides that quarterly clean energy supplement is to be paid as soon as reasonably practicable on or after the first supplement test day (the current test day) that follows a day on which the person is qualified for clean energy supplement.

The note after new subsection 48D(2) directs the reader to new section 915 of the Social Security Act for the determination of when quarterly clean energy supplement is payable to a person.

New subsection 48D(3) provides that the amount of instalment is worked out by calculating a daily rate of quarterly clean energy supplement for each day during the test period that the person is qualified for the payment and adding up all the rates as calculated for each day in the test period that the person was qualified for the payment.

New subsection 48D(4) defines supplement test day to mean, 20 March, 20 June, 20 September and 20 December of each year. Test period is defined as being the period:

(a)

starting on the most recent supplement test day before the current test day; and

(b)

ending on the day immediately before the current test day.

Division 2 - Other amendments

Amendments to the Social Security Act

Item 51 inserts a new paragraph (b) into the definition of clean energy bonus, which was inserted into subsection 23(1) by item 6 of this Schedule. The new paragraph provides that a clean energy bonus includes clean energy supplement and quarterly clean energy supplement.

Item 52 inserts a new paragraph (b) into the definition of clean energy payment, which was inserted into subsection 23(1) by item 7 of this Schedule. The new paragraph provides that a clean energy payment includes quarterly clean energy supplement.

Item 53 inserts a definition of quarterly clean energy supplement into subsection 23(1) of the Social Security Act, to mean the social security payment described in Division 2 of new Part 2.18A of the Social Security Act.

Items 54, 55 and 57 make technical amendments to several provisions of the Social Security Act to ensure that a person's social security payment remains payable even if their rate is nil, where the person's rate is nil merely because they have received an advance of pharmaceutical allowance, or because they have elected to receive their pension supplement and/or their clean energy supplement on a quarterly rather than fortnightly basis.

Item 56 repeals subsection 547(2) and substitutes a new subsection 547(2) to ensure that a person's youth allowance remains payable even if their rate is nil, where the person's rate is nil merely because they have received an advance of pharmaceutical allowance or because they have elected to receive their clean energy supplement on a quarterly rather than fortnightly basis.

Amendments to the Social Security Administration Act

Item 58 inserts a new section 12DB to provide that a claim is not required for quarterly clean energy supplement and it will be paid automatically to qualified people.

Item 59 inserts a reference to section 48D into subsection 55(1) to ensure that a payment of quarterly clean energy supplement is to be paid in accordance with section 55. Section 55 provides for the Secretary to pay social security payments into a person's bank account.

Part 4 - Indexation

Amendments to the Social Security Act

Item 60 inserts a number of new items into the indexed and adjusted amounts table at the end of subsection 1190(1). This item identifies the clean energy rates to be indexed and provides a convenient abbreviation for each category of rates.

Item 61 makes a technical, consequential amendment to the note at the end of section 1190, as a second note is inserted by item 62. That new note confirms for the reader that the indexation of the various clean energy supplement rates will have a flow-on effect to the rate at which quarterly clean energy supplement is paid and the amount of seniors supplement that is payable to a person. As the clean energy supplement rates set out in section 1190 are increased, the increase will flow on to quarterly clean energy supplement and seniors supplement.

Item 63 inserts a number of new items into the CPI Indexation table at the end of subsection 1191(1), which represent the new clean energy supplement rates. This item provides for the Consumer Price Index indexation of these rates. The arrangements are similar to the indexation arrangements that apply in relation to the maximum basic rate of the same social security payment, except that the rounding rule for the clean energy pension (CEP) rate is consistent with the rounding rule for indexation of the pension supplement as they both use a combined couple methodology that is not used elsewhere in the social security law.

Item 64 adds Note 3 at the end of subsection 1192(2) to confirm for the reader that the indexation of certain amounts may be affected by new Division 8 of Part 3.16 of the Social Security Act (as inserted by item 68).

Item 65 amends section 1192 of the Social Security Act to specify when the indexation arrangements for the various clean energy supplement rates first apply. New subsection 1192(3D) provides that the first indexation of amounts under items 1D, 1E and 1F of the CPI Indexation Table in subsection 1191(1) is to take place on 20 September 2013. New subsection 1192(3E) provides that the first indexation day for amounts under items 1G, 1H and 1J of the CPI Indexation Table is to take place on 1 January 2015. This item ensures that Consumer Price Index increases are not applied to the clean energy supplement amounts until the first indexation point after the supplements are added to the social security law.

Item 66 makes a technical, consequential amendment to the note at end of section 1196(2), as a second note is inserted by item 67. That new note confirms for the reader that the indexation of certain amounts may be affected by new Division 8 of Part 3.16 of the Social Security Act (as inserted by item 68).

Item 68 inserts a new Division 8 into Part 3.16 of the Social Security Act, which provides for the adjustment of indexation arrangements relating to clean energy household assistance. The additional Consumer Price Index impact of the carbon price is expected to be 0.7 per cent. The clean energy supplement will comprise the additional rise in the Consumer Price Index caused by the introduction of the carbon price (0.7 per cent), together with a further one per cent increase. The expected impact of the carbon price on indexation (0.7 per cent) will be delivered through the clean energy supplement, rather than indexation of the primary social security payment. Regular indexation of the primary payment will continue to apply, adjusted by the equivalent amount now being delivered through the clean energy supplement.

Special rules for indexation of certain rates on or after 20 March 2013

New section 1206GF sets out some special rules that apply to indexation of specified amounts on or after 20 March 2013. These special rules provide for the adjustment of primary payment indexation in order to pay the expected increase in the Consumer Price Index due to the carbon price (0.7 per cent) through the clean energy supplement. Regular indexation of the primary payment will continue to apply, adjusted by the equivalent amount now being delivered through the clean energy supplement.

The indexation factor is relevant in working out an indexed amount (the method statement in subsection 1192(2) refers) and is usually worked out in accordance with section 1193.

However, subsection 1206GF(1) sets out rules for adjusting the indexation factors that apply to certain amounts on or after 20 March 2013, to reflect the fact that the 0.7 per cent expected additional Consumer Price Index impact from carbon pricing will be delivered through the clean energy supplement, rather than indexation of the primary social security payment. (This 0.7 per cent is the initial brought forward CPI indexation amount of 0.007.) This subsection also ensures that primary social security payments will not be affected, should the relevant CPI indexation factor be less than one plus the brought forward CPI indexation amount.

The amounts affected by subsection 1206GF(1) are then listed in new subsection 1206GF(2). These are:

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pension MBR (maximum basic rate);

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PS (pension supplement) rate;

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PS minimum rate;

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PS basic rate;

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benefit MBR (ordinary);

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pension supplement component for pension bonus; and

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maximum transitional pension rates.

The initial brought forward CPI indexation amount is 0.007, the expected additional increase in the Consumer Price Index due to carbon pricing, which is being delivered through the clean energy supplement, rather than indexation of the primary social security payment.

The brought forward CPI indexation amount is defined in new subsection 1206GF(5) to mean:

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zero, if subsection 1206GF(3) applies and the brought forward PBLCI indexation amount in relation to that day is zero; or

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0.007 less any previous adjustment under subsection 1206GF(1).

The brought forward PBLCI indexation amount is defined to mean:

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zero, if the brought forward CPI indexation amount in relation to the day is zero; or

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0.007 less any previous adjustment under subsection 1206GF(3).

The note at the end of subsection 1206GF(1) provides that, once the brought forward CPI indexation amount is zero, there is no further adjustment of the indexation factor. An example is also included to provide the reader with a clear picture of how the adjustment of indexation will apply.

New subsection 1206GF(3) provides some special rules that modify the cost of living indexation factor (worked out under section 1197) for pension MBR except to the extent that it covers the maximum basic rate of pension PP (single). These rules apply for each indexation after 20 March 2013, and have the effect of adjusting the cost of living indexation factor to reflect the fact that the 0.7 per cent expected additional Consumer Price Index impact from carbon pricing will be delivered through the clean energy supplement, rather than indexation of the primary social security payment. These rules also ensure that primary social security payments will not be reduced, should the relevant PBLCI indexation factor be less than one plus the brought forward PBLCI indexation amount. (The initial brought forward PBLCI indexation amount is 0.007.)

The brought forward PBLCI indexation amount is defined in new subsection 1206GF(5), as described above.

The note at the end of subsection 1206GF(3) provides that, once the brought forward PBLCI indexation amount is zero, there is no further adjustment of the indexation factor. An example is also included to provide the reader with a clear picture of how the adjustment of indexation will apply.

New subsection 1206GF(5) provides that the adjustment rules as they apply to pension MBR do not affect a rate of payment worked out under clause 146 of Schedule 1A or an amount worked out in relation to a pension because of clause 149 of Schedule 1A.

Special rules for indexation of certain rates on or after 1 January 2014

New section 1206GG modifies the indexation arrangements for AP MBR and YA MBR, which are indexed on 1 January 2014. New subsection 1206GG(1) requires that the indexation factor for these amounts on 1 January 2014 (and subsequent indexation days if required) be adjusted by the brought forward indexation amount, but also ensures that the relevant payments will not be adjusted, should the relevant CPI indexation factor be less than one plus the brought forward CPI indexation amount.

The brought forward indexation amount is then defined in new subsection 1206GG(2) to mean 0.007 less any previous adjustment under this section.

The note at the end of section 1206GG provides that, once the brought forward indexation amount is zero, there is no further adjustment of the indexation factor. An example is also included to provide the reader with a clear picture of how the adjustment of indexation will apply.

Part 5 - Other amendments

Amendments to the Social Security Act

Item 69 repeals and substitutes subsection 17(8). New subsection 17(8) redefines the formula to work out the 'income cut-out amount' to take into account the clean energy supplement component. The terms 'maximum basic rate' and 'ordinary free area limit' are unchanged. The term 'pension supplement component' is used to mean the amount previously referred to as the 'Point 1064-BA3 amount'. The new formula adds the clean energy supplement component to the maximum basic rate and pension supplement component, multiplies this total by two, and then adds the ordinary free area limit. The total is then divided by 52 to give a weekly income cut-out amount.

Item 70 adds to subsection 1061ECA(2) (method statement, at the end of step 2) the words 'and (c) the person's clean energy supplement (if any)'. This includes the clean energy supplement in the calculation of the amount of advance payment of various pensions which may be paid to a person.

Items 71 to 74 make technical consequential amendments to the method statements and rate calculators to omit references to items or steps that have been repealed.

Item 75 omits the word 'either' in paragraph 1210(1)(a) and substitutes the words 'one or more'.

Item 76 inserts a new subparagraph 1210(1)(a)(ia) into section 1210 to refer to the clean energy supplement module (the CE Module). This ensures that that the clean energy supplement can be reduced as a result of the application of the income and assets tests. However , items 83 and 84 will ensure that people who are over pension age and in receipt of a part pension due to their income or asset level will receive the full amount of the clean energy supplement.

Item 77 inserts a new item 4A into the table at the end of subsection 1210(1), which refers to the person's clean energy supplement. By inserting the clean energy supplement after table item 4, a person's clean energy supplement will be reduced by the application of the income or assets test after any amount added for rent assistance (if applicable) but before any amount of the person's pension supplement minimum amount.

Item 78 repeals the note at the end of subsection 1210(1) and inserts two new notes. Note 1 provides that, for the purposes of table item 4A, a person's rate of clean energy supplement will be nil if they are receiving quarterly clean energy supplement. Similarly, Note 2 provides that table item 5 will not apply if a person is in receipt of quarterly pension supplement.

Item 79 inserts a new subsection 1210(3A) after subsection 1210(3). New subsection 1210(3A) provides that, if:

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a quarterly clean energy supplement is payable to a person; and

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if quarterly clean energy supplement were not payable to the person (that is, they had not elected to receive quarterly clean energy supplement), their rate would have included a component of clean energy supplement; and

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their rate of social security payment would have been reduced by the application of the income or assets test;

their rate of quarterly clean energy supplement is reduced to the same extent that their rate of social security would have been reduced if they had not elected to receive their clean energy supplement on a quarterly basis.

The note at the end of new subsection 1210(3A) confirms for the reader that the reduction provided by the subsection may be disregarded in certain circumstances, and refers the reader to new subsection 43(5B) of the Social Security Administration Act (inserted at item 84, below).

Item 80 repeals and substitutes subsection 1210(4). This sets out a new table detailing the Modules that are relevant to the application of section 1210. New subsection 1210(4) sets out the details of which rate calculators include payment of pension supplement, pharmaceutical allowance, and clean energy supplement, and signposts the relevant module of the rate calculator. In addition, the table signposts the relevant income and assets test modules of the various rate calculators.

Amendments to the Social Security Administration Act

Items 81, 82, 83 and 84 amend section 43 to provide that, where any amount of pension supplement minimum amount, clean energy supplement, or quarterly clean energy supplement is payable to a person after the application of the income or assets test, then the full amount is to be paid to that person.

For example, if, a person's employment income reduces their rate of pension so that they receive an amount that is less than the full amount of the pension supplement minimum amount (but more than nil), their daily rate of pension will be increased to an amount that is equal to the daily rate of pension supplement minimum amount plus the daily rate of the clean energy supplement.

These provisions will ensure that people who are over pension age and in receipt of a part pension due to their income or asset level will receive the full amount of the clean energy supplement.