House of Representatives

Replacement Explanatory Memorandum

(Circulated by the authority of the Minister for Social Services, the Hon Scott Morrison MP)

Outline

Streamlined income management

Schedule 1 to the Bill will amend the social security law to streamline the current income management programme under a two-year continuation.

Income management and the BasicsCard will continue for two additional years to maintain support for existing income management participants. The streamlining amendments made by this Bill will enable more effective operation of the income management programme.

In particular, the Bill provides for the abolition of certain incentive payments relating to income management, amends the operation of the vulnerable measure of income management, and makes minor streamlining amendments to remove ambiguities and improve the programme's effectiveness.

Aged care measures

Schedules 2 and 3 to the Bill make amendments to reflect two measures relating to aged care, which were included in the 2014-15 Mid-Year Economic and Fiscal Outlook announcement.

The first measure is to cease payment, from 1 July 2015, of the residential care subsidy to residential aged care providers for holding a place for up to seven days prior to a care recipient entering care. This will ensure the subsidy is appropriately targeted to those actually receiving care. This subsidy is currently paid to providers at a reduced rate of 30 per cent of the full residential care subsidy that will be payable once the care recipient enters care. The provider will not be able to recoup any lost residential care subsidy from the care recipient, but will still be able to charge the care recipient the standard resident contribution for the pre-entry period.

The second measure is to abolish the Aged Care Planning Advisory Committees as part of the Smaller Government initiative. The Smaller Government reforms are reducing the size and complexity of government by eliminating duplication and waste, streamlining services and reducing the cost of government administration. The Aged Care Planning Advisory Committees' role was to provide advice in relation to the distribution of aged care places. However, the last of these committees expired in September 2014. These amendments repeal the now-redundant relevant provisions in the Aged Care Act 1997.

Financial impact statement

Statements of compatibility with human rights

The statements of compatibility with human rights appear at the end of this explanatory memorandum.

Notes on clauses

Abbreviations used in this explanatory memorandum

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Aged Care Act means the Aged Care Act 1997

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Social Security Act means the Social Security Act 1991

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Social Security Administration Act means the Social Security (Administration) Act 1999

Clause 1 sets out how the new Act is to be cited - that is, as the Social Services Legislation Amendment (No. 2) Act 2015.

Clause 2 provides a table setting out the commencement dates of the various sections in, and Schedules to, the new Act.

Clause 3 provides that each Act that is specified in a Schedule is amended or repealed as set out in that Schedule.

Schedule 1 - Income management regime

Summary

Income management and the BasicsCard will continue for two additional years to maintain support for existing income management participants. The amendments in Schedule 1 will make a number of changes to streamline the income management programme to enable more effective operation of the programme.

This Schedule provides for the abolition of certain incentive payments relating to income management, amends the operation of the vulnerable measure of income management, and makes minor amendments streamlining the operation of income management, removing ambiguities and providing for more effective operation of the programme.

Background

These amendments abolish certain incentive payments. The matched savings scheme (income management) payment and the voluntary income management incentive payment provide payments for remaining on voluntary income management for periods of six months or more, or for accumulating savings of income managed funds. These payments are no longer needed, and are being abolished.

The amendments also streamline the operation of the current vulnerable income management measure. The measure was under-utilised and administratively burdensome. The determination that a person is a vulnerable welfare payment recipient will cease to be done on a case-by-case basis by Department of Human Services social workers, and will instead only apply where a welfare recipient meets various objective criteria as part of a class. The class will be prescribed by legislative instrument, to allow continuing flexibility about who this measure covers.

Exemptions from being a vulnerable welfare payment recipient are streamlined to refer solely to a person's rate of welfare payment, rather than also to require subjective assessment of a person's circumstances. This will simplify administration.

The amendments align the manner in which people with dependent children are treated for income management purposes with the broader approach to dependent children of most social security payments, by relying upon the concept of a 'principal carer' to identify a person who relevantly has such dependants. Other streamlining amendments are made to the provisions that may result in a person being exempt from income management. There are a number of circumstances in which the income management administrative provisions do not provide for raising of debts or restoring the balance of an income management account where amounts have been either credited or debited in error. These omissions are being corrected.

Other minor administrative corrections are also being made.

The amendments made by this Schedule generally commence on 1 July 2015.

Explanation of the changes

Part 1 - Abolition of certain incentive payments

Items 1 and 2 repeal various definitions from the Social Security Act, which will no longer be required when the two incentive payments are abolished. Item 2 repeals Parts 2.25D and 2.25E, which respectively provide for the voluntary income management incentive payment and the matched savings scheme (income management) payment.

Items 3 to 5 consequentially amend the Social Security Administration Act to remove references to the incentive payments, which will become redundant.

Part 2 - Vulnerable welfare payment recipients

Item 6 makes consequential changes to the simplified outline of income management to reflect the removal of individual determinations for the vulnerable measure of income management.

Item 7 consequentially amends section 123TC of the Social Security Administration Act definition of vulnerable welfare payment recipient to reflect it will now rely upon the person coming within a class of persons prescribed by legislative instrument.

Item 8 repeals and substitutes section 123UGA of the Social Security Administration Act. New section 123UGA empowers the Minister, by legislative instrument, to prescribe a class or classes of persons who are vulnerable welfare payment recipients instead of the current DHS social worker assessment determination process.

Part 3 - Miscellaneous

Items 9 to 11 and 13 to 24 make amendments removing references to 'dependent child of another person' and substituting references to the person being the principal carer of a child.

Item 12 revises the work test which may result in a person being an exempt welfare payment recipient. The criterion will look at whether the person has, within at least four of the last six fortnights before the test time, received less than 25 per cent of the maximum basic rate of youth allowance, newstart allowance, pension PP (single) or benefit (PP) partnered, or the equivalent rate of special benefit. The new earnings test also omits reference to meeting priority needs.

Item 25 amends section 123WL of the Social Security Administration Act to remove the requirement that the balance of an income management account be paid within 12 months to another person upon the death of the income managed person. The amount will be paid in accordance with the provision but, where no person to whom payment can be made has been identified within 12 months, it will still be possible to pay out the balance lawfully once an appropriate recipient is later identified.

Item 26 repeals and substitutes section 123YR of the Social Security Administration Act. In order to allow greater flexibility to the Secretary in dealing with a person whose income management account has been credited in error, the Secretary either may choose to debit the account by an amount equal to the excess, or amounts totalling an amount equal to the excess, or may instead raise a debt of the excess amount. This will enable recovery of the excess amount by instalments, rather than requiring recovery to occur in a single action. The Secretary's determination under new subsection (1) is not a legislative instrument because it is an administrative action in relation to a single person, although, to avoid doubt, this is declared at new subsection (3).

Item 27 adds new section 123ZJA into the Social Security Administration Act. This new section enables the Secretary to correct the balance of income management accounts and recover debts appropriately where an action has purportedly been taken under Division 6, but the action is invalid due to an administrative error. For example, the Secretary may have purported to provide a stored value card to an income managed person, but mistakenly issued the card to the wrong person.

The relevant excess amount is then a debt to the Commonwealth by the person who has received the amount in error. For a person who has mistakenly been issued a stored value card, the excess amount is the face value of the card. For other situations, the excess amount is similarly the equivalent value the person has received. If the error resulted in a credit to a person's income management account, the person's income management account is debited by an equivalent amount, or amounts totalling the equivalent amount, or the person must repay a debt to the Commonwealth of the excess amount. If the payment resulted in the credit of a joint bank account, then each account holder is jointly and severally liable for the payment of a debt due to the Commonwealth.

Notes alert the reader that debt recovery is provided by Chapter 5 of the Social Security Act.

If the purported action resulted in an amount being debited from a person's income management account in error, an amount equal to the shortfall must be credited to the Income Management Record and the person's income management account.

The Secretary's determination under new subsection (2) is not a legislative instrument because it is an administrative action in relation to a single person, although, to avoid doubt, this is declared at new subsection (11).

Item 28 adds a subparagraph to subsection 123ZN(1) of the Social Security Administration Act to provide that making a payment to cover an invalid action, as mentioned in new subsection 123ZJA(1) is covered by the appropriation in section 123ZN.

Part 4 - Consequential amendments

Items 29 to 31 amend the Income Tax Assessment Act 1997, to remove references to the matched savings scheme (income management) payment and the voluntary income management incentive payment, consequential to the repeal of those payments by item 2 above. This repeal takes effect from 1 July 2016 to ensure any final payments remain tax-exempt when paid.

Part 5 - Transitional and savings provisions

Item 32 provides a transitional provision for the repeal of the voluntary income management incentive payment. Despite the repeal of Part 2 25D of the Social Security Act, a person may accrue a qualifying incentive payment period and be qualified for an incentive payment if the person's qualifying incentive payment period began before 1 July 2015, but continues such that it ends on or after 30 June 2015, and the requirements of Part 2.25D are otherwise satisfied. This means that people who have part-accumulated a qualifying incentive payment period before 1 July 2015, and otherwise maintain qualification for the required 26 weeks may be paid an incentive payment for that period.

Item 33 provides a transitional provision for the repeal of the matched savings scheme (income management) payment. Despite the repeal of Part 2.25E of the Social Security Act, a person may accrue a qualifying savings period and be qualified for a payment if the person's qualifying savings period began before 1 July 2015, but continues such that it ends on or after 30 June 2015, and the requirements of Part 2.25E are otherwise satisfied. This means that persons who have part-accumulated a qualifying incentive payment period before 1 July 2015, and otherwise maintain qualification for the required number of weeks and claim the payment on or before 31 December 2015 may qualify for a matched savings scheme payment for that period.

Item 34 provides a transitional provision for people income managed as vulnerable welfare payment recipients. Under subitem (1), despite the repeal of section 123UGA of the Social Security Administration Act, a determination that a person is a vulnerable welfare payment recipient made on or before 30 June 2015 remains in force for the balance of the period for which it was originally made, and the provisions of that section continue to apply in respect of the determination.

Subitem (2) then provides that, despite subitem (1), a person may request the Secretary to revoke a determination made before 1 July 2015 that the person is a vulnerable welfare payment recipient. If such a request is made, the Secretary must revoke the determination.

Schedule 2 - Ceasing residential care subsidy for pre-entry leave

Summary

This measure ceases the payment of residential care subsidy for care recipients during a period of leave taken before entering a residential care service. It also makes consequential amendments to fee and leave provisions.

Background

Under the Aged Care Act, providers are paid the residential care subsidy for the care they provide to care recipients. The residential care subsidy is also paid when care recipients are on leave, usually at a reduced rate.

To facilitate the entry of care recipients into residential care, a care recipient may take leave for up to seven days before entry (subsection 42-3(3)). This is referred to as 'pre-entry leave'. During this period, the residential care service reserves the care recipient's place, but the care recipient does not receive care.

The Government will no longer pay the residential care subsidy or supplements during this period.

The amendments made by this Schedule commence on 1 July 2015.

Explanation of the changes

Amendments to the Aged Care Act

Item 1 adds new subsection (4) to section 42-1 to remove an approved provider's eligibility for residential care subsidy for a care recipient who is on pre-entry leave from the residential care service.

Item 2 inserts new subsection (3AA) to section 42-2 to ensure the 52-day cap on leave will not include any leave that was taken as pre-entry leave. This ensures any pre-entry leave taken by a care recipient does not negatively impact their ability to be on other leave from the residential care service.

Item 3 amends subsection 42-3(3) to clarify when a period of pre-entry leave ends. This amendment provides clearer alignment with existing paragraph 42-3(1)(b).

Item 4 adds new subsection (4) to section 52C-3 to place an express limit on the maximum daily amount of resident fees that can be charged to a care recipient who is on pre-entry leave. New subsection 52C-3(4) ensures that care recipients who are on pre-entry leave can only be charged the standard resident contribution (as defined in section 52C-4).

Amendments to the Aged Care (Transitional Provisions) Act 1997

The Aged Care (Transitional Provisions) Act 1997 sets out the fees and payments payable by care recipients who were in care before 1 July 2014.

Items 6 to 11 make the necessary changes to that Act to cease eligibility for residential care subsidy for continuing care recipients on pre-entry leave on or after 1 July 2015 and to limit fees payable while on pre-entry leave to the standard resident contribution for days on or after 1 July 2015.

Items 5 and 12 are application provisions that set out how the removal of eligibility for residential care subsidy for pre-entry leave will operate. The application provisions confirm that the amendments provided by this Schedule only apply to days that occur on or after 1 July 2015. That is, an approved provider will continue to be eligible for residential care subsidy for a care recipient for days they are on pre-entry leave that occur before 1 July 2015, even if the care recipient is still on pre-entry leave on or after 1 July 2015.

Subitems 5(3) and 12(3) also ensure the changes made to the fees an approved provider can charge are only in relation to days on or after 1 July 2015.

Schedule 3 - Aged Care Planning Advisory Committees

Summary

This measure forms part of the Smaller Government reforms, which reduce the size and complexity of government. The measure removes the provisions that allow the establishment of Aged Care Planning Advisory Committees.

Background

Aged Care Planning Advisory Committees were established in all states and territories. Their role, when called upon, was to advise the Department on the most appropriate distribution of places to aged care planning regions through the conduct of the Aged Care Approvals Round process.

The last appointments to the various committees expired in September 2014. This measure is part of the third phase of the Smaller Government reforms, which reduce the size and complexity of government.

The amendments made by this Schedule commence on the day of Royal Assent.

Explanation of the changes

Amendments to the Aged Care Act

Item 1 removes reference to the Aged Care Planning Advisory Committee from the diagram at the end of section 11-4, used to explain the allocation process, given the proposed removal of the committee as provided by item 3 below.

Item 2 amends paragraph 12-1(2)(c) by removing the reference to section 12-7, which is the power to appoint people as members of the Aged Care Planning Advisory Committee, as item 3 below repeals section 12-7.

Item 3 repeals section 12-7 as this section provides the power for the Secretary to establish Aged Care Planning Advisory Committees. By removing the power to appoint members to the Aged Care Planning Advisory Committee, there can no longer be a committee, which is the aim of this measure.

Statements of compatibility with human rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

SOCIAL SERVICES LEGISLATION AMENDMENT (No. 2) BILL 2015

Schedule 1 - Income management regime

This Schedule is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview of the legislative amendments

Income management and the BasicsCard will continue for two additional years to maintain support for existing income management participants. The amendments in this Schedule will make a number of changes to streamline the income management programme to enable more effective operation of the programme.

The key objectives of income management under the social security law are to:

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reduce immediate hardship and deprivation by directing welfare payments to the priority needs of a recipient and their partner, children and any other dependents;

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help affected welfare payment recipients to budget so they can meet their priority needs;

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reduce the amount of discretionary income available for alcohol, gambling, tobacco and pornography;

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reduce the likelihood that welfare payment recipients will be subject to harassment and abuse in relation to their welfare payments; and

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encourage socially responsible behaviour, particularly in the care and education of children.

Human rights implications

The right to social security

Article 9 of the International Covenant on Economic, Social and Cultural Rights (ICESCR) recognises 'the right of everyone to social security, including social insurance'. The United Nations Committee of Economic, Social and Cultural Rights (the UN Committee) has stated that implementing this right requires a country to, within its maximum available resources, provide 'a minimum essential level of benefits to all individuals and families that will enable them to acquire at least essential health care, basic shelter and housing, water and sanitation, foodstuffs, and the most basic form of education'.

Measures such as income management, which restrict what welfare can be spent on, would not detract from the eligibility of a person to receive welfare, nor reduce the amount of a person's social security entitlement. Rather, these types of arrangement provide a mechanism to ensure that certain recipients of social security entitlements use a proportion of their entitlement to acquire essential items, including all of those referred to by the UN Committee.

The UN Committee has stated that the right to social security encompasses the right to access and maintain benefits 'in cash or in kind'. Neither arrangement detracts from situations in which someone has the right to social security, such as unemployment and workplace injury, and family and child support - it simply supports a person further once they have achieved their right to receive social security.

The right to an adequate standard of living

Article 11(1) of the ICESCR states that everyone has the right to 'an adequate standard of living for himself and his family, including adequate food, clothing and housing, and to the continuous improvement of living conditions', and that 'appropriate steps' be taken to 'ensure realisation of this right'. Further to this, article 11(2) of the ICESCR states that 'measures, including specific programmes,' should be taken in 'recognising the fundamental right of everyone to be free from hunger'.

With regard to the right to an adequate standard of living, income management does not limit this right given that the programme supports individuals to achieve and maintain an adequate standard of living through the purchase of essential goods and services, including food, clothing, water and housing, which are all classified as priority needs under Part 3B of the Act and which income managed funds can be used to purchase. The programme therefore aims to advance this right through ensuring that money is available for priority goods and services, such as housing, food and clothing, in situations where individuals need additional support to meet these needs. In turn, this helps stabilise an individual's living circumstances and financial situation, enabling them to focus on caring for children and/or joining or returning to work.

Income management does not restrict the availability, adequacy and accessibility of essential needs required to maintain an adequate standard of living. The availability, adequacy and accessibility of essential needs is maintained through the ability of income managed recipients to purchase goods and services through a range of payment options, including via direct deductions to third parties through the Department of Human Services and a wide footprint of merchants that accept BasicsCard, both within and outside areas in which income management currently operates. Recipients are not required to pay for replacement BasicsCards.

The right to self-determination

Article 1 of the ICESCR states that 'all peoples have the right of self-determination. By virtue of that right they freely determine their political status and freely pursue their economic, social and cultural development'.

The continuation of income management and expansion to any new communities will not affect the means of subsistence or political status of any person or group, but will require that, subject to certain exceptions, 50 per cent of the social security payments of people subject to the income management regime must be spent on priority goods and services such as food and rent. While income management does to an extent limit a person's ability to spend their social security payments freely on excluded goods and services, it does not impact on or interfere with their right to pursue freely their economic, social or cultural development. The limitation under income management on how social security payments may be spent is to ensure that the essential needs of vulnerable people are met and that they are protected against risks of homelessness and financial exploitation. Community consultation would be undertaken prior to any expansion of the programme to new locations to ascertain how income management might support people and what model would work best.

This limitation is reasonable and proportionate to achieve a legitimate objective, as discussed above, and is necessary to promote other rights by ensuring that income support payments are used to meet the essential needs of vulnerable people and their dependents, and that these people are protected against risks of homelessness and financial exploitation. Any limitation that may occur is therefore necessary to pursue the legitimate objectives of the programme.

The rights of equality and non-discrimination

The rights of equality and non-discrimination are provided by a number of the seven core international human rights treaties to which Australia is a party, most relevantly the International Covenant on Civil and Political Rights (ICCPR) and the Convention on the Elimination of All Forms of Racial Discrimination (the CERD). In particular, Article 5 of the CERD requires parties 'to prohibit and eliminate racial discrimination in all its forms and to guarantee the right of everyone, without distinction as to race, colour or national or ethnic origin, to equality before the law' notably in the enjoyment of 'the right to...social security and social services' (Article 5(e)(iv)).

Discrimination is impermissible differential treatment among persons or groups that results in a person or a group being treated less favourably than others, based on a prohibited ground for discrimination, such as race. However, the UN Human Rights Committee has recognised that 'not every differentiation of treatment will constitute discrimination, if the criteria for such differentiation are reasonable and objective, and if the aim is to achieve a purpose which is legitimate under the Covenant'.

Measures such as income management, which restrict what welfare can be spent on, are aimed at achieving legitimate objectives and are not applied on the basis of race or cultural factors. Income management operates in a range of locations which were chosen based on demonstrated high levels of disadvantage indicated by a range of factors which are reasonable, objective and non-race based, such as the number of people receiving welfare payments and the length of time people have been receiving welfare payments.

People may go onto income management for a range of reasons, including:

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being in receipt of particular welfare payments; or

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having been referred for income management; or

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having volunteered to participate.

Anyone residing in a location where income management operates is eligible for income management, as long as specific eligibility criteria are met. Income management is therefore not targeted at people of a particular race, but to income support recipients who meet particular criteria.

To the extent that income management measures may disproportionately affect Indigenous people, any such limitation is reasonable and proportionate to achieve its objectives. As evidenced by the evaluations of income management conducted to date in the locations in which it operates, the programme has led to an increase in funds being directed towards people's priority needs, leading to improvements in wellbeing for individuals, families and children.

The rights of children

By ensuring that a portion of income support payments is used to cover essential goods and services, income management can improve living conditions for the children of income support recipients. It thereby advances the right of children to the highest attainable standard of health and the right of children to adequate standards of living (articles 24, 26 and 27 of the Convention on the Rights of the Child, respectively).

Conclusion

The amendments are compatible with human rights. Income management will advance the protection of human rights by ensuring that income support payments are spent in the best interests of welfare payment recipients and their dependents. To the extent they may limit human rights, those limitations are reasonable, necessary and proportionate to achieving the legitimate objective of reducing immediate hardship and deprivation, reducing violence and harm, encouraging socially responsible behaviour, and reducing the likelihood that welfare payment recipients will be subject to harassment and abuse in relation to their welfare payments.

Schedule 2 - Ceasing residential care subsidy for pre-entry leave

Schedule 3 - Aged Care Planning Advisory Committees

These Schedules are compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Ceasing residential care subsidy for pre-entry leave

Overview of the legislative amendments

This measure will implement the removal of residential care subsidy for pre-entry leave, announced in the Mid-year Economic and Fiscal Outlook 2014-15.

Currently, under subsection 42-3(3) of the Aged Care Act 1997, a care recipient may take leave for up to seven days prior to entering permanent residential care. This is referred to as pre-entry leave. During this period, a provider is still eligible to receive an amount of residential care subsidy in respect of the care recipient's care costs, but at the reduced rate of 30 per cent of the full amount of the residential care subsidy that will be payable once the resident enters the service. The Government does not pay any supplements in respect of the care recipient's accommodation costs for the period of pre-entry leave.

Currently, the aged care provider is able to charge the care recipient the standard resident contribution and a means-tested care fee (calculated on the reduced residential care subsidy rate) for any day taken as pre-entry leave. Nothing is payable by the care recipient in respect of the care recipient's accommodation costs.

Currently, any days taken as pre-entry leave are counted as part of the care recipient's entitlement to 52 days of social leave from the aged care service.

The aged care provider will not be able to recoup any lost residential care subsidy from the care recipient as a result of this measure.

Human rights implications

The measure is compatible with the right to an adequate standard of living and the right to the enjoyment of the highest attainable standard of physical and mental health, as contained in article 11(1) and article 12(1) of the International Covenant on Economic, Social and Cultural Rights (ICESCR) and article 28 of the Convention on the Rights of Persons with Disabilities (CRPD).

The measure also engages the right to health, relating to the provision of aged care services, as contained in article 25 of the CRPD by ensuring that a care recipient retains the right to access pre-entry leave for up to seven days prior to entering a residential care service. The amendments also prohibit an aged care provider from recouping any amount representing residential care subsidy for the pre-entry period from the care recipient. This ensures that a care recipient is not financially disadvantaged as a result of this legislative change.

In addition, the exclusion of leave taken as pre-entry leave from a care recipient's entitlement to 52 days of social leave per annum from an aged care service supports the care recipient's human rights by ensuring any pre-entry leave taken by a care recipient does not negatively impact their allocated entitlements to social leave from the residential care service.

Conclusion

Schedule 2 to this Bill is compatible with human rights as it is compatible with the human right to health and the right to an adequate standard of living. To the extent that the Schedule limits this right by ceasing the payment of residential care subsidy and supplements payable to an approved provider while a care recipient is on certain types of leave from residential care, the limitation is reasonable and mitigated by the protections outlined above.

Aged Care Planning Advisory Committees

Overview of the legislative amendments

This measure reflects the Government's decision to abolish the Aged Care Planning Advisory Committees as part of the Smaller Government initiative. The Aged Care Planning Advisory Committees' role was to provide advice in relation to the distribution of aged care places.

Human rights implications

This measure does not engage any of the applicable rights or freedoms.

The Smaller Government reforms are reducing the size and complexity of government. Ongoing functions of the Aged Care Planning Advisory Committees will be performed by the Department.

Conclusion

Schedule 3 to this Bill is compatible with human rights as it does not raise any human rights issues.

[Circulated by the authority of the Minister for Social Services, the Hon Scott Morrison MP]