House of Representatives

Revised Explanatory Memorandum

(Circulated by the authority of the Minister for Social Services, the Hon Kevin Andrews MP)

Outline

Encouraging responsible gambling

As foreshadowed during the 2013 election campaign, this Bill will implement the first stage of a different approach to addressing problem gambling, reducing bureaucracy and the duplication of functions between the Australian Government and State and Territory Governments.

The Bill will repeal the position and functions of the National Gambling Regulator, along with those provisions relating to the supervisory and gaming machine regulation levies, the automatic teller machine withdrawal limit, dynamic warning provisions, the trial on mandatory pre-commitment, and matters for Productivity Commission review. The Bill will also amend the pre-commitment and gaming machine capability provisions, to express clearly the Government's commitment to the development and implementation of these measures in the near future, informed fully by consultations with industry, State and Territory Governments, and other stakeholders.

Charities

The Charities Act 2013 defines charity and charitable purpose for the purposes of all Commonwealth legislation.

The Bill delays the commencement of the Charities Act 2013 by nine months, from 1 January 2014 to 1 September 2014. The delay will allow for further consultation on the legislation in the broader context of the Government's other commitments in relation to the civil sector.

Continuing income management as part of Cape York Welfare Reform

The Bill amends the Social Security Administration Act to enable a two-year continuation of income management as part of the continuation of Cape York Welfare Reform. The continuation of income management until the end of 2015 as a key element of the reforms will continue to assist in stabilising people's circumstances and fostering behavioural change, particularly in the areas of school attendance, parental responsibility and increasing individual responsibility.

Family tax benefit and eligibility rules

From 1 January 2014, family tax benefit Part A will be paid to families only up to the end of the calendar year in which their teenager is completing school.

Youth allowance, with its 'learn or earn' provisions that require young people to participate in work, job search, study or training, will remain available as the more appropriate payment to help young people transition from school into work or post-secondary study.

Exemptions will continue to apply for children who cannot work or study due to physical, psychiatric, intellectual or learning disability.

Period of Australian working life residence

From 1 January 2014, age pensioners and certain other pensioners with unlimited portability, will be required to have been Australian residents for 35 years during their working life (from age 16 to age pension age) to receive their full means-tested pension after 26 weeks' absence from Australia. The current requirement is 25 years. The change will also apply to all pensioners paid under social security agreements outside Australia, except those with Greece and New Zealand due to the specific terms of those agreements.

The change recognises that Australia's social security system differs markedly from the contributory systems that operate overseas, and that payments are made from general tax revenue and based on the concepts of residence and need. Other countries generally require 35 to 45 years of pension contributions to receive a full pension.

Pensioners who are living overseas immediately before 1 January 2014 will continue to be paid under the current 25-year rule, unless they return to Australia for longer than 26 weeks and leave again, when the new rules will start to apply to their pension calculation.

In an associated change, members of a couple paid outside Australia under a social security agreement will now have their pensions calculated on the basis of their own Australian working life residence, rather than their partners' Australian working life residence, as already applies to pensioners paid outside Australia under domestic portability rules in non-agreement countries. Existing pensioners outside Australia immediately before 1 January 2014 are exempt from this change unless they would be eligible for a higher rate of pension under the new rules.

Interest charge

The Bill will allow for an interest charge to be applied to certain debts relating to austudy payment, fares allowance, youth allowance payments to full-time students and apprentices, and ABSTUDY living allowance payments. The interest charge will only be applied where the debtor does not have or is not honouring an acceptable repayment arrangement. Debtors who are already making repayments, or who come to a repayment agreement with the Department of Human Services following the implementation of the measure, will not be charged interest.

The key purpose of the interest charge is to encourage debtors to repay their debt, in a timely fashion, where they have the financial capacity to do so. At present, current recipients of income support with debts have their payments reduced until their debts are repaid. For former recipients of income support, on the other hand, there is no incentive to repay their debts. Once the interest charge is in place, debtors who have not been making repayments will have an incentive to engage with the Department of Human Services to make a repayment arrangement in order to avoid the interest charge.

The rate of the interest charge will be based upon on the 90-day Bank Accepted Bill rate, plus an additional seven per cent, as is currently applied by the Australian Taxation Office for tax debts under the Taxation Administration Act 1953. Over the last four years, this rate has averaged 11.07 per cent, and currently stands at 9.6 per cent.

Student start-up loans

The Bill establishes, from 1 January 2014, the student start-up loan. These loans will be income-contingent, and there will be a limit of two loans a year of $1,025 each (indexed from 2017). The loans will be repayable under similar arrangements to Higher Education Loan Program debts. Students will only be required to begin repaying their start-up loan after their Higher Education Loan Program debt has been repaid.

The Bill also provides grandfathering arrangements so that recipients who received a student start-up scholarship or Commonwealth Education Costs Scholarship prior to 1 January 2014, and have remained continuously on student payments, will continue to be eligible to receive the student start-up scholarship, as a grant, until coming off student payments.

The student start-up loan and student start-up scholarship aim to assist students with the costs of study, including the purchase of text books, computers and internet access.

Paid parental leave

To ease administrative burdens on business, the Paid Parental Leave legislation will be amended to remove the requirement for employers to provide Government-funded parental leave pay to their eligible long-term employees.

From 1 March 2014, employees will be paid directly by the Department of Human Services, unless an employer opts in to provide parental leave pay to its employees and an employee agrees for their employer to pay them.

Pension bonus scheme

From 1 March 2014, the Bill will end late registrations for the closed pension bonus scheme.

The scheme provides a lump sum payment to people who are qualified for age pension, age service pension, partner service pension after reaching pension age, or income support supplement after reaching qualifying age - but who choose to defer their pension and remain in the workforce. The scheme was closed from 2009, although people remained able to register for the scheme if they were qualified for it, but had not registered, at the time of its closure.

However, the introduction around the same time of a work bonus for age pensioners with earnings from employment has been more effective in encouraging older Australians to continue contributing to the workforce past pension age. Ending late registrations for the pension bonus scheme will help ensure the pension system is simpler and more sustainable for older Australians into the future.

Indexation

This Bill will extend the indexation pauses on certain higher income limits for three further years until 30 June 2017.

This will apply to the family tax benefit Part B primary earner income limit, the parental leave pay and dad and partner pay individual income limits, and the higher income free area for family tax benefit Part A. In addition, the annual end-of-year family tax benefit supplements will remain at current levels for three years.

This Bill will also maintain the annual child care rebate limit at $7,500 for three further income years starting from 1 July 2014, with the first indexation of this amount occurring on 1 July 2017. As a result, an individual will be able to receive up to the maximum amount of $7,500 per child per financial year for out-of-pocket child care costs for those three income years.

Changes to the rules for receiving payments overseas

From 1 July 2014, the length of time that families can be temporarily overseas and continue to receive family and parental payments will reduce from three years to 56 weeks.

In some circumstances, (such as where certain Australian Defence Force and Australian Federal Police personnel are deployed overseas) a person will continue to be eligible for family and parental leave payments for up to three years while temporarily absent from Australia.

Extending the deeming rules to account-based income streams

The Bill will align the income test treatment of account-based superannuation income streams, for products assessed from 1 January 2015, with the deemed income rules applying to other financial assets. Account-based income streams held by income support recipients immediately before 1 January 2015 will continue to be assessed under the previous rules unless recipients choose to change to a product that is assessed under the new rules.

Other amendments

Other amendments include improving the administration of debt recovery under the Student Financial Supplement Scheme, clarifying the provisions relating to the time period for lodging tax returns for family assistance purposes, and ensuring that funding under the National Disability Insurance Scheme paid into a person's account, which is set up for the purpose of managing the funding for supports for a participant's plan, cannot be garnisheed for debt recovery purposes.

Financial impact statement

Regulation impact statement

The regulation impact statement for the paid parental leave measure appears at the end of this explanatory memorandum.

STATEMENTS OF COMPATIBILITY WITH HUMAN RIGHTS

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