House of Representatives

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)

SCHEDULE 1-AMENDMENTS RELATING TO ABSTUDY SCHEME

Summary of proposed changes

The following amendments are made by Schedule 1 :

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a general exclusion under the income test for a payment under the ABSTUDY Scheme is made except where the payment relates to a person who is a student child or a dependent child of another person;

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provisions relating to educational and other schemes exclusion (currently only applying to ABSTUDY Scheme payments) for age pension, disability support pension, wife pension, carer payment, bereavement allowance, widow B pension and pension PP (single) are added;

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technical amendments to replace references to ABSTUDY Tertiary Scheme with ABSTUDY Scheme;

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removal of provisions relating to dependent spouse allowance previously payable under the ABSTUDY Scheme; and

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a saving provision.

The proposed amendments will achieve equity in the treatment of ABSTUDY Scheme recipients and their partners (where applicable) with that of other income support recipients and their partners (where applicable). These amendments are required because of changes made, with effect from 1 January 2000, to the ABSTUDY Scheme which include the removal of the dependent spouse allowance component of the scheme.

Arrangements for ex-gratia payments for all people affected by the changes between 1 January 2000 until these amendments commence operation have been made.

Explanation of the changes

Section 8 of the Social Security Act 1991 (the Social Security Act) provides for income test definitions that generally apply to all social security payments. Subsection 8(8) of the Social Security Act provides for general exclusions of payments from the income test. Paragraph 8(8)(zf) provides for a specific exclusion from the income test for payments of pensioner education supplement under the Social Security Act or under the ABSTUDY Scheme to a person who is receiving a social security pension or a social security benefit. Item 1 repeals paragraph 8(8)(zf) and replaces it with a wider exclusion from the income test for any payment under the ABSTUDY Scheme.

A new subsection 8(8A) of the Social Security Act is inserted by item 2 which provides that for the purpose of determining whether a person is a student child or a dependent child under section 5 this new subsection has effect as if paragraph 8(8)(zf) were not included. This means that in respect of a person who is a student child or a dependent child and who is receiving a payment under the ABSTUDY Scheme, that payment is not excluded for the purposes of the income test. In this case, the income test is only relevant in ascertaining the income of the student child or the dependent child under subsections 5(1A), (3) and (4) of the Social Security Act. This amendment ensures consistency in the treatment of the income of a student child or dependent child for the purposes of the social security law.

Items 3 to 8 and 12 respectively insert new sections 47A (age pension), 103A (disability support pension), 151A (wife pension), 202A (carer payment), 321A (bereavement allowance), 368A (widow B pension) and 500VA (pension (PP) single) into the Social Security Act. All of these new sections provide an educational and other schemes exclusion in respect of the payment that they relate to. They ensure that the relevant payment is not payable to a person in respect of a period where the person receives a payment under the ABSTUDY Scheme on the basis that the person is a full-time student and the payment includes a component known as living allowance (the basic payment) (this is similar in character to an income support payment). These educational and other schemes exclusion provisions are similar to those that currently apply in respect of social security benefits except that they only apply to an ABSTUDY Scheme payment and in the circumstances described.

Items 9, 10 and 13 to 19 remove references to the ABSTUDY Tertiary Scheme in various provisions relating to multiple entitlement exclusion or educational and other scheme exclusion provisions for particular social security payments and replace them with references to the ABSTUDY Scheme to the extent that it applies to part-time students. These amendments are required because a payment under the ABSTUDY Scheme can be made to a person over the age of 18 years who is in part-time studies at a secondary school and it is contrary to Government policy to exclude an otherwise qualified person from receiving an income support payment in these circumstances.

Subsection 500V(3) of the Social Security Act is repealed at item 11 . This subsection inserted at item 29 of Schedule 7 of the A New Tax System (Family Assistance) (Consequential and Related Measures) Act (No 1) 1999 provides for parenting payment to not be payable if the persons partner is receiving a payment under the ABSTUDY Scheme that includes a dependent spouse allowance. The changes made to the ABSTUDY Scheme removed the payment of dependent spouse allowance and so subsection 500V(3) is redundant. Similar amendments are made to the Social Security Act at items 20 and 21 (the repeal of subparagraph 1067G-F3(c)(i) and paragraph 1068B-B2(c)).

A savings provision is inserted into the Social Security Act at item 22 . New clause 132 of Schedule 1A of the Social Security Act will provide that if a person was receiving before 1 January 2001 (the commencement date of the ABSTUDY Scheme amendments) an age pension, bereavement allowance, carer payment, disability support pension, pension PP (single), widow B pension or a wife pension and a payment under the ABSTUDY Scheme for full-time students, the person would continue to be eligible to receive the relevant pension and the ABSTUDY Scheme would continue to be treated as the income of the person. This provision ensures that no person is disadvantaged by the changes made by items 3 to 8 and 12 .

This measure commences on 1 January 2001 except for items 20 and 21 , which commence on Royal Assent of the Bill.