House of Representatives

Replacement Explanatory Memorandum

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

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.