Senate

Revised Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Scott Morrison MP)

Chapter 4 Job commitment bonus

Summary

Currently, a person aged 18 to 30 who has been receiving newstart allowance or, in some cases, youth allowance for at least 12 months can qualify for a 'job commitment bonus' if they subsequently:

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complete a period of 12 months of continuous gainful work and do not receive an income support payment during that period (they qualify for the 'first bonus' at this stage), and

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complete a further period of 12 months of continuous gainful work and do not receive an income support payment during that further period (they qualify for the 'second bonus' at this stage).

The first bonus is $2,500 and the second bonus is $4,000.

The job commitment bonus commenced in 2014 following the enactment of the Social Security Legislation Amendment (Increased Employment Participation) Act 2014 . The bonus was intended to encourage young long-term unemployed job seekers to find and keep a job. However, analysis of program awareness and impact identified that the job commitment bonus has not had a significant impact on young job seekers either obtaining or remaining in employment.

The job commitment bonus has had low take-up since its introduction, with less than 30 per cent of expected claims for the 2015-16 financial year being achieved. Further, the job commitment bonus did not increase job seekers' efforts to find a job and generally was not an incentive for potentially eligible individuals to stay in a job. Survey results show that, of those people who were aware of the bonus, the majority said that the bonus did not increase their job application effort, the number of jobs they applied for, or their motivation to find a job. Individuals who were potentially eligible for the bonus generally stated that their main motivation was to move from welfare into work. Once they got work, they expressed a desire to stay in work and off income support, regardless of the bonus.

Part 1 of this Schedule would repeal provisions of the Social Security Act 1991 (the SS Act) and the Social Security (Administration) Act 1999 (the Administration Act) that refer to the job commitment bonus. Part 2 would make consequential amendments to the Farm Household Support Act 2014 and the Income Tax Assessment Act 1997 (ITAA 1997). Part 3 contains transitional provisions that would ensure that people who have qualified for a job commitment bonus before the commencement date would be able to claim the bonus within a particular timeframe, and would also ensure that the bonus will continue to be exempt from income tax (regardless of whether a person receives it before or after the commencement date).

Detailed explanation

Part 1 - Main Amendments

Social Security Act 1991

Item 1 - subsection 23(1) (definition of job commitment bonus)

This item would repeal the definition of job commitment bonus from subsection 23(1). This definition will no longer be required.

Item 2 - Part 2.16A

This item would repeal Part 2.16A.

Part 2.16A currently provides for the job commitment bonus. It establishes, amongst other things, when a person is qualified for a job commitment bonus under subsection 861(1) (the 'first bonus') and under subsection 861(3) (the 'second bonus'). It also sets out the amount of the first and second bonus. These provisions need to be repealed to give effect to the cessation of the job commitment bonus.

Social Security (Administration Act) 1999

Item 3 - subsection 13(6)

This item would repeal subsection 13(6).

Section 13 'deems' certain types of contact with the Department by or on behalf of a person to constitute a claim for a social security payment. Subsection 13(6) currently makes clear that a person cannot be deemed to make a claim for the job commitment bonus under section 13. This provision will no longer be required.

Item 4 - Subdivision FD of Division 1 of Part 3

This item would repeal Subdivision FD of Division 1 of Part 3.

Subdivision FD currently contains time limits for making claims for job commitment bonus. The time limit is generally 90 days after a person is qualified for the bonus (unless special circumstances exist, or the person is claiming the first bonus and the second bonus together). This Subdivision will no longer be required.

Item 5 - Subsection 37(6A)

This item would repeal subsection 37(6A).

Subsection 37(6A) currently provides that the Secretary must determine that a claim for job commitment bonus is to be granted if the Secretary is satisfied that the claimant is qualified for the bonus. This provision will no longer be required.

Item 6 - Paragraph 47(1)(hsa)

This item would repeal paragraph 47(1)(hsa).

Section 47(1) defines the term 'lump sum benefit'. Paragraph 47(1)(hsa) specifically lists the job commitment bonus as a lump sum benefit. This provision will no longer be required.

Item 7 - Section 47BA

This item would repeal section 47BA.

Section 47BA currently provides that if a person is qualified for a job commitment bonus, the bonus must be paid as a single lump sum on the earliest day the Secretary considers it reasonably practicable for the bonus to paid, in such manner as the Secretary considers appropriate. This provision will no longer be required.

Part 2 -Consequential Amendments

Farm Household Support Act 2014

Item 8 - section 95 (table item 1A)

This item would repeal table item 1A from the table contained in section 95.

The table contained in section 95 modifies particular provisions of the SS Act for the purposes of the Farm Household Support Act 2014 . Table item 1A refers to paragraph 861(1)(a) of the SS Act (which relates to when a person is qualified for job commitment bonus). This table item will no longer be required.

Income Tax Assessment Act 1997

Item 9 - section 11-15 (table item headed "social security or like payments")

This item would repeal the reference to the job commitment bonus in section 11-15.

Section 11-15 contains a list setting out the types of ordinary or statutory income that are exempt from income tax. This list will no longer need to refer to the job commitment bonus.

Items 10 and 11 - Paragraph 52-10(1)(wb) and subsection 52-10(1EB)

These items would repeal paragraph 52-10(1)(wb) and subsection 52-10(1EB).

Section 52-10 deals with the income tax treatment of social security payments. Subsection 52-10(1EB) specifies that the job commitment bonus is exempt from income tax. This provision is no longer required. The amendment to paragraph 52-10(1)(wb) is consequential to the repeal of subsection 52-10(1EB).

Item 12 - Section 52-40 (table item 14)

This item repeals item 14 of the table in section 52-40.

Section 52-40 contains a table listing provisions of the SS Act under which social security payments are made that are wholly or partly exempt from income tax under Subdivision 52-A of the ITAA 1997. Section 52-40 will no longer need to refer to provisions under which the job commitment bonus is paid.

Part 3 - Savings and transitional provisions

Item 13 - Saving and transitional provisions

This item contains saving and transitional provisions relating to the job commitment bonus.

Subitem 13(1)

This subitem would make clear that a person cannot become qualified for a job commitment bonus on or after the commencement date.

Subitem 13(2)

This subitem would ensure that Chapter 5 of the SS Act, as in force immediately before the commencement date, continued to apply in relation to a payment of a job commitment bonus, regardless of whether the payment was made before, on or after commencement.

Chapter 5 of the SS Act relates to overpayments and debt recovery. This subitem would enable the Commonwealth to recover any overpayments or debts arising in relation to a payment of a job commitment bonus, regardless of whether it was paid before, on or after commencement.

Subitem 13(3)

This subitem would enable a person to claim a job commitment bonus on or after the commencement date if they qualified for the bonus before the commencement date and were permitted to make a claim under section 27D of the Administration Act, as in force immediately before the commencement date.

Consistently with section 27D, a person would ordinarily have to claim a bonus within 90 days of becoming qualified for it (unless special circumstances exist, or the person is claiming the first and the second bonus together). A person who was qualified for both the first and second bonuses before the commencement date could claim both bonuses at the same time (subsection 27D(3)). They would need to claim both bonuses within the time limit specified in subsection 27D(1) (or, if special circumstances exist, the further time limit specified in subsection 27D(2)), as in force immediately before the commencement date.

Subitem 13(4)

This subitem would ensure that Part 3 of the Administration Act, as in force immediately before the commencement date, continued to apply in relation to the job commitment bonus.

Part 3 of Administration Act relevantly provides for deciding claims for, determinations in relation to, and making payments of, job commitment bonus. Part 3 would continue to apply to deciding claims for the job commitment bonus and determinations relating to the job commitment bonus, regardless of whether the relevant claim or determination was made before, on or after commencement. Part 3 would also continue to apply to making payments of the job commitment bonus on or after commencement.

Subitem 13(5)

This subitem would ensure that Parts 4 and 4A of the Administration Act, as in force immediately before the commencement date, continued to apply to decisions made under the social security law in relation to the job commitment bonus.

Parts 4 and 4A of the Administration Act provide for the internal and external review of decisions made under the social security law. This subitem would ensure that these review processes would continue to be available in relation to decisions about the job commitment bonus, regardless of whether those decisions were made before, on or after commencement.

Subitem 13(6)

This subitem would ensure that subsection 52-10(1EB) of the ITAA 1997, as in force immediately before the commencement date, continued to apply in relation to a payment of the job commitment bonus, regardless of whether the payment was made before, on or after commencement.

This subitem would ensure that payments of the job commitment bonus remain exempt from income tax, regardless of whether they are made before, on or after commencement.

STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS

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

Job commitment bonus

This Schedule is compatible with 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 Schedule

The Schedule would amend the Social Security Act 1991 and the Social Security (Administration) Act 1999 to give effect to the cessation of the job commitment bonus measure, as announced in the 2016-17 Budget. It would make consequential amendments to the Income Tax Assessment Act 1997 and the Farm Household Support Act 2014 relating to the cessation of the job commitment bonus.

The Schedule also includes transitional provisions that would ensure that people who have qualified for a job commitment bonus before the commencement date would be able to claim the bonus (tax-free) within a particular timeframe.

Human rights engaged by the Schedule

The Schedule engages the following rights:

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the right to social security in article 9 of the International Covenant on Economic, Social and Cultural Rights (ICESCR)

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the right to an adequate standard of living in article 11(1) of the ICESCR

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the right to work in article 6 of the ICESCR, and

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the right to equality and non-discrimination in article 2(2) of the ICESCR and article 26 of the International Covenant on Civil and Political Rights (ICCPR).

Human rights implications of the Schedule

Currently, a person aged 18 to 30 who has been receiving particular income support payments for at least 12 months can qualify for a tax-free bonus of $2,500 if they complete 12 months of continuous gainful work and do not receive an income support payment during that period. In addition, such persons can qualify for a second tax-free bonus of $4,000 if they complete a further period of 12 months of gainful work and do not receive an income support payment during that further period.

The job commitment bonus was intended to encourage young long-term unemployed job seekers to find and keep a job. However, analysis of program awareness and impact identified that the job commitment bonus has not had a significant impact on young job seekers either obtaining or remaining in employment. In particular, the bonus has had low take-up since its introduction (with less than 30 per cent of expected claims for the 2015-16 financial year being achieved). Further, the bonus did not increase job seekers' efforts to find a job and generally was not an incentive for potentially eligible individuals to stay in a job. Survey results show that, of those people who were aware of the bonus, the majority said that the bonus did not increase their job application effort, the number of jobs they applied for, or their motivation to find a job. Individuals who were potentially eligible for the bonus generally stated that their main motivation was to move from welfare into work. Once they got work, they expressed a desire to stay in work and off income support, regardless of the bonus.

Right to social security and right to an adequate standard of living

Article 9 of the ICESCR recognises the right of everyone to social security. The right to social security requires States to establish a social security system and, to the maximum of its available resources ^[2] , ensure access to a social security scheme that provides 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 forms of education ^[3] . Further, Article 11(1) of the ICESCR recognises the right of everyone to an adequate standard of living including adequate food, water and housing, and to the continuous improvement of living conditions.

Cessation of the job commitment bonus could be seen as adversely affecting an individual's rights to social security and an adequate standard of living. However, it is significant that an individual only qualifies to receive a job commitment bonus if they engage in continuous gainful employment for at least 12 months and do not receive an income support payment during that period. The bonus was not itself intended to constitute income support for recipients to meet their living expenses. The people it is paid to already receive remuneration in return for gainful work and, therefore, typically enjoy a higher standard of living than income support recipients. Further, cessation of the job commitment bonus will not affect individuals' ability to make a claim for income support payments under the social security system if they cease to be engaged in gainful employment. In addition, people who have qualified for a job commitment bonus before the commencement date would not be disadvantaged because they would be able to claim the bonus (tax-free) within a particular timeframe.

Consistently with this, to the extent that the cessation of the job commitment bonus has any impact on individuals' rights to social security and an adequate standard of living, that impact would not be unreasonable. The cessation of the bonus is a necessary, reasonable and proportionate response by the Commonwealth to a measure that has not achieved its intended policy objectives.

Right to work

Article 6(1) of the ICESCR recognises the right to work, which includes the right to the opportunity to gain a living by work which the job seeker freely chooses or accepts. Article 6(2) specifically refers to States' obligations to realise this right by implementing 'technical and vocational guidance and training programmes, policies and techniques to achieve steady economic, social and cultural development and full and productive employment'.

The job commitment bonus was intended to promote the right to work by providing an incentive to young long-term unemployed job seekers to find and keep a job. However, as discussed above, the bonus has not had a significant impact on young job seekers either obtaining or remaining in employment. The cessation of the bonus is a necessary, reasonable and proportionate response by the Commonwealth to a measure that has not achieved its intended policy objectives.

Right to equality and non-discrimination

Article 2(2) of the ICESCR and article 26 of the ICCPR recognise the right to equality and non-discrimination on a range of grounds including of race, sex, colour, language, national origin or 'other status'. Age is considered to fall within 'other status' for the purpose of these articles. However, a measure can differentiate between particular groups of people on the basis of age where this treatment is aimed at achieving a legitimate objective, is based on reasonable and objective criteria and is proportionate to the objective to be achieved.

The job commitment bonus differentiates between people on the basis of age because it is only available to individuals aged between 18 and 30. Similarly, cessation of the job commitment bonus will only affect people who currently fall within, or who may in future fall within, this age group. However, for the reasons discussed above, this is a necessary, reasonable and proportionate response by the Commonwealth to a measure that has not achieved its intended policy objectives.

Conclusion

The Schedule is compatible with human rights because to the extent that it may limit human rights, those limitations are reasonable, necessary and proportionate.