House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Minister for Industry, Science and Technology, Senator the Hon Peter Cook)

SCHEDULE 1

AMENDMENTS OF THE SOCIAL SECURITY ACT 1991

Background

The introduction of YTA necessitates a number of consequential amendments to other Commonwealth legislation including the Social Security Act 1991 (the Social Security Act). These amendments are contained in the Student Assistance (Youth Training Allowance Transitional Provisions and Consequential Amendments) Bill 1994 (the amending Bill).

The most notable amendments to the Social Security Act 1991 arising as a result of the introduction of YTA are as follows -

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a new rate calculator applicable to certain under 18 year old sickness allowees will be inserted into the Act;

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the qualification conditions for job search allowance will be modified so that only certain 'saved' clients who are under 18 years of age can receive JSA; and

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loss of AUSTUDY/ABSTUDY payments will be accepted as loss of income for the purposes of qualification for sickness allowance (SA).

Explanation of major changes

New benefit rate calculator

From 1 January 1995, the rate of YTA payable to under 18 year olds who are unemployed will be worked out in accordance with the Rate Calculator in Schedule 1 of Part 8 of the Student and Youth Assistance Act 1973. The new YTA Rate Calculator differs from Benefit Rate Calculator A in section 1067 of the Social Security Act 1991 (applicable to under 18 year old JSA/SA clients) in two major respects.

First, in order to be paid a higher rate of YTA, a person will be required to satisfy independence criteria that are modelled on current AUSTUDY concepts rather than definitions in the Social Security Act 1991. These definitions are also relevant for the purposes of the new assets test applicable to YTA clients.

The second major difference relates to the assets test applicable to under 18 year old clients. The YTA Rate Calculator incorporates an assets test based on the AUSTUDY rather than social security model.

The features of the new rate calculator applicable to YTA clients are explained in the explanatory memorandum to the Student Assistance (Youth Training Allowance) Amendment Bill 1994.

The differences described above can lead to inconsistent treatment of under 18 year old clients in similar circumstances. Where, for example, a person is receiving YTA, becomes sick for a period that is expected to last longer than 13 weeks and transfers to SA, the person may receive a different rate of payment under the current SA rules than under the new YTA rules if that person meets the social security definitions of homelessness and independence. A similar inconsistency is present when one compares the situation of an under 18 year old unemployed person who claims and is granted YTA at the single rate (because the person does not meet the YTA independence criteria) and an under 18 year old in substantially the same domestic situation who qualifies for SA at the higher rate by virtue of meeting the social security definitions of homelessness and independence.

This inconsistency in the treatment of SA/YTA clients is undesirable. Consequential amendments will therefore be made to the Social Security Act 1991 to align the two regimes by incorporating the YTA Rate Calculator into the Social Security Act 1991. The new rate calculator would apply unless the person was a transferee from JSA to SA or the person is under 18, was receiving SA immediately before 1 January 1995 and continues to do so after that date. This would have the effect of allowing current under 18 year old JSA/SA clients to retain their current social security rate of payment provided the client was receiving JSA/SA prior to the introduction of YTA and continues to do so after that date.

This is consistent with the treatment that will be accorded to clients who transfer to JSA from SA after 1 January 1995 and 'current' JSA clients (see below).

The relevant provisions in the amending Bill are item 174 (that reworks section 709 of the Social Security Act 1991) and Schedule 2 (that inserts a new Sickness Allowance Rate Calculator into the Social Security Act 1991).

In addition, amendments will be made to the indexation provision in the Social Security Act 1991 to ensure that certain rates in the new Sickness Allowance Rate Calculator are indexed. Indexation will occur at the times and in the manner applicable to comparable rates in the new YTA benefit rate calculator (that, in turn, are consistent with the indexation of comparable rates in Benefit Rate Calculator A in the Social Security Act 1991). The relevant provisions in the amending Bill are items 254, 255, 256 and 257.

Modified qualification conditions for job search allowance

The qualification conditions for JSA will also need to be modified as a result of the introduction of YTA. As a general rule, qualification for JSA for under 18 year olds will be limited to clients who were receiving JSA immediately before the introduction of YTA on 1 January 1995 and who continue to do so after that date. There are, however, two exceptions. First, breaks in payment of less than 6 weeks would not interrupt continuity of payment for the purposes of the new qualification rule. This exception allows clients to undertake short term work without disadvantage and is consistent with other provisions in the Social Security Act 1991 allowing breaks in registration with the CES of less than 6 weeks to count as registration (duration of registration with the CES is relevant in determining when a person qualifies for newstart allowance). The second exception allows a person who is receiving JSA on or after 1 January 1995, becomes sick for more than 13 weeks, transfers to sickness allowance and then recovers to transfer back to JSA provided the current qualification and payability conditions are satisfied (rather than YTA).

The relevant provision in the amending Bill is item 84.

Loss of AUSTUDY/ABSTUDY payments counts as loss of income for SA purposes

In order to establish qualification for SA in respect of a period, a person is required to show -

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a loss of 'salary, wages or other income of a similar nature because of the incapacity';

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that, if the person were able to work, the person would have or would be likely to be qualified for job search allowance or newstart allowance (or, after 1 January 1995, youth training allowance); or

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the person was, or is likely to be receiving, a pension before the beginning of the period.

The rate of SA payable to a person if the person qualifies for SA due to a loss of income is not to exceed the amount of that loss.

Although these qualification conditions will allow YTA clients who become sick to qualify for SA, the provisions do not cover people who lose AUSTUDY or ABSTUDY as a result of sickness and 'suspend' studies. In order to qualify for SA, a person in these circumstances would need to show that he or she would qualify for JSA, YTA or NSA if the person were able to work. This would not be possible where studies are suspended only until such time as the person recovers from the sickness and the person has no intention of entering the workforce.

Items 158, 176 and 177 have the combined effect of allowing loss of AUSTUDY/ABSTUDY to count as loss of income for the purposes of qualification for SA and for the purposes of the cap on rate of payment of SA.

Other consequential amendments

The remaining consequential amendments to the Social Security Act 1991 are minor and technical in nature. In broad terms, they achieve the following results -

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ensure that new YTA clients are treated in the same manner and under similar rules as currently apply under the JSA system;

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ensure that the relationship between YTA and other payment types in the Act is the same as the relationship between JSA and those other payment types; and

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establish links between JSA and YTA to take account of the situation where a person who has been registered with the CES as unemployed for less than 12 months turns 18 and transfers to JSA. The links established by the consequential amendments will be similar to those that currently apply when a person transfers from JSA to newstart allowance.