Senate

Social Services Legislation Amendment (Welfare Reform) Bill 2017

Revised Explanatory Memorandum

(Circulated by the authority of the Minister for Social Services, the Hon Christian Porter MP)
This memorandum takes account of amendments made by the House of Representatives to the bill as introduced.

Schedule 5 - Cessation of Sickness Allowance

Summary

This Schedule will cease Sickness Allowance from 20 September 2020. However, there will be no new entrants to Sickness Allowance from 20 March 2020.

Background

Sickness Allowance is a short-term income support payment for working age people (aged between 22 years and Age Pension age), who have a temporary incapacity due to illness or injury and who have a job or study to return to after their recovery. Recipients need a medical certificate from a doctor declaring that they are temporarily unfit for work. Sickness Allowance recipients are not subject to an activity test or participation requirements. Sickness Allowance is generally paid for the period specified on the person's medical certificate or 13 weeks, whichever is less. This period can generally be extended in 13 week increments if further medical certificates are provided. Sickness Allowance can also be paid to people undertaking a rehabilitation program in certain circumstances for a period of up to 208 weeks.

From 20 March 2020, there will be no new grants of Sickness Allowance. People who are current recipients on that date will remain on Sickness Allowance. However, there would be no capacity for the Secretary to extend their maximum allowance period, as at 20 March 2020. When their maximum period ends, the person would cease to qualify for Sickness Allowance and, if appropriate, would transfer to the new Jobseeker Payment (or return to employment or study).

The qualification conditions for Jobseeker Payment would be modified to allow people who are temporarily incapacitated for work or study because of illness or accident to qualify for Jobseeker Payment in similar circumstances to those presently covered by Sickness Allowance. People who qualify for Jobseeker Payment on the basis of these new rules could be subject to the activity test or may be exempt from the activity test if a relevant exemption applies (for example, the temporary incapacity exemption in Subdivision BA of Division 1). A new exemption from the activity test would be included for people who are undertaking a rehabilitation program in certain circumstances.

To ensure that there is an adequate amount of time to transfer all recipients to Jobseeker Payment without being disadvantaged, a six month period has been provided before ceasing Sickness Allowance. The amendments contained in this Schedule will cease Sickness Allowance from 20 September 2020. People who are on Sickness Allowance will be transitioned to the new Jobseeker Payment.

Explanation of the changes

Part 1 - Amendments commencing 20 March 2020

Social Security Act

Section 593 of the Social Security Act sets out the qualification conditions for Newstart Allowance (which will be replaced by Jobseeker Payment from 20 March 2020).

Subsection 593(1) requires, among other things, that a person be unemployed or a CDEP participant throughout the relevant period (paragraph (a) refers). Item 2 amends paragraph (a) to provide for another category of qualification, as set out in new subsection 593(1A) (inserted by item 4). New subsection 593(1A) applies if:

the person is incapacitated for work or study because of sickness or accident;
the incapacity is caused by a medical condition arising from the sickness or accident;
the incapacity is, or is likely to be, temporary; and
one of the following applies:

o
the person was employed immediately before the incapacity occurred and has employment to return to after the incapacity ends; or
o
the person was in full-time education and receiving ABSTUDY immediately before the incapacity occurred and is committed to resuming full-time study when the incapacity ends; or
o
the person was undertaking qualifying study and receiving austudy payment immediately before the incapacity occurred and is committed to resuming study when the incapacity ends.

Item 4 also inserts new subsections 593(1AA) and (1AB).

New subsection 593(1AA) ensures that a person cannot qualify under new subsection 593(1A) if their incapacity is brought about with a view to obtaining Jobseeker Payment or other specified payments. There is currently a similar rule for Sickness Allowance.

New subsection 593(1AB) defines work for the purposes of new subsection 593(1A), consistent with the definition that currently applies for Sickness Allowance.

A person who satisfies these new requirements would also need to satisfy the remaining qualification requirements in subsection 593(1), namely activity testing (unless exempt), participation requirements (as appropriate), age and residence requirements.

Items 1 and 3 make necessary consequential amendments.

The rules relating to the liquid assets test waiting period are set out in section 598 of the Social Security Act. Items 5 to 16 make consequential adjustments to the liquid assets test waiting period provisions for Jobseeker Payment so that these provisions can also apply in relation to people who are incapacitated for work or study because of sickness or accident and who qualify for Jobseeker Payment under the new rules described above. These changes incorporate elements of the liquid assets test waiting period rules that currently applies to Sickness Allowance as needed.

Item 17 inserts new section 602D. Under this new provision, a person is not required to satisfy the activity test if the person qualifies for Jobseeker Payment under new subsection 593(1A) (subparagraph 593(1)(a)(iii) applies to the person), the person is undertaking a rehabilitation program that is intended to enhance the person's ability to work and the person's participation in that program is likely to last between 6 and 208 weeks. The period of this exemption is as determined by the Secretary.

Item 18 makes a related amendment to subsection 605(2C) to include a reference to new section 602D. The means that if a person is exempt from the activity test under new section 602D they will also not be required to enter into an Employment Pathway Plan.

Item 19 inserts a new section 666A into Division 1 of Part 2.14 of the Social Security Act.

New subsection 666A(1) ensures that Sickness Allowance cannot be granted to a person unless the person claims Sickness Allowance before 20 March 2020 and they satisfy the qualification and payability conditions for that allowance before 20 March 2020. A note at the end of this provision informs the reader that a claim for Sickness Allowance can be backdated under the deemed claim provisions in section 12 or 15 of the Social Security Administration Act.

New subsection 666A(2) ensures that this new rule does not affect the operation of section 85 of the Social Security Administration Act (which provides for restoration of payment after suspension or cancellation in certain circumstances).

Section 669 of the Social Security Act provides for a time limit on qualification for Sickness Allowance. Item 20 inserts a new subsection 669(8) which ensures that a person's maximum allowance period (their period of qualification) cannot be extended on or after 20 March 2020.

Item 21 sets out some transitional arrangements.

Subitem (1) addresses the situation where a person claims Sickness Allowance before 20 March 2020 and does not satisfy the qualification or payability conditions for Sickness Allowance before that date because a specified waiting period applies. In this situation, the person is taken to have claimed Jobseeker Payment on 20 March 2020 and any equivalent waiting period for Jobseeker Payment is taken to have started when the waiting period for Sickness Allowance started. This ensures that waiting periods served for Sickness Allowance count for the purposes of Jobseeker Payment.

Subitem (2) addresses the situation where a person's claim for Sickness Allowance is granted in anticipation of their qualification because the person was subject to a seasonal work preclusion period. In this situation, the decision to grant Sickness Allowance is taken to be a decision to grant Jobseeker Payment and, for the purposes of applying the preclusion period, the person is taken to have lodged the claim for Jobseeker Payment on the day they lodged their Sickness Allowance claim.

Part 2 - Amendments commencing 20 September 2020

A New Tax System (Medicare Levy Surcharge - Fringe Benefits) Act 1999

Items 22 to 25 make consequential amendments to remove references to paragraph 251U(1)(c) of the Income Tax Assessment Act 1936 from paragraphs 13(2)(a) and 14(2)(a) of the A New Tax System (Medicare Levy Surcharge - Fringe Benefits) Act 1999 and the notes at the end of these provisions.

These changes are necessary because paragraph 251U(1)(c) of the Income Tax Assessment Act 1936 is repealed by item 30.

Income Tax Assessment Act 1936

Items 26 to 31 make consequential amendments to various provisions in the Income Tax Assessment Act 1936 as a result of the repeal of Sickness Allowance from 20 September 2020. A reference to Part 2.14 of the Social Security Act is omitted from the definition of rebatable benefit in subsection 160AAA(1), references to Sickness Allowance are omitted from paragraphs 202CB(6)(a) and 202CE(7)(a), paragraph 251U(1)(c) (which refers to Sickness Allowance under Part 2.14 of the Social Security Act) is repealed and a reference to this paragraph is removed from subsection 251R(6A) and paragraph 251U(3)(b).

Income Tax Assessment Act 1997

Items 32 to 39 also make consequential amendments to various provisions in the Income Tax Assessment Act 1997 to remove references to Sickness Allowance and to make other necessary related changes.

Income Tax Rates Act 1986

Item 40 makes a consequential amendment to the definition of eligible pensioner in section 16 to remove reference to Part 2.14 of the Social Security Act (which provides for Sickness Allowance).

Social Security Act

Part 2.14 of the Social Security Act provides for Sickness Allowance. Item 71 repeals this Part.

Benefit Rate Calculator B (in section 1068 of the Social Security Act) sets out the process for calculating the rate of Sickness Allowance and other specified social security benefits including Newstart Allowance (Jobseeker Payment from 20 March 2020).

Items 92 to 106 amend various provisions in section 1068 and Benefit Rate Calculator B so as to remove references to Sickness Allowance and make other amendments consequential upon the repeal of Sickness Allowance and technical amendments.

Items 41 to 70, 72 to 91 and 107 to 129 amend various provisions in the Social Security Act as a result of the repeal of Sickness Allowance. References to Sickness Allowance are removed, references to Part 2.14 of the Social Security Act and provisions in this Part are removed and other necessary consequential amendments and technical amendments are made.

Social Security Administration Act

Section 32 of the Social Security Administration Act is a claim provision relating to Sickness Allowance. This provision is repealed by item 131. Item 130 removes a reference to section 32 from subsection 29(1) and (2).

Section 65 sets out requirements for obtaining medical certificates in relation to Sickness Allowance. With the repeal of Sickness Allowance, this provision is no longer required and repealed by item 134.

Items 132, 133 and 135 to 137 similarly make amendments consequential upon the repeal of Sickness Allowance.

Veterans' Entitlements Act

Subsection 118ND(4) lists bereavement payment provisions in the Social Security Act. Paragraph (l), which refers to Part 2.14 of the Social Security Act and Sickness Allowance, is repealed by item 138.

Savings and transitional provisions

Item 139 sets out savings and transitional provisions for amendments relating to Sickness Allowance contained in the Social Security Act.

Subitem (1) ensures that Parts 2.14 and 3.6 continue to apply in working out qualification for, or rate of Sickness Allowance, in relation to days occurring before commencement.

Subitem (2) ensures that if a person who qualified for Sickness Allowance under section 667 of the Social Security Act, Sickness Allowance is not payable to the person on and after commencement.

Subitems (3) and (4) preserve the operation of certain bereavement and portability provisions despite amendments made by this Part (allowing a person to continue to receive Sickness Allowance after commencement in limited circumstances). However, subitem (5) ensures that the person cannot qualify for Jobseeker Payment for a day in respect of which they receive Sickness Allowance.

Item 140 sets out savings provisions for amendments to the Income Tax Assessment Act 1936. These amendments ensure that section 160AAA continues to apply on and after commencement in relation to a payment of Sickness Allowance before, on or after commencement and that paragraph 251U(1)(c) continues to apply on and after commencement in relation to a recipient of Sickness Allowance.

Item 141 sets out a saving provision for amendments to Income Tax Assessment Act 1997. The saving provision maintains the tax treatment of Sickness Allowance for payments made before, on or after commencement.

Item 142 sets out savings provisions for amendments to certain definitions in the Social Security Act relevant to Sickness Allowance so that they can continue to apply as relevant after commencement.

Item 143 sets out savings provisions for amendments relating to qualification for Sickness Allowance.

Subitems (1) and (2) save the effect of qualification provisions relating to disability support pension and Partner Allowance, to enable these provisions to continue to apply on or after commencement in relation to working out whether a person was qualified for the payments, in relation to days or a period (as relevant) before commencement.

Subitem (3) saves the effect of the Partner Allowance bereavement provisions where they applied before commencement in certain circumstances involving receipt of Sickness Allowance by the deceased, to enable the provisions to continue to apply as if the amendments had not been made.

Subitem (4) saves the effect of qualification provisions relating to telephone allowance to enable the provisions to continue to apply on or after commencement in relation to working out whether a person is qualified for telephone allowance before, on or after commencement.

Item 144 sets out savings provisions for amendments to specified provisions that are used to work out the amount of a person's crisis payment and the rate of Youth Allowance, to enable these provisions to apply on and after commencement in relation to days before commencement. The effect of paragraph 1070(e) (relating to rent assistance) is also saved on and after commencement for days in respect of which Sickness Allowance is payable.

Item 145 provides savings provisions for various concession card provisions within the Social Security Act, to provide that such provisions continue to apply on or after commencement in working out a person's qualification for a card for days before, on or after commencement, despite amendments made by this Schedule. For a person who ceased to receive Sickness Allowance before commencement, the effect of section 1061ZM of the Social Security Act is saved in relation to working out the person's qualification for a health care card before commencement.

Item 146 provides savings provisions for various other Social Security Act provisions relating to ancillary matters, such as means testing, debt recovery and compensation recovery, such that those provisions continue to apply in relation to Sickness Allowance as specified, despite amendments made by this Schedule.

Item 147 provides savings provisions for certain Social Security Administration Act provisions. Subitem (1) saves the effect of Part 3 so that it continues to apply on and after commencement to allow Sickness Allowance to be paid to a person to whom it is payable and to continue a determination or requirement in relation to Sickness Allowance. Subitem (2) saves the effect of Parts 3B and 3D (quarantining payments) in relation to the payment of Sickness Allowance or a bereavement payment in relation to Sickness Allowance made before, on or after commencement. Similarly, subitem (3) saves the effect of Parts 4 and 4A (review of decisions) for decisions relating to Sickness Allowance made before, on or after commencement. Subitem (4) ensures the validity of a specified automatic cancellation is not affected by the amendments made by this Part.

Item 148 saves the effect of specified Veterans' Entitlements Act provisions so that they continue to apply on and after commencement in relation to working out the rate of Sickness Allowance for days occurring before, on or after commencement.


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