House of Representatives

Explanatory Memorandum

(Circulated by authority of the Minister for Employment and Workplace Relations the Honourable Julia Gillard MP)

Outline

The Bill proposes wide ranging amendments to income support arrangements for students. The measures are designed to increase income support for students who need it the most, making higher education more accessible.

The Bill has four principal measures.

The first measure contains changes to the criteria upon which a youth allowance recipient is considered to be "independent". Independent youth allowance recipients are entitled to a higher rate of payment and are not subject to a test for parental income.

The age at which a person is automatically independent is changing from 25 to 22 years. This change will be phased in, so that the age of independence will be reduced to 24 years in 2010 years, 23 years in 2011 and 22 years in 2012. This change means that more young people will be eligible for youth allowance, and many existing youth allowance recipients will receive a higher rate of payment.

In addition, from 1 January 2010, changes will be made to provisions that enable young people to be considered self-supporting through workforce participation and therefore independent for youth allowance purposes. This change seeks to better target youth allowance to those who need it.

No person who is currently independent because of the current workforce participation tests will be affected by the change. In addition, young people who completed secondary school in 2008 and did not study full-time in 2009 may continue, up to 1 January 2011, to meet the current workforce participation tests if they start university before 31 December 2010 and:

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move to study because their parental home is 90 minutes or more from their chosen university course; or

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are not required to move away from home when they start their university course and their combined parental income for the tax year ending 30 June 2009 is less than $150,000.

The second measure makes significant changes to means testing for payments to students and youth.

From 1 January 2010, the annual parental income threshold for non-independent youth allowance recipients to get the maximum rate of youth allowance will increase from $32,800 to $44,165.

The parental income reduction for youth allowance will also change from a taper rate of 25% per person, to a taper of 20% apportioned between the members of the family who are subject to the parental income test. This measure reduces the effect of parental income on a youth allowance recipient, particularly where the same parental income applies to multiple recipients in a family. The point at which a person's parental income will disentitle the person to youth allowance will therefore be substantially raised.

It is estimated that these changes to the parental income test will result in 67,800 additional students qualifying for income support, and 34,600 students receiving a higher rate of payment.

Additionally, the personal income free area for youth allowance and austudy students and Australian Apprentices will rise from $236 to $400 per fortnight, from 1 July 2012. Students and Australian Apprentices will therefore be able earn up to $400 per fortnight without having their payments reduced. The increased free area will also be indexed to the Consumer Price Index. It is estimated that 61,480 students will receive a higher rate of income support payment because of this measure.

The third measure provides for new scholarships for students on income support.

All students receiving youth allowance or austudy while undertaking an approved higher education course will receive a student start-up scholarship. In 2010, the scholarship will be $717 for each six months of study, totalling $1,434 for the year. This amount of the scholarship will increase to $1127 (indexed) for each six months of study in 2011. An estimated 146,600 students will receive a student start-up scholarship in 2010.

In addition to the student start-up scholarship some students receiving student income support will receive a relocation scholarship to assist with the cost of relocating for study. The scholarship will be $1,000 per year, and $4,000 for a student's initial relocation. An estimated 14,200 students will receive a relocation scholarship payment in 2010.

The fourth measure is exempting merit and equity based scholarships from the income test under social security and veterans' entitlements legislation. These scholarships will be exempt to a threshold of $6,762 per year. The threshold will be indexed. This measure will increase the entitlement to income support for students receiving scholarships, and provide an incentive to individuals and organisations to fund scholarships for students. It is estimated that this measure will result in around 3,500 students receiving a higher rate of income support payment.

The Bill also amends to the social security law and veterans' entitlements law to facilitate the measures and make amendments of a technical nature.