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					                                  2008-2009




    THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA




                      HOUSE OF REPRESENTATIVES




SOCIAL SECURITY AMENDMENT (LIQUID ASSETS WAITING PERIOD)
                       BILL 2009




                     EXPLANATORY MEMORANDUM




(Circulated by authority of the Minister for Employment and Workplace Relations
           and Minister for Education the Honourable Julia Gillard MP)
SOCIAL SECURITY AMENDMENT (LIQUID ASSETS WAITING
                 PERIOD) BILL 2009

                                      OUTLINE

Under the current social security law people claiming Newstart Allowance, Youth
Allowance, Sickness Allowance and Austudy who have liquid assets above a
maximum reserve amount (of $2,500 if single without dependants or $5,000
otherwise) must generally serve a waiting period, called the Liquid Assets Waiting
Period, before being able to access income support.

The Bill will amend the Social Security Act 1991 to double the maximum reserve
threshold for liquid assets to $5,000 for singles without dependants or $10,000 for
others for a two year period from 1 April 2009. The effect of this will generally be to
reduce the length of the Liquid Assets Waiting Period.

The Bill will also amend the Social Security Act 1991 to exclude the surrender value
of life insurance policies from the definition of ‘liquid assets’ for social security
purposes. This will mean that life insurance policy surrender values will not be taken
into account in calculating any applicable Liquid Assets Waiting Period or in
determining severe financial hardship for the purposes of eligibility for income
support. This amendment will ensure that income support claimants are not
unreasonably disadvantaged by having to cash in their life insurance policies before
they can access income support.

These measures will commence on 1 April 2009.

Finally the Bill will make technical amendments to the Income Tax Assessment Act
1936, the Income Tax Assessment Act 1997, the Social Security Act 1991, the Social
Security (Administration) Act 1999 and the Veterans’ Entitlements Act 1986 to correct
the citation of the Household Stimulus Package Act (No. 2) 2009 in those Acts.


                               FINANCIAL IMPACT

 Year                 Expense
2008-09                $5.64m
2009-10               $12.47m
2010-11               $11.10m

Total                 $29.21m
SOCIAL SECURITY AMENDMENT (LIQUID ASSETS WAITING
                 PERIOD) BILL 2009

                               NOTES ON CLAUSES


Clause 1 – Short title

Provides for the Act to be cited as the Social Security Amendment (Liquid Assets
Waiting Period) Act 2009.


Clause 2 – Commencement

Subclause 2(1) inserts a three column table setting out commencement information for
various provisions in the Act. Each provision of the Act specified in column 1 of the
table commences (or is taken to have commenced) in accordance with column 2 of the
table and any other statement in column 2 has effect according to its terms.

The table has the effect of providing for sections 1-3 and any provision not covered
elsewhere in the table to commence on Royal Assent; for Parts 1 and 2 of Schedule 1
to commence on 1 April 2009; and for part 3 of Schedule 1 to commence immediately
after the time specified in the Household Stimulus Package Act (No. 2) 2009 for the
commencement of Schedule 5 to that Act.

Clause 3 - Schedule(s)

Provides that each Act that is specified in a Schedule is amended or repealed as set
out in the applicable items in the Schedule and that any other item in a Schedule has
effect according to its terms.
Schedule 1 – Amendments
Part 1—Main amendments

Social Security Act 1991
Items 1 and 2 - Subsection 14A(1)

Subsection 14A(1) sets out social security benefit liquid assets test definitions. Item
1 inserts new paragraph 14A(1)(dac) to amend the definition of liquid assets to have
the effect of excluding the surrender value of a life policy (within the meaning of the
Life Insurance Act 1995) from the concept of liquid assets. (An equivalent
amendment is made to the concept of liquid assets in section 19B, see item 4).

Item 2 inserts a note at the end of subsection 14A(1) to alert readers that the
definition of maximum reserve is affected by new subsections 14A(6A) and (6B)
inserted by item 3.


Item 3 - At the end of section 14A

Inserts new subsections 14A(6A) and (6B). These new subsections have the effect of
doubling the maximum reserve for the social security benefit liquid assets test
definitions for a designated period.

New subsection (6A) has the effect of providing that, for the purposes of Parts 2.11,
2.11A, 2.12 and 2.14 of the Act, the amounts of the maximum reserve prescribed in
paragraphs (a) and (b) of the definition of maximum reserve in subsection 14A(1) are
doubled to $5000 and $10 000 respectively for the designated period.

New subsection (6B) inserts a definition of designated period for the purposes of new
subsection (6A). The designated period is the period beginning on 1 April 2009 and
ending on either 31 March 2011 or a later date if prescribed by the Minister by
legislative instrument.

By doubling the maximum reserve amounts, the length of a Liquid Assets Waiting
Period will normally be reduced. Under the Social Security Act 1991, only the value
of liquid assets of a person above the maximum reserve are used in calculating the
length of the person’s waiting period. Consequently, increasing the maximum reserve
reduces the value of liquid assets that are used to calculate the length of the waiting
period.
Item 4 – Section 19B (after paragraph (fb) of the definition of liquid assets)

Section 198N of the Act sets out exemptions from the care receiver assets test to allow
for carer payments in the case of financial hardship. Section 19B provides for a
definition of liquid assets for the purposes of section 198N. Item 4 amends the
definition of liquid assets in section 19B by inserting a new paragraph (fc) to have the
effect of including the surrender value of a life policy (within the meaning of the Life
Insurance Act 1995) among the list of exemptions from the care receiver assets test.
Part 2— Application and transitional provisions

Item 5 – Claims made on or after 1 April 2009

Provides that the amendments made by Part 1 apply in relation to a person making a
claim on or after 1 April 2009 for a social security payment.


Item 6 - Persons subject to liquid assets test waiting period at beginning and end
of designated period

Subitems 6(1) and (2) are application provisions relating to persons subject to the
liquid assets test waiting period at the beginning of the designated period.

Subitem 6(1) has the effect of providing that the amendments made by items 1, 2 and
3 of this Schedule will apply in relation to a person if she/he is subject to a liquid
assets test waiting period on 1 April 2009 and the Liquid Assets Waiting Period
commenced before that date. In short, a person who is subject to a Liquid Assets
Waiting Period when the new maximum reserve amounts come into effect will have
the length of their waiting period re-calculated using the new maximum reserve
amounts. This may result in the length of their waiting period being reduced. If, as a
result of this re-calculation, a person’s waiting period would have ended before 1
April 2009, their waiting period is considered to have ended on 31 March (see
subitem 6(2)).

Subitem 6(3) is a transitional provision relating to persons subject to the Liquid
Assets Waiting Period after the end of the designated period. The effect of this
provision is to preserve the application of subsection 14A(6A) of the Social Security
Act 1991 (as inserted by item 3 of this Schedule) in relation to a person after the end
of the designated period, if that person is subject to a Liquid Assets Waiting Period on
the day after the end of the designated period and the waiting period started before the
end of the designated period. That is, if a person’s waiting period has been calculated
using the increased maximum reserve amounts before those amounts reduce to their
pre-amendment levels, then the length of the waiting period is not affected by the
reduction of the maximum reserve amounts.

Subitem 6(4) defines designated period and liquid assets test waiting period for the
purposes of item 6 of this Schedule. For the purposes of item 6, designated period
means the designated period referred to in subsection 14A(6B) of the Social Security
Act 1991 (as inserted by item 3 of this Schedule) and liquid assets test waiting period
means a liquid assets test waiting period under Part 2.11, 2.11A, 2.12 or 2.14 of the
Social Security Act 1991.
Part 3—Technical amendments

Items 7 to 13

Items 7 to 13 make a number of technical amendments to the Income Tax Assessment
Act 1936 (item 7), the Income Tax Assessment Act 1997 (items 8 to 10), the Social
Security Act 1991 (item 11), the Social Security (Administration) Act 1999 (item 12)
and the Veterans’ Entitlements Act 1986 (item 13) to correct the citation of the
Household Stimulus Package Act (No. 2) 2009 in those Acts.

				
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