Christian Porter (Pearce, Liberal Party, Minister for Social Services) Share this | Hansard source

I thank all members for their contributions—and remarkably colourful contributions they were in the circumstances—on a bill that deals with a general interest charge on recipient debt in the social welfare system. Nevertheless, it is incumbent on me to briefly summarise at the finality of the second reading debate.

The bill introduces the legislative amendments required to apply an interest charge to former recipients of social welfare payments who have outstanding debts and who have failed to enter into or have not complied with an acceptable payment arrangement. The interest charge will apply to social security, family assistance, child care, paid parental leave and student assistance debts. The rate of the proposed interest charge of approximately nine per cent will be based on the 90-day bank-accepted bill rate of approximately two per cent plus an additional seven per cent as is routinely applied by the Australian Taxation Office. Under the Taxation Administration Act 1953 the bill will strengthen the integrity of Australia's welfare system.

At the end of June 2015, there were over one million debts with a value of $3.04 billion. Those debts have increased by almost 10 per cent in value since June 2014. The average value of the social welfare debt held by individuals is about $2,357. The average length of debt is over three years, making the repayment figure, based on the average Australian wage, about $60 per fortnight over 18 months if time-to-pay arrangements are entered into. The government does not consider this to be unreasonable. However, individuals are able to negotiate a lower repayment rate should their financial circumstances require it.

A debt to the Commonwealth occurs when a welfare recipient receives an overpayment of payments, to which they are not entitled. The government is taking steps to ensure that people pay back those welfare debts if they have received payments they are not entitled to. The number of debts, the size of debts and the duration of outstanding debts is a cause of some concern. One per cent of Australia's population have received money they are not entitled to and owe a debt to the other 99 per cent of Australians, a debt that in too many instances they are making no effort to repay.

There are $870 million worth of debts held by about 270,000 people who are in the welfare system who have received overpayments and then have left the welfare system. There have to be concerted efforts made to recoup that debt wherever reasonably possible. Importantly, current recipients of social welfare payments who also have a social security or family assistance debt have their welfare payments reduced until their debts are paid. The critical issue pertinent to this bill is that there is no similar arrangement in place to recover debts, naturally enough, once a person no longer requires social welfare or family assistance payments. In fact, not only is there no incentive for former recipients who are no longer dependent on the welfare system to repay their debts, some, unfortunately, actively avoid repayment.

The introduction of the interest charge will ensure that people who once received social welfare payments do not receive an unfair advantage by having received what is, in effect, an interest-free loan from the government. Debtors who are no longer eligible to receive financial support through social welfare payments are arguably more likely to have the financial capacity to make repayments than those in receipt of income support or family assistance. The interest charge will provide an incentive for responsible self-management of debts and encourage debtors to repay their debts in a timely manner where they have the financial capacity to do so. To ensure that all debtors are treated consistently and fairly, the interest charge will also apply to those receiving only childcare assistance and/or paid parental leave payments, and no other social welfare payment, with outstanding debts. These debtors are not subject to deductions from their payments and should be required to enter into an acceptable repayment arrangement to repay their debts, as with other debtors.

Debtors will receive a letter seeking repayment of the debt in full to avoid the application of the interest charge. Where the debtor cannot repay the debt in full, the letter will encourage the debtor to contact the Department of Human Services within 28 days to negotiate an acceptable repayment arrangement

If no arrangement is made within 28 days, the interest charged will then be applied to the full balance of the debt accruing on a daily basis until an acceptable debt repayment arrangement has been entered into. In cases of severe financial hardship, a thorough review of a debtor's capacity to repay will be considered. The debt might be waived or temporarily written off until the debtor's financial circumstances improve. Alternatively, a reduced rate of recovery might be applied. No interest charge would be applied for that period of time.

It is important to reiterate that only former recipients of social security and family assistance who have a debt to the Commonwealth—that is, they have received a payment to which they are not entitled—and who do not enter into or who are not honouring an acceptable repayment arrangement will have this interest charge applied. There is nothing fair about former recipients failing to repay or failing enter into a repayment plan for a debt to the Commonwealth resulting from them being in receipt of a payment to which they were not entitled. This bill simply levels the playing field to ensure that former welfare recipients with a debt to the Commonwealth are subject to the same requirement to repay the debt as expected of current welfare and family payment recipients and, indeed, any other Australian with a lawful civil debt.

The bill is expected to achieve savings in the fiscal balance of $24.4 million over four years from 1 July 2016, with underlying cash savings of $416.5 million. This bill provides long-needed incentives for people to repay their debt to the Commonwealth taxpayer so that we can ensure the sustainability of the welfare system and continue to provide assistance to those who need it the most. On that basis, I commend the bill to the House.

Question agreed to.

Bill read a second time.

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