Mitch Fifield (Victoria, Liberal Party, Manager of Government Business in the Senate) Share this | Hansard source

I move:

That these bills be now read a second time.

I seek leave to have the second reading speeches incorporated in Hansard.

Leave granted.

The speeches read as follows—

SOCIAL SERVICES LEGISLATION AMENDMENT (ENHANCED WELFARE PAYMENT INTEGRITY) BILL 2016

This Bill introduces the legislative amendments required for the 2015-16 Mid-Year Economic and Fiscal Outlook Enhanced Welfare Payment Integrity – expand debt recovery measure.

This measure contains two elements that require legislative amendments to strengthen our capacity to recover debt.

Firstly, the Bill contains amendments to allow for the use of departure prohibition orders to prevent targeted social welfare debtors from leaving the country (as currently applies to child support debtors).

The Bill also removes the current six-year limitation on the recovery of social welfare debt that would otherwise be non-recoverable, aligning the treatment of social welfare debt with the recovery arrangements in place for other Commonwealth agencies.

At the end of June 2015, there were over one million debts with a value of $3.04 billion. These debts have increased by almost 10 per cent in value since June 2014.

Of this debt base, approximately $870 million is held by around 270,000 former recipients who do not make sufficient or regular payments.

Departure prohibition orders

The Government believes it is not appropriate for an individual to travel overseas, when they have the means to fund that travel but have not set up any arrangement to repay their outstanding debt to the Commonwealth.

This new legislation proposes that the Secretary may make a departure prohibition order prohibiting a person from departing Australia for a foreign country if the person has one or more debts to the Commonwealth and there are no arrangements satisfactory to the Secretary for one or more of the debts to be wholly repaid. This is consistent with the treatment of people with child support debts.

The Government is mindful of reasons why people may be required to travel overseas, and procedures will be put in place to allow for people subject to a departure prohibition order to travel overseas in specified circumstances.

Departure authorisation certificates may also be granted on humanitarian grounds or where the person's travel may be in Australia's best interests.

Limitation of recovery

The Government believes that, where there is a debt owed by a person to the Commonwealth, these debts should be recovered wherever possible, and should not be bound by arbitrary timelines.

The Government is introducing an amendment to allow for the pursuit and recovery of debts, similar to the recovery of taxation debts. This will increase the Department of Human Services' capacity to recover outstanding debts.

This measure requires us to remove the current limitation on the recovery of debt where recovery action has not been undertaken in the preceding six years.

Social welfare debtors generally have more than one debt. Given the resources social welfare recipients have to repay debts, debts are generally paid off one at a time over an extended period. It is possible in these circumstances for some of an individual's debts to reach the six-year limitation before recovery can be actioned.

As at the end of 2014-15 there were:

Let me present the following examples to illustrate this point:

1. An 85 year old male was overpaid Unemployment Benefit of $36,949.32 due to undeclared earnings. The debt was raised approximately 30 years ago. There have been no repayments on this debt, meaning the gentleman in question is no longer a recipient of social welfare or family assistance payments. The six-year limitation has expired on this debt, making it unrecoverable.

2. A 71 year old female was overpaid Widows Allowance of $383,359.10 due to false or multiple identities. No recovery action has taken place for this debt as the person is not currently on payment. The person's whereabouts are currently unknown.

3. A 69 year old female was overpaid Family Allowance of $908.53 due to not being in Australia. A debt was raised almost 30 years ago. An outstanding balance remains of $346.53. Repayments have been made through garnishee of tax returns in 2003, 2006, and 2008). The six-year limitation expired in 2015 and as a result, this debt is no longer recoverable.

4. A 64 year old female was overpaid Parenting Payment Single of $5,989.60 due to undeclared earnings. A debt was raised over 30 years ago. Repayments via withholdings were made until September 1990 and a one-off payment in August 2009. An outstanding balance remains of $2,971.60. The six-year limitation expired in 2015 and, as a result, this debt is no longer recoverable.

5. An 87 year old male was overpaid Age Pension of $301,863.23 for a period of 8,482 days (that is just over 23 years) due to false or multiple identities. A debt was raised on 10/12/2014. A single repayment of $33,077.10 was made on 21 January 2015. In the event that this legislation does not pass, and the gentleman in this example fails to make any contributions in the next five years, the Commonwealth will not be able to recover this debt.

So in several of the above examples, we have debts that were raised over 30 years ago. In the intervening period, the recipients ceased to be on payment and the Commonwealth was unable to recoup any of the debt within the six-year limitation. Should these people come back on to a welfare payment after the six-year limitation has expired, we are not able to withhold any contribution from their payments in order to repay their debt.

Should the 85 year old male in the example above become eligible to receive the Age Pension, the Commonwealth would be unable to recover any portion of the $37,000 debt resulting from his failure to declare earnings.

Individual debt to the Commonwealth forms an increasing assets base that poses significant financial costs on the community. These are financial resources that the Government can use to support other priorities for the Australian community.

The Enhanced Welfare Payment Integrity – expand debt recovery measure will also better enable the Department of Human Services to recover debts from current and ex-recipients of social security and family assistance payments.

The measure provides additional funds to expand Centrelink's debt recovery operations and capacity to utilise the full extent of powers contained within existing legislation for pursuing the recovery of debts. This includes:

The Government will continue to focus on protecting the integrity of the welfare system.

The Enhanced Welfare Payment Integrity – expand debt recovery measure is estimated to achieve net underlying cash savings of $157.8 million over the forward estimates.

These sensible measures will resonate with the taxpayers of Australia who know that in everyday life they need to manage their household budget including repayment of debts.

This Bill, in conjunction with the Social Services Legislation Amendment (Interest Charge) Bill 2016, provides a suite of measures that strengthens the government's ability to recover debts from former social welfare and family payment recipients.

I think those opposite will agree that having a social welfare system where an individual can have an outstanding debt to the Commonwealth of $300,000 dating back 30 years is unacceptable and I look forward to their support for this Bill.

SOCIAL SERVICES LEGISLATION AMENDMENT (INTEREST CHARGE) BILL 2016

This Bill introduces the legislative amendments required for the 2015-16 Mid-Year Economic and Fiscal Outlook measure, Applying a general interest charge to the debts of ex-recipients of Social Security and Family Assistance Payments.

From an intended implementation date of 1 July 2016, the Bill will provide for the application of a new annual interest charge to outstanding debts owed by former recipients of social welfare payments who have failed to enter into, or have not complied with, an acceptable repayment arrangement.

The interest charge will apply to social security, family assistance (including child care), paid parental leave and student assistance debts.

At the end of June 2015, there were over one million debts with a value of $3.04 billion. These debts have increased by almost 10 per cent in value since June 2014.

Of this debt base, approximately $870 million is held by around 270,000 former recipients who do not make sufficient or regular payments.

While the average value of social welfare debt is $2,357 and the average length of debt is just over three years, there are some extremes which I will expand on shortly.

To understand how we have end up with over $3 billion in social welfare debt, we must first understand how social security and family assistance debts are raised. A debt to the Commonwealth occurs when a welfare recipient receives an overpayment – a payment to which they are not entitled.

The main reasons for overpayment are as follows:

1. Welfare recipients that have not lodged a tax return

- Until their tax return is lodged, the entire FTB payment is raised as debt.

This cohort represents 20% of debts and 39% of the value of debts.

2. Advance payments

- Former recipients who received an advance payment, and before it could be recovered through withholdings, ceased to be a payment recipient. This cohort represents 15% of debts and 1.5% of the value of debts.

3. Undeclared earnings and wrongly declared earnings

- Former recipients who have, either accidentally or deliberately, failed to declare earnings or accurately declare earnings.

This cohort represents 16% of debts and 20% of the value.

4. Reconciliation

- FTB and child care assistance payments through the year are based on a recipient's income estimate, which is then reconciled at the end of the financial year. Debts are raised when a recipient has been overpaid due to under-estimating their income. This is not a fraudulent activity in the main as many families have inconsistent income, fringe benefits and other sources of tax offsets, including negative gearing, that can only be finally determined at the end of financial year.

This cohort represents 13% of debts and 10% of the debt value.

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. There is no similar arrangement in place to recover debts 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 payment system to repay their debts, some may actively avoid repayment.

I'd like to illustrate the point by presenting the following examples:

1. A 54 year old male was overpaid $74,459.66 in Unemployment Benefit due to false or multiple identities. The debt was raised almost 30 years ago. While the recipient made multiple repayments each time he came back onto social welfare payments – and similarly failed to make payments each time he left the system – the gentleman in question is now an ex-recipient without a repayment plan in place for the outstanding debt of over $45,000.

2. An 85 year old male was overpaid Unemployment Benefit of $36,949.32 due to undeclared earnings. As in the previous case, the debt was raised approximately 30 years ago. There have been no repayments on this debt, meaning the gentleman in question is no longer a recipient of social welfare or family assistance payments. The limitation on recovery has expired on this debt, making it unrecoverable.

3. A 71 year old female was overpaid Widows Allowance of $383,359.10 due to false or multiple identities. No recovery action has taken place for this debt as the person is not currently on payment. The person's whereabouts are currently unknown.

4. A 93 year old male was overpaid Age Pension of $261,376.85 over a period of 19 years due to having assets over the limit. A one-off payment of $25,000 has been made in January this year.

5. An 87 year old male was overpaid Age Pension of $301,863.23 for a period of 23 years due to false or multiple identities. A single repayment of $33,077.10 was made in 2015.

The interest charge will provide an incentive for the 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.

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 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.

The rate of the proposed interest charge (approximately nine per cent) will be based on the 90-day Bank Accepted Bill rate (approximately two per cent) plus an additional seven per cent, as is already applied by the Australian Taxation Office under the TaxationAdministrationAct 1953.

To ensure all debtors are treated consistently and fairly, the interest charge will also apply to those receiving only child care 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.

It is important to reiterate that only former recipients of social security and family assistance payments who have a debt to the Commonwealth, i.e. 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 an interest charge applied.

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 charge will 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 debtor can apply to the Department of Human Services for a review of their capacity to pay, and the debt may be waived or temporarily written off until the debtor's financial circumstances improve. Alternatively, a reduced rate of recovery may be applied. No interest charge would be applied for that period of time.

The Bill is expected to achieve savings to the fiscal balance of $24.4 million over four years from 1 July 2016, with underlying cash savings of $416.5 million.

On 14th October 2015, the Member for Jagajaga said:

As we have always said, we will support sensible savings when the government puts them forward. We do understand the task of fiscal repair and we will take decisions that improve our nation ' s finances when appropriate. But I add that we will only do so when the savings do not offend our fundamental sense of fairness.

It is clear from the examples I outlined above that there is nothing fair about former welfare recipients failing to repay, or 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 former welfare recipients with a debt to the Commonwealth are subject to the same requirement to repay the debt as is expected of current welfare and family payment recipients.

I look forward to the support of those opposite.