PAYMENT PROCESSING LEGISLATION AMENDMENT (SOCIAL SECURITY AND VETERANS' ENTITLEMENTS) BILL 1998 Explanatory Memorandum

PAYMENT PROCESSING LEGISLATION AMENDMENT (SOCIAL SECURITY AND VETERANS' ENTITLEMENTS) BILL 1998

(Circulated by the authority of the Minister for Family and Community Services,
Senator the Hon Jocelyn Newman)

PAYMENT PROCESSING LEGISLATION AMENDMENT (SOCIAL SECURITY AND VETERANS' ENTITLEMENTS) BILL 1998

This Bill gives effect to two 1997 Budget initiatives to pay most social security and veterans' affairs payments fortnightly in arrears and to simplify the date of effect provisions.

The legislation to be amended is the Social Security Act 1991, the Veterans' Entitlements Act 1986, the Child Care Payments Act 1997 and the Income Tax Assessment Act 1997.

Amendments to the Social Security Act 1991

This Bill provides for the payment of social security payments fortnightly in arrears for reasons of consistency and simplification. This involves removing the concept of payday-based payments, namely, all social security pensions and all payments aligned with the family allowance payday, and changing these payments to period-based payments (that is, providing these payments with a daily rate period-based method of payment similar to the current arrangements for social security benefits such as newstart allowance).

Consequential amendments to ensure that daily rate calculations for most social security payments can be determined and that a smooth transition for those customers currently in receipt of payday-based payments to move to the new period-based payments, are also made.

Date of effect: 1 July 1999

Financial impact: Payments fortnightly in arrears

(net outlays)
1997-98 $ 0.194m.
1998-99 $19.703m.
1999-2000 (-$100.770m.)
2000-01 (- $18.873m.)

Currently, pensions and families payments are paid fortnightly on alternate Thursdays. Normally there are 26 paydays each year. However, if a payday falls on the first of July there will be 27 paydays in that financial year and associated higher expenditure. Under the existing system of payday-based payments, the 1999-2000 financial year would have had 27 families paydays.

The current measure provides for the spreading of pensions and family payments over each fortnight. This will result in an average of 26.2 paydays every year and an evening out of annual expenditure when an even distribution of paydays over the fortnight is achieved.

Financial impact: Date of effect rules

(net outlays)
1997-98 $0.164m.
1998-99 $5.483m.
1999-2000 (-$23.900m.)
2000-01 (-$26.754m.)

Amendments to the Veterans' Entitlements Act 1986

Similar changes are to be introduced for income support payments made under the Veterans' Entitlements Act 1986. The different financial impact of payments fortnightly in arrears is due to the different nature of income support payments, the smaller number of payments, and the comparative stability of income support payments under the Veterans' Entitlements Act 1986.

Date of effect: 1 July 1999

Financial impact: Payments fortnightly in arrears

(net outlays)
Negligible

Financial impact: Date of effect rules

(net outlays)
1997-98 $3.190m.
1998-99 $5.694m.
1999-2000 (-$1.284m.)
2000-01 (-$1.638m.)

Clause 1 of the Payment Processing Legislation Amendment (Social Security and Veterans' Entitlements) Bill 1998 sets out how the amending Act is to be cited.

Clause 2 specifies that the amending Act commences on 1 July 1999 except for Schedules 6 and 7 which commence on Royal Assent and items 44 and 45 of Schedule 4 which commence on 13 July 1999.

Clause 3 says that each Act that is specified in a Schedule to the Payment Processing Legislation Amendment (Social Security and Veterans' Entitlements) Bill 1998 is amended or repealed in accordance with the applicable items in those Schedules.

The abbreviations to be used in this Explanatory Memorandum are set out below:

the Social Security Act 1991 (the Social Security Act)

the Veterans' Entitlements Act 1986 (the Veterans' Entitlements Act)

the Child Care Payments Act 1997 (the Child Care Payments Act)

the Income Tax Assessment Act 1997 (the Income Tax Assessment Act).

This Schedule amends the Social Security Act by removing the payment of payday-based payments on alternate Thursdays to generally ensure that most social security payments will be period-based payments. This involves the introduction of a daily rate calculation for these payments.

The rationale for changing payday-based payments to period-based payments is to achieve greater efficiency in making income support payments. This will be done by matching the payments received with the periods for which the payments are made. In general terms most social security payments will continue to be made to customers each fortnight except for exceptional cases where the payment period may be less than or greater than a fortnight period.

The new payment arrangements necessitate some fundamental changes to the social security system which will become more flexible and more responsive to best suit the particular needs of a customer. The instalment period of a social security payment will not exceed 14 days and in most cases 14 days will be the typical period but it can be a shorter period if the circumstances warrant it.

It will also be clear that an instalment period will be the sum of the daily rate or rates. This will ensure that a number of determinations setting the rate of the social security payment will be able to be made during an instalment period.

Current situation

The social security system encompasses three different cycles under which social security payments are made. These are:

payday-based payments;

period-based payments; and

lump sum payments.

Currently, approximately 2.5 million payday-based payments for social security pensions are made each alternate Thursday. Likewise, over 2.0 million payday-based benefits and supplements (like partnered parenting payment and family allowance) are paid every second Thursday in the alternate week to the week in which the social security pensions are paid.

Problems with the current system

• The interaction of provisions governing the different cycles causes unnecessary complexity for customers and staff and can result in anomalies, inefficiencies and inequities. In particular, maintaining the correct entitlement in relation to the treatment of members of a couple where customers transfer from one payment to another, and assessing fluctuating amounts of earned income, have been areas of concern.

• Where customers transfer from a period-based payment to a payday-based payment, they can be paid the "old" period-based payment up to the day before the first payday for the "new" payday-based payment. Not only might a customer in this situation receive up to 13 days of the "old" period-based payment, they would then receive a full instalment of the "new" payday-based payment on the first payday following transfer. In effect, this customer would receive up to 27 days payment for a 14 day period. Making all payments period-based will eliminate this anomaly.

• Couples where one member is receiving a payday-based payment and the other member of the couple is receiving a period-based payment are generally not able to be paid on the same day. In addition, different days of payment combined with the current date of effect provisions can cause changes in the circumstances of the couple to be applied to the entitlement of each member of the couple at different times. This can make it difficult for couples in this situation to predict the effect of changes (particularly in their respective earnings) on their entitlements, which may act as a disincentive to undertaking paid work.

• Places undue strain in administering the payment system on Centrelink, financial institutions and other businesses.

What is involved in the changes

Essentially, social security payments will be paid fortnightly in arrears. This involves removing the concept of payday-based payments for all social security pensions and all payments aligned with the family allowance payday, and changing these payments to period-based payments (that is, providing these payments with a daily rate period-based method of payment similar to the current arrangements for social security benefits such as newstart allowance). The transition from payday to period based payment will involve no delay or loss of payment for customers affected by the change.

Benefits arising from the changes

• Will better match qualification to the amount of payment received

The rationale for changing payday-based payments to period-based payments is to achieve greater efficiency in making income support payments. Customers in receipt of a payday-based payment are paid for the fortnight on the basis of their circumstances on the payday. Changes in the circumstances of payday-based payment recipients are applied against the payday only. This will be done by matching the payments received with the periods for which the payments are made. Making payments in arrears, and generally for a period of a fortnight, will establish a clear and logical relationship between the qualification on a day and the amount received. That is, qualification requirements for the payday-based payments will apply for each day throughout the period of payment rather than just on the payday itself.

• Streamline administration

As noted above, the qualification requirements for the payday-based payments will apply on each day throughout the period of payment rather than just on the payday itself. This will simplify the system, making it more easily understood by customers and staff alike.

The changed payment arrangements for payday-based payments will enable these payments to be more evenly spread over each day in the payment period fortnight in much the same way as the current period-based payments. This will reduce the existing weekly "peaks" of demand and improve levels of enquiry service provided by Centrelink across a fortnight and result in a more streamlined system that will be more responsive to customer needs and changes.

In terms of customer needs, the social security system will become more responsive by providing the means to make payments on a day that is convenient to the customer.

From the perspective of being responsive to customer changes, significant benefits will also flow in respect of the administration of the system by reducing processing times. The processing of the approximately 2.5 million social security pensions on each alternate Thursday and the over 2.0 million family allowance (and associated payments which are processed in the adjacent week) payments requires these to commence on the previous Friday (that is, a lead time of 5 days). This can result in inaccurate payments being made when customers report the occurrence of an event or a change in circumstances during the lead time. It is expected that lead times will be reduced from the current 5 days to 2 days and over the coming years it is anticipated that processing times will be able to be achieved overnight (that is, in much the same way as the newstart system).

The payment of most social security payments on an arrears system will also facilitate transfers from one payment to another and will eliminate overlapping entitlement and non-recoverable excess payments because of the reduced lead times for processing. Reassessments will be able to be made more quickly and transfers between payments will be dovetailed. This means that a customer will receive their exact entitlement.

Impact on social security customers

For the first time ever, recipients of payday-based payments will be able to choose the day on which they want to be paid. The introduction of choice will allow customers to tailor the flow of their social security income to suit their expenditure patterns and circumstances.

Customers in receipt of family allowance as well as an income support payment will be able to choose to have their family allowance paid in the alternate week to the week in which their income support payment is regularly paid. The capacity for a customer to choose a payday for their income supplement which is different to the payday for their income support payment will further support customisation of social security income flows.

Payments made to social security customers who reside overseas will not be affected by this initiative. These payments will continue to be made every 28 days with the exception of payments made to customers who reside in the Netherlands who will continue to be paid every 6 months (this is because of the high cost of financial institution duty).

Section 3 of the Social Security Act is an index to definitions. Items 1 to 7 omit redundant references to definitions that will be repealed.

The definition of family allowance payday in subsection 6(1) is amended at item 8 by replacing paragraph (b) with a new paragraph that specifies that the last family allowance payday will be Thursday 1 July 1999.

Item 9 repeals the definition of family tax payment payday in section 6AA. Similar amendments are made at items 11 to 14 and item 17 where the definitions of parenting payment payday, pension PP (single) payday, PP (partnered) payday (all in section 18), allowance payday (in section 19) and pensioner education supplement payday (in subsection 23(1)) are repealed.

Subsection 17(7) is repealed and substituted by item 10 that provides that a compensation affected payment is made in respect of the period of payment referred to in Part 3.14.

Section 19A which deals with the calculation of pharmaceutical allowance and advance pharmaceutical allowance is repealed by item 15 because these calculations can be made under the relevant rate calculators and by reference to Part 2.23.

The definition of payday in subsection 23(1) is repealed and substituted by a new definition at item 16. The new definition will specify that a payday is a day on which an instalment of a social security payment is, or is to be paid or if the person is receiving a service pension is a pension payday within the meaning of the Veterans' Entitlements Act.

The definition of pension payday in subsection 23(1) is amended at item 18 by replacing paragraph (b) with a new paragraph that specifies that the last pension payday will be Thursday 24 June 1999.

The definition of pension period in subsection 23(1) is repealed and substituted by a new definition at item 19. The new definition will specify that a pension period means the instalment period of a social security pension.

Items 20 and 21, respectively, repeal subsections 23(1A) and (3) because the provisions are redundant.

Subsections 23(4), (4AAA) and (4AA) are repealed by item 22 and a new subsection (4) is substituted. This new subsection will provide that a social security payment is taken to be received until the latest day on which the payment is payable.

Subsection 23(6) of the Social Security Act is amended by items 23 to 25 so that the transfer day for a person qualified for an income support payment is the day that immediately follows the day on which the person ceases to receive their old pension or benefit. Subsection 23(7) is similarly amended by items 26 to 28 so that the transfer day for a person who is a member of a couple and is qualified for an income support payment is also the day that immediately follows the day on which the person becomes qualified for the new payment.

Section 42 is repealed by item 29 because there is no need to have a provision that specifies the meaning of payday-based payments and period-based payments.

Items 30, 38, 52, 60, 65, 74 and 113 all provide for new subsections that respectively provide that a person transferring to an age pension, disability support pension, carer payment, bereavement allowance, widow B pension, parenting payment and special needs pension that the provisional commencement day will be the day of the transfer if the claim is made within 14 days of the transfer day. These provisions reproduce the existing transferee provisions currently provided in respect of social security benefit payments.

Section 57 of the Social Security Act provides for the payment by instalments of age pension. This section is repealed by item 31 and a new section 57 is substituted. The new section 57 will provide, in relation to an instalment of age pension:

it is payable in arrears and by instalments relating to such periods as the Secretary determines but not exceeding 14 days (subsection (1));

it is paid at such times as the Secretary determines (subsection (2) generally);

it is the sum of the daily rates for the days in that period (subsection (3));

it is paid at such times as the Secretary determines in relation to a person who is outside Australia (subsection (4));

it is to be paid at such times as the Secretary determines in the case of a person receiving a veterans' disability pension or the person's partner receiving an age pension and a veterans' disability pension (subsection (5)); and

each period is an instalment period (subsection (6)).

The instalment provisions will enable the setting of a flexible instalment period that will not exceed 14 days. A determination by the Secretary will be required to set a person's instalment period. In general terms this period will continue to be a period of 14 days. However a shorter period can be set, either as a short-term measure (for example, to change the regular instalment period of a customer because the customer has, either become or ceased to be, a member of a couple) or as a long-term measure which will be dependent upon the particular circumstances of the customer. This will also allow the Secretary to take account of the request of a customer to receive their social security payment on a day they choose.

Subsection 57(3) will provide that an instalment period, is the sum of a determination or determinations, as appropriate, setting the rate of payment. This provision will ensure that the general rule in relation to the date of effect of a determination, that the change to a person's rate should take effect from the date of the event, is followed.

Subsection 57(5) will primarily enable instalments of age pension to be made at the same time as the instalments of veterans' disability pension are made. This will continue the current arrangement that allows age and wife pensioners to have the administration of these pensions managed by the Department of Veterans' Affairs.

Items 39, 43, 53, 61, 66, 75, 98, 114, 118, 125, 132, 138, 144 and 154, respectively, repeal and substitute sections 119 (disability support pension), 161 (wife pension), 212 (carer payment), 331 (bereavement allowance), 378 (widow B pension), 504A (sections 504A and 504B are repealed - parenting payment), 660XGB (mature age allowance and mature age partner allowance under Part 2.12A), 798 (special needs pension), 863 (family allowance), 900AZE (family tax payment), 969 (child disability allowance), 1012 (double orphan pension), 1046 (mobility allowance) and 1061PZI (pensioner education supplement) which provide for the payment by instalments of these current payday-based payments.

These new provisions, similar to the amendment made by item 31, will all provide for the instalments to be:

payable in arrears by instalments and relating to such periods as the Secretary determines but not exceeding 14 days;

paid at such times as the Secretary determines;

the sum of the daily rates for the days in that period;

that an instalment is paid at such times as the Secretary determines in relation to a person who is outside Australia (excepts items 114 and 144); and

each period is an instalment period.

Item 43 will also provide, at subsection 161(5), for instalments of wife pension to be made at the same time as the instalments of age pension and veterans' disability pension are made to the woman's partner.

Item 118 will also provide that the amount of an instalment of family allowance if it is not a multiple of 5 cents, is to be rounded up to the nearest multiple of 5 cents (subsection 863(6)).

Item 125 will also provide, at subsection 900AZE(6), for instalments of family tax payment to be paid on an earlier day if the day that the instalment would normally be paid is a public holiday or a bank holiday.

Sections 58, 120, 162, 213, 332, 379, 660XGC, 799, 864, 970, 1013, 1047 and 1061PZJ all provide for the effect on instalments of backdating a claim and are unnecessary with the removal of payday-based payments. These sections are repealed by items 32, 40, 44, 54, 62, 67, 99, 115, 119, 133, 139, 145 and 155.

Subsections 59(1), 121(1), 163(1), 214(1), 333(1), 380(1), 660XGD(1) and 800(1) provide that the fortnightly rate of a pension is the annual rate divided by 26 (this represents the usual number of pension paydays in any year). These subsections are all unnecessary because of the amendments proposed to be made to the rate calculators by the introduction of a daily rate calculation and are repealed at items 33, 41, 45, 55, 63, 68, 100 and 116.

References to a payment that is payable to a person on a pension payday are all omitted by items 34, 42, 46, 56, 64, 69, 101 and 117 and replaced with a reference to an instalment at subsections 59(2) and (3) (item 34), subsections 121(2) and (3) (item 42), subsections 163(2) and (3) (item 46), subsections 214(2) and (3) (item 56), subsections 333(2) and (3) (item 64), subsections 380(2) and (3) (item 69), subsections 660XGD(2) and (3) (item 101) and subsections 800(2) and (3) (item 117). A similar amendment is made to section 504F by items 79 to 81 and to subsection 500C(3) by item 73 by omitting references parenting payday, pension PP (single) payday and PP (partnered) payday, where appropriate.

Sections 59A and 163A which provided for the calculation of an amount equivalent to a half-instalment in respect of age pension and wife pension are repealed by items 35 and 47. These sections were necessary when these payments were payday-based because they facilitated the smooth transfer from the social security payment system to the veterans' payment system. However, these sections are redundant once the payday-based arrangements are removed.

Items 36 and 37 respectively amend paragraphs 93R(a) and (b). Section 93R provides for the payment of pension bonus. These amendments ensure that the changed payment arrangements are reflected in the pension bonus scheme.

Items 48 to 51 amend section 198C. The amendment to subsection 198C(1) by item 48 provides that the appropriate tax year for a day is the base tax year for that day. Item 49 simply omits a redundant reference to payday in subsection 198C(2) and item 51 amends the definition of base tax year in subsection 198C(6) by replacing references to carer payment payday with day.

The amendment made by item 50 simply changes the current payday method of retaining the current tax year in consecutive years in certain circumstances. The amendment ensures that an instalment of carer payment paid to a person on a day in the next calendar year is an instalment whose period of payment commences immediately after the end of an instalment that was paid in the previous calendar year. A similar amendment to point 1069-H15 in relation to the retention of the current tax year in consecutive calendar years for family allowance is made by item 199.

Subsection 225AA(2) is amended by item 57 so that carer payment, in certain circumstances, continues to be payable for 14 weeks after the carer ceases to be qualified rather than the current 7 pension paydays.

Item 58 removes references to pension payday in subsection 315(1) of the Social Security Act and substitutes references to day. A similar amendment is made by item 59 to subsection 316(1) which also omits the reference to pension payday.

Section 408GB of the Social Security Act currently provides that widow allowance is paid by instalments for periods determined by the Secretary and at the times determined by the Secretary. Sections 646 (newstart allowance), 660YGB (mature age allowance under Part 2.12B), 716 (sickness allowance), 749 (special benefit) and 771KG (partner allowance) like section 408GB also provide for the payment of these social security benefits in instalments.

Items 70, 86, 91, 102, 105, 108 and 110 repeal sections 408GB, 559A, 646, 660YGB, 716, 749 and 771KG and substitute new sections that provide for the payment by instalments. The new sections (similar to the amendments made by items 31, 39, 43, 53, 61, 66, 75, 98, 114, 118, 125, 132, 138, 144 and 154) all provide that the payment:

is payable in arrears and by instalments relating to such periods as the Secretary determines (subsection (1));

is paid at such times as the Secretary determines (subsection (2));

is payable for the days in that period (subsection (3)); and

is an instalment period for each period (subsection (4)).

Sections 408GC, 504C, 559B, 584B, 647, 660YGC, 717, 750 and 771KH all provide for the calculation of an instalment for a period of less than a fortnight. These sections are unnecessary because of the new provisions that provide for a daily rate and are repealed by items 71, 76, 87, 88, 92, 103, 106, 109 and 111.

Items 72, 89, 93, 104, 107 and 112, respectively amend subsections 408GD(4), 584C(3), 648(2B), 660YGD(4), 718(2B) and 771KI(4) by amending the divisor for the calculation of the daily rate of pharmaceutical allowance from 10 to 14 so that this conforms with the notion of daily rate rather than just week days and ensuring that the period is the number of days rather than week days.

Items 77, 78 and 82 to 85, respectively repeal section 504D, section 504E, subsection 504J(4) and sections 504G, 504H and 504I. Section 504D is repealed because the calculation of the amount of an instalment is unnecessary following the introduction of a daily rate. Section 504E is repealed because this provision, which deals with the calculation of the amount of an instalment when a person transfers from pension PP (single) to PP (partnered) (or vice versa), is no longer necessary under a period-based payment system. The repeal of subsection 504J(4) and sections 504G, 504H and 504I all of which deal with the gap supplement for parenting payment are not required because they will not be necessary under a period-based payment system.

Subsections 614(2A) and (2B) are repealed by item 90. These provisions are unnecessary because the transfer arrangements between newstart allowance and mature age allowance and mature age partner allowance under Part 2.12A will no longer require provisions that provide when newstart allowance is not payable.

Items 94 to 97, respectively, amend subsection 660XCG(1), section 660XCH, subsection 660XCO(1) and section 660XCP of the Social Security Act by omitting references to pension payday and substituting new references to a period.

Sections 864A and 864B provide for the payment of family allowance advance. Items 120 to 124 amend these provisions to accommodate the changes from payday-based payment of family allowance to period-based payment. Subsection 864A(2) is amended by items 120 and 121 sets a person's standard advance period. Section 864B of the Social Security Act which provides for the calculation of the amount of the advance of family allowance is amended by items 122 to 124 by amending the definition of Number of paydays in subsection (1) (item 122) so that it means the number of days in the advance period in which an instalment of family allowance would normally be paid, by specifying the commencement of the advance period in subsection (3) (item 123) and repealing subsection (6) (item 124).

The definition of child in section 900A is amended by item 126 by ensuring that it includes a child who was born alive but dies before a claim for maternity allowance is made. Consequential amendments to subsections 900B(4) and (5) are also required to remove references to payday and substitute references to day (item 127).

The rate of child disability allowance is currently specified as a fortnightly rate in subsection 967(1). Item 128 inserts a new subsection 967(1AA) (immediately before subsection 967(1)) to provide for the daily rate of child disability allowance. Technical amendments to subsection 967(1) made by items 129 and 130 are required because of the amendment made by item 128 to provide consistency of treatment of all amendments specifying the daily rate of a social security payment.

Item 131 amends subsection 967(2) by substituting a reference to an instalment period for family allowance instead of a reference to 14 days ending on a family allowance payday.

Item 134 omits a reference to a family allowance payday in section 1003 and substitutes a reference to an instalment of family allowance.

The rate of double orphan pension is currently specified as a fortnightly rate in section 1010. Item 137 inserts a new subsection 1010(2) to provide for the daily rate of double orphan pension. Technical amendments to section 1010 made by items 135 and 136 are required because of the amendment made by item 137 to provide consistency of treatment of all amendments specifying the daily rate of a social security payment.

The rate of mobility allowance is currently specified as a fortnightly rate in section 1044. Item 140 inserts a new subsection 1044(1AA) (immediately before subsection 1044(1)) to provide for the daily rate of mobility allowance. Technical amendments to section 1044 made by items 141 and 142 are required because of the amendment made by item 140 to provide consistency of treatment of all amendments specifying the daily rate of a social security payment.

Item 143 inserts new subsection 1044(3) to provide for a definition of advance payment period for mobility allowance. The other advance payment provision for mobility allowance which requires amendment is section 1047A. In this respect, items 146 and 147 make the necessary amendments by repealing subsection 1047A(2) (item 146) and by omitting advance payday and substituting the day on which the person receives the advance in subsection 1047A(3) (item 147).

Section 1058 of the Social Security Act is repealed and substituted by item 148 that will provide that mobility allowance continues to be paid for a period of 12 weeks if the person ceases to qualify for the allowance in certain circumstances. The substituted section 1058 reproduces the existing continuation of payment of mobility allowance provisions found in the repealed section but which are slightly modified to take account of the period-based payment changes.

The reference to payday in subsection 1061G(1) of the Social Security Act is omitted by item 149.

Item 150 amends paragraphs 1061JB(2)(a) and (b) by providing that a proper claim for advance pharmaceutical allowance is made if it lodged within 14 days of the end of an instalment period that includes 31 December.

The rate of pensioner education supplement is currently specified as a fortnightly rate in section 1061PZG. Item 153 inserts a new subsection 1061PZG(2) to provide for the daily rate of pensioner education supplement. Technical amendments to section 1061PZG made by items 151 and 152 are required because of the amendment made by item 153 to provide consistency of treatment of all amendments specifying the daily rate of a social security payment.

Section 1061U provides for the payment by instalments of telephone allowance. Subsection (2) is amended by items 156 to 159 by removing redundant references to payday and repealing paragraph (2)(c).

Items 160, 163, 164, 167, 170 and 181, respectively amend points 1064-A1, 1065-A1, 1066-A1, 1066A-A1, 1066B-A1 and 1068A-A1 by providing that the rate of pension is a daily rate and that this rate is worked out by dividing the annual rate by 364.

Items 161, 162, 165, 166, 168, 169, 182 and 183, respectively amend the method statement of points 1064-A1, 1066-A1, 1066A-A1 and 1068A-A1 by providing that the provisional payment rate is an annual rate. These amendments clarify that the intention of the method statement is to provide a basis for calculating a person's annual rate.

Items 171, 172, 175, 178, 184, 191 and 203, respectively, amend points 1067-A1, 1067G-A1, 1067L-A1, 1068-A1, 1068B-A1 and 1069-A1 and subpoint 1070-A1(1) by providing that the rate of allowance, benefit or payment is a daily rate and that this rate is worked out by dividing the fortnightly rate by 14.

Items 173, 174, 176, 177, 179, 180, 186, 187, 189 190, 192 and 193, respectively amend the method statement of points 1067G-A1, 1067L-A1, 1068-A1, 1068B-A2, 1068B-A3 and 1069-A1 by providing that the provisional payment rate is a fortnightly rate. These amendments clarify that the intention of the method statement is to provide a basis for calculating a person's fortnightly rate.

Technical amendments to points 1068B-A2 and 1068B-A3 are made by items 185 and 188 to follow on from the amendments made by items 186, 187, 189 and 190.

The divisor of 364 is the appropriate denominator because it conforms with the current rules associated with social security pensions and 14 is the appropriate divisor for the remaining payday-based payments and all period-based payments.

The calculation of the amount of an instalment of a social security pension is currently the annual rate divided by 26 (see, for example, subsection 59(1) in relation to age pension). This represents the fortnightly rate of the social security pension. The calculation of the amount of an instalment of a social security benefit is already set as a fortnightly rate. To determine the daily rate of an instalment of a social security benefit the fortnightly rate is divided 10 (see, for example, section 408GC in relation to widow allowance). The divisor of 10 is based on week days rather than the whole week.

The amendments associated with the removal of payday-based payments and the date of effect of determinations, required a more precise manner in calculating the amount of an instalment rather than relying on a number of provisions that would provide for an instalment period of less than a fortnight. In this regard the introduction of a daily rate (rather than an annual or fortnightly rate) rendered provisions that allowed a calculation of an amount of an instalment for a period of less than a fortnight redundant. It was necessary to amend the divisor from week days to the whole week, thus, the appropriate denominator became 14. This is both fairer and more precise than its counterpart.

The 364 divisor is therefore an amalgamation of the current rules associated with social security pensions and social security benefits (slightly adjusted for accuracy and equity) because it is a combination of 26 multiplied by 14.

Points 1069-H13, 1069-H14, 1069-H20 and 1069-H21 are provisions in the Family Allowance Rate Calculator that deal with matters related to the appropriate tax year. Items 194 to 198 and 200 and 201 amend point 1069-H13 (items 194 and 195), point 1069-H14 (items 196 to 198), paragraph 1069-H20(b) (item 200) and point 1069-H21 (item 201) by omitting references to family allowance payday and substituting new references to day. Item 199 repeals paragraphs 1069-H15(a), (b) and (c) and substitutes new paragraphs (a), (b), (c) and (ca) which will provide the circumstances in which the current tax year can be retained in consecutive calendar years (this amendment is similar to the amendment made by item 50).

Items 202 and 204 omit redundant references to family tax payment payday in subsection 1070(2) and paragraph (a) of the definition of taxable income in point 1070-D2.

Item 205 amends the definition of calculation day in subsection 1100(6) of the Social Security Act by requiring it to be the first business day for each month rather than the first social security pension payday in that month.

Subsection 1134(2) is repealed and substituted by item 206 so that it properly sets out when the payment of the pension or allowance under the Pension Loans Scheme is to be made. Item 207 amends section 1141 to omit a redundant reference to pension payday and substitute a reference to instalment period that indicates when the operation of the Pension Loans Scheme is to cease. Like item 207, item 208 makes a similar amendment to subsection 1142(1) to provide for when the Pension Loans Scheme ceases to operate because the person withdraws from the Scheme.

Item 209 repeals and substitutes section 1158 to specify when an instalment of a social security pension is not payable during a period in gaol or psychiatric confinement.

Items 210 and 211 make technical amendments to section 1160 because of the change to period-based payments.

Item 212 repeals and substitutes section 1162 to specify when an instalment of parenting payment is not payable during a period in gaol or psychiatric confinement.

Items 213 to 216 amend clauses 101 and 102 of Schedule 1A to ensure that these savings provisions continue to operate after the payday-based payments ceased to be paid on the specific pension or family allowance payday.

This Schedule amends the Social Security Act by amending the bereavement provisions to take account of the amendments to be made in Schedules 1 and 3.

The amendments made will reflect that a payday, under the changed arrangements made in Schedule 1, will mean the payday of the person rather than the current generic payday.

The date of effect of determination provision amendments to be made in Schedule 3 are also reflected in this Schedule by ensuring that the bereavement period commences on the day of the death of a person and that bereavement payments are made from that date.

The current bereavement provisions for social security pensions and social security benefits all specify that the bereavement period in relation to a person's death is the day after the day on which the person died. The date of effect of determination provision amendments made in Schedule 3 require that the bereavement period starts from the date of the person's death.

The removal of payday-based payments made in Schedule 1 also require consequential amendments to the bereavement provisions of the Social Security Act. These amendments ensure that the paydays in the bereavement period are the paydays of the person who has died and where appropriate the partner's paydays.

Items 1 and 2 make some technical amendments to the definitions of bereavement period and first available bereavement adjustment payday in subsection 21(2) of the Social Security Act.

Items 3, 6, 21 and 44 omit "after the day" from the note at subsection 82(2) (item 3), the note at subsection 146F(2) (item 6), the note at subsection 237(2) (item 21) and the note at subsection 660XKA(3) (item 44) so that the date of effect of the determination is the day on which the person's partner died rather than the next day. A similar amendment is made to section 900AZZC by item 76 and to subsection 992AA(1) by item 81.

Sections 86, 146K, 191, 241, 514E, 660XKE, 660XKM, 660YKF, 771NY and 826 (Step 6 of the Lump Sum Calculator in these sections) and sections 567D, 592D, 660LE, 728PE and 768E (Step 4 of the Lump Sum Calculator in these sections) are amended by items 4, 7, 20, 32, 40 to 43, 45, 58 and 60 to 64 by ensuring that the number of the partner's paydays commences in the period on the day on which the person died rather than from the day after the person died.

Redundant references to pension payday are omitted by items 5, 8, 33 to 35, 46 and 65 and replaced by references to person's payday in subsections 91(1), 146Q(1), 246(1), 359(1), 407(1), 660XKG(1) and 830(1). Items 11, 13, 16, 18, 23, 25, 28, 30, 49, 51, 54 and 56 also substitute references to pension payday to the person's payday in sections 190, 191, 239, 241, 660XKL and 660XKM (Steps 1 and 4 of the Lump Sum Calculator in all cases). Similarly, items 10 and 48 substitute payday with day in sections 189 and 660XKK, respectively.

Amendments by items 14, 26, 52 and 57 to substitute references to pension paydays with paydays of the partner are respectively made to sections 190 (Step 6 of the Lump Sum Calculator), 239 (Step 6 of the Lump Sum Calculator), 660XKL (Step 6 of the Lump Sum Calculator) and 660XKM (Step 6 of the Lump Sum Calculator). Items 9, 19, 22, 24, 29, 31, 47 and 55 make similar amendments by substituting references to pension paydays with partner's paydays to section 189, section 191 (Step 6 of the Lump Sum Calculator), subsection 238(1), section 239 (Step 2 of the Lump Sum Calculator), section 241 (Steps 2 and 6 of the Lump Sum Calculator), section 660XKK and section 660XKM (Step 2 of the Lump Sum Calculator).

Item 12 follows on from the amendments made to the Lump Sum Calculator in section 190 by items 11 and 13 to 15 by amending Step 2 to ensure that amount that would have been payable to the person's partner is the amount that would have been paid on the same payday on or after the first available bereavement adjustment payday. A similar amendment is made to Step 2 of the Lump Sum Calculator in section 660XKL by item 50.

Items 15, 27 and 53 amend sections 190, 239 and 660XKL (Step 7 of the Lump Sum Calculator in all cases) to provide that the partner's instalment component is multiplied by the number obtained in Step 6.

Item 17 follows on from the amendments made to the Lump Sum Calculator in section 191 by items 16, 18 and 19 by amending Step 2 to ensure that amount that would have been payable to the woman's partner is the amount that would have been paid on the same payday as the amount calculated under Step 1.

Items 36 and 37, respectively amend subsections 512(1) and 512A(1) of the Social Security Act to specify that parenting payment is payable for a period of 14 weeks (section 512) or 4 weeks (section 512A - for a non-benefit PP (partnered)), in certain circumstances from the date of death of a dependent child.

Item 38 omits a redundant reference to pension PP (single) in subsection 513(1).

The Note at subsection 513(1) of the Social Security Act refers the reader to the definition of pension PP (single) payday at section 18, however, this definition is repealed by amendments made in Schedule 1. Accordingly, item 39 repeals this Note.

Item 59 corrects an error in Step 7 of the Lump Sum Calculator in section 660XKM.

The Lump Sum Calculator in subsection 895(1) is amended by items 66 to 68 by omitting redundant references to family allowance payday and substituting references to the person's payday. Item 69 also amends this Lump Sum Calculator by amending Step 5 to provide that the deceased child component is multiplied by the number obtained in Step 4.

Subsection 895(2) is amended by items 70 and 71 by omitting redundant references to family allowance payday and substituting references to the person's payday.

The Lump Sum Calculator in subsection 896(1) is amended by items 72 to 74 by providing that references to payday refer to the person or the person's partner. Item 75 also amends this Lump Sum Calculator by amending Step 5 to provide that the deceased child component is multiplied by the number obtained in Step 4.

Item 77 amends subsection 991(2) of the Social Security Act by omitting a reference to an amount that would normally be paid on the pension payday and substituting that this is the amount payable to the person.

The Lump Sum Calculator in section 992 is amended by items 78 to 80 by omitting the reference to family allowance payday in Step 1 (item 78), by substituting a reference to paydays of the person in Step 2 (item 79) and by amending Step 3 to provide that the rate is multiplied by the number obtained in Step 2 (item 80).

Subsection 992AA(2) is amended by item 82. It is a technical amendment to ensure that the rate of child disability allowance payable during the bereavement period is the rate that was payable immediately before the day on which the young person died.

Item 83 makes a technical amendment to Step 1 of the Lump Sum Calculator in section 1034 in respect of double orphan pension to ensure that the continued rate is the rate of double orphan pension payable immediately before the first available bereavement adjustment payday. Items 84 and 85 also amend this Lump Sum Calculator by omitting a redundant reference to family allowance payday and substituting it with a reference to the person's payday (item 84) and providing that the continued rate is multiplied by the number obtained in Step 2 not by the number of family allowance paydays (item 85).

Subsection 1139(2) of the Social Security Act is amended by item 86 to provide that a debt incurred under the Pension Loans Scheme may not be recovered by the Commonwealth until after the end of the bereavement period.

This Schedule amends the Social Security Act by changing the date of effect of determination provisions to generally ensure that the date of an event or a change in circumstances of a customer that necessitates a change in the rate of payment or requires the payment to be cancelled or suspended is the actual date of the event of change in circumstances.

The minimum period in which recipients of payments must report changes in their circumstances will be reduced from 14 days to 7 days for the majority of recipients of currently payday-based payments. Customers with profound disabilities, living in remote areas of Australia or living outside Australia will all be able to be given notification periods longer than 7 days (up to a maximum of 28 days).

Customers needing to report the death of a partner, a child or a qualifying caree will have a minimum notification period for these events of 28 days.

For the first time ever, a customer reporting a favourable change in their circumstances within a period of 7 days after the day on which the event occurred will have the effect of the event backdated to the date on which the event occurred. A customer with a notification period for unfavourable events longer than 7 days will be able to have the effect of favourable events backdated for periods longer than 7 days.

Current situation

The date of effect provisions govern the commencement, cessation and variation of social security payments.

At present, these provisions vary from payment to payment. This inconsistency across payment types has an impact on the timing of the effect of various determinations, which complicates compliance with the notification provisions for customers and reduces the scope for computerisation of decision-making by Centrelink.

What is involved in the change

The date of effect provisions will be simplified by providing consistent treatment across payment types.

The date of effect of determination provisions in the Social Security Act will be amended to generally ensure that the date of an event or a change in circumstances of a customer that necessitates a change in the rate of payment or requires the payment to be cancelled or suspended is the actual date of the event or change in circumstances.

The general rule will be that an event or change in circumstances that requires a reassessment of a customer's social security payment (including transfers to new payments) will take effect from the day of the event or the change. To accommodate this outcome the general reporting requirements imposed upon customers (whether it be for the occurrence of an event, change in circumstances or by way of a statement given to a customer) will be a consistent 7 days (the notification period).

If a customer informs Centrelink of the occurrence of an event or a change in circumstances, whether under a general reporting requirement or by way of a statement given to the customer, the variation to the social security payment will generally take effect from the date of the event or the change. If the information is received within the required notification period and the social security payment is not able to be reassessed prior to the issue of the payment, the date of effect of the determination will take effect from:

in the case of an increase in the rate of payment, the date of the event or the change in circumstances; and

in the case of a reduction in the rate of payment or a termination of the payment, the date of the event or the change in circumstances, the end of the notification period or the end of the instalment period, depending upon when the change is processed. In these cases, customers will not incur a debt for the notification period.

The current rules concerning the date of effect of a determination for customers who do not inform Centrelink of the occurrence of an event or a change in circumstances within the notification period will not be affected by this proposal. That is, the determination will take effect from:

in the case of an increase in the rate of payment, the date of the notification; and

in the case of a reduction in the rate of payment or a termination of the payment, the date of the event or the change in circumstances.

In addition, provisions enabling the Secretary to extend the notification period to up to 28 days in special circumstances related to either the event or the change in circumstances that is being reported or because of the particular needs of the customer in question (such as being profoundly physically disabled, living in a remote locality of Australia, or living outside Australia), will be enacted. This will allow an extended notification period to apply to customers who, for example, reside overseas, live in remote areas or for the notification of a death. Other situations unique to an individual will also be able to be taken into account which will mean that the social security system will be less impersonal and more responsive to the individual needs of customers who require access to income support payments.

The provisions in the Social Security Act that specify the commencement of a social security payment will not be affected by this proposal.

Benefits arising from the changes

The changes will achieve greater efficiency, equity and accuracy in the reassessment of customers' income support payments when an event or a change in circumstances requires a reassessment determination to be made.

This is because the system will be more responsive because inconsistencies will be removed. More determinations will be able to be automated so errors arising from manual determinations will also be reduced. Simpler transfer provisions will also result in a more streamlined administration.

For the first time, customers who advise the Department, within the advice period, of a change in circumstances that results in a favourable determination will be paid their increased rate of payment from the date of the change. Under the current rules, a favourable determination takes effect from the date of the advice or the change, whichever is the later.

Simplification of date of effect rules and standardisation of the notification period across payments will substantially increase the computerisation of decision-making. Apart from the administrative savings that will be achieved, reported changes can be processed more rapidly, and customers will be advised of the effects of changes faster.

The savings to outlays made by this initiative and that initiative in Schedule 1 arise only from the prevention of extra payments rather than the withdrawal of payments customers might already be receiving.

Subsections 68(4) and 132(4) are amended by items 1 and 13 to ensure that the notification period is subject to the new provisions that allow for the notification period to be extended in special circumstances. These are simply technical amendments that follow-on from the amendments made by items 2 and 14.

Subsections 68(4), 132(4), 172(4), 222(4), 341(4), 389(4), 408JB(5), 506D(5), 561B(5), 586B(5), 657(4), 660XIC(5), 660YIC(5), 727(4), 759(4), 771MC(5), 808(4), 872(4), 900AZL(5), 978(4), 1023(4), 1054(4), 1061PZQ(5), 1061Y(4) and 1061ZK(4) are amended by items 2, 14, 25, 35, 46, 56, 66, 74, 85, 93, 101, 109, 120, 127, 135, 140, 148, 158, 169, 179, 189, 196, 200, 206 and 208 to ensure that the notification period is not later than 7 days after the event or the change in circumstances. Items 160 and 171 provide similar amendments to subsection 873A(3) and 900AZN(4) in relation to a recipient and a change of address.

New provisions that allow the notification period to be extended up to 28 days in special circumstances, related to the person to whom the notice is given. In relation to a notice that specifies an event consisting of the death of a person the period is 28 days. The new provisions are inserted after subsections 68(4), 132(4), 172(4), 222(4), 341(4), 389(4), 408JB(5), 506D(5), 561B(5), 586B(5), 657(4), 660XIC(5), 660YIC(5), 727(4), 759(4), 771MC(5), 808(4), 872(4), 900AZL(5), 978(4), 1023(4), 1054(4), 1061PZQ(5), 1061Y(4) and 1061ZK(4) by items 3, 15, 26, 36, 47, 57, 67, 75, 86, 94, 102, 110, 121, 128, 136, 141, 149, 159, 170, 180, 190, 197, 201, 207 and 209.

Items 4, 5, 16, 17, 27, 28, 37, 38, 48, 49, 58, 59, 68, 69, 76, 77, 87, 88, 95, 96, 103, 104, 111, 112, 122, 123, 129, 130, 142, 143, 150, 151, 161, 162, 172, 173, 181, 182, 191, 192, 202 and 203 amend sections 72, 137, 176, 226, 345, 393, 408LB, 508C, 563B, 588A, 660B, 660XJD, 660YJC, 728E, 771ND, 812, 875, 900AZP, 982, 1027 and 1061PZT which are automatic termination provisions that apply when a recipient of the social security payment complies with the notification obligations under the relevant section applicable to the social security payment in question. The amendments will provide that the social security payment will continue to be payable until:

the end of the notification period; or

the end of the instalment that is current when the event or change in circumstances occurs;

depending upon when the social security payment is able to be cancelled.

This will mean, providing the person complies with their notification obligations, that if an event or change in circumstances occurs and because of that event or change the person is not qualified for the social security payment, the payment will be cancelled from the earliest possible day. However, the earliest possible day cannot be any later than the end of the notification period.

Sections 73, 138, 177, 227, 346, 394, 508D, 660XJE, 813, 876, 900AZQ, 983 and 1028 of the Social Security Act are amended by items 6, 18, 29, 39, 50, 60, 78, 113, 152, 163, 174, 183 and 193 so that a person's social security payment is automatically terminated with effect from the date of the event or the change in circumstances when the person fails to comply with their notification obligations. This brings these automatic termination provisions in line with those that currently apply to social security benefits, that is, in synchronisation with the period-based payments. A similar amendment is made to section 762B by item 137.

Items 7, 8, 19, 20, 30, 31, 40, 41, 51, 52, 61, 62, 70, 71, 79, 80, 89, 90, 97, 98, 105, 106, 114, 115, 131, 132, 144, 145, 153, 154, 164, 165, 184 and 185 amend sections 73B, 141A, 177A, 227B, 347A, 395A, 408MAA, 509B, 564A, 589A, 660EA, 660XJFA, 728GA, 771NHA, 814A, 876A and 983A which are automatic rate reduction provisions when a recipient of the social security payment complies with the notification obligations under the relevant section applicable to the social security payment in question. The amendments will provide that the social security payment will continue to be payable at the higher rate until:

the end of the notification period; or

the end of the instalment that is current when the event or change in circumstances occurs;

depending upon when the rate of the social security payment is able to be reduced.

This will mean, providing the person complies with their notification obligations, that if an event or change in circumstances occurs and because of that event or change the person's rate of social security payment is higher than it should be, the rate of the payment will be reduced from the earliest possible day. However, the earliest possible day cannot be any later than the end of the notification period.

New sections 660YJGA and 900AZQA, providing for automatic rate reduction determinations, are inserted into the Social Security Act for mature age allowance under Part 2.12B and for family tax payment by items 124 and 175.

Sections 74, 142, 178, 228, 348, 396, 509C, 660XJG, 815, 877, 900AZR and 984 of the Social Security Act are amended by items 9, 21, 32, 42, 53, 63, 81, 116, 155, 166, 176 and 186 so that a person's social security payment is automatically reduced with effect from the date of the event or the change in circumstances when the person fails to comply with their notification obligations. This brings these automatic rate reduction provisions in line with those that currently apply to social security benefits, that is, in synchronisation with the period-based payments.

Items 10, 22, 33, 43, 54, 64, 72, 82, 91, 99, 107, 117, 125, 133, 138, 146, 156, 167, 177, 187 and 204 repeal subsections 80(5), 146D(5), 184(5), 233(5), 354(5), 402(5), 408PA(5), 511(5), 566(5), 591(5), 660K(5), 660XJP(5), 660YJQ(5), 728Q(5), 767(5), 771NR(5), 820(5), 887(5), 900AZZA(5), 989(5), 1031(4) and 1061PZZB(5) of the Social Security Act and respectively substitute new subsections 80(5), (5AA) and (5AB), 146D(5), (5AA) and (5AB), 184(5), (5A) and (5B), 233(5), (5AA) and (5AB), 354(5), (5A) and (5B), 402(5), (5A) and (5B), 408PA(5), (5A) and (5B), 511(5), (5A) and (5B), 566(5), (5A) and (5B), 591(5), (5A) and (5B), 660K(5), (5A) and (5B), 660XJP(5), (5A) and (5B), 660YJQ(5), (5A) and (5B), 728Q(5), (6) and (7), 767(5), (6) and (7), 771NR(5), (5AA) and (5AB), 820(5), (5AA) and (5AB), 887(5), (5AA) and (5AB), 900AZZA(5), (5A) and (5B), 989(5), (5A) and (5B and 1061PZZB(5), (5A) and (5B), so that the date of effect of a favourable determination following advice of the occurrence of an event or change in circumstances is, either:

• where advice of the event or change in circumstances is received within the advice period, the date the event or change occurred; or

• where advice of the event or change in circumstances is not received within the advice period, the date the event or change was notified.

The advice period will usually be 7 days unless this period has been extended in relation to a notice that has been given to a person which requires the person to inform of the occurrence of an event or a change in circumstances.

Items 194 and 198 insert new subsections 1031(4A), (4B) and (4C) and 1060(4A), (4B) and (4C) into the Social Security Act so that the date of effect of a favourable determination following advice of the occurrence of an event or change in circumstances is either:

• where advice of the event or change in circumstances is received within the advice period, the date the event or change occurred; or

• where advice of the event or change in circumstances is not received within the advice period, the date the event or change was notified.

Items 11, 23, 44, 83 and 118, respectively, amend subsections 80(5A), 146D(5A), 233(5A), 511(6) and 660XJP(6) to ensure that date of effect of the favourable determination is the day on which the partner died not the day after that day.

Sections 81, 146E, 185, 234, 355, 403, 408PB, 511A, 566A, 591A, 660L, 660XJQ, 660YJR, 728R, 768, 771NS, 821, 889, 900AZZB, 990, 1032, 1061 and 1061PZZC of the Social Security Act all provide for the date of effect of an adverse determination. These sections are repealed by items 12 (this item also repeals sections 81A and 81B), 24, 34, 45, 55, 65, 73, 84, 92, 100, 108, 119, 126, 134, 139, 147, 157, 168, 178, 188, 195, 199 and 205 and replaced by new sections that will:

specify that the day on which certain determinations take effect is worked out under that section;

specify that the day on which a determination is made is the date of the event or change in circumstances if a person complies with their notification obligations under the provision that allows the Secretary to issue the person with a notice that requires notification of an event or change in circumstances and the determination can be made before the instalment is paid (this provision applies when an automatic termination or rate reduction provision is not applicable); and

may be an earlier day than the day the determination is made, if the person contravenes a provision of the Social Security Act and the contravention causes a delay in the making of the determination;

may be an earlier day than the day the determination is made, if the person makes a false statement or misrepresentation and the social security payment has been paid when it should have been cancelled or suspended;

may be an earlier day than the day the determination is made, if the person makes a false statement or misrepresentation and the social security payment has been paid at a higher rate then it should have been (all except items 195, 199 and 205); or

the date of effect is the day on which the determination is made in any other case or a later day.

Items 12, 24, 34, 45, 73, 84, 92, 100, 108, 119, 126, 134, 147 and 157 also amend sections 81, 146E, 185, 234, 408PB, 511A, 566A, 591A, 660L, 660XJQ, 660YJR, 728R, 771NS and 821 of the Social Security Act by providing that the date of effect of an adverse determination will also:

cancel or suspend the social security payment from the first day of the period to which arrears of periodic compensation relate; or

reduce the rate of the social security payment from the first day of the period to which arrears of periodic compensation relate.

Items 12, 24, 34, 55 and 65 also amend sections 81, 146E, 185, 355 and 403 of the Social Security Act by providing that the date of effect of an adverse determination made under section 1218 is the day specified in the determination (these determinations relate to departure certificate rules).

New section 234 of the Social Security (item 45) also provides that the date of effect of an adverse determination is either:

the day that an earlier determination took effect if the determination was based upon an assessment of the care recipient's taxable income and that assessment is amended so that the payment should have been cancelled or suspended;

the day that an earlier determination took effect if the determination was based upon an estimate of the care recipient's taxable income and the amount assessed actually means that the payment should have been cancelled or suspended; or

the day the care receiver informed the Department or the day on which the care receiver's income exceeded the income ceiling if the care receiver's taxable income for a later tax year exceeds the income ceiling and the payment should have been cancelled or suspended.

Items 92, 100, 108, 126, 147 and 205 also amend sections 566A, 591A, 660L, 660YJR, 771NS and 1061PZZC of the Social Security Act by providing that the date of effect of an adverse determination made following a person giving the Department a statement in accordance with a notice is the day on which the matter arose.

All of the provisions inserted by items 12, 24, 34, 45, 55, 65, 73, 84, 92, 100, 108, 119, 126, 134, 139, 147, 157, 168, 178, 188, 195, 199 and 205 simply reproduce the existing date of effect of adverse determination rules currently in the Social Security Act with the exception of the provision that specifies the date of effect in the case of a person complying with their notification obligations and to which an automatic provision is not applicable.

This Schedule amends the Veterans' Entitlements Act to provide similar arrangements for calculating the instalments of income support payments payable under the Veterans' Entitlements Act, to the arrangements of payment that will be adopted for social security payments under Schedule 1. From 13 July 1999 all income support payments payable under the Veterans' Entitlements Act will be paid fortnightly in arrears with daily entitlements.

In addition to the amendment of the arrangements for calculating the instalments of income support payments, a number of other changes to the Veterans' Entitlements Act will reflect changes to the Social Security Act. The notification period in which an income support recipient has to notify the Department of Veterans' Affairs (DVA) of an event or change of circumstances that might affect their pension generally will be 7 days. The rules will also be simplified to clarify when a variation, suspension or cancellation of an income support payment takes effect.

A number of consequential amendments arise from these amendments. Transitional provisions are also included to ensure a smooth transition for income support recipients from the current payday-based payments to the new system of period-based payments.

Arrangements for paying income support payments

The current method of paying instalments of service pensions and income support supplement (ISS) is dependent on the recipient's rate of pension or ISS on the actual day of payment. A person is paid a full 14 days instalment of pension based on the rate of pension he or she is entitled to be paid on the pension payday. In other words, under the current pay system a person is paid either a full 14 day instalment or nothing.

On 13 July 1999 service pensions paid under Part III and ISS paid under Part IIIA of the Veterans' Entitlements Act will transfer from the current payday-based cycle to a period-based cycle. The change to payments fortnightly in arrears with daily entitlements will establish a clear and logical relationship between the number of days a person is qualified for payment and the amount of money he or she receives. 13 July 1999 is the date of the start of the first complete new pension period after 1 July 1999.

The pension period for income support payments will run from two days before a pension payday to two days before the next pension payday, in order to process an instalment of pension for the pension period and pay that instalment on the next pension payday.

The result of this change to the arrangements for determining the amount of an instalment of service pension and ISS will be that:

service pension and ISS will be payable with daily entitlements from the date of grant rather than as a full fortnight instalment on the next pension payday after that date;

instalments of pension will relate to a pension period; and

any variation, suspension or cancellation of a service pension or ISS will occur on the date of the event or change in circumstances which prompted the variation, suspension or cancellation, or on another day specified by the simplified date of effect rules introduced by this Schedule.

Notification period and date of effect

These amendments to the Veterans' Entitlements Act mirror amendments outlined in Schedule 3 of this Bill.

Date of effect rules determine when service pension or ISS payments commence, cease or vary following a change of the pension recipients’ circumstances.

The amendments to the date of effect provisions simplify the rules when a recipient's circumstances change. The changes are intended to make the rules clearer for recipients and officers of the Department. The date of effect will be determined by whether or not a recipient complies with his or her notification obligations and informs the Department of a change of circumstances within a specified notification period.

Clause 2: provides the commencement rules for this Schedule.

Clause 3: provides that each Act that is specified in this Schedule is amended as set out in the Schedule.

Items 1 to 23, 46 to make amendments to the Veterans' Entitlements Act relating to
48 and 55 to 72 changes to the arrangements for calculating the instalment of pension.

Items 24 to 43: make amendments to the Veterans' Entitlements Act relating to bereavement payments.

Items 44 to 45 and make amendments to the Veterans' Entitlements Act relating to
49 to 54: notification period and date of effect rules.

Amendments relating to arrangements for paying income support payments

Items 1 to 3 make minor amendments to paragraph 5MC(5)(a) and (b) and subsection 5NB(9) (note) to correct legislative references in those provisions to the Rate Calculator in sections 41 and 42. The Rate Calculators were moved to Schedule 6 and section 42 was repealed by the Veterans' Affair Legislation Amendment (Budget and Simplification Measures) Act 1997 (Act Number 87 of 1997).

Item 4 amends the definition of pension period in subsection 5Q(1) (definition of pension period) to distinguish the different pension periods that will arise in the Veterans' Entitlements Act following the changes to the instalments of income support payments.

Pensions payable under Parts II and IV and allowances payable under Part VI will continue to operate on the current pension payday arrangements.

The pension period for income support pensions payable under Parts III and IIIA will commence 2 days before the beginning of a pension payday and continue to the end of 2 days before the next pension payday. The reason for this shift of the two week pension period for income support payments is to provide two days after each pension period and prior to the next pension payday to process and calculate the instalment of pension for that period.

Item 5 makes a minor amendment to subsection 5S(2) relating to the date of effect of certain determinations granting pension or allowance. With the new arrangements for calculating income support payments, section 5S no longer describes the date of effect of determination granting those payments. This amendment ensures that section 5S does not apply to pension or ISS payable under Parts III or IIIA. The date of effect of a determination to grant service pension or ISS is determined by sections 36M, 37M, 38M and 45R.

Items 6, 9, 12 and 16 insert a note after each of the sections 36M, 37M, 38M and 45R, to alert the reader that sections 36C, 37C, 38C and 45D prevent a person from receiving dual income support pensions. For example a service pension is not payable to a person who is receiving another service pension or social security pension or benefit.

The note added to sections 36M, 37M, 38M and 45R signals that an income support payment cannot be payable if the person is still receiving a social security payment. In the event there is an overlap of the payment of social security and veterans income support payments, section 205AA provides a method for recovering any overpayment.

Items 7, 8, 10, 11, 13, 14 make minor procedural amendments to sections 36N, 37N and 38N to refer the reader directly to the Rate Calculator in Schedule 6 (rather than to section 41 which currently directs the reader to the Rate Calculator). These items also insert the Notes from subsection 41(1) at the end of sections 36N, 37N and 38N. Section 41 is being deleted by item 15.

Item 15 removes Division 7 of Part III. Division 7 contains only one section, section 41. Subsection 41(1) directs the reader who is seeking the rate of age, invalidity or partner service pension to the Rate Calculator in Schedule 6 (items 7, 8, 10, 11, 13, 14 remove the need for subsection 41(1)).

Subsections 41(2) and (3) prescribe the method for the calculation of an instalment of a pension where a person transferred from a social security pension to a service pension or income support pension. The change in the calculation of instalments of income support payments and social security payments simplifies the administrative procedure for people who transfer from a payment under the Social Security Act to an income support payment under the Veterans' Entitlements Act. Daily entitlements will enable the payment of the social security payment up to the day the person ceases to be eligible for that payment. The payment under the Veterans' Entitlements Act may then commence the day after the day the person ceased to receive the social security payment.

Item 17 removes subsections 45S(3) and (4). These subsections mirror subsections 41(2) and (3) and are no longer necessary for the same reasons as outlined above in item 15.

Item 18 makes a minor amendment to paragraph 52Z(6)(b) to remove a reference to section 41 (deleted by item 15 above) and refer the reader to the Rate Calculator.

Items 19 to 22 make minor amendments to clarify the date of effect of various decisions relating to the pension loans scheme established under Subdivision E of Division 11 of Part IIIB. With the change of payment methods for income support payments to daily entitlements, the following changes will occur:

pension loans scheme may now be payable on and from the day the request is lodged, rather than the first pension payday after the request is lodged: subsection 52ZB(2);

in the case of a person's death, the debt cannot be recovered until the end of the bereavement period: subsection 52ZG(2);

if a person's debt exceeds the maximum loan available, the scheme will cease to operate on the day on which the person’s debt exceeded that limit rather than the first pension payday after: section 52ZJ; and

if a person withdraws for the scheme, the scheme will cease to operate the day on which the request is lodged rather than the payday following the request: section 52ZK.

Item 23 makes a similar minor amendment to paragraph 53E(3)(c) to those contained in items 19 to 22 above. This item clarifies the dates of effect relating to a period of entitlement to treatment. Section 53E contains the criteria a veteran must satisfy to be entitled to treatment under Division 12 of Part IIIB. The amendment to paragraph 53E(3)(c) will provide that the veteran will continue to be eligible for treatment benefits for 13 weeks from the day on which the veteran's income is reduced. This will amend the procedure that operates from 20 September 1998 whereby paragraph 53E(3)(c) provides that the treatment will continue for 13 weeks from "the first pension payday" after the event.

Division 14 of Part IIIB deals with the payment of service pensions to pensioners in certain institutions. Sections 55 and 55A address the situation where a service pensioner is imprisoned. Items 46 to 48 make minor changes to subsection 55(2) to clarify the dates a pension is suspended or forfeited when a pensioner is in gaol.

Item 55 repeals sections 58AA, 58A and 58B and inserts a new section 58A. This new subsection provides that income support payments will be payable in arrears by instalments relating to each pension period: new subsection 58A(1).

For income support payments occurring from 13 July 1999 the fortnightly instalment will no longer be the annual rate of pension divided by 26. Rather the instalment will be the total amount of pension payable to the person for each of the days in that pension period on which pension was payable to the person: new subsection 58A(2).

The daily rate of pension is determined by dividing the annual rate of pension by 364 (this figure represents 26 fortnights multiplied by 14 days): new subsection 58A(4).

The instalment for the pension period will be payable to the person on the next payday after the end of the pension period: new subsection 58A(3).

The remaining subsections in new section 58A preserve provisions that currently exist in section 58A.

Items 56 to 61 make minor amendments to the terminology relating to advance payment deductions under Division 6 of Part IVA. With the new arrangements for paying income support pension, an advance payment will now be deducted from the fortnightly instalment of pension rather than the rate of pension. These items remove "rate" and substitute "instalment" in subsections 79L(1), 79L(2), paragraph 79O(2)(a) and sections 79P and 79Q.

Division 2 of Part VIA provides for special adjustments to the rate of invalidity service pension if a veteran receives earnings while participating on a vocational rehabilitation scheme. Items 62 to 68 amend this Division to reflect the new pension payment arrangements. These amendments ensure that the rate of invalidity service pension payable to a veteran may continue to be calculated under this Division while the veteran is participating on a vocational rehabilitation scheme.

Item 62 inserts a definition for CPI indexation day in section 115A. This corrects an oversight in the initial drafting of Part VIA, whereby section 115A only refers to the indexation day for disability pensions affected by Part VIA (ie. CPI payday) and not the indexation day for service pensions affected by Part VIA. By defining the CPI indexation day this amendment recognises the distinction between the indexation day in Division 18 of Part IIIB for service pension, and the period-based indexation day under section 198 for disability pensions.

Item 63 removes the reference to "on a pension payday" in subsection 115C(2).

Items 64 to 68 amend section 115G so that the excluded income applied to the assessment of the rate of invalidity service pension may continue to be calculated with the new payment method.

Item 69 makes a similar amendment to subsection 121(5) to the amendment in item 5 to subsection 5S(2). This amendment specifies that section 121 will not apply to income support payments. This amendment distinguishes the payment of income support pension or ISS from provisions relating to payment of an instalment of pension.

With the new arrangements for paying income support payments, an instalment of service pension or ISS will be calculated under section 58A (see item 55 above). Following this amendment section 121 will only specify the method for determining the fortnightly instalment of a pension under Parts II and IV or an allowance that is not excluded by subsection 121(5).

Item 70 makes a minor technical amendment to subclause 7(3) of Schedule 5. Clause 7 of Schedule 5 is a transitional and saving provisions applicable to the amendments relating to the pension loans scheme. This amendment ensures that the current scheme will apply to the person on the day on which the request is lodged rather than the next payday.

Module D of Schedule 6 provides for pharmaceutical allowance and advance pharmaceutical allowances to assist service pensioners and ISS recipients who are eligible under the Pharmaceutical Benefits Scheme (PBS), and the Repatriation Pharmaceutical Benefits Scheme (RPBS). Items 71 and 72 make minor technical amendments to Module D of Schedule 6 to ensure that, in line with other changes to the arrangements for paying income support payments, the amount of advance pharmaceutical allowance is based on the number of pension periods and not pension paydays.

Amendments relating to bereavement payments

Although bereavement payments by the Family and Community Services and Veterans' Affairs Departments have a common outcome, current provisions for bereavement payments under the Veterans' Entitlements Act differ from the provisions for bereavement payments under the Social Security Act. Bereavement payments under the Veterans' Entitlements Act were consolidated by the Veterans' Affairs Legislation Amendment (1995-96 Budget Measures) Act (No.2) 1995 (Act Number 146 of 1995). The amendments under this Schedule to bereavement provisions in the Veterans' Entitlements Act therefore differ from the amendments to the Social Security Act specified in Schedule 2.

Items 24 to 43 amend Division 12A of Part IIIB to take account of the other amendments in this Schedule to the payment of income support pensions. These amendments ensure the surviving pensioner will be entitled to the same amount of bereavement payment as he or she would be entitled to prior to these amendments. To this end items 24 to 43 identify the relevant dates and rates for the purpose of assessing and determining bereavement payments and make a series of technical amendments to ensure bereavement payments may continue to be assessed and paid under the new payment system. These items amend references to the "amount" or "instalment" of a pension and to the "last pension payday before the death" for the amount of pension in sections 53K, 53L, 53M, 53N, 53Q and 53S.

Item 24 changes the commencement of the bereavement period to the date of death: section 53H (currently the bereavement period commences the day after the day on which the person died). This will ensure the bereavement periods commence on the same day under the Veterans' Entitlements Act as under the Social Security Act amended by Schedule 2. Item 24 also amends section 53H to provide that the bereavement period be specified as 98 days starting on the date of death (equivalent to 14 weeks as is currently the case).

Item 25 makes a minor amendment to remove some redundant notes in Section 53J. These Notes refer to provisions in the Veterans' Entitlements Act that have been removed.

Items 26 to 40 amend Subdivision B, death of pensioner's partner (where partner was receiving a service pension or a social security pension), to ensure that, during the bereavement period, the surviving pensioner will continue to receive no less than the amount of income support pension the couple was paid on the last day of the last pension period before the partner died. This amount of payment may be adjusted by the provisions of section 53M. Section 53M is not affected by the changes in this Bill.

Items 41 and 42 amend Subdivision C, death of pensioner, to ensure that a one off bereavement payment of 14 days pension will be payable. The bereavement payment will be an amount equal to the amount of income support that would have been payable to the pensioner for the 14 days after the pensioner died, calculated as if the pensioner had not died. The payment may be made to any person whom the Commission considers appropriate.

Item 43 makes a minor amendment to Subdivision D, death of dependent child, to ensure that pension continues to be payable to the pensioner during the bereavement period after the death of the dependent child as if the child had not died.

Amendments relating to certain notices and determinations

Item 44 mirrors changes to the notification period in the Social Security Act under Schedule 3. This item ensures that the notification period in which a person has to notify DVA of an event or change of circumstances that might affect his or her payment of service pension or ISS is not more than 7 days: subsection 54(5).

The 7 day notification period will be exclusive of the day on which the event took place, but inclusive of any Saturday, Sunday or public holiday. If the notification period ends on a Saturday, Sunday or public holiday, then subsection 36(2) of the Acts Interpretation Act 1901 applies and the person would have until the next day which is not a Saturday, Sunday or public holiday to notify the Department.

As with the Social Security Act there are some exceptions to the 7 day notification rule. Item 45 provides for the inclusion of two new provisions after subsection 54(5) that allow the notification period to be extended:

where the Secretary is satisfied there are special circumstances, the notification period may be extended up to 28 days: new subsection 54(5A); or

for a pensioner whose partner dies (and the partner was receiving an income support pension or social security pension immediately before his or her death), or a pensioner whose dependent child dies, to have the bereavement period to notify DVA of the death: new subsection 54(5AA).

New subsection 54(5AA) provides that entitlement to a bereavement payment under Division 12A of Part IIIB will not be affected by the new notification period in subsection 54(5). Provided the Department is notified before the expiry of the 98 day bereavement period, the amount of bereavement payment may be calculated and paid up to the end of the bereavement period. If the Department is not informed of the death, and payment to the deceased continues beyond 98 days, an overpayment will arise.

Items 49 to 54 amend provisions relating to date of effect of certain determinations to vary, suspend or cancel an income support pension under Division 15 of Part IIIB of the Veterans' Entitlements Act. The purpose of the changes is to simplify and clarify the rules relating to notification of an event or change of circumstances.

Item 49 adds new subsection 56(3) to provide an automatic rate reduction if the person notifies of an event or change of circumstances within the notification period and as a result, the person's rate of pension or income support supplement is to be reduced (see Table 1 below).

Items 50 and 51 amend subsection 56A(1) and section 56B to ensure that a cancellation or reduction under these provisions takes effect from the date of event and not the day after the event as is currently the case (see Table 2 below).

Item 52 amends the date of effect of a favourable decision in subsection 56G(2). If the person notifies of an event or change of circumstances within the notification period, the increase in pension will take effect from the date of event: new paragraph 56G(2)(a). If the person notifies an event or change of circumstances outside the notification period, the increase in pension will take effect from the date of event or date of notification, whichever is later: new paragraph 56G(2)(b). See Tables 1 and 2 below.

Item 53 repeals subsections 56G(2A), (2B) and (2C). These provisions are redundant because of the extended period within which a person will be required to notify of the death of their partner (see item 45 above) and the streamlined date of effect provisions.

Item 54 amends section 56GA to provide that the date of effect of a favourable determination relating to a dependent child is the day on which the child is taken to have become a dependent child and not the next pension payday.

As a result of the amendments in these items, the actions by the pensioner will determine which of the two potential outcomes after an event or change of circumstances will apply:

A. A person who complies with section 54 notification obligations

The changes to date of effect rules will ensure that a person who complies with his or her section 54 notification obligations:

will not have an unfavourable variation of their pension made until the day after the end of the 7 day notification period; or

will have a favourable variation made from the date of the event or change in circumstances.

Put another way - where:

a person who is receiving a service pension or ISS is given a notice under section 54; and

the notice requires the person to inform DVA or a specified officer of the occurrence of an event or change in circumstances within 7 days (for the purposes of Table 1 called the notification period); and

the event or change in circumstances occurs; and

the person informs DVA or the specified officer of the occurrence of the event or change in circumstances within 7 days, in accordance with the notice; then

Table 1 applies:

Table 1

Column 1 result of event or change in circumstances:	Column 2 Section which applies	Column 3 variation the pension or ISS:	Column 4 date of effect
the person ceases to be eligible for the pension or ISS	56(1)(e)(i)	is cancelled	from the day after the end of the notification period
the pension or ISS ceases to be payable to the person	56(1)(e)(ii)	is reduced to nil	from the day after the end of the notification period
the person's pension or ISS should be paid at a reduced rate	56(3)	is reduced to a new rate	from the day after the end of the notification period
the person's pension or ISS should be paid at an increased rate	56C & 56G(2)(a)	is increased to a new rate	from the day on which event or change in circumstances occurred

B. A person does not comply with section 54 notification obligations

Under the new date of effect rules, a person who does not comply with his or her section 54 notification obligations:

will have an unfavourable variation made from the date of the event or change in circumstances; or

will have a favourable variation made from the date that the notification is received.

Put another way - where:

a person who is receiving a service pension or ISS is given a notice under section 54; and

the notice requires the person to inform DVA or a specified officer of the occurrence of an event or change in circumstances within 7 days (for the purposes of Table 2 called the notification period); and

the event or change in circumstances occurs; and

the person does not inform DVA or the specified officer of the occurrence of the event or change in circumstances within 7 days in accordance with the notice; then

Table 2 applies:

Table 2

Column 1 result of event or change in circumstances:	Column 2 Section which applies	Column 3 variation the pension or ISS:	Column 4 date of effect
the person ceases to be eligible for the pension or ISS	56A	is cancelled	from the day on which the event or change in circumstances occurs.
the pension or ISS ceases to be payable to the person	56A	is reduced to nil	from the day on which the event or change in circumstances occurs
the person’s pension or ISS should be paid at a reduced rate	56B	is reduced to a new rate	from the day on which the event or change in circumstances occurs
(person provides notification outside the notification period) the person’s pension or ISS should be paid at an increased rate	56C & 56G(2)(b)	is increased to a new rate	from the day on which notification is received
(person provides no notification) the person’s pension or ISS should be paid at an increased rate	56C & 56G(3)	is increased to a new rate	from the day on which the determination is made

Items 1 to 43 and 46 to 72 of this Schedule will commence on 1 July 1999. Items 44 and 45 of this Schedule will commence on 13 July 1999.

The amendments made by Schedule 5 are consequential upon the amendments made to the Social Security Act by Schedules 1 and 2. The amendments are made to the Child Care Payments Act and the Income Tax Assessment Act.

Child Care Payments Act

The Child Care Payments Act provides that a payday for the purposes of payments made under this Act is the family allowance payday under the Social Security Act. This arrangement was put in place simply to provide a definite day on which to make child care payments.

The actual payment of child care payments is not dependent upon whether a person is or is not receiving family allowance under the Social Security Act.

Income Tax Assessment Act

The Income Tax Assessment Act provides for the calculation of certain amounts paid to a person during the bereavement period under the Social Security Act because of the death of the person's partner to be exempt from taxation liability.

The amendments made by this Schedule to the Income Tax Assessment Act ensure that the calculation of the exempt amount from 1 July 1999 will reflect the changed arrangements to the Social Security Act made by Schedules 1 and 2.

Child Care Payments Act

Section 5 of the Child Care Payments Act provides for various definitions used in that Act. The definition of payday currently specifies that the payment of child care payments is made on the family allowance payday under the Social Security Act.

Item 1 repeals and substitutes this definition to provide that payments made under the Child Care Payments Act will continue to be made on the family allowance payday as if that definition had not been amended (see item 8 of Schedule 1).

Income Tax Assessment Act

Item 2 repeals paragraph 52-20(1)(b) and substitutes a new paragraph that provides that the ordinary payment became due during the bereavement period.

Items 3 and 4 and 6 to 9, respectively, omit redundant references to pension paydays in paragraph 52-25(2)(b), subsection 52-25(3) (method statement), paragraph 52-30(2)(b), subsection 52-30(3) (method statement), paragraph 52-35(2)(b) and subsection 52-35(3) (method statement). These references are no longer necessary following the amendments to the Social Security Act in Schedules 1 and 2.

The example in subsection 52-25(3) of the Income Tax Assessment Act is repealed and a new example demonstrating the new arrangements is substituted in its place by item 5.

Schedule 6—Transitional provisions relating to amendments of the Social Security Act 1991

The transitional provisions in this schedule will provide for the payment of instalments of a social security payment for the period from the end of the payday-based payments to the beginning of the regular payment of instalments of these payments in arrears.

In order to change customers from a payday-based payment to a period-based a one-off transitional payment in order to establish them on a new paycycle will be made.

A recipient of a social security payment which is payday-based before 1 July 1999 who elects to change their payday will receive a "transitional" instalment after 1 July 1999. For example, Andrew receives a disability support pension. He decides that he would prefer to be paid on a Tuesday in the week in which his "normal" Thursday payday would occur. Because his "new" payday has been moved two days closer to his last "normal" payday (ie the pension payday of 24 June 1999), Andrew will receive a "transitional" instalment of his disability support pension on his first "new" payday after 1 July 1999 which is 12/14ths of the instalment he would otherwise have received if he had continued to be paid on his "normal" payday.

A fundamental principle in changing customers paydays is that there will be no compulsion for customers to change. Over time, the choice by customers of a payday, will spread the payments more evenly throughout the fortnight.

Customers in receipt of payments which are already period-based around 1 July 1999 will experience minimal change because the paydays for these payments are already spread through the fortnight, and recipients of these payments are already subject to a seven day notification period. However, for the first time, recipients of social security benefits (other than partnered parenting payment) will be paid instalments for each calendar day in a fortnight rather than each working day in a fortnight. This will enable changes in circumstances to be applied evenly through payment fortnights for all social security payments.

Commencement of a formerly payday-based payment—new customer

If a person's qualification to a formerly payday-based payment (for example, age pension) commences during the transitional period, the customer will be paid for the number of days they qualify for during the period.

Where a person's qualification to a formerly payday-based payment commences before the transitional period and the determination to grant the claim is made during or after the transitional period, the person will be paid an instalment for each payday on which they were qualified before the beginning of the transitional period, and will also be paid for each day they were or are qualified during the transitional period.

Transfers between payments during the transitional period

The customer will be paid for each day they are qualified for their old social security payment and they will then be paid from the first day they qualify for their new social security payment.

Rate increases or reductions during the transitional period

Determinations to increase or reduce a rate of payment will be applied under the existing law at the date the relevant determination is required to be made. That is, if the rate increase or reduction takes effect prior to 1 July 1999 then the law to be applied will be that existing prior to 1 July 1999. Similarly, if the rate increase or reduction determination takes affect on or after 1 July 1999 then the law to be applied will be the new provisions provided by the amendments in Schedule 3.

Item 1 of this Schedule will provide that a transitional instalment period will commence before 1 July 1999 (but no earlier than 18 June 1999) and can end before, on or after 1 July 1999. It will also provide that the times of a transitional instalment period are to be paid on or after 1 July 1999.

Item 2 will provide that any entitlement of a person to be paid an instalment of a social security payment after that person's last old payday is to be determined as if Schedule 1 had commenced on the first day of that transitional instalment period.

Item 3 will provide for definitions of first new instalment period and transitional instalment period for this clause in relation to the application of amendments made in Schedule 3 as those amendments apply to the determinations made under items 1 and 2. In essence the amendments made by Schedule 3 will not apply until the beginning of the person's first new instalment period.

Item 4 will allow transitional regulations to be made arising out of amendments made by Schedules 1, 2 or 3. This is a provision that can be utilised in the event that some circumstances that have not been anticipated arise and would mean that a person might be disadvantaged in the application of the transitional period.

Schedule 7—Transitional provisions relating to amendments of the Veterans' Entitlements Act 1986

This Schedule inserts the transitional provisions related to Schedule 4 of this Bill in Schedule 5 of the Veterans' Entitlements Act. The purpose of the transitional arrangements is to change income support recipients from a payday-based payment system to period-based payments with minimum disruption and no disadvantage to existing pensioners. The transitional period will be from 1 July 1999 to 15 July 1999.

The current notification period of at least 14 days will continue to apply to events occurring up to and including 12 July 1999. The new notification period of 7 days will come into effect for events and changes of circumstances that occur on or after 13 July 1999. New clause 22 ensures that a section 54 notice that was sent out before 13 July 1999 informing pension recipients of their notification obligations will continue to have effect after 13 July until revoked.

The last payday-based pension payment under current rules will be 1 July 1999.

A transitional payday-based payment will be made on 15 July 1999 based on the rate of income support pension payable on 12 July 1999: new clause 20.

The new period-based payment arrangement of fortnightly instalments in arrears, based on accrued daily entitlement, will commence on 13 July 1999. The first pension period will be from 13 to 27 July as specified in new clause 21. The first period-based pension payment will made on the payday of 29 July 1999.

Commencement during the transitional period

New clause 19 specifies the procedures for commencement of a pension during the transition period:

Commencement date	Date of effect	Payment
If a pension becomes payable to a person on or before 12 July 1999	date of grant	payday-based – full fortnightly instalment of pension on the next payday (up to and including the payday of 15 July)
If a pension becomes payable to a person on or after 13 July 1999	date of grant	period-based – person paid for the actual number of days entitled during the pension period on next payday

Variation, suspension or cancellation of pension during the transitional period

A person who is receiving a pension and has no change of circumstances during July 1999 will continue to receive his or her full (and regular) amount of instalment for each of the paydays on 1, 15 and 29 July.

In the event of a variation, suspension or cancellation of pension during the transitional period the following rules will be used to determine which date of effect provisions and which manner of calculating payment applies. For events occurring on or before 12 July 1999, the following two step inquiry will be necessary:

On what date did the pensioner notify the Department of an event or change of circumstances?

If the person notifies the event or change of circumstance on or before 12 July 1999, current date of effect provisions will apply: new subclause 23(1);

If the person does not notify the event or change of circumstance on or before 12 July 1999, then the amended date of effect provisions apply: new subclause 23(2).

Applying the relevant date of effect provisions, what is the date that a variation, suspension or cancellation takes effect?

If the variation, suspension or cancellation takes effect on or before 12 July 1999, then the current payday-based payment arrangements apply;

If the variation, suspension or cancellation takes effect on or after 13 July 1999 then the new period-based payment arrangements apply.

Put another way, for events occurring before, during or after the transitional period the following rules apply:

Date of event	Date of effect rules	Payment
on/before 12 July 1999	If notify before 13 July – current date of effect rules determine date of effect	payday-based – full payment/instalment varied next payday (15 July 1999 being the last payday where such a payday-based variation may be made)
	If notify on/after 13 July (or fail to notify) – new date of effect rules determine date of effect	If date of effect is before 13 July, payday base - full payment/instalment varied up to and including payday of 15 July (daily entitlements commence from the first pension period beginning 13 July)
		If date of effect on/after 13 July – new period-based payments – daily entitlements – variation, suspension or cancellation takes effect from the actual date of effect
on/after 13 July 1999	new date of effect rules apply	new period-based payments – daily entitlements – variation, suspension or cancellation takes effect from the actual date of effect

New Clause 24 provides a safety net provision, allowing regulations to be made if needed to ensure that no one is disadvantaged during the transitional period.

Commonwealth of Australia Explanatory Memoranda

PAYMENT PROCESSING LEGISLATION AMENDMENT (SOCIAL SECURITY AND VETERANS' ENTITLEMENTS) BILL 1998