Operation of income management

13.13 Under income management, a percentage of a person’s welfare payments is set aside for their ‘priority needs’ and that of their children; namely, for services such as food, rent and utilities.^[15] Income management does not affect or otherwise reduce the total amount of welfare payments payable to a recipient. Rather, it changes the way in which a person receives their payment. This is achieved by requiring persons to buy goods with a BasicsCard at approved stores, or through direct payment arrangements with landlords or utility providers.^[16]

13.14 Income managed funds cannot be used to purchase excluded goods, such as alcohol, tobacco products, pornographic material and gambling goods and activities.^[17]

Objects

13.15 The objects of income management, as set out in the Social Security (Administration) Act are:

(a) to reduce immediate hardship and deprivation by ensuring that the whole or part of certain welfare payments is directed to meeting the priority needs of:

(i) the recipient of the welfare payment; and

(ii) the recipient’s children (if any); and

(iii) the recipient’s partner (if any); and

(iv) any other dependants of the recipient;

(b) to ensure that recipients of certain welfare payments are given support in budgeting to meet priority needs;

(c) to reduce the amount of certain welfare payments available to be spent on alcoholic beverages, gambling, tobacco products and pornographic material;

(d) to reduce the likelihood that recipients of welfare payments will be subject to harassment and abuse in relation to their welfare payments;

(e) to encourage socially responsible behaviour, including in relation to the care and education of children;

(f) to improve the level of protection afforded to welfare recipients and their families.^[18]

Who is subject to income management?

13.16 Under New IM, a person may be income managed under either the compulsory or voluntary measure. Both measures apply for various welfare payment categories.^[19] To be subjected to compulsory income management, a person must fall within one of three streams identified below.

13.17 First, a person is subject to compulsory income management under the participation/parenting (mainstream) stream if the person:

• meets the criteria relating to the Disengaged Youth Payment Recipient; or
• meets the criteria relating to the Long-term Welfare Payment Recipient.

13.18 In the case of Vulnerable Welfare Payment, Disengaged Youth and Long-term Welfare Payment Recipients, a person is subject to compulsory income management if the person’s place of usual residence is, at the test time, within a ‘declared income management area’.^[20]

13.19 Secondly, a person is subject to compulsory income management under the child protection stream if a child protection officer of a state or territory refers the person to be subject to the income management regime.

13.20 Thirdly, a person is subject to compulsory income management under the vulnerable stream if:

• the Secretary of the Department of Families, Housing, Community Services and Indigenous Affairs (the Secretary) has determined that the person is a vulnerable welfare payment recipient;
• the person, or the person’s partner, has a child who does not meet school enrolment requirements;
• the person, or the person’s partner, has a child who has unsatisfactory school attendance; or
• the Queensland Commission requires the person to be subject to the income management regime.^[21]

Compulsory income management

13.21 Under ‘Compulsory income management’ (Compulsory IM), an individual’s income support and family assistance payments are income managed at 50% (for participation/parenting, vulnerable and voluntary schemes), or 70% (for the Child Protection Scheme).^[22]

13.22 One way a person is subjected to Compulsory IM is if the person is a vulnerable welfare payment recipient,^[23] and there is a determination under the Social Security (Administration) Act by the Secretary (or a delegated Centrelink staff) to that effect.^[24] In determining whether a person is a vulnerable welfare payment recipient, the Secretary must comply with certain decision-making principles set out in the Social Security (Administration) (Vulnerable Welfare Payment Recipient) Principles 2010 that require, among other things, an express consideration as to whether the person is ‘experiencing an indicator of vulnerability’.^[25]

Indicators of vulnerability

13.23 The Guide to Social Security Law and thePrinciples provide the following examples of indicators of vulnerability:

• financial hardship;
• financial exploitation;
• failure to undertake reasonable self-care; or
• homelessness or risk of homelessness.^[26]

13.24 When placing an individual on Compulsory IM based upon the indicators of vulnerability and ‘the circumstances of the person’, Centrelink staff must consider whether:

• the person is experiencing an indicator of vulnerability;
• whether the person is applying appropriate resources to meet some or all of their priority needs;
• if the person is experiencing an indicator of vulnerability—income management is an appropriate response to that indicator of vulnerability;^[27] and
• whether income management will assist the person to meet some or all of the person’s priority needs.^[28]

13.25 Reforms that require the compulsory quarantining of a person’s welfare payment have been, and continue to be, the most controversial welfare reform in income management.

Voluntary income management

13.26 Under the Social Security (Administration) Act, a person may enter into a written agreement with the Secretary agreeing to be subject to the income management regime throughout the period in force (which must be at least 13 weeks).^[29] The agreement remains in force until it is terminated, or the period in force expires.^[30]

13.27 Under voluntary income management (Voluntary IM), all lump sum and advance payments are income managed at 100%, while other regular payments are income managed at 50%.^[31]

Exemptions

13.28 Exemptions from income management can be sought by people under various measures, where the person is:

• in a specified class;^[32]
• without dependent children;^[33]
• with dependent children;^[34]
• a full-time student;^[35] or
• a school age child.^[36]

13.29 The availability of these exemptions is subject to meeting a range of conditions in the Social Security (Administration) Act.^[37] The Minister has discretion, under s 123UGB, to specify a class of welfare payment recipients as exempt from income management.

13.30 A person on income management may qualify for an exemption under s 123UGD of the Social Security (Administration) Act, if the person has school-aged children who are enrolled and attending, or participating in other prescribed activities, and the Secretary of FaHCSIA is ‘satisfied that there were no indications of financial vulnerability in relation to the person during the 12-month period ending immediately before the test time’.

13.31 The Guide to Social Security Law sets out some ‘core principles’ that should be applied in cases where a person seeks an exemption from income management. These principles, in part, state that:

• It is intended that income management promote personal responsibility and positive social behaviour by providing pathways to evidence based exemptions for people who have a demonstrated record of responsible parenting, or participation in employment or study.
• Exemptions are available in cases where income management is not necessary because a person has met the broad outcomes that comprise the objectives of income management. That is, the person can demonstrate that they:

– are not experiencing hardship or deprivation and are applying appropriate resources to meet their families’ priority needs,

– can budget to meet priority needs,

– are not vulnerable to financial exploitation or abuse, and

– are demonstrating socially responsible behaviour, particularly in the care and education of dependent children, or

– that they are meeting workforce participation requirements for those who are not a principal carer of a child.^[38]

13.32 As of March 2009, Centrelink data indicated that 649 clients had applied for and been granted an exemption from income management, which represented 9.8% of managed clients. Three in five exemptions (58%) were due to clients permanently moving away from their community.^[39]

Exemption review process

13.33 Where an exemption is refused by Centrelink, the welfare recipient has various ways to request a review of the decision. A person can request an internal review of the decision made by the Centrelink officer, which is conducted by a Centrelink Authorised Review Officer (ARO).^[40] If the ARO decides not to exempt the person from income management, a person can seek review before the Social Security Appeal Tribunal.^[41]

13.34 The Commonwealth Ombudsman, in a review of rights for income managed people in the Northern Territory, recommended that Centrelink develop criteria against which to review and prioritise a decision for people experiencing ‘vulnerability’.^[42] The Ombudsman highlighted the complexity involved for a welfare recipient to have a refused exemption reviewed by Centrelink, and to appeal, before the Social Security Appeals Tribunal.^[43]

Issues related to family violence

13.35 The ALRC has identified three broad issues that arise in relation to the ways in which income management affects victims of family violence:

• the appropriateness of compulsory income management to victims of family violence;
• applying voluntary income management to victims of family violence; and
• practical issues that victims of family violence face in accessing necessary funds.