Income management

124. The following part of this Issues Paper discusses the treatment of family violence in the income management of welfare payments under the Social Security (Administration) Act. It briefly explains the nature and history of the income management regime and discusses how income management can work to protect, or work against, the safety of people experiencing family violence.

125. The part examines the implications of family violence for how individuals may become subject to, or obtain exemptions from, the application of the income management regime; and the consequences of income management for people experiencing family violence. For example, issues are raised concerning whether:

• family violence should be an indicator of vulnerability for the purposes of administering the ‘vulnerable welfare payment recipients’ provisions;

• there should be some express provision allowing people experiencing family violence to seek an exemption from income management in specified circumstances;

• changes could be made to the administration of income management accounts, to assist people who are victims of family violence; and

• voluntary, rather than compulsory, forms of income management should be more broadly adopted.

What is income management?

126. ‘Income management’ is an arrangement under which 50 to 100% of a person’s social security and family payments is ‘quarantined’ to be spent only on ‘priority goods and services’, such as food, housing, clothing, education and health care.

127. The objects of the income management legislation are primarily to:

• promote socially responsible behaviour, particularly in relation to the care and education of children;

• set aside the whole or part of certain welfare payments; and

• meet the priority needs of the welfare recipient, the recipient’s partner, the recipient’s children and any other dependants of the recipient.^[93]

128. The Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA) has the primary responsibility for the income management system, which is administered by Centrelink.

129. Income management was first introduced in 2007 as part of the Northern Territory Emergency Response (NTER) to allegations of child abuse in specific Indigenous communities. The NTER scheme imposed income management on Indigenous people in receipt of income support or family assistance payments in 73 prescribed communities, including associated outstations and 10 prescribed town camp regions of the Northern Territory.

130. The income management legislation was implemented by the Australian Government as a ‘special measure’ for the purposes of the International Convention on the Elimination of All Forms of Racial Discrimination^[94] and the Racial Discrimination Act 1975 (Cth) (RDA).^[95] In 2010, the income management regime was amended^[96] following legal challenges to the NTER legislation on the basis of racial discrimination.^[97] Questions about whether past or current income management provisions comply with the RDA are beyond the Terms of Reference of this Inquiry.

131. The NTER legislation was primarily focused on child protection within the environment of family violence among remote and discrete Indigenous communities. The new income management regime under the Social Security (Administration) Act is intended to focus on categories of the most vulnerable Indigenous people.^[98] While, under the NTER, income management applied to Indigenous people in selected Northern Territory locations, the new regime has been expanded to include other ‘declared income management areas’,^[99] including the whole of the Northern Territory.^[100]

132. The Australian Government’s ‘Close the Gap’ policy under the Northern Territory National Partnership Agreement provides for the continuation of the income management regime at least until review in 2014.^[101]

Who is subject to income management?

133. In outline, a person may become subject to the income management regime where:

• a child protection officer of a State or Territory requires the person to be subject to the income management regime;

• the Secretary has determined that the person is a vulnerable welfare payment recipient;

• the person meets the criteria relating to disengaged youth;

• the person meets the criteria relating to long-term welfare payment recipients;

• 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;

• the Queensland Commission^[102] requires the person to be subject to the income management regime; or

• the person voluntarily agrees to be subject to the income management regime.^[103]

134. In the case of vulnerable welfare payment recipients, disengaged youth and long-term welfare payment recipients, the person must also be residing within a declared income management area.

Income management and family violence

135. The dynamics of family violence are aimed at the exercise and control of a person or persons in a relationship, where violence includes a range of coercive behaviours.^[104] Indigenous women are 45 times more likely than non-Indigenous women to be the subject of family violence, and more likely to be seriously injured.^[105]

136. Income management has the potential both to assist and unintentionally harm victims of family violence. Income management may be extremely useful in protecting people who remain in violent relationships. For example, there are well-documented links between alcohol and family violence in some communities^[106] and, when a person is income managed, this may protect victims from increased levels of violence resulting from access ‘excluded goods’, such as alcohol.

137. Income management also ensures that at least 50% of the income is spent on necessities, such as food and housing. If a person’s income is managed, it may provide protection from financial abuse—particularly where the income of the person who uses family violence is also income managed.

138. On the other hand, lack of control over personal finances can interfere with a person’s ability to flee a violent environment in times of crisis, or to take other actions to change the person’s circumstances.^[107]

Vulnerable welfare payment recipients

139. One issue that arises under the present income management regime concerns the vulnerable welfare payment recipients. Under the Social Security (Administration) Act, the Secretary may determine that a person is a vulnerable welfare payment recipient, which may lead to the imposition of income management. An indicator of vulnerability is stated, in the Guide to Social Security Law, to be one of the following:

• financial hardship;

• financial exploitation;

• failure to undertake reasonable self-care; or

• homelessness or risk of homelessness.^[108]

140. There is no express reference to family violence as an indicator of vulnerability in the Guide to Social Security Law or Social Security (Administration) Act.

141. The Guide to Social Security Law does, however, provide that ‘financial exploitation’ is considered to occur when a person is subject to undue pressure, harassment, violence, abuse, deception or exploitation for resources by another person or people, including other family and community members.^[109] There are other links between the existing indicators and family violence. For example, family violence may lead to homelessness where the victim is forced to leave the home.

142. Questions may be raised about whether family violence should nevertheless be included as an express indicator of vulnerability—especially given the widely accepted view that economic abuse should be recognised as a form of family violence.^[110] Family violence could be included more explicitly as an indicator of vulnerability and made subject to additional decision-making principles.

143. The Guide to Social Security Law states, for example, that the decision makers ‘should take into account all of the circumstances of the person’ when assessing eligibility for weekly payment. Indicators that weekly payments may be beneficial include homelessness, mental health or drug dependency problems and ‘recent traumatic relationship breakdown, particularly if domestic violence was involved’.^[111] Under such guidelines, individuals might initially be offered access to weekly payments, rather than immediately being made subject to income management.

144. Many objections may be raised to including family violence as an indicator of vulnerability. The Australian Human Rights Commission, for example, has stated that applying family violence as a trigger for the imposition of income management may have unintended consequences because Indigenous peoples on low incomes who experience family violence require support services, not financial management.^[112]

145. Other concerns include that victims of family violence may choose to stay in abusive relationships, rather than leave and claim Crisis Payment, out of fear that disclosing the existence of family violence to Centrelink will result in them losing control of their finances.^[113] Imposing income management on people experiencing family violence, who are capable of looking after themselves and their families, may reduce their ability to take steps to protect their safety.

146. On the other hand, there may be advantages in being able to impose income management on a person who is engaging in family violence, in order to protect the victims of that person’s violent conduct from further physical or economic abuse.

Exemption from income management

147. Exemptions from income management can be sought by people under the disengaged youth and long-term welfare payment recipient measures. The availability of these exemptions is subject to meeting a range of conditions under pt 3B, div 2, subdiv BB of the Social Security (Administration) Act.^[114]

148. For example, a person on income management with dependent children may qualify for an exemption under s 123UGD of the Social Security (Administration) Act if children who are of school age are enrolled at and attend school, or participate in other prescribed activities, and the Secretary 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’.

149. The Guide to Social Security Law states that the principles for determining that there were no indications of financial vulnerability in relation to a person are:

• a person has been applying appropriate resources to meet priority needs,

• a person had stable payment patterns and budgeting practices and is meeting priority needs from their income support and family assistance payments,

• a person had control over their money and was not subject to financial exploitation,

• a person did not regularly require urgent funds to pay for foreseeable costs, or did not frequently change their income support pay dates and consideration is given to the reason for seeking the urgent payment.^[115]

150. 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 …^[116]

151. As at 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.^[117]

152. The general approach to exemptions from income management, as reflected in the core principles, would make it hard for most people experiencing family violence to obtain an exemption.

153. Questions may be raised, however, about whether there should be some express provision allowing people experiencing family violence to seek an exemption from income management in specified circumstances. Such circumstances might include where a person has been in contact with family violence counselling or other social services, has demonstrated a desire and capacity to take action to prevent or reduce the violence, and would benefit from an exemption in order to do so.

Accounts and payments

154. Under the income management regime, payments to particular welfare recipients are held in separate, notional, accounts known as ‘income management accounts’.^[118] When a recipient ceases to be income managed, any residual monies are payable to the recipient.^[119]

155. Section 123B of the Social Security (Administration) Act provides for the Secretary to appoint a payment nominee on behalf of a welfare recipient, after taking into account the wishes of the recipient. Payments payable to the welfare recipient are paid into the bank account of the payment nominee.^[120]

156. A welfare recipient under income management, or a payment nominee, may be issued with a stored value card, vouchers or receive approved expense and other payments.^[121] Stored value cards, generally known as BasicsCards, may be used at community stores and other approved outlets. Stored value cards, vouchers or payments may not be used to purchase excluded goods and services, including alcoholic beverages, tobacco products, pornographic material and gambling.^[122]

157. Concerns have been raised, however, about unintended consequences of the income management account system—including for people who are experiencing family violence. Problems have been identified in relation to:

• obtaining access to money for travelling interstate;

• delays in the transfer of needed funds;

• the increased cost of goods and services through the use of the BasicsCard because of the lack of community stores or merchants;

• limits placed on daily expenditure using the BasicsCard are problematic during a crisis of family violence;

• restricted access to account balances because of inadequate facilities and technology; and

• the assessment and reassessment of priority needs, which can be time consuming, invasive and demeaning, because the recipient must seek permission to purchase goods and services not covered by the provision.^[123]

158. Generally, under the income management regime, access to welfare payments is made subject to a detailed set of rules, which determine when Indigenous people are granted access to their money and what payments should be spent on. The system has been described as ‘requiring a micro examination of every aspect of a recipient’s financial circumstances that exceeds the rigours of applying for a bank loan’.^[124]

159. Under the income management system, Indigenous welfare recipients who receive quarantined payments have minimal control over their income and are scrutinised on all expenditures or intended purchases. Access to funds in an income management account is based on narrow criteria that do not take into account the ‘totality of a person’s circumstances’.^[125] That is, decision-making principles may not be flexible enough to assist victims of family violence to leave a residence or community or take other urgent steps to avoid violence. Access to resources to cover an immediate departure is likely to be limited. Travel or other crisis needs where a person needs to escape family violence may not be ‘priority needs’ for the purposes of the income management regime.^[126]

160. It has also been observed that the restrictions of the BasicsCard may affect Indigenous cultural sharing practices—in particular, during ‘sorry business’, where cash is contributed to the deceased’s family.^[127] Where family members have experienced family violence, an inability to contribute an amount of cash may exacerbate their vulnerability to the pressures of immediate and extended family, especially where family violence already exists.

161. Further, in remote and discrete Indigenous communities, geographical isolation combined with the lack of transport and accommodation may inhibit access to a person’s income management account funds and the ability to attend Centrelink to apply for an emergency payment.

Compulsory or voluntary income management?

162. From one perspective, the established principles of social security and family assistance law provide for the inalienability of social security payments and enshrine a person’s legal right to a social security payment.^[128]

163. The compulsory element of income management may be seen to hinder access to these basic rights and there are suggestions that a voluntary approach to income management should be more broadly applied. This issue is discussed below.

164. Indigenous people in declared case management areas must comply with a range of requirements in order to avoid being made subject to compulsory income management, or to obtain an exemption. These include requiring a person with children of compulsory school age or younger to demonstrate responsible parenting, by meeting attendance or participation requirements relating to education, health care and other activities.^[129]

165. Indigenous people in remote, discrete, and rural areas face difficulties in complying with such requirements, including because of lack of access to accessible, affordable, available and culturally appropriate services—for example, limited childcare services, limited access to children’s activities and infrequent transport during the wet season.^[130] Compulsory case management may be too inflexible to take account of the difficulties faced by Indigenous people experiencing family violence.

166. Submissions to the Senate Standing Committees on Community Affairs inquiry into the 2010 amending legislation proposed the introduction of a broad voluntary system of income management. This would provide unconditional support for victims of family violence, where financial management is self-determined by the recipient. It was suggested that a voluntary system of income management would encourage disclosure of family violence and better allow clients to be linked with appropriate service providers. These stakeholders stated that an opt-in system might avoid the burden of satisfying exemption criteria and encourage self-management among Indigenous communities.^[131]

167. The income management regime, since the 2010 amendments, provides for a voluntary form of income management—only available to eligible persons who are not subject to compulsory income management. Under the Social Security (Administration) Act, people who are recipients of welfare payments and live in a declared income management area may enter ‘voluntary income management agreements’.^[132]

168. These voluntary income management agreements may be suited to Indigenous people who are undecided about becoming income managed but require long-term assistance in managing income—for example, due to the existence of family violence.

169. On the other hand, where a person has other problems such as homelessness, mental health or drug dependency problems, compulsory management may be more appropriate. People who are experiencing family violence may also prefer that income management be compulsorily imposed, rather than voluntary, to avoid being pressured by an abusive partner^[133] to terminate a voluntary income management agreement.

170. Voluntary income management was introduced following trials in Indigenous communities in Western Australia.^[134] In a submission to the Senate Standing Committees on Community Affairs inquiry, the National Welfare Rights Network suggested that, under voluntary income management, welfare recipients should be able to ‘self select the percentage of funds they require to be income managed’.^[135]

Criticism of income management

171. There have been arguments for and against the income management system since its implementation, including in relation to its effect on the incidence of family violence.

172. Income management is commonly referred to as a form of ‘conditional welfare’ because it is devised to change behaviour, targeted at the most disadvantaged members of society. The components of ‘conditional welfare’ programs include punitive and rehabilitative elements. The provisions of the income management regime operate on both these levels.^[136]

173. Criticisms of the income management regime have included that:

• problems in Indigenous communities may be better addressed through long-term support and increased investment—for example, in improving financial capacity and self-determination;^[137]

• the prescriptive and punitive approach of the conditional welfare model may discourage disclosure of family violence;^[138]

• the prescriptive and punitive approach under the new system may not meet the needs of people with a disability or mental health problems;^[139]

• people face problems in exercising rights of review of administrative decisions made under the income management regime;^[140]

• there is a lack of Indigenous interpreters to inform communities about the income management regime.^[141]

174. It remains unclear whether income management is effective in addressing problems faced by Indigenous welfare recipients.^[142] In particular, there is little evidence to indicate that income management has reduced family violence.^[143] In any case, a major problem with any evaluation is the lack of a comparison group to measure what would occur in the absence of income management.^[144]

175. In 2009, FaHCSIA conducted interviews with 76 Indigenous people living in declared income management areas in relation to the state of their family and community wellbeing. Respondents were asked if they had noticed changes with their family since income management was implemented. Most (46%) indicated they were unsure. Slightly more considered that there had been no changes (30%); and some (24%) said there had been changes, which were mainly positive, including that their family was happier, they had increased access to food and experienced less ‘humbugging’.^[145]

176. When asked if there had been changes in the community since income management was introduced, 52% thought there had been change (generally of a positive nature), 21% thought there had not been any change and 27% were unsure.^[146] In relation to family violence specifically, 13% of respondents thought there had been more violence, 37% thought there had been less, with 50% nominating no change.^[147]