3.1.14.50 Financial Penalties

Introduction

Financial penalties may apply to job seekers who persistently and deliberately fail to comply with their mutual obligation requirements or commit work refusal and unemployment failures. Five mutual obligation failures without a valid reason within a short period (generally 6 months) will generally indicate persistence, so after 5 demerits, if their requirements are assessed to be appropriate, these job seekers will enter the Penalty Zone and their sixth failure will result in a penalty. Job seekers who fail to attend a job interview, fail to act on a job opportunity or act in a manner such that an offer of employment would not be offered to them may enter the Penalty Zone more quickly, recognising the seriousness of these failures.

Persistent non-compliance is not a prerequisite for the application of penalties for work refusal failures or unemployment failures, so penalties are applicable for these failures regardless of a job seeker's past compliance record.

Financial penalties for persistent non-compliance

Job seekers who have persistently committed mutual obligation failures are subject to escalating penalties for further non-compliance. The legislation does not define the circumstances in which a person can be taken to have 'persistently committed mutual obligation failures' but requires the Secretary to make a legislative instrument outlining how the decision maker is to be satisfied that they have. The Social Security (Administration) (Non-Compliance) Determination 2018 (No. 1) therefore describes the administrative mechanisms which are to be used to monitor a job seeker's compliance and identify when they have become persistently non-compliant.

Administratively, after 5 mutual obligation failures within 6 active months (3.1.14.10) (and if the person is found able to meet their requirements in the capability interview and capability assessment) the person will enter the Penalty Zone. Further mutual obligation failures without reasonable excuse will result in the person being determined to have 'persistently committed mutual obligation failures', and will result in them facing escalating financial penalties:

  • For the job seeker's first failure in the Penalty Zone the person's participation payment for that instalment period will be reduced by half.
  • For a second failure, the job seeker will lose their entire participation payment for that instalment period.
  • For a third failure, the job seeker's payment will be cancelled and a 4-week non-payment period will apply.

If a job seeker is cancelled from payment after 3 failures in the Penalty Zone, and they re-claim payment within 3 active months, they will remain in the Penalty Zone (which will recommence if their cancellation was for a mutual obligation failure). A first subsequent failure after re-commencement of payment would result in a reduction of the person's fortnightly payment by half, a second failure would result in loss of the fortnight's entire participation payment, and a third would result in cancellation.

Penalties for refusing work & voluntary unemployment

Job seekers who refuse or fail to commence suitable work without a reasonable excuse will be subject to payment cancellation and a 4-week non-payment period (regardless of the zone they are in).

Job seekers who leave suitable work voluntarily or are dismissed from suitable work due to misconduct will be cancelled from payment if they are receiving payment and be subject to a 4-week non-payment period (or 6 weeks where the person received relocation assistance to move to take up the work - see below). Job seekers who claim payment after leaving work voluntarily or being dismissed for misconduct will not be paid for 4 weeks (or 6 weeks if they received relocation assistance - see below) from the date they became unemployed (subject to other waiting period provisions of the social security law, which are served concurrently with the compliance non-payment period but may be longer). No penalty will be applied if the job seeker leaves the job in circumstances where it was reasonable to do so, or the loss of their job was not due to misconduct.

If:

  • a person has been paid relocation assistance specified in the Social Security (Administration) (Relocation Assistance) Specification 2014, and
  • the person is dismissed for misconduct or becomes voluntarily unemployed within 6 months of the date on which they were first paid relocation assistance, and
  • a non-payment period for an unemployment failure is applicable to the person,

then the duration of the non-payment period is 6 weeks instead of 4 weeks.

Job seekers participating in the ParentsNext program are not subject to work refusal and voluntary unemployment failures. ParentsNext is a pre-employment program and participants are not required to look for or accept paid work as part of their requirements to receive participation payments.

Act reference: SS(Admin)Act section 42AG Compliance action for work refusal failures, section 42AH Compliance action for unemployment failures, section 42AP Cancelling participation payments

Participation payment & the value of penalties

For the purposes of calculating penalties, a person's participation payment is the total value of their NSA, YA, PPS or SpB payable (including any supplements that are included in the payment rate, such as RA, PhA, ES, Pension Supplement, YDS, APWS). The amount of FTB payable to a person is unaffected by a penalty, as is any RA paid through FTB. A job seeker's partner's payment is also not affected by any penalty. Additionally, for the purposes of means-testing of the person's other entitlements or their partner's payment, the job seeker is taken to be still receiving a participation payment during any payment reduction or 4-week preclusion period after being cancelled from a participation payment due to persistent non-compliance.

Penalty calculations occur after a person's participation payment has been reduced by the income test (either their own income, their partner's or their parents' if applicable).

Example: After the income test has been applied, Naomi receives $100 per fortnight in NSA and RA. Following a first failure in the Penalty Zone, her payment is reduced by half. That fortnight Naomi receives $50.

Penalties cannot be recovered as a debt. Where payment has been released for the instalment period in which the incident occurred, the rate reduction will be calculated against and deducted from, or the cancellation applied to the next available instalment period.

Act reference: SS(Admin)Act section 42AN Reducing instalments of participation payments for mutual obligation failures

Social Security (Administration) (Non-Compliance) Determination 2018 (No. 1)

Notification of penalty & review process

Before any penalty is applied, the job seeker will be notified and given the opportunity to either accept the penalty or explain the reasons for the non-compliance to DHS. If the job seeker satisfies the delegate that they have a reasonable excuse (3.1.13.90) for failure, they will not face a financial penalty (that is, they will not have their payment reduced or cancelled).

Job seekers will be able to seek a review of any decision to apply a financial penalty. If they seek a review within 13 weeks of being notified of the decision and the review is decided in their favour, they will have their payment reinstated and back paid. However, they will not receive payment pending the outcome of the review.

Example: Mihir considers that a 1-week penalty he received for a failure on 1 August was unfairly applied and appeals his penalty. While waiting for the finalisation of his appeal, on 8 August Mihir commits another failure without reasonable excuse, resulting in the application of a 2-week penalty. Mihir's appeal of his 1-week penalty is successful, and he is back-paid the 1 week-penalty. Because Mihir entered the Penalty Zone on 25 July, he remains in the Penalty Zone, but his 2-week penalty is reduced to a 1-week penalty - he is back paid the difference. If it were the case that the successful appeal of the 1-week penalty meant that Mihir would have left the Penalty Zone before committing the failure which originally resulted in a 2-week penalty, Mihir would be back-paid the full amount of the 2-week penalty.

Act reference: SS(Admin)Act section 109 Date of effect of favourable determination resulting from review, section 131 Secretary may continue payment pending outcome of application for review (Internal review), section 145 Secretary may continue payment pending outcome of application for review (AAT)

Last reviewed: 2 July 2018