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

This determination specifies when a jobseeker receiving a “participation payment” (such as Newstart Allowance or Youth Allowance (jobseeker)) is treated as having “persistently committed mutual obligation failures” for the purposes of section 42AF of the Social Security (Administration) Act 1999 (the Act). It also sets the amount by which an instalment of the payment must be reduced when such a finding is made. The instrument is made under subsection 42AR(1) of the Act and came into effect on 1 July 2018 (as indicated by the definition of “active months” referring to periods “beginning on or after 1 July 2018”).

Mechanically, the determination does three things. First, it defines the time windows within which the counting of failures occurs. It creates two “active months” periods: “3 active months” and “6 active months”. These are not simple calendar periods. Each is calculated as a shorter of (a) a specified number of consecutive days (91 or 182) plus extra days for times when the person was exempt from activity requirements, had previous payment reductions, was in a post-cancellation non-payment period, or was waiting for a Department of Human Services (DHS) assessment; or (b) twelve months. This means that a person can be considered to have committed failures over a period that is potentially much longer than three or six calendar months because days that are not counted as “active” are added on at the end. The definition also provides that overlapping days are counted only once.

Second, the instrument establishes the thresholds for a “persistent” finding. Under section 5, the Secretary must be satisfied the person has persistently committed mutual obligation failures if, within any 6 active months, the person either: (i) commits at least 5 mutual obligation failures to which a demerit is attached; or (ii) commits 2, 3 or 4 such failures where at least one is a “serious” failure (failing to attend a job interview, failing to act on a job opportunity when asked, or intentionally acting to avoid an offer of employment). In both cases, the person must also have undergone a DHS assessment during those 6 active months. The day on which the DHS assessment is completed is the reference day from which the 3 active months period for the “relevant failure” is measured. However, if some demerits are reversed after the DHS assessment, the day may be reset to the date of the fifth (or second, third or fourth) uncorrected demerit.

Third, the instrument dictates the penalty amount. Under section 6, if the Secretary determines under paragraph 42AF(2)(c) of the Act that an instalment is to be reduced, the reduction must be half the instalment (paragraph 42AN(3)(a)) where the circumstances of persistent failure under section 5(1)(a) or (b) apply. But if within the 3 active months before the relevant failure there was already a prior half-reduction determination, then the reduction must be the whole instalment (paragraph 42AN(3)(b)). There is a special rule: if the person had a previous participation payment that was cancelled under paragraph 42AF(2)(d) and the relevant failure is the first failure without a reasonable excuse within 3 active months after that cancellation, then only a half reduction applies, overriding the escalation rule.

The determination also provides circumstances where the Secretary must not find persistent non-compliance: if the person has not committed any demerit-attached failure or failure without reasonable excuse in the 3 active months before the relevant failure (section 5(5)); or if after reversing demerits the person no longer meets the threshold numbers (section 5(6)).

Participation payment is defined in the Act (section 42A) and broadly includes Newstart Allowance, Youth Allowance (jobseeker), Parenting Payment (if the person has mutual obligation requirements), and other payments subject to activity testing. The instrument does not re-define it but cross-references the Act.

Mutual obligation failure is defined by subsection 42AC of the Act. It includes failures to satisfy a requirement relating to an employment pathway plan, failures to attend a job interview, failures to accept a job offer, and failures to comply with other obligations determined by the Minister. This instrument does not create new types of failures; it uses the existing statutory concept.

Demerit is defined in the instrument as “a record on the Employment Department’s Information Technology System that the person has committed a mutual obligation failure without a valid reason.” Each time a jobseeker commits a failure without a reasonable excuse, a demerit is recorded. The demerit is the unit used to trigger the thresholds in section 5. A demerit can be “reversed” if it is removed from the system because the person later had a DHS assessment that found the employment pathway plan was not suitable for them, or a capability assessment with the provider had the same outcome, or the person was found to have had a valid reason for the failure, or the demerit was recorded in error.

Active months are the critical temporal units. “3 active months” means the shorter of (a) 91 consecutive days (starting on or after 1 July 2018) plus “extension days” as described, or (b) 12 months. The extension days include: time exempt from activity test requirements under various provisions of the Social Security Act 1991; periods when the person is not required to satisfy employment pathway plan requirements under certain sections of the Administration Act; one week for each previous half-reduction of the payment under paragraph 42AN(3)(a); two weeks for each previous full reduction under paragraph 42AN(3)(b); any post-cancellation non-payment period under section 42AP(5); and the time between a referral to DHS for an assessment and the completion of that assessment. Similarly, “6 active months” uses 182 consecutive days plus the same extension days, capped at 12 months. This complicated arithmetic means that a person who has been subject to multiple penalty reductions or long exemption periods can have a very large “active” window, making it easier for a subsequent failure to be counted as persistent.

is an assessment by the Human Services Department to determine whether the person’s employment pathway plan is suitable for them. It is a gateway step in the persistent failure finding: under section 5(2) the person must undergo such an assessment within the 6 active months for the thresholds to apply. The outcome of the DHS assessment can lead to the reversal of demerits if the plan is found unsuitable (section 5(4)(a)). But if the plan is found suitable, the demerits stand, and the assessment completion date sets the reference day for the 3 active months window.

The primary persons affected are recipients of participation payments who are subject to mutual obligation requirements. These are typically unemployed or underemployed individuals receiving working-age income support from the Australian Government, including those on Newstart Allowance (now JobSeeker Payment), Youth Allowance (jobseeker), and Parenting Payment (when the recipient has mutual obligation requirements). The instrument may also affect individuals with partial capacity to work or with disabilities, because the DHS assessment process specifically considers whether the employment pathway plan is suitable for the person. A person who has a medical condition or disability that makes a standard plan unsuitable may have demerits reversed if they undergo such an assessment and it is found that the plan was not suitable for them. However, the onus is on the person to initiate or participate in the DHS assessment process within the 6 active months window.

Employment services providers are indirectly affected: they record demerits on the Employment Department’s Information Technology System and they also conduct capability assessments that can lead to reversal of demerits. The instrument imposes no explicit duties on providers, but their recording practices and the accuracy of their decisions directly influence whether a person meets the threshold for persistent failure.

The Secretary (delegated to officials in the Department of Employment and Workplace Relations and Services Australia) is the decision-maker who must apply the rules. The instrument uses mandatory language: “the Secretary must be satisfied” (section 5(1)), “the Secretary must determine” (section 6(1), (2), (4)), and “the Secretary must not be satisfied” (section 5(5), (6)). This limits the Secretary’s discretion but also creates highly prescriptive rules that may not allow consideration of individual circumstances beyond those expressly recognised (such as valid reasons, DHS assessment outcomes, or capability assessments). The rigidity may affect decision-makers who need to apply complex arithmetic of “active months” and overlapping periods.

The DHS assessment is a cost imposed on the person and the administration. For the person, it may involve travel, waiting times, and providing documentation. For the government, it requires resources to conduct assessments within the 6 active months period. The instrument does not specify how quickly the DHS assessment must be completed, but the counting of “3 active months” includes the time between referral and completion, which can extend the window and make it more likely that a person will be found persistent if they accumulate further failures during the assessment wait.

Duties. The person receiving a participation payment must comply with their mutual obligation requirements as set out in their employment pathway plan. If they fail to do so, a demerit may be recorded if the failure is without a valid reason. If they accumulate enough demerits within the complex “active months” windows, the Secretary must find they have persistently committed failures (section 5(1)), and then must reduce their payment by half or the full amount depending on prior reductions (section 6). There is no explicit duty in this instrument to undergo a DHS assessment; rather, the existence of a DHS assessment is a condition for the persistent finding. However, in practice, a person may be encouraged or required to attend a DHS assessment to potentially reverse demerits. If they do not undergo such an assessment within the 6 active months, the thresholds in section 5(2) cannot be met (because paragraph 5(2)(b) requires that the person undergoes a DHS assessment). This could mean that without an assessment, the Secretary cannot find persistent failure under those specific pathways. But the instrument also provides an alternative pathway in section 5(1)(b): if the person has at least one prior mutual obligation failure without a reasonable excuse where the Secretary was satisfied the person had persistently committed failures, then the Secretary may still find persistent failure without a new DHS assessment. That alternative captures recidivists even if no current assessment is done.

Rights. The person has a right to have demerits reversed if they undergo a DHS assessment and the outcome is that their employment pathway plan was not suitable for them (section 5(4)(a)). They also have a right to reversal if they undergo a capability assessment with their employment services provider with the same outcome (section 5(4)(b)), or if they are later found to have had a valid reason for the failure (section 5(4)(c)), or if the demerit was recorded in error (section 5(4)(d)). The instrument explicitly provides that the Secretary must not be satisfied that the person has persistently committed failures if one or more demerits are reversed and the reversal results in the person falling below the relevant threshold (section 5(6)). This is a significant protection, but it depends on the person having access to the DHS assessment or capability assessment, and on the provider correctly recording a valid reason or acknowledging an error.

The person also benefits from the “clean period” rule in section 5(5): if they have not committed any demerit-attached failure or failure without reasonable excuse in the 3 active months before the relevant failure, the Secretary must not find persistence. This provides a potential reset point for those who have maintained compliance for that period. However, the “3 active months” may be longer than 91 days due to the extension days, so the clean period might be more generous or less generous depending on exemptions and penalties.

The instrument itself does not create the power to reduce or cancel a payment; that power is in section 42AF of the Act. What the instrument does is to mandate the amount of reduction when the Secretary decides to reduce under paragraph 42AF(2)(c). The penalties prescribed are:

• Half instalment reduction: under section 42AN(3)(a) of the Act, the instalment is reduced by 50 per cent. This applies when the persistent failure finding is made and either there was no prior half reduction within the preceding 3 active months, or the person is returning after a cancellation (section 6(1) and 6(4)). The half reduction applies for the instalment period that includes the relevant failure, or for such other period as the Secretary determines under the Act.

• Full instalment reduction: under section 42AN(3)(b), the instalment is reduced by 100 per cent (i.e., no payment at all). This applies when, within the 3 active months before the relevant failure, the Secretary had previously made a half reduction determination under paragraph 42AF(2)(c) and that previous determination was the last such determination before the current one (section 6(2)). The escalation is automatic: if the Secretary has already imposed a half reduction once within the lookback period, the next persistent failure triggers a full reduction.

• Cancellation: the instrument does not set out the cancellation criteria. It only references cancellation under paragraph 42AF(2)(d) as a fact used in section 6(4) to trigger the half reduction rule upon return. Cancellation under the Act is a more serious sanction that ends the payment entirely, and it is separate from reduction. The determination only deals with reductions once a persistent failure finding has been made; it does not determine when cancellation occurs.

The enforcement of these penalties is automatic once the Secretary is satisfied of the conditions. The Secretary “must” reduce by the relevant amount; there is no discretion to waive or vary the reduction amount. This rigidity may produce harsh outcomes. For example, a person who has a half reduction and then, due to circumstances beyond their control, commits another failure within 3 active months would receive a full reduction even if the new failure was minor or the person had a valid reason (but valid reasons would normally prevent a demerit being recorded). The instrument assumes that a previous reduction indicates a pattern, but it does not allow the Secretary to consider the nature of the subsequent failure.

This instrument is made under the Social Security (Administration) Act 1999 (the Administration Act), specifically subsection 42AR(1). It operates within the broader framework of that Act, which contains the powers to impose mutual obligation requirements (Division 3A of Part 3), to determine compliance failures (section 42AC), to reduce or cancel participation payments (section 42AF), to set reduction amounts (section 42AN), and to impose post-cancellation non-payment periods (section 42AP). This determination fills in the details that the Act left to delegated legislation: the precise meaning of “persistently” and the amount of reduction when the Secretary exercises the reduction power.

The instrument also interacts with the Social Security Act 1991 (the 1991 Act). For example, the definition of “active months” includes extensions for time spent exempt or relieved from activity test requirements under specific provisions of the 1991 Act, such as Division 3A of Part 2.10 (exemptions from activity testing for certain categories), Subdivision C of Division 1 of Part 2.11 (exemptions for Youth Allowance), and various sections including 602B, 602C, 603, 603A, 603AAA, 603AB, 731DA, 731DB, 731E, 731F, 731GA, 731JA, 731K. These are provisions that allow for temporary relief from the activity test (e.g., for illness, caring responsibilities, or participation in programs). The counting of “active months” is therefore directly linked to the operation of those exemption provisions: days spent exempt are not counted as active days but are added to the 91 or 182 consecutive days to extend the window. This means that a person who is often exempt may find that their “active” window is much longer than a calendar period, because the exempt days do not count toward the 91 days but are simply added on at the end. The practical effect is that a person who has had many periods of exemption may be vulnerable to being found persistent over a period that stretches well beyond 12 months (because the extension is capped at 12 months total in any case; see paragraphs 1(b) of both definitions, which say “12 months” as the alternative cap, meaning the active months period can be up to 12 months at most, but the 91-day-plus-extensions period is capped at 12 months as a maximum. That cap limits the extension to 12 months total. So a person with many exemptions could have a 3 active months period that is up to 12 months, and a 6 active months period also up to 12 months. The cap ensures it does not extend indefinitely.

The instrument also references the “Human Services Department” and the “Employment Department”. These are administrative entities. The determination acknowledges the role of the Employment Department’s Information Technology System in recording demerits. It also references “DHS assessment” which is a departmental process under the Administration Act. The interaction with administrative processes is critical: the existence of a DHS assessment is a condition precedent to a finding of persistence under the threshold pathways. The instrument does not create the DHS assessment process but relies on it.

The instrument is titled “Social Security (Administration) (Non-Compliance) Determination 2018 (No. 1)”. As presented, no amendment history is provided. The text reflects the instrument as originally made. The definition of “active months” uses the phrase “beginning on or after 1 July 2018”, which is consistent with a commencement date of 1 July 2018. There is no indication in the source that this instrument has been amended. The user’s material does not include any amending instruments, explanatory memoranda, or later versions. Therefore, this deep dive treats the determination as the original version. Practitioners should verify whether subsequent amending determinations exist, as the legislative regime for mutual obligations has undergone changes (for example, the introduction of the JobSeeker Payment and the Workforce Australia system since 2018). However, this specific instrument may have been amended or replaced by later determinations. The reader is cautioned that this analysis is based solely on the text provided, and the current law should be checked on the Federal Register of Legislation.

The source does not cite any case law, and this deep dive cannot invent litigation. The instrument itself is a legislative instrument of a subordinate nature, and it is possible that it has been considered in judicial review proceedings under the Administrative Decisions (Judicial Review) Act 1977 or in the social security appeals jurisdiction (the Administrative Appeals Tribunal). However, without source references, we cannot discuss specific decisions. The instrument’s definitions, particularly “active months” and the interaction with reversal of demerits, may have been litigated on questions of jurisdictional fact or reasonableness. But we must refrain from speculation. The reader should search for decisions of the Federal Court and the AAT that consider this determination. The instrument is not known to have been struck down or significantly altered by court ruling based on public knowledge, but no authoritative statement can be made from the source alone.

Several provisions in the determination are traps for the unwary. First, the definition of “active months” is far from intuitive. A person who has had many penalty reductions or lengthy exemption periods may find that the “3 active months” before a failure is actually many calendar months long because the extension days are added to the 91 consecutive days. For example, a person who had a full reduction (two weeks added for that reduction) and also had a period of exemption (say 10 days), and then committed a failure, the 91-day countdown would start from the beginning of the relevant window, but the extension days would be added at the end, stretching the period. The cap of 12 months is the outer limit, but many people may not realise that the period can be that long. This means that a person who has been compliant for several months may still be within the “active months” window if past penalties or exemptions have extended it. They could be caught by a minor failure that occurs many months after their last failure, because time spent in penalty or exemption is not counted as reducing the window.

Second, the reversal of demerits under section 5(4) appears generous, but the conditions are narrow. The DHS assessment must result in a finding that the person’s employment pathway plan was not suitable for them. That is a specific outcome; if the plan is found to be suitable but the person had a different reason for the failure, that may not lead to reversal unless the person also provides a valid reason for the specific failure (section 5(4)(c)). The capability assessment with the provider similarly requires the outcome that the plan was not suitable. Many people may not know they can request these assessments, and the determination does not impose an obligation on the Secretary or providers to inform the person of the possibility of reversal. The note to section 5(4) says that if the DHS assessment finds the plan unsuitable, all of the person’s demerits will be removed at that time. That is a powerful reset, but it requires the person to have undergone the assessment and for it to have that outcome.

Third, the “clean period” in section 5(5) - no failure in the 3 active months before the relevant failure - is only a protection if the person has no demerit-attached failure and also no failure without a reasonable excuse in that period. A failure without a reasonable excuse even if no demerit is attached? The definition of “demerit” requires a failure without a valid reason. So if there is a failure without a reasonable excuse, it would normally result in a demerit. But the wording “mutual obligation failure without a reasonable excuse” in section 5(5) is slightly different from “demerit” which is defined as a record of a failure without a valid reason. The Act distinguishes between “valid reason” and “reasonable excuse”? This may be a point of confusion. In any case, the safe harbour is lost if the person has any failure without a reasonable excuse, even if not yet recorded as a demerit.

For a person receiving a participation payment, avoidance of a persistent failure finding is best achieved by complying with all mutual obligation requirements, including attending job interviews, acting on job opportunities, and avoiding behaviour that could reasonably be foreseen to result in an offer not being made. If a failure occurs, the person should immediately ensure that any valid reason is recorded with the employment services provider or with the Department. If no valid reason existed, the person should consider whether the employment pathway plan was suitable for them. If they have a medical condition, disability, or other circumstance that makes the plan unsuitable, they should request a DHS assessment (or a capability assessment with the provider). This should be done promptly, because the DHS assessment must occur within the 6 active months that may be running, and the assessment can lead to reversal of demerits.

When a demerit is recorded, the person should keep a record of the date and nature of the failure and any steps taken to challenge it. If the DHS assessment finds the plan unsuitable, all demerits will be removed (per note after section 5(4)). This is a reset that can prevent a persistent finding. The person should also be aware that a DHS assessment may set the reference day for the 3 active months window (section 5(2)), but if the plan is found unsuitable, the demerits are reversed and the thresholds may not be met.

If a person has had a previous reduction (half or full), they should be especially careful to avoid any further failure within the 3 active months following that reduction, because the escalation rule under section 6(2) will impose a full reduction for a subsequent persistent finding. The “3 active months” may be longer than three calendar months due to extension days, so vigilance is required for an extended period.

If a person’s payment is cancelled under paragraph 42AF(2)(d), they should note that after cancellation, any first failure without reasonable excuse within 3 active months after that cancellation will attract only a half reduction (section 6(4)). This provides a limited second chance. However, to avoid future penalties, the person should ensure that after resuming their payment they maintain full compliance.

For employment services providers and departmental officers, compliance with this determination requires accurate recording of demerits, proper conduct of capability assessments, and timely referral for DHS assessments where appropriate. Providers should ensure that a person is informed of the possibility of a DHS assessment and of the reversal provisions. When a demerit is recorded in error, it must be promptly removed.