A person applying for the JobSeeker Payment may be subject to a 26 week non-payment period if they relocate to a new place of residence, without sufficient reason, and where their employment prospects have consequentially reduced as a result of the move [Social Security Act 1991 (Cth) s 634].

A person has sufficient reason in relocating if:

See Social Security Act 1991 (Cth) s 634(3).

A person applying for the JobSeeker Payment may also be subject to an eight week non-payment period if they voluntarily resign from their previous employment or if they are terminated because of misconduct [see Social Security (Administration) Act 1999 (Cth) s 42S].

The non-payment period can be waived, however, in circumstances where the person is in severe financial hardship and where they have a dependant child, have medical expenses relating to an illness, have a recognised cognitive impairment, or do not have access to safe and secure housing, for example.

For a full list of the classes of people who may be eligible to have the non-payment period waived, see the Ending Unemployment Non-Payment Periods - Classes of Persons Specification.

Certain recipients of the JobSeeker payment (and some in receipt of Youth Allowance or Parenting Payment) have obligations that they must meet in order to continue to receive the payment. These obligations are referred to as mutual obligation requirements. The requirements include entering into an employment pathway (i.e. Workforce Australia) and a Job Plan, and meeting any activity requirements [Social Security (Administration) Act 1999 (Cth) Part 3 Division 2A]. These obligations generally apply to those recipients who are eligible to receive the JobSeeker payment because they are unemployed and therefore there is an expectation they would be looking for employment.

The new system from 2022 includes the requirement to participate in mandatory activations referred to as activation points. Activation points include:

Different obligations apply to people who are aged 55 years and over [s 40R], to people who are the principal carer of a child aged under 16 years [s 40P], or to people who have a partial capacity to work [s 42AC(1A)].

An exemption from mutual obligation requirements can also be sought in situations of crisis, such as where someone is experiencing family violence [s 40N] or on the breakdown of a marriage or relationship [s 40L].

Where a person breaches their mutual obligation requirements, penalties may apply. These penalties may include the demerit system and financial penalties [see ss 42AC, 42AD, 42AE], see Demerit System.

For more information, see the Mutual Obligation Requirements section on the Social Security Guide.

Since 1 July 2018, a new penalty system applies for recipients of the JobSeeker Payment who are not compliant with their jobseeker requirements. This system is called the Targeted Compliance Framework, or more commonly the Demerit system [see Social Security (Administration) Act 1999 (Cth) Part 3 Division 3AA and Division 3A]. This applies to those recipients of the JobSeeker Payment who must meet mutual obligations or requirements relating to job hunting or training.

The Demerit system has three stages and recipients of the JobSeeker Payment may move between the stages depending on their compliance with their jobseeker requirements. Every time a JobSeeker Payment recipient fails to meet a JobSeeker requirement, their payments will be suspended until they meet certain requirements.

The zones and some of the associated requirements are not legislated but are instead administrative mechanisms to monitor compliance [see for example Social Security (Administration) (Non-Compliance) Determination 2018 (No. 1)].

Stage one: the Green Zone

The Green Zone is where JobSeeker Payment recipients will be when they are first approved for the payment.

If a person in the Green Zone fails to meet one of their mutual obligation requirements, they will be given one demerit point for each failure without a valid reason. When a person receives a demerit point, they move to the next zone, the Warning Zone, and their payments may be suspended.

For a list of what constitutes a mutual obligation failure, see Social Security (Administration) Act 1999 (Cth) s 42AC.

Stage two: the Warning Zone

People in this zone (i.e. people who have incurred one or more demerit points for a mutual obligation failure) will have their payments suspended until they complete a reconnection requirement, which is usually correcting whatever action led to the incursion of the demerit point in the first instance. If the reconnection requirement is completed, payments will recommence and the person will be back paid from the date of suspension [see Social Security (Administration) Act 1999 (Cth) ss 42AF (compliance action for mutual obligation failures); s 42AG (compliance action for work refusal failures); s 42AL (payment suspension for mutual obligation or work refusal failures)].

A person in the warning zone will receive written notification of the payment suspension, the requirement to undertake the activity they failed to do which led to the suspension, and the effect of not complying with the activity requirement [see s 42AM(2)].

If a person does not complete the reconnection requirement within four weeks of being notified of their payment suspension, their payment will be cancelled [see s 42AM(3)].

If a person incurs three demerit points within a six month period, they will be required to attend a capability interview to explain why they are not meeting their mutual obligation requirements. The person’s demerit points can be reset to zero if the job seeker requirements need to be adjusted, allowing the person to return to the Green Zone. The person can be required to complete the activities.

If a person incurs five demerit points within a six month period, or fails to attend a job interview, they will be referred to Centrelink for a capability assessment. This is another opportunity for the person to provide an explanation as to why mutual obligation requirements are not being met. The person’s Job Plan may be adjusted, or their demerit points may be reset to zero. The person can also be required to complete the activities that led to them incurring the demerit points.

See Social Security (Administration) (Non-Compliance) Determination 2018 (No. 1) section 5(2).

If a capability interview and capability assessment determine the job requirements are appropriate, the person automatically moves to the next zone, the Penalty Zone.

Stage three: the Penalty Zone

In this zone, no further demerit points are given and financial penalties for non-compliance are instead imposed. If a person in this zone fails to meet one mutual obligation requirement, they will lose 50% of their payment. If they fail to meet two requirements, they will lose 100% of their payment. If they fail to meet three requirements, their payments will stop for four weeks [see Social Security (Administration) Act 1999 (Cth) ss 42AN(3) and s 42AP(5); Social Security (Administration (Non-Compliance) Determination 2018 (No.1) sections 6(1) and 6(2)].

If, however, a person in the penalty zone meets all their activity requirements for a three month period, they will return to the Green Zone [see Social Security (Administration) (Non-Compliance) Determination 2018 No.1 sections 5(5) and 5(6); Social Security (Administration) Act 1999 (Cth) s 42AF(2)].

Further information

If a person disagrees with a decision to impose a demerit point, they must ask for a review of this decision with their provider or the digital services contact centre. If their complaint is not resolved, they can contact the Department of Employment and Workplace Relations’ National Customer Service Line.

If a person disagrees with a decision of Centrelink to impose a financial penalty (while in the penalty zone) they can seek a review of this decision through the usual processes – see Appeal Process.

A person’s payments can also be stopped at any time for a four week period if they undertake certain behaviour, such as where they refuse a suitable job offer or where they fail to attend a job interview [see Social Security (Administration) (Non-Compliance) Determination 2018 No. 1 section 5(2)(a)(ii)].

If it is agreed that a person has a reasonable excuse as to why they have failed to meet a mutual obligation, and in some instances they have given prior notification of that reasonable excuse before committing the mutual obligation failure, then they may not be penalised. Matters that can be taken into account when deciding whether a person has a reasonable excuse include:

See Social Security (Administration) (Reasonable Excuse- Participation Payments) Determination 2018 section 5; Social Security (Administration) Act 1999 (Cth) s 42AI.

As the rules regarding demerit points can be complex, legal advice should be sought if any decision is made that is disputed.

For more information, see the Consequences of not meeting mutual obligation requirements – tarted compliance framework section on the Social Security Guide.

Previously, a person receiving the former Newstart Allowance could seek an exemption from their mutual obligation requirements if they were suffering from drug or alcohol dependency issues, or they could use their dependency as a reasonable excuse for their failure to meet their requirements. This is no longer the case.

A person experiencing drug or alcohol dependency issues is offered the option of voluntarily undertaking treatment for their dependency. In some instances, participating in treatment will enable them to meet their mutual obligation requirements. If a person refuses voluntary treatment options, they will not be able to rely upon their drug or alcohol dependency as a reasonable excuse for failing to meet their requirements in the future. If they continue to fail to meet their requirements, they will be subject to the demerit point system and financial penalties [see Social Security (Administration) (Reasonable Excuse- Participation Payments) Determination 2018 (Cth) section 6(4)], see also Demerit System.