Bills Digest No. 65 1999-2000 Family and Community Services Legislation Amendment (1999 Budget and Other Measures) Bill 1999

Numerical Index | Alphabetical Index

WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments. This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

CONTENTS

Passage History
Purpose
Background
Main Provisions
Concluding Comments
Endnotes
Contact Officer and Copyright Details

Passage History

Family and Community Services Legislation Amendment (1999 Budget and Other Measures) Bill 1999

Date Introduced: 2 September 1999

House: House of Representatives

Portfolio: Family and Community Services

Commencement: Generally, the Bill will commence on Royal Assent. Items 2, 3, 5 and 11 of Schedule 1 which relate to shared care of children will commence on 1 January 2001. Items 1, 6, 7, 8 and 9 of Schedule 1 which relate to student financial assistance will commence on 1 January 2000 or immediately after the commencement of related amendments to the Social Security Act 1991.(1) Schedule 2 will commence or will be taken to have commenced immediately after the commencement of family assistance legislation.(2) Schedule 3 will commence on 1 January 2000 or on Royal Assent.

Purpose

To give effect to a number of measures announced in the 1999-2000 Budget and to facilitate the introduction of the new Family Assistance arrangements and Bonuses for Older Australians scheme. The main measures announced in the budget relate to financial assistance for rural and remote students.(3)

Background

Background Legislation

This Bill should be read in conjunction with:

• Youth Allowance Consolidation Bill 1999
• A New Tax System (Bonuses for Older Australians) Act 1999
• A New Tax System (Family Assistance) Act 1999
• Social Security Legislation Amendment (Youth Allowance Consequential and Related Measures) Act 1998, and
• A New Tax System (Family Assistance) (Consequential and Related Measures) Act (No.2) 1999.

1999-2000 Budget Measures

In the 1999-2000 Budget one of the major Outcomes identified in the Family and Community Services Portfolio related to the Stronger Families strategy.(4) In the Budget Measures the Commonwealth Government announced changes to income support arrangements for separated parents who share care of their children, concessions for isolated and secondary student boarders, and extensions to the definition of independent employment for the purposes of means testing to include young people employed by their family.

Income Support Arrangements for Separated Parents

Currently, where the care of a child is shared, only one parent may qualify for Parenting Payment.(5) The Social Security Act 1991 does not stipulate or require any minimum proportion or percentage of care. So, even in cases where care is being shared on a 50/50 basis, the Secretary must determine that Parenting Payment is payable only to one of the parents. If the other parent is unemployed, s/he must meet the activity tests applying to other allowances or benefits despite the fact that s/he may be part caring for a child.

The changes would mean that parents who share care of children between 40 % to 60 % of the time would each be eligible for Job Entry Training and Newstart or Youth allowance with a modified activity test. Parenting Payment would then only be payable to new claimants who cared for their children for at least 60 % of the time. To protect existing shared care arrangements, current recipients of Parenting Payment would have their entitlements protected until the youngest shared care child turned 16 or otherwise ceased to be qualify for the payment.(6) (Also refer to concluding comments at the end of this Digest).

Family Actual Means Test

The Youth Allowance was introduced from July 1998. It merged all income support for young unemployed people under the age of 21 years and full-time students between the ages of 16 and 24 years, into one payment. This process involved a transfer of responsibility for student income support from the Department of Employment Education, Training and Youth Affairs (DEETYA) to the Department of Social Security, now the Department of Family and Community Services (FACS). It required amending legislation,(7) disallowable instruments(8) and a new set of regulations(9) to preserve existing provisions while transferring them to the new legislative regime. In accordance with a previous commitment,(10) the Government introduced legislation in February to formally incorporate the regulations into the Social Security Act 1991.(11)

The regulations related to the Family Actual Means Test (FAMT) and the calculation of Youth allowance. In 1996 an actual means test was introduced for the calculation of AUSTUDY. Since July 1998 it has been be applied in the calculation of Youth allowance. FAMT supplements the Parental Income Test (PIT) by factoring in the actual financial means available to family members other than parental income. Actual means includes the total annual savings and spending of each family member. However, exceptions apply in areas such as income assistance, child maintenance, and lump sum compensation pay-outs.(12) There are also exceptions in respect of independent income of family members(13) and boarding expenses for dependent family members who live away from home.(14)

Under existing arrangements, income derived by family members from working on the family farm or in a family business is included for the purposes of FAMT. The changes seek to extend the existing exemptions to cover spending and savings from this income.

Student Financial Supplementary Scheme

One element of the Youth allowance package was the Student Financial Supplementary Scheme (SFSS). The scheme was originally called the AUSTUDY Supplement. It allows tertiary students to 'trade-in' a proportion of their Youth allowance or AUSTUDY entitlement for twice the amount in the form of a loan. The scheme is also available to students who would have been eligible for Youth allowance but for PIT and/or FAMT. The scheme is currently contained in a disallowable instrument.(15) The Government intends to incorporate the scheme into the Social Security Act 1991 as above.(16)

The changes will increase the discount under SFSS for certain assets from 50 % to 75 %. They reflect concern that the 50% threshold may have imposed a disincentive for students from families with farm and small business assets to continue with education.

Isolated and Secondary Student Boarders

Currently, payments for boarding expenses relating to isolated and secondary students are exempt from FAMT based on a formula to be incorporated into the Social Security Act 1991. The changes will simplify the formula to set a fixed amount of allowable spending.

A New Tax System: Social Measures

The tax package included two changes relating to bonuses for the elderly and changes to family assistance arrangements. The bonus related to the provision, subject to certain age and income qualifications, of a one-off tax-free bonus payment to be made to individuals.(17) The family assistance changes related to a rationalisation of twelve separate payments and tax assistance arrangements into three main packages of assistance.(18) The relevant legislation was expressed to commence the day after specified goods and services legislation receives Royal Assent.(19)

Data Matching

One of the major themes in the Budget for the Family and Community Services Portfolio was the need for greater data matching between relevant agencies. The Government announced improvements to data matching using tax file numbers.(20) Data matching involves the exchange of personal information between relevant agencies that may otherwise have constituted a breach of the Privacy Act 1988.

Main Provisions

Schedule 1: Items relating to the Social Security Act 1991

Family Actual Means Test

Items 1, 7, 8, 9 and 10 make adjustments to the proposed provisions regarding the Family Actual Means Test (FAMT).

As indicated, spending or savings from independent employment income of a dependent family member is exempt from FAMT. Items 1 and 9 will remove the definition relating to 'independent employment' and the word 'independent' from the relevant provision of the Social Security Act 1991.(21) Any spending or savings from income of a family member, including income from a family business, etc., will therefore be exempt from FAMT up to the existing allowable level ($6000).(22)

As indicated, certain boarding expenses are exempt from FAMT. The statutory formula exempts these expenses up to the value of $5,274 less any government boarding allowance(23) or after-tax income concessions(24) obtained by the family for the boarding family member. Thus, there is an exemption for expenses over and above those covered by an allowance or concession (up to $5,274). Item 7, 8 and 10 would simply allow an exemption of the whole $5,274 on the basis that after-tax income concessions are abolished and boarding allowances are included in the calculation of actual means. Thus, while the exemption is enlarged, the actual means of a person will not be reduced by concessions and will effectively be increased by the value of any allowances, leaving a net exemption in respect of expenses over and above these incidents.

Student Financial Assistance Supplement

Item 6 makes an adjustment to SFFS.

As indicated, SFSS is available to full time students who are not eligible for Youth Allowance simply because they fail PIT or FAMT. Item 6 would extend this eligibility to persons who fail the ordinary Youth Allowance assets test. Currently, in calculating assets for the purposes of Youth Allowance, a person is entitled to disregard 50% of the value of certain business interests that relate to primary production or professional services.(25) The amendment would allow a person to disregard 75% of the value of these interests for the purposes of calculating eligibility for assistance under SFSS.

Eligibility for Parenting Payment

Items 2, 3, 5, and 11 alter the existing arrangements relating to shared care.

As indicated, only one parent is currently eligible for Parenting Payment. Item 2 would allow both parents to be eligible for Parenting Payment depending upon the proportion of their child care responsibilities (proposed sub-section 500E(1)). A person would qualify for Parenting Payment if they have immediate responsibility for one or more children for at least 60% of a given period (proposed sub-section 500E(2)). Item 4 would allow for children to be away from a person's care for a period of 8 weeks without upsetting their eligibility for Parenting Payment. Item 5 would ensure that while both parents may be eligible, only one parent will qualify in respect of each child (proposed sub-section 500E(3)). Item 11 provides for the continuation of existing Parenting Payments to persons who are currently eligible or would be eligible under the new provisions.

A related issue is the eligibility for Newstart or Youth Allowance for parents whose shared care responsibilities are between 40% and 60%. The Bill does not contain any amendments to effect the proposed modified activity test. Officers from the Department of Family and Community Services have indicated that special arrangements will be made for these cases using Activity Agreements.(26)

Schedule 2: Commencement of Family Assistance Measures

As indicated, the changes relating to family assistance and elderly bonuses were expressed to commence following the commencement of specified goods and services legislation. Schedule 2 delays the commencement of relevant aspects of those changes until 1 January 2000 or until the commencement of specific family assistance legislation.(27)

Item 2 delays the commencement of amendments to taxation legislation relating to the family assistance and elderly bonuses packages.(28) These amendments relate to the lawful use of tax file numbers. Item 3 delays the commencement of data matching provisions relating to family assistance.(29) These provisions establish transitional arrangements relating to data matching to allow the implementation and operation of the family assistance package.

Schedule 3: Data Matching for Elderly Australians

Schedule 3 complements the data matching provisions relating to the family assistance. It extends the same protection to information sharing to allow the implementation and operation of the elderly bonuses package.

Concluding Comments

Most of the changes contained in this Bill appear to be innocuous. However, some criticisms have appeared of amendments to Parenting Payments in Rights Review, The Australian and the Briefing Notes prepared by the Australian Council of Social Services.

Presently, a single parent will receive Parenting Payment for carrying a significant shared care responsibility. In the future, as indicated, unless their responsibility reaches the 60% level, they will be ineligible for Parenting Payment. Where their responsibility is between 40% and 60% they will be eligible for the Newstart or Youth Allowance and will be subject to the modified activity test. This may disadvantage some Parenting Payment recipients who will face a reduced entitlement, harsher income test and fewer concessions (see the table on the following page).

In effect, it has been argued, the changes discriminate against separated parents who are able to establish more evenly shared care arrangements.(30) While there have been difficulties in dealing with these arrangements,(31) it has been argued that the changes could effectively disadvantage both parents by making neither of them eligible for Parenting Payments.(32) They might also tend to work against flexibility in shared care arrangements.(33) It has also been suggested that they may act as a disincentive for people to undertake shared care or for current recipients of Parenting Payment (Single) to take temporary or casual work.(34) Thus, while the modified activity test may benefit parents who have a lesser shared care responsibility, the immediate responsibility test is likely to disadvantage parents who have a greater responsibility. While the budget information suggests that the changes will only affect 2700 new claimants for Parenting Payment,(35) the exact impact is not known.(36)

Further inquiries on this Bill may be directed to Dale Daniels or Peter Yeend in the Social Policy Group.

Comparison of Assistance under Parenting Payment and Newstart Allowance

(as at September 1999)(37)

Endnotes

2. That is amendments to be inserted by the Youth Allowance Consolidation Bill 1999, Schedule 2, Part 1.

3. A New Tax System (Family Assistance) (Consequential and Related Measures) Act No. 2 1999.

4. Senator Jocelyn Newman, Minister for Family and Community Services, 'Increased Financial Assistance to Young People in Rural and Remote Australia', Media Release, in Budget: 1999-2000 Media Releases.

5. The Outcome emphasised the need to ensure that families, young people and students have access to financial assistance and family support services: Portfolio Budget Statements: Family and Community Services, Part C, Section 2, Outcome 1 - Stronger Families [http://www.facs.gov.au/budget99/part_c/sec_2/out_1/pc_s2_outcome_1.htm] 15 September 1999.

6. Social Security Act 1991, s 500E.

7. Budget Paper No 2 - Budget Measures 1999-2000, Part II: Expense Measures (Family and Community Services), p 13.

8. The Social Security Legislation Amendment (Youth Allowance) Act 1998 and the Social Security Legislation Amendment (Youth Allowance Consequential and Related Measures) Act 1998.

9. For example, Social Security Student Financial Supplement Scheme 1998, 24 June 1998, Special Gazette No. S306, 26 June 1998.

10. Social Security (Family Actual Means Test) Regulations 1998

11. Social Security Legislation Amendment (Youth Allowance) Bill 1997, Explanatory Memorandum, p 80.

12. Youth Allowance Consolidation Bill 1999, Schedule 3.

13. Social Security (Family Actual Means Test) Regulations 1998, Statutory Rules 1998, No. 159, cl 15.

14. Social Security (Family Actual Means Test) Regulations 1998, Statutory Rules 1998, No. 159, cl 16.

15. Social Security (Family Actual Means Test) Regulations 1998, Statutory Rules 1998, No. 159, cl 15(2)(c) and (d).

16. For example, Social Security Student Financial Supplement Scheme 1998, 24 June 1998, Special Gazette No. S306, 26 June 1998.

17. Youth Allowance Consolidation Bill 1999, Schedule 2.

18. A New Tax System (Bonuses for Older Australians) Bill 1998. See Bills Digest No. 93 1998-99, A New Tax System (Bonuses for Older Australians) Bill 1998.

19. A New Tax System (Family Assistance) Bill 1999. See Bills Digest No. 175 1998-99, A New Tax System (Family Assistance) Bill 1999.

20. Section 1-2 of the A New Tax System (Goods and Services Tax) Act 1999; Section 2 of the A New Tax System (Goods and Services Tax Imposition - Excise) Act 1999; Section 2 of the A New Tax System (Goods and Services Tax Imposition - Customs) Act 1999 Section 2 of the A New Tax System (Goods and Services Tax Imposition - General) Act 1999; and Section 2 of the A New Tax System (Goods and Services Tax Administration) Act 1999.

21. Information and Research Services, Budget Features 1999-2000, May 1999.

22. Proposed section 1067G-G10 to be inserted by the Youth Allowance Consolidation Bill 1999, Schedule 3, Item 3.

23. Proposed point 1067G-G10 to be inserted by the Youth Allowance Consolidation Bill 1999, Schedule 3, Item 3.

24. Proposed point 1067G-G9(2)(c)(ii) to be inserted by the Youth Allowance Consolidation Bill 1999, Schedule 3, Item 3.

25. Proposed point 1067G-G9(2)(d)(v) to be inserted by the Youth Allowance Consolidation Bill 1999, Schedule 3, Item 3.

26. Social Security Act 1991, s 547G inserted by Social Security Legislation Amendment (Youth Allowance Consequential and Related Measures) Act 1998.

27. These are written agreements between the delegate of the Secretary and the recipient of Youth Allowance or New Start Allowance which adapt the activity test to suit the particular needs of the individual: Social Security Act 1991, s 604 (NSA), s 544A (YA).

28. These aspects are delayed until the commencement of Schedule 2, which effectively means the commencement of A New Tax System (Family Assistance) (Consequential and Related Measures) Act No. 2 1999.

29. The amendments are to: Income Tax Assessment Act 1936 s 202 and Taxation Administration Act 1953, para. 8WA(1)(b) and 8WB(1)(d) and (e).

30. A New Tax System (Family Assistance) (Consequential and Related Measures) Act (No. 1) 1999, s 5 inserted by A New Tax System (Family Assistance) (Consequential and Related Measures) Act (No. 2) 1999, Schedule 11, Item 2.

31. Adele Horin, 'Budget '99 The Reaction: Penalised for sharing care', Sydney Morning Herald, 13 May 1999, p 7 and 'Budget Penalises Sole Parents', Rights Review, June 1999, p 5.

32. One difficulty related to the situation where separated parents shared care responsibilities that were roughly equal in terms of time: Secretary, Department of Social Security v Lowe [1999] FCA 705, 28 May 1999 and commentary by Claire Harvey, 'Separate parents, single welfare, court rules', The Australian, 29 May 1999.

33. Horin, op. cit., p 7 and Rights Review, op. cit., p 5.

34. Notwithstanding the period of grace in Item 4, there may be a need for greater flexibility. It is not uncommon for shared care arrangements to regularly change, in response to factors affecting one or both parents, e.g. work requirements or changes, schooling arrangements, accommodation changes, access to other familial support. In the past, where one parent has been accepted as being the primary care provider, changes to care arrangements that do not substantially change the status of the primary care giver, have not generally affected qualification to payment. However, under this proposal to require a minimum of 60% of care, a minor change in care arrangements that takes the primary care provider below the 60% minimum, has the potential to significantly alter qualification to assistance.

35. Australian Council of Social Services, Federal Budget 1999-00 Briefing Notes, [http://www.acoss.org.au/papers/budget98/bbn99_4.htm]

36. Commonwealth Department of Family and Community Services, Portfolio Budget Statements 1999-2000: Family and Community Services Portfolio, p 108.

37. These figures are at best guesstimates, given that data on the complexion or make up of shared care arrangements, for both Parenting Payments and Newstart Allowance recipients, is not currently collected.

38. A guide to Commonwealth Government Payments, Centrelink publication No. PR087.9909.

Contact Officer and Copyright Details

Nathan Hancock
27 September 1999
Bills Digest Service
Information and Research Services

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ISSN 1328-8091
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