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 & Copyright Details
A New Tax System (Family Assistance and Related
Measures) Bill 2000
Date Introduced: 9 March 2000
House: House of
Representatives
Portfolio: Community Services
Commencement: Upon Royal Assent, however, the
measures contained in the Bill have different application dates,
which will be considered in the Main Provisions section of the
Digest.
The amendments
contained in this Bill amend the legislation establishing the new
family assistance regime, which will apply from 1 July 2000,
to:
-
- provide the administrative infrastructure to support the
payment of the child care benefit
-
- clarify the operation of various aspects the family assistance
law
-
- replace regulation making powers with substantive
provisions
-
- provide savings and transitional provisions, and
-
- make technical amendments.
Tax Reform Package
On 13 August 1998 the Federal Government
released proposals for reform of the Australian tax
system(1) of which, a goods and services tax (GST) was
the centrepiece. The tax reform plan included:
-
- changes to the Commonwealth-State financial relations by
allocating to the States and Territories the GST revenue
-
- reductions in individual marginal tax rates
-
- a major rationalisation of family assistance
-
- the introduction of a 'pay as you go' system of tax collection
to replace the various existing taxation payment and reporting
systems
-
- a new universal business number system
-
- the movement towards an entity taxation system which is
directed toward the elimination of tax advantages between different
business structures, and
-
- the simplification of the imputation system and introduction of
refunds for excess franking credits.
As part of the tax reform package the Government
proposes to simplify the structure and delivery of family
assistance. Accordingly, twelve family benefits are proposed to be
reduced to three family benefits, and a new Family Assistance
Office will deliver the new set of assistance
programs.(2)
Family Assistance Measures
Under the Government's plan for a new tax
system, the structure and administration of family assistance is
being reformed with effect from 1 July 2000. The aim of the
reforms is to create three new family assistance payments: the
family tax benefit (Part A), the family tax benefit (Part B) and
the child care benefit. These benefits replace the current twelve
forms of assistance available through the tax and social security
systems. These reforms were enacted in the following
legislation:
- A New Tax System (Family Assistance) Act 1999 the
(Family Assistance Act) which contains the eligibility requirements
for, and rates of, the new family assistance payments, and
- A New Tax System (Family Assistance) (Administration) Act
1999 which contains the administrative, procedural and
technical rules for the new payments.
For additional information in relation to family
assistance initiatives please refer to the Bills Digest No 175
1998-99, A New Tax System (Family Assistance) Bill 1999 and Bills
Digest No. 205 1998-99, A New Tax System (Family Assistance)
(Administration) Bill 1999.
Terms
A family assistance benefit is called a 'family
tax benefit'.(3) This term in defined in section 3
of the Family Assistance Act as meaning a benefit for which a
person is eligible under Division 1 of Part 3. In addition to end
of year calculations, family tax assistance may be available on a
periodic basics Division 1 of Part 3 of the Family Assistance Act
deals with the eligibility for family assistance.
A 'child care benefit' is defined in
section 3 of the A New Tax System (Family Assistance) Act
1999 as meaning the benefit for which a person is eligible
under Division 4 of Part 3.(4) Division 4 of Part 3
deals with eligibility for the child care benefit.
There is no central purpose to the Bill, it is a
collection of independent amendments. It appears that almost all
the amendments are beneficial and are designed to remove anomalous
assessment differences between aligned and related payments. There
do not appear to be any losers in terms of number of persons
affected or in the cost of the measures. It should be noted that
the family assistance measures to be amended are not due to have
effect until, at the earliest, July 2000.
Schedule 1 - Amendments relating to
family tax benefit and maternity immunisation allowance
Part 1: Amendments relating to
family tax benefit and maternity immunisation
allowance
Part 1 of Schedule
1 amends the eligibility and rate rules in the Family
Assistance Act.
Pattern of care eligibility
Under the family allowance rules, if two or more
individuals live apart and have a 'pattern of care' for a child,
they may be eligible for a family tax benefit for the days for
which they have care for the child. This rule is contained in the
eligibility requirements for the family tax benefit. The existing
system provides a different treatment: it provides a parent with a
family allowance for the days the child is with the other parent.
The family tax benefit paid in this situation reflects the time the
child is in a parent's care.
The proposed family tax benefit will result in
an unintended consequence in respect of rent assistance for social
security recipients. In pattern of care situations, an individual's
family tax benefit includes a rent assistance component for the
days on which he or she is eligible for the family tax benefit. If
the individual is a social security recipient, rent assistance for
the remaining days is calculated under a different system with a
lower benefit. To resolve this unintended consequence on rent
assistance, amendments are made to modify the existing pattern of
care arrangements so that rent assistance is treated in a similar
manner to the shared care arrangements under the family allowance.
The Explanatory Memorandum states that the 'intention is that the
higher FTB [family tax benefit] maximum rate of rent assistance is
available for each day in the period of the pattern of
care.'(5)
This enables individuals with a pattern of care
in relation to a child to be eligible for the family tax benefit
for each day in the pattern of care period. This resolves the
present rent assistance problems. The Secretary of the department
administering the legislation has a power to determine a percentage
of family tax benefit for an individual based on the living
arrangements for the child. The percentage developed under this
process would not affect the payment of rent assistance.
(Items 2, 3, 4, 5, 6, 7, 8, 11, 16, 17, 18 and
20).
Rent assistance for parents paying low
rent and sharing the care of a child
The Explanatory Memorandum states that the
existing Social Security Act 1991 contains an anomaly for
a parent paying low rent when they accept 'shared care' of a
child.(6) The problem arises because the threshold for
rent assistance for those with the care of a child is higher than
those not caring for children. While the maximum rate of assistance
is higher for those with children, individuals with low rents are
ineligible for the rental assistance. This may result in
individuals receiving a lower benefit under the 'with child' rate
than they would under the 'without child' rate.
To resolve this problem, Division
3 of Part 2 of Schedule
1 of the Family Assistance Act will be amended to provide
that individuals with only shared care of child are assessed for
rent assistance under both the 'with child' rate and 'without
child' rate. The individual will qualify for the payment of rent
assistance at the higher rate.
Part 2: Amendments relating to
the child care benefit
Part 2 of Schedule
1 amends the eligibility and rate rules in the Family
Assistance Act for child care benefits.
Revised eligibility provisions,
including limitations on eligibility other than the weekly limit of
hours
Item 54 repeals Division 4 of
Part 3 of the Family Assistance Act and replaces it with a new
Division 4 containing the eligibility rules for
the child care benefit. According to the Explanatory Memorandum,
proposed Division 4 contains the same basic
elements of eligibility.(7) It is asserted that 'their
structure and content have been refined to better reflect the
complex operation of the existing child care payments as translated
to the family assistance regime.'(8)
An individual may be eligible for the child care
benefits by the following methods:
-
- fee reduction for care provided by an approved child care
service (proposed section 43 of
Subdivision A)
-
- single payment for a past period for care provided by an
approved child care service (proposed section 44
of Subdivision B)
-
- single payment for a past period of care provided by a
registered carer (proposed section 45 of
Subdivision C), and
-
- single payment because of the death of another individual
(proposed section 46 of Subdivision
D).
An approved child care service may be eligible
for child care benefit by fee reduction for care provided by the
service to a child at risk (proposed section 47 of
Subdivision E).
Revised rate provisions, including the
special rate applicable for individuals in hardship or children at
risk
Item 55 repeals Divisions 4 and
5 of Part 4 of the Family Assistance Act and replaces them with
proposed Division 4 rates of child care benefits
and proposed Division 5, on
indexation. Proposed Division 4 contains five
subdivisions. Proposed Subdivision A provides an
overview of the division. Proposed
Subdivision B contains general provisions on the rate
of 'child care by fee reduction' and 'child care for a past period'
for care provided by an approved child care service.
Proposed Subdivision C provides the special rates
applicable when a child is at risk of serious abuse or neglect, or
when a child's family is in hardship. The rate may be set at the
discretion of either an approved child care service or the
Secretary. Proposed Subdivision D deals with
the rate of child care benefit applicable to an individual who is
eligible under proposed section 45 for a child
care benefit for a past period for care provided by a registered
carer.
Amendments to the Child Care Benefits
Rate Calculator
Loading for part-time care: A 10% loading
to the child care benefit is provided for children receiving
part-time child care because of the higher fees charged by centre
based long day care services for part-time child care. The existing
provision benefits families using less than 34 hours of care per
week. The proposed amendment applies a taper to the loading for
families using between 34 to 37 hours of care. This results in such
families getting a reduced loading so that these families do not
get less child care benefits in total than those using 33 hours of
child care. Item 56 repeals the existing
definition of 'part-time %' in subclause 2(2) of Schedule 2 (child
care benefit rate calculator) of the Family Assistance Act and
replaces it with another definition to resolve the above unintended
consequence of the existing provisions.
Rate of child care for children in families
with more than three children: The current provision provides a
rate of child care benefit for a one child family. This rate is
increased for the second and third child of a family but the rate
reduces back to the one child family rate for the fourth and
subsequent children in a family. This consequence places families
with more than three children at a relative disadvantage. To
resolve this unintended consequence, items 62 and
64 amend the maximum rate of child care benefits
for families with more than three children so that the rate per
child is the same as that for three children families.
Part 3: Common provisions
relating to family assistance
Part 3 of Schedule
1 amends provisions in the Family Assistance Act that are
not specific to any particular type of family assistance payment.
These amendments provide for the inclusion of definitions for other
amendments contained in this Bill. Part 3 also
amends the rules in Schedule 3 of the Family Assistance Act on
adjusted taxable income and amends the indexation provisions as
they apply to maximum rent assistance rate and rent thresholds.
Application
-
- The items of Schedule 1, other than
item 82, commence immediately after the
commencement of the Family Assistance Act (subclause
2(2))
- Item 82 of Schedule 1
commences immediately after the commencement of Schedule 4 to
the A New Tax System (Compensation Measures Legislation
Amendment) Act 1999.
Schedule 2 - Amendment of the A New
Tax System (Family Assistance)(Administration) Act
1999
Part 1: Amendments relating to
family tax benefit, maternity allowance and maternity immunisation
allowance
Part 1 of Schedule
2 amends the family tax benefits contained in Part 3 of
the A New Tax System (Family Assistance) (Administration) Act
1999 (the Family Assistance Administration Act). The
amendments are summarised in the following categories:
-
- payments into bank accounts
-
- requirements to provide a tax file number
-
- variation of entitlement determination if unreasonable estimate
is provided
-
- variation of entitlement determination pending determination of
a claim for a social security pension or benefit
-
- variation of entitlement determination to reflect revised
estimates of adjusted taxable income, and
-
- other miscellaneous amendments.
Part 2: Amendments relating to
the child care benefit
Part 2 of Schedule
2 replaces the regulation making provisions with
substantive provisions. The substantive provisions deal with:
-
- making claims for payment of child care benefits
-
- tax file number requirements
-
- determination of claims
-
- payment of child care benefits (how and by whom)
-
- notification obligations of claimants (including offences for
failure to comply with obligations)
-
- the powers of the Secretary of the department administering the
family assistance measures
-
- variation of determinations
-
- obligations of approved child care services, and
-
- payment of advances to approved child care services.
Part 3: Common provisions
relating to family assistance
Part 3 of Schedule
2 amends the common provisions in the Family Assistance
Administration Act that apply to family assistance payments. The
amendments will provide definitions to support other amendments
made in Parts 1 and 2. Amendments
are also made for: payment protection; overpayments and debt
recovery; review of decisions; information management; approval of
child care services and registered carers; and other matters.
Application
Schedule 2 commences
immediately after the commencement of the provisions referred to in
subsection 2(2) of the A New Tax System
(Family Assistance) (Administration) Act 1999
(subclause 2(4)).
Schedule 3 - Amendment of the Social
Security Law
Schedule 3 contains proposed
technical and consequential amendments to the Social Security
Act 1991. The Social Security Act 1991 is amended to
increase the following social security payment by 4% to compensate
recipients for the effects of the goods and services tax:
-
- CDEP(9) participant settlement
-
- pensioners education supplement, and
-
- carer allowance.
Increases in the rate of certain
social security payments by 4%
According to the Explanatory Memorandum, section
1061PZG of the Social Security Act 1991 provides for the
payment of the pensioner education supplement.(10) There
are two rates of payment, $60 and $30 per fortnight. The $60 amount
was increased by 4% by the A New Tax System (Compensation
Measures Legislation Amendment) Act 1999. Item
5 increases the $30 amount by 4% to $31.20.
Items 9 and 10
increase the $20 CDEP participant rate by 4 % to $20.80.
Items 11 and
12 amend item 1 in the Table in section 1206GA of
the Social Security Act 1991 to provide a 4% increase in
the rate of carer allowance specified in subsection 974(2) of the
Social Security Act 1991. From 1 July 1999 the carer
allowance replaced the child disability allowance. Section 974(2)
of the Social Security Act 1991 sets the rate of carer
allowance.
Application
-
- Items 1 to 3 and
13 to 15 of Schedule
3 commence immediately after the commencement of the
provisions referred to in subsection 2(2) of the A New Tax
System (Family Assistance) (Administration) Act 1999
(subclause 2(4)).
-
- Item 4 of Schedule 3 commence
immediately after the commencement of Part 1 of Schedule 1 to the A
New Tax System (Family Assistance) (Consequential and Related
Measures) Act (No. 2) 1999 (subclause 2(5)).
-
- Items 5 and 9 to
12 of Schedule 3 commence
immediately after the commencement of Schedule 1 to the A New
Tax System (Compensation Measures Legislation Amendment) Act
1999 (subclause 2(6)).
-
- Items 6 to 8 of
Schedule 3 commence immediately after the
commencement of Schedule 7 to the A New Tax System (Family
Assistance) (Consequential and Related Measures) Act (No. 1)
1999 (subclause 2(7)).
Schedule 4 - Amendment of other
Acts
Schedule 4 makes minor technical amendments to
the following Acts:
-
- A New Tax System (Bonuses for Older Australians) Act
1999
-
- Child Support (Assessment) Act 1989
-
- Health Insurance Act 1973
-
- Income Tax Assessment Act 1936
-
- Medicare Levy Act 1986
Application
-
- Items 1, 29 and
31 of Schedule 4 commence on
Royal Assent (subclause 2(1)).
-
- Items 2 to 9 of
Schedule 4 commence immediately after the
commencement of Schedule 4 to the A New Tax System (Family
Assistance) (Consequential and Related Measures) Act (No. 2)
1999 (subclause 2(8)).
-
- Item 10 of Schedule 4
commences immediately after the commencement of item 16 of Schedule
7 to the A New Tax System (Family Assistance) (Consequential
and Related Measures) Act (No. 2) 1999 (subclause
2(9)).
-
- Items 11 to 27 and
30 of Schedule 4 commence
immediately after the commencement of Schedule 8 to the A New
Tax System (Family Assistance) (Consequential and Related Measures)
Act (No. 1) 1999 (subclause 2(10)).
-
- Item 28 of Schedule 4
commences immediately after the commencement of Schedule 10 (other
than item 63) to the A New Tax System (Family Assistance)
(Consequential and Related Measures) Act (No. 2) 1999
(subclause 2(11)).
Schedule 5 - Transitional and saving
provisions associated with the establishment of a scheme for the
payment of family benefits, maternity allowance and maternity
immunisation allowance
Schedule 5 contains provisions
dealing with the transition from the existing family assistance
regime in the Social Security Act 1991 to the new family
assistance regime contained in the family assistance law. It also
contains a saving provision for certain family allowance customers
with a child attracting payment of double orphan pension or carer
allowance.
Application
Schedule 5 commences
immediately after the commencement of the provisions referred to in
subsection 2(2) of the A New Tax System (Family Assistance)
(Administration) Act 1999 (subclause
2(4)).
Schedule 6 - Transitional provisions
associated with the establishment of a scheme for the payment of
child care benefits
Schedule 6 provides for the
transition to the new child care benefit system. The transitional
provisions are:
-
- definitions
-
- the transition to the child care benefit (claims,
determinations and other matters)
-
- existing child care assistance agreements, and
-
- the limited continuation of child care assistance and child
care rebates.
Application
Schedule 6 commences
immediately after the commencement of the provisions referred to in
subsection 2(2) of the A New Tax System (Family Assistance)
(Administration) Act 1999 (subclause
2(4)).
The amendments contained in this Bill are
extensive amendments to the A New Tax System (Family
Assistance) Act 1999 and A New Tax System (Family
Assistance) (Administration) Act 1999. It is surprising that
these two Acts which do not commence to operate until 1 July 2000
required such extensive amendment before commencement.
Nevertheless, the amendments are technical changes and do remove
unintended consequences. The complexity of the legislation
represents its aim to achieve equity but this is achieved at the
expense of simplicity.
- Treasurer, Tax Reform: not a new tax - a new tax
system (Tax Reform Plan, 13 August 1998, Commonwealth of
Australia).
- Treasurer, Tax Reform: not a new tax - a new tax
system (Tax Reform Plan, 13 August 1998, Commonwealth of
Australia), pp. 52-55.
- The family tax benefit is abbreviated to 'FTB' in A New Tax
System (Family Assistance and Related Measures) Bill 2000 and the
Explanatory Memorandum to A New Tax System (Family
Assistance and Related Measures) Bill 2000. This abbreviation has
not been used in this Digest.
- The child care benefit is abbreviated to 'CCB' in A New Tax
System (Family Assistance and Related Measures) Bill 2000 and the
Explanatory Memorandum to A New Tax System (Family
Assistance and Related Measures) Bill 2000. This abbreviation has
not been used in this Digest.
- Explanatory Memorandum to A New Tax System (Family
Assistance and Related Measures) Bill 2000, p. 3.
- Explanatory Memorandum to A New Tax System (Family
Assistance and Related Measures) Bill 2000, p. 6.
- Explanatory Memorandum to A New Tax System (Family
Assistance and Related Measures) Bill 2000, p. 19.
- ibid.
- Community Development Employment Programs.
- Explanatory Memorandum to A New Tax System (Family
Assistance and Related Measures) Bill 2000, p. 154.
Mike Kobetsky
4 April 2000
Bills Digest Service
Information and Research Services
This paper has been prepared for general distribution to
Senators and Members of the Australian Parliament. While great care
is taken to ensure that the paper is accurate and balanced, the
paper is written using information publicly available at the time
of production. The views expressed are those of the author and
should not be attributed to the Information and Research Services
(IRS). Advice on legislation or legal policy issues contained in
this paper is provided for use in parliamentary debate and for
related parliamentary purposes. This paper is not professional
legal opinion. Readers are reminded that the paper is not an
official parliamentary or Australian government document.
IRS staff are available to discuss the paper's contents with
Senators and Members
and their staff but not with members of the public.
ISSN 1328-8091
© Commonwealth of Australia 2000
Except to the extent of the uses permitted under the
Copyright Act 1968, no part of this publication may be
reproduced or transmitted in any form or by any means, including
information storage and retrieval systems, without the prior
written consent of the Parliamentary Library, other than by Members
of the Australian Parliament in the course of their official
duties.
Published by the Department of the Parliamentary Library,
2000.
Back to top