Bills Digest No. 143  1999-2000A New Tax System (Family Assistance and Related Measures) Bill 2000


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 & Copyright Details

Passage History

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.

Purpose

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.

Background

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.

Main Provisions

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)).

Concluding Comments

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.

Endnotes

  1. Treasurer, Tax Reform: not a new tax - a new tax system (Tax Reform Plan, 13 August 1998, Commonwealth of Australia).
  2. Treasurer, Tax Reform: not a new tax - a new tax system (Tax Reform Plan, 13 August 1998, Commonwealth of Australia), pp. 52-55.
  3. 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.
  4. 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.
  5. Explanatory Memorandum to A New Tax System (Family Assistance and Related Measures) Bill 2000, p. 3.
  6. Explanatory Memorandum to A New Tax System (Family Assistance and Related Measures) Bill 2000, p. 6.
  7. Explanatory Memorandum to A New Tax System (Family Assistance and Related Measures) Bill 2000, p. 19.
  8. ibid.
  9. Community Development Employment Programs.
  10. Explanatory Memorandum to A New Tax System (Family Assistance and Related Measures) Bill 2000, p. 154.

Contact Officer and Copyright Details

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

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Published by the Department of the Parliamentary Library, 2000.

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