Bills Digest No. 122 2004–05
Family and Community Services and Veterans' Affairs
Legislation Amendment (Further 2004 Election Commitments and Other
Measures) Bill 2005
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
Contact Officer & Copyright Details
Community Services and Veterans' Affairs Legislation Amendment
(Further 2004 Election Commitments and Other Measures)
House: House of Representatives
Portfolio: Family and Community
Schedule 1 commences
on 1 January 2005. Schedule 2 commences on 1 July 2005.
Schedule 3 and the remainder of the Bill commence when the Act
receives Royal Assent.
introduces a supplement to Family Tax Benefit part B (FTBB),
makes aged care accommodation bonds exempt assets under the
Social Security and Veterans Affairs Assets Test, and
replaces the existing formula for the child income cut out
amount for Family Tax Benefit (FTB) with a set amount of
During the 2004 election campaign the government promised to
increase the rate of Family Tax Benefit part B (FTBB) by $300 per
annum from 1 July 2005.(1) The detail of the commitment
was announced by the Minister for Family and Community Services,
Senator the Hon. Kay Patterson on 9 February 2005(2).
The Minister announced that the rate increase would be delivered as
an end of year bonus payment once FTBB recipients lodged their
annual income tax return. She indicated her reasons for this
decision as follows:
Following the positive response I received from
parents who received the lump sum payments last year, I have
decided to deliver this commitment in a lump sum also. Parents have
told me the lump sum allowed them to purchase items such as school
uniforms, replace household goods, pay for a special sporting
activity and provide a boost to saving for their children's
She also announced that the implementation date had been brought
forward from July 2005 to January 2005. This meant that at the end
of the 2004-05 year a half year payment of $150 would be
Senator Evans, the Shadow Minister for Social Security claimed
that paying the $300 increase in this form effectively delayed
delivery and saved the Government money(4).
Delivery of the rate increase as a lump sum is consistent with
the introduction of the $600 lump sum addition to Family Tax
Benefit part A (FTBA) from July 2004. That payment was in part
introduced to reduce the number of families faced with Family Tax
Benefit debts. Both FTBA and FTBB are income tested on the basis of
estimates of income made at the beginning of the financial year.
Many families underestimate their income and have their entitlement
adjusted once they submit their tax return. The most recent data on
the numbers of families with FTB overpayments for the 2003-04 year
indicate that this approach has been successful in reducing the
numbers of families with overpayments compared to earlier years.
There were 125,845 families with overpayments, 8% of the 1,591,590
families who received FTB(5).
In May 2004 the ALP criticised the way the increased rate of
FTBA was delivered. They claimed it should be paid fortnightly
rather than at the end of the financial year, because families
needed the money during the year to meet family expenses. The ALP
criticised the Government for not addressing the fundamental
features of the FTB income test that caused the debts to
accrue.(6) That criticism was maintained during the 2004
Under section 22A (1) of the Family Assistance Act 1999
certain children cannot be regarded as children for the purposes of
FTB eligibility if the child s adjusted taxable income exceeds a
cut-out amount. Children aged five to 15 years who are not
undertaking full-time study or primary school education and all
those aged 16 years or more are covered by this provision. At
present the cut-out amount is determined with reference to the rate
of FTBB for children aged five years or more and the income test
free threshold under the FTBB income test. Both of these reference
values have been changed or are likely to be changed in the future
as family assistance policy evolves. This Bill removes the present
formula and sets a specific dollar amount for the cut-out amount.
This will remove any chance of cut-out amount being influenced by
future changes to the structure of FTBB.
Operators of hostel level aged accommodation have been levying
capital contributions from new residents since the 1950s. These
accommodation bonds are held by the operator, who can deduct a
portion each year for the first five years and keep the interest
earned from investing the bond. The balance of the bond is refunded
if the resident dies or leaves the facility. Bonds may be paid as a
lump sum, periodic payment, or a combination of the two.
The Government promised to exempt accommodation bonds from the
assets test during the 2004 election campaign(7).
Item 1 and 2 of Schedule 1 provide for the
inclusion of the FTBB supplement in the calculation of the rate of
FTBB under clause 29 of Schedule
1 of the Family Assistance Act 1999.
Item 3 of Schedule 1 inserts new
Division 2A into Schedule 1 of the Family Assistance
Act 1999. It sets out the amount of the supplement and states
that the amount as indexed on a July 1 only applies to the income
year starting on that July 1 and not to entitlements for the year
Items 4 to 7 of schedule 1 provide for annual
indexation of the supplement.
Items 1 and 2 Schedule 2 repeal existing
definitions of the cut-out amount in subsections 22A920 and
25(3) of the Family Assistance Act 1999 and
substitute the new amount of $11,233.
Items 3 to 5 of Schedule 2 provide for annual
indexation of the new cut-out amount.
Part 1 of Schedule 3 amends the Social
Security Act 1991 to exempt accommodation bonds from counting
as assets under the assets test.
Items 1 and 4 of Part 1 of Schedule 3 provide
for income derived from renting a former principal home, to pay an
accommodation bond by periodic payments, to be exempt from the
social security income test.
Items 2 and 7 of Part 1 of Schedule
3 provide for a customer s accommodation bond balance to
be disregarded for the assets test.
Item 3 of Part 1 of Schedule 3 provides for an
accommodation bond balance to still count as an asset for purposes
other than the assets test, such as the provisions about asset
Part 2 of Schedule 3 amends the Veterans
Entitlements Act 1986 to exempt accommodation bonds from the
assets test in much the same manner at is achieved in Part
1 for the Social Security Act 1991.
Extra Assistance for Families 26 Sept 2004, p. 5
Hon. K. Patterson (Minister for Family and Community Services),
Extra assistance for 1.3 million Australian families,
media release, 9 February 2005.
Senator C. Evans (Shadow Minister for Social Security), $550
million funding grab to shore up budget bottom line, media
release, 10 February 2005.
Senate Community Affairs Legislation Committee, Answers to
Estimates questions on Notice, Family and Community Services
Portfolio, 2004-05 Supplementary Budget Estimates December 2005,
Question No. 35.
Wayne Swan, Family Assistance Legislation Amendment (More Help
For Families--One-Off Payments) Bill 2004 : Family Assistance
Legislation Amendment (More Help For Families Increased Payments)
Bill 2004: Second Reading , House of Representatives,
Debates, 12 May 2004 , p. 28348
Recognising Senior Australians- Their Needs and Their
Carers 1 Oct 2004, p. 8. Full text at:
7 March 2005
Bills Digest Service
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