Family and Community
Services Legislation Amendment (Family Assistance and Related
Measures) Bill 2005
26 May 2005
House: House of Representatives
Portfolio: Family and Community
The various amendments
presented in the Bill have differing dates of commencement,
from the day on which the Act receives Royal Assent, 1 January 2006
or 1 July 2005. Section 2 contains a table setting
out the commencement dates for each part of the Bill.
contains the largely unrelated measures listed below:
A new method for calculating Family Tax Benefit Part B (FTBB)
entitlement for those who return to the workforce after the birth
of a child
A change to Maternity Payment (MP) eligibility criteria to allow
payment for adopted children who enter the care of their adoptive
parents up to the age of two years
A number of changes to the treatment of Family Tax Benefit
A minor change to the FTBB income test, and
Two minor changes to the payment of rent assistance.
FTBB was introduced in 2000 as a payment for
parents who stayed home to look after their children on a full-time
or nearly full-time basis.(1) An income test was used as
a means of excluding people who worked for more than few hours a
week from receiving the payment. However, the inevitable result of
such an income test was increased disincentives for parents to
return to work after their youngest child was no longer an
Concern about disincentives produced by income
testing of family assistance and other income support payments is
not new. The design of the Family Tax Benefit introduced in 2000
was influenced by a desire to reduce disincentives. However, recent
research indicates that disincentives are still of
The 2004 Budget included two measures to
address this issue: the measure in this Bill and a measure to ease
the income test to allow part payment of FTBB to parents who worked
part-time and earned up to about $19,000 per annum. This second
measure was introduced from 1 July 2004.
The change included in this Bill addresses the
situation of parents who would face the prospect of a FTB debt if
they returned to the workforce part way through a financial year.
FTBB eligibility is assessed on an annual basis in line with an
estimate of income made at the start of the financial year.
Commencing paid employment part way though a year can mean that
eligibility for FTBB for the whole year is lost or at least that
entitlement is reduced. Any payments already received can become an
This measure ensures that the parent returning
to work retains eligibility for FTBB for the part of the financial
year before they return to work. Their income will only reduce
entitlement for the period after they return to work. This change
significantly reduces the work disincentives faced by parents in
The MP was introduced from July 2004. It
replaced the Maternity Allowance introduced in February 1996.
Eligibility for the new payment was limited to children who entered
the care of their adoptive family before the age of 26 weeks. This
effectively excluded most adopted children because only a minority
were adopted before that age. Overseas adoptions were particularly
affected. This change ensures that eligibility is available where
the adopted child enters the care of their new family up to the age
of two years.
There were 502 adoptions of
children in Australia in 2003 04, an increase of 6 per cent from
472 adoptions in 2002 03. 74 per cent (370) of the adoptions were
inter country placement adoptions, 14 per cent (73) were local
placement adoptions and 12 per cent (59) were known child
Almost half of all children
adopted (43 per cent) were aged less than 1 year. In local
placement adoptions 88 per cent of all children were aged less than
1 year, while in inter country adoptions 41 per cent of children
were aged less than 1 year and a further 30 per cent were 1 year of
age. Known child adoptions differed in that 96 per cent of the
children were aged 5 years or more.(4)
While there were only 59
known child adoptions, almost all were aged over 5 years, so these
adoptions will not gain access to the MA with this change.
The Bill contains several measures designed to
ensure that parents who separate are not disadvantaged by the
non-lodgement of income tax returns by their ex-partner. The
reconciliation process, where FTB and Child Care Benefit (CCB)
entitlements are finalised, relies on tax returns for both ex
partners being lodged. If the lodgement of an ex partner s tax
return is delayed for longer than the two year lodgement period
allowed, there is no entitlement to a top up where family income
had been over estimated. This Bill ensures that non lodgement by an
ex partner does not reduce access to a top up. The Bill also
provides that where separation occurs more than two years after the
FTB entitlement year any non lodger debt incurred because the ex
partner had not lodged a tax return may be written off.
Rent assistance for a past period can only be
claimed in conjunction with FTB if fortnightly instalments of FTB
are claimed at the same time. If FTB is claimed as a lump sum, rent
assistance cannot be claimed. In 2004 the time limit for claiming
FTB as a lump sum was extended from one to two years after the end
of the entitlement year. The Bill adjusts the A New Tax System
(Family Assistance) Act 1999 (FAA) to make it clear that rent
assistance cannot be claimed along with a lump sum of FTB in either
the first or the second year after the entitlement year.
Certain child support debts may be recovered
from FTB entitlements. However, they may not be recovered from FTB
advances. To ensure that this does not provide a means for debtors
to avoid debt recovery, the Bill ensures that advances will not be
made available to child support debtors in the same way that they
are not available to people who have a social security or family
The Bill makes a minor adjustment to the FTBB
income test. From January 2005 a FTBB supplement was introduced. It
is paid as a lump sum at the time of reconciliation after the end
of the entitlement year. This amendment merely specifies that the
standard rate of FTBB will be reduced by the income test before the
supplement is affected.
The Bill makes two changes to the
administration of rent assistance. First, amendments ensure that
double payments of rent assistance through FTB and through a social
security or veteran s entitlements payment cannot occur. If they do
through administrative error they will be recoverable.
Second, amendments ensure that where a rent
certificate review is not submitted, only the rent assistance
portion of a person s FTB or social security payment will be
cancelled, rather than the whole payment as at present.
Item 2 provides a definition
of passive employment income to include income from paid leave, or
compensation payment etc. This definition is inserted to prevent
this sort of income from being defined as returns from paid work
Item 4 inserts a definition
of secondary income earner . Normally the secondary income earner
of a couple is the partner with the lesser amount of income, but
where both partners have the same income the secondary income
earner is to be the one who returns to work first in any one year.
These sorts of cases where both partners have the same income are
Item 5 inserts various
definitions such as paid work , returns to paid work . Paid work is
not just minimal paid work but requires a substantial degree of
exertion . This is then defined under returns to paid work as of at
least 10 hours per week for 4 consecutive weeks.
Returns to paid work also requires the person
to notify Centrelink in writing within the year of work.
Notification within the year that FTBB is paid for should not be a
problem as recipients will want to gain the advantage of the
beneficial application of this new treatment of paid employment
income under the FTBB income test. Notification in writing is
somewhat exceptional as in most other notification requirements,
verbal notification by phone is usually sufficient.
Item 8 amends the FTBB income
test sections in the FAA to calculate the rate where the recipient
returns to work after the birth of a child etc . While it refers to
returning to work after the birth of a child, it really refers to
any employment income earned during the year where previously there
was no employment income earned.
Item 1 adjusts the age limit
of the child under which an adopted child can qualify an adoptive
parent for MA from 26 weeks to 2 years of age.
Item 2 stipulates that where
the child is adopted from overseas the child must have been aged
less than 2 years on arrival in Australia as part of the adoption
process. This means where the child was aged less than two on
arrival but the adoption processes only commenced after arrival,
the child would not qualify the adoptive parent for MA.
Item 3 requires the claim for
MA to be made within 26 weeks of the adopted child coming into the
claimant s care. This is the same rule that currently applies for
children adopted from inside Australia.
Item 5 provides for the
commencement of these changed MA provision to go back to when MA
originally commenced, being from 1 July 20004. The other
requirement to claim within 26 weeks of the child coming into care
would otherwise undermine this, so Item 6 provides
for transitional provisions to get around this problem.
Item 7 allows only one MA
payment to be made in respect of a child.
Item 8 makes amendments to
the section 28 of the FAA to allow a separated partner entitlement
to any top up payment after two years, even though the other
partner has not lodged their tax return. Currently unless both
separated partners lodge their tax returns within two years of the
year FTB was paid for, no top up payment owed to the partner who
has lodged their return can be made.
Item 16 inserts amendments
into the FAA to allow the write off of FTB and CCB debts in certain
circumstances. The circumstances are where one partner of a
separated couple has not lodged a tax return within two years of
the relevant payment year, for which FTB or CCB was paid.
Item 3 amends the FAA to
allow the payment of RA for a period of up to two years in the
past. This might apply where the claim for FTB is lodged up to two
years after the end of the relevant year for which FTB is being
paid. The Item 3 amendments also ensure the rate
of RA paid attached to FTB takes into account any RA paid for the
same period attached to qualification to any other income support
payment paid under the SSA. Item 3 also requires
the RA payable attached to FTB to likewise take into account any RA
paid attached to an income support payment provided under the
Veterans Entitlements Act 1986 (VEA).
Item 31 allows the amount of
RA deemed to be payable to be varied on its own, separate to the
amount of FTB payable.
Item 36 places a new section
in the SSA to allow the separate cancellation of RA payable, where
the rent certificate is not provided. The main income support
payment can still be paid, rather than it also being cancelled.
Item 37 allows the increase
of the rate of assistance payable (the RA amount) to be restored
where the rent certificate is later provided.
A New Tax System (Family Assistance) Bill 1999, Bills Digest No.
Examples of research in this area are: G. Beer Work
Disincentives under A New Tax System: The distribution of effective
marginal tax rates in 2002 , Paper presented to the 2002 Conference
of Economists, 30 September 2002. Full text at: http://www.natsem.canberra.edu.au/publication.jsp?titleID=CP0306
M. Toohey and G. Beer, Is it worth working now? :Financial
incentives for working mothers under Australia s new tax system .
Paper presented to the 2003 Australian Social Policy Conference 9
July 2003. Full text at: http://www.natsem.canberra.edu.au/publication.jsp?titleID=CP0212
Australian Institute of Health and Welfare, Adoptions Australia
2002 04, Child Welfare Series No. 35, Canberra, 26 November 2004,
p. X. http://www.aihw.gov.au/publications/index.cfm/title/10073