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APPENDIX 2
Department of Families, Housing, Community
Services and Indigenous Affairs response to issues raised by National Welfare
Rights Network (NWRN)
Schedule 1 – Continuous adjustment of rate of family tax
benefit by instalment
NWRN recommends that the Bill be amended to give Centrelink
a general discretion not to apply the continuous adjustment measure when having
regard to the recipient’s individual family circumstances, there is a more
appropriate means available to manage the notional overpayment.
The amendments in Schedule 1 do not provide for discretion
as it is considered appropriate for the method of adjusting a person’s ongoing
rate to be applied in a consistent and fair manner. The method applied is
considered to be fair as it compares the amount that a person has already
received in the earlier part of the financial year based on the previous
estimate, with the amount that would have been paid in that period based on the
higher revised estimate. Adjusting the person’s ongoing rate for the remainder
of the financial year to recoup the amount of the notional overpayment already
received in that financial year is considered reasonable as the adjustment is
effectively ‘smoothing out’ the person’s remaining entitlement for the
financial year. The adjustment will act as a timely and fair mechanism to
reduce the incidence of debts at reconciliation.
The provision of discretion to not apply the adjustment
would add complexity, would weaken the effectiveness of the measure for
reducing the incidence of debts, and would be less equitable as it would
provide different outcomes for families who revise their estimate and have the
same remaining entitlement for the financial year.
The adjustment method is flexible as it allows for a
subsequent recalculation of the ongoing adjustment if a person provides a
further revised estimate that is lower than the first revised estimate. This
reflects the continuous nature of the adjustment, and takes into account that a
person’s circumstances may continue to change, or that the person may have new
information leading to a further estimate. Centrelink will reassess the
person’s rate based on a revised estimate of income if Centrelink considers the
revised estimate to be reasonable.
A person who is prompt in notifying Centrelink of a change
in circumstances that results in an increased estimate of income will minimise
the amount of the ongoing adjustment. This is because prompt notification will
reduce the amount of the notional overpayment and will increase the length of
the remaining period to recoup the notional overpayment. An adjustment may be
higher than it would otherwise have been if the person delays notifying
Centrelink. It is not considered appropriate to allow for a different approach
in such circumstances.
If the adjustment is significant because the increase in the
estimate is quite high, this also means the person’s financial ability has
significantly improved. It is not considered appropriate to allow for a
different approach in such circumstances.
It is considered inappropriate to continue to allow people
to receive ongoing payments that would allow the amount paid during the
financial year to exceed the amount payable based on the revised estimate.
This measure is designed to prevent that outcome. Allowing alternative
mechanisms to manage the overpayment would undermine the intent of the measure.
Schedule 2 – Non-payment of family tax benefit for
non-lodgement of tax returns
NWRN recommends in the event that Schedule 2 is allowed to
stand, that it be amended to provide adequate safeguards to address the
identified flaws in the provisions and further that the grounds for the
extension of the grace period are broadened to take account of the concerns
that NWRN have highlighted.
We consider that the concerns raised by NWRN may to an
extent reflect a misunderstanding of the way in which the provisions will
operate.
When Centrelink decides that a person is not entitled to
Family Tax Benefit (FTB) for a previous financial year due to the non-lodgment
of relevant tax returns for that year (a non-lodger decision), the provisions
provide for a grace period after that decision before a prohibited period would
start. In general, the grace period will be 75 days. In practice, as
Centrelink makes non-lodger decisions in November each year, this would result
in a prohibited period starting in mid-January of the next year if relevant tax
returns had still not been lodged by that time. This means a person will have
more than 18 months to lodge an outstanding tax return before a prohibited
period starts.
The provisions allow for the minimum grace period of 75 days
to be extended in special circumstances. The provisions also allow for a
prohibited period that has already begun to be ended in special circumstances.
Further, where a prohibited period is ended in special circumstances, a new
grace period will be set which will be a minimum period of 14 days, or such
longer period as justified by the special circumstances.
While ‘special circumstances’ is not defined, it is a
concept that is well understood due to its use in various provisions in family
assistance and social security law and decisions by courts and tribunals on its
meaning. In Re Beadle and Director-General of Social Security (1984), the
Administrative Appeals Tribunal (Toohey J presiding) said:
An expression such as "special circumstances" is by
its very nature incapable of precise or exhaustive definition. The qualifying
adjective looks to circumstances that are unusual, uncommon or exceptional. Whether
circumstances answer any of these descriptions must depend upon the context in
which they occur. For it is the context which allows one to say that the
circumstances in one case are markedly different from the usual run of cases. This is not to say that the circumstances must be unique but they must have a
particular quality of unusualness that permits them to be described as special.
As a matter of policy, in all cases where the Australian
Taxation Office (ATO) decides to grant a person an extended time period to
lodge a tax return or decides to suspend enforcement action against an
outstanding tax return, Centrelink will also extend the grace period or suspend
the prohibited period to correspond with the ATO decision. Also, independently
of any ATO decision about the lodgment of an outstanding tax return, Centrelink
will be able to apply the discretion in other special circumstances. This
includes situations involving domestic violence, severe illness or severe
financial hardship. This policy for special circumstances will be reflected in
policy guidelines.
NWRN has proposed that the discretion to extend the grace
period or suspend a prohibited period should be broadened to cover situations
where it is the current partner of the FTB recipient who has not lodged the
relevant tax return and the partner is simply refusing to comply with the
requirement to lodge the outstanding tax return.
If the prohibition measure was to exclude an outstanding tax
return of the current partner of an FTB recipient, it would undermine the
effectiveness of the measure. This is because the application of the measure
could easily be avoided simply by the couple agreeing to swap who receives FTB
for the family. The inclusion of an outstanding tax return of the current partner
also recognises that payment of FTB based on an estimate is affected by the
combined income of a couple.
While a prohibition applies, this will not prevent payment
of FTB as a lump sum at reconciliation for a particular financial year, as this
payment would be based on actual income for that financial year. The measure
limits only the method by which payment can be made. That is, the measure
prevents the method of payment based on an estimate.
The measure does not affect the existing provision which precludes
the payment of a top-up and the end of year FTB supplements if a person fails
to lodge a required tax return within two years after the end of the relevant
financial year. However, the measure will help people to avoid missing out on
a top-up and the supplements by providing a further incentive for relevant tax
returns to be lodged before the existing two year limit lapses.
Centrelink will write to people in advance to advise them
that the method of payment based on an estimate will cease at the end of the
grace period if they have not lodged relevant tax returns by that time. For
existing cases that will be potentially affected by the measure from mid
January 2010, Centrelink will write in August 2009 to advise them about the
measure. For new cases, this information will be provided each year in
November at the same time that a person is advised about a non lodger decision.
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