Family payments

Budget Review 2015–16 Index

Michael Klapdor

New means testing arrangement for youth payments

As part of the Budget’s Families Package the Government has announced that it will remove the family assets test and the family actual means test that currently apply to dependent young people in receipt of Youth Allowance, ABSTUDY Living Allowance and the Assistance for Isolated Children Scheme.[1] The parental income test that currently applies will also be aligned with the Family Tax Benefit Part A (FTB-A) income test. The stated aim of the measure is to provide more support for families with dependent young people, particularly rural and regional families with children undertaking post-secondary studies. The Government expects an additional 5,300 young people to qualify for Youth Allowance and 4,860 existing recipients will receive an increase in their payment rate.[2] The measure is expected to cost $262.7 million over five years and will commence on 1 January 2016.

Currently, young people aged under 22 years who are considered financially dependent on their parents have both their own means as well as their family’s means assessed to determined eligibility for payments such as Youth Allowance. The family means-testing arrangement includes a parental income test, a family assets test and, in some cases, a family actual means test. Each test is designed to assess the level of resources a family can draw upon to support their dependent children, and income, assets or means over a certain level can result in a reduced payment rate or ineligibility for income support. The Budget proposes to remove any assessment of a family’s means other than their income. This will mean that children from asset-rich but income-poor families, such as farmers, will be more likely to qualify for income support or receive higher payment rates.

A separate change will see all Family Tax Benefit (FTB) eligible children included in the ‘family pool’ for the parental income test rather than just FTB children aged 16 or older and other children in receipt of income support. The parental income test assesses how many other dependent children are supported by the same parents’ income. The more children assessed as part of this process, the less an individual young person’s rate is reduced by their parent’s income. The changes to the ‘family pool’ arrangements will see 5,800 families become eligible for a payment and 13,700 families will receive a rate increase.[3] Maintenance income will also be removed from the parental income test assessment and, from 1 July 2017, a separate maintenance income test will apply to these payments, similar to the way child support is assessed for FTB-A. These changes will see a reduction in payments for 850 young people.

There are few details as to how the new income test arrangements will work. The available information suggests it will be administratively simpler and less onerous on families, but at the cost of a less rigorous assessment of the resources families can draw upon and a less targeted youth payment system.

Abolition of the Large Family Supplement and the Low Income Supplement

Two separate budget measures will abolish supplementary payments for low-income families. The first measure will abolish the Large Family Supplement (LFS) paid to each family in receipt of FTB-A with three or more children, from 1 July 2016. The LFS is currently worth $321.20 per annum per child after the second-born child (that is, for the third and each subsequent child). Abolishing the payment is expected to achieve savings of $177.3 million over four years and follows a 2014–15 budget measure, passed by the Parliament, which will see the LFS paid only to families with four or more children in 2015–16.[4] The LFS was introduced in 1996 to ensure the rate of payments for families with four or more children would be maintained following a reform of the family payment structure. The rationale for abolishing the LFS is for savings to be redirected to ‘repair the Budget and fund policy priorities’.

The second measure will abolish the Low Income Supplement and the Low Income Family Supplement (LIS/LIFS).[5] These payments were introduced as part of the Clean Energy Household Assistance package, which provided compensation for the introduction of a carbon price.[6] The LIS/LIFS payments were compensation payments to low-income households who would not receive enough assistance through the tax cuts and changes to welfare payments included in the Household Assistance package to offset the average expected cost impact of carbon pricing. The basic rate of the LIS/LIFS is $300 per year.[7]

At the 2013 Election, the Coalition committed to removing the carbon price while keeping the compensation measures introduced in the Household Assistance package.[8] With the carbon price removed, it is questionable whether or not the LIS/LIFS is needed. However, abolishing the payment is inconsistent with the Government’s pre-election commitment. The measure is expected to achieve savings of $42.9 million over four years.

Reduction in Family Tax Benefit Part A portability

Savings of $42.1 million over five years are expected from a measure which will limit the period FTB-A can be paid while a recipient is overseas (known as the portability of the payment). No rationale has been provided for the measure other than the ‘savings have already been provided for by the Government’. Currently, FTB-A can be paid at the full rate for temporary absences overseas of up to six weeks and at the ‘base rate’ for a further 50 weeks (56 weeks in total).[9] The measure will see the period for which FTB-A is payable while overseas reduced to a maximum of six weeks in a 12-month period. Some extensions and exemptions to this rule will apply, similar to current arrangements. A six-week portability period applies to many income support payments, but the cumulative cap on travel within 12 months is unusual, although similar to the four-week in 12 months general portability limit for Disability Support Pensioners (announced in the 2014–15 Budget and applying from January 2015).[10]

Status of 2014–15 family payment budget measures

The 2014–15 Budget included an array of savings measures affecting different family payments—some have been implemented, but a number are yet to be passed by the Parliament.[11] The measures that have passed commence from 1 July 2015 and include: limiting the FTB-A LFS to families with four or more children; removing the FTB-A ‘per child add-on’ to the higher income-free area for each additional child after the first; and reducing the primary earner income limit for Family Tax Benefit Part B (FTB-B) from $150,000 to $100,000 per annum.[12] The measures that are yet to pass include (from 1 July 2015):

  • pausing indexation of several FTB income test free areas for three years
  • pausing indexation of the maximum and basic rates of FTB-A and the maximum rate of FTB-B for two years
  • reducing the FTB end-of-year supplements to close to their 2004 values, and ceasing indexation
  • limiting FTB-B to families with children under six years of age and
  • Introducing a new FTB allowance for single parents receiving the maximum rate of FTB-A for each child aged 6 to 12 years, to partially make up for the loss of FTB-B.[13]

[1].          The budget information in this article has been taken from the following document unless otherwise sourced: Australian Government, Budget measures: budget paper no. 2: 2015–16

[2].          Department of Social Services (DSS), Means testing arrangements for youth payments, 2015 Budget factsheet, DSS, 2015.

[3].          Ibid.

[4].          L Buckmaster and M Klapdor, Social Services and Other Legislation Amendment (2014 Budget Measures No. 6) Bill 2014, Bills digest, 45, 2014–15, Parliamentary Library, Canberra, 2014.

[5].          The Low Income Family Supplement (LIFS) is an administrative name for the Low Income Supplement (LIS) as it is paid to Family Tax Benefit recipients and to one member of a couple if eligible.

[6].          P Yeend and L Buckmaster, Clean Energy (Household Assistance Amendments) Bill 2011, Bills digest, 58, 2011–12, Parliamentary Library, Canberra, 2011.

[7].          Liberal Party of Australia and The Nationals, The Coalition's policy to scrap the carbon tax and reduce the cost of living, Coalition policy document, Election 2013, p. 5.

[8].          Department of Human Services (DHS), ‘Low Income Supplement’, DHS website, 2014.

[9].          See DSS, ‘ FTB payments during absence from Australia’, Family Assistance Guide, version 1.1.78, 11 May 2015.

[10].       L Buckmaster and M Klapdor, op. cit., p. 10.

[11].       P Yeend and M Klapdor, ‘Family payments’, Budget review 2014–15, Research paper series, 2013–14, Parliamentary Library, Canberra, 2014.

[12].       L Buckmaster and M Klapdor, op. cit.

[13].       Legislation providing for these measures is currently before the Senate. See M Klapdor and L Buckmaster, Social Services and Other Legislation Amendment (2014 Budget Measures No. 4 Bill 2014, Bills digest, 49, 2014–15, Parliamentary Library, Canberra, 2014. For a list of other 2014–15 budget measures that have no passed see T Dale and K Swoboda, ‘Previous measures: those revised in the 2015–16 Budget and those not yet proceeded with’, Budget review 2015–16, Research paper series, 2014–15, Parliamentary Library, Canberra, 2015.


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