New means testing arrangement for
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. 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.
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. 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. 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). These payments were
introduced as part of the Clean Energy Household Assistance package, which
provided compensation for the introduction of a carbon price.
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
At the 2013 Election, the Coalition committed to removing
the carbon price while keeping the compensation measures introduced in the
Household Assistance package. 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
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). 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).
Status of 2014–15 family payment
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. 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. The measures that are
yet to pass include (from 1 July 2015):
pausing indexation of several FTB income test free areas for
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.
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
Department of Social Services (DSS), Means
testing arrangements for youth payments, 2015 Budget factsheet, DSS,
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.
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.
P Yeend and L Buckmaster, Clean
Energy (Household Assistance Amendments) Bill 2011, Bills digest, 58,
2011–12, Parliamentary Library, Canberra, 2011.
Liberal Party of Australia and The Nationals, The Coalition's policy to scrap the carbon tax and reduce the cost of
policy document, Election 2013, p. 5.
Department of Human Services (DHS), ‘Low
Income Supplement’, DHS website, 2014.
See DSS, ‘22.214.171.124 FTB payments
during absence from Australia’, Family Assistance Guide, version
1.1.78, 11 May 2015.
L Buckmaster and M Klapdor, op. cit., p. 10.
P Yeend and M Klapdor, ‘Family
payments’, Budget review 2014–15, Research paper series, 2013–14,
Parliamentary Library, Canberra, 2014.
L Buckmaster and M Klapdor, op. cit.
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.
All online articles accessed May 2015.
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