Bills Digest no. 150 2007–08
Families, Housing,
Community Services and Indigenous Affairs and Other Legislation
Amendment (2008 Budget and Other Measures) Bill 2008
WARNING:
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
Bill.
CONTENTS
Passage history
Purpose
Background
Main provisions
Concluding comments
Endnotes
Contact officer & copyright details
Passage history
Families, Housing, Community
Services and Indigenous Affairs and Other Legislation Amendment
(2008 Budget and Other Measures) Bill
2008
Date
introduced: 29 May
2008
House: House of Representatives
Portfolio: Familles, Housing, Community Services
and Indigenous Affairs
Commencement:
There are various
commencement dates for different schedules and sections in this
Bill and these are set out in the Table in Clause
2 of the Bill.
Links: The
relevant links to the Bill, Explanatory Memorandum and second
reading speech can be accessed via BillsNet, which is at http://www.aph.gov.au/bills/.
When Bills have been passed they can be found at ComLaw, which is
at http://www.comlaw.gov.au/.
To provide for the legislative
amendments necessary for the implementation of initiatives
announced by the government, mostly in the 2008-09 Budget. There
are also some other minor legislative amendments. The Budget
initiatives feature:
- a $150 000 income limit for Family Tax Benefit Part B
(FTB-B),
- a $150 000 income limit for the Baby Bonus (BB),
- the payment of the BB over 13 fortnightly instalments rather
than as a lump-sum,
- changing the twice yearly indexation of the BB to once yearly
indexation to movements in the Consumer Price Index (CPI),
- an expansion of the age limit at which an adoption gives access
to the BB from the current 2 year age limit to a 16 year age
limit,
- introduction of the requirement to provide a Tax File Number
(TFN) for claimants of the Commonwealth Seniors Health Card
(CSHC),
- the allowance for individuals to volunteer to have their
welfare payments placed under an Income Management Regime (IMR)
payment arrangement, and
- a reduction in access to the partner service pension for
partners from the current age 50, raising the access age to the age
service pension qualifying age.
The government announced its intention of introducing an income
limit of $150 000 for access to the FTB-B in the 2008-09
Budget.[1] FTB-B is
to be limited to families where the primary income earner has
income of $150 000 a year or less. The initiative is scheduled to
commence from 1 July 2008.
The Budget papers and the Explanatory Memorandum presents
estimated savings of $112.8 million in 2008-09, $132.4 million in
2009-10, $141.2 million in 2010-2011 and $158.0 million in
2011-2012.[2] These
savings will be achieved by reduced numbers of persons qualifying
for FTB-B and is a total net savings of $543.9 million over four
years.
FTB-B was introduced, along with the two other main Commonwealth
family income supplement payments (Family Tax Benefit Part A and
Child Care Benefit), with the Goods and Services Tax (GST) and the
A New Tax System (ANTS) arrangements that commenced from July
2000.[3] FTB-B
replaced a number of payments and income tax rebates for sole
parents and single income couple families. The payments and
assistance replaced were Guardian Allowance, Basic Parenting
Payment, Family Tax Payment Part B, Family Tax Assistance Part B,
Sole Parent Tax Rebate and Dependent Spouse Tax Rebate (with
Children).
As with the payments and tax measures it replaced, the current
FTB-B tests only one income in a partnered family, that is the
income of the lowest income earner, in a partnered family. For sole
parent families, there is no income test and there is an automatic
entitlement to the full rate of the FTB-B, regardless of
income.
For FTB-B, for the 2007-08 year, where the income of the lower
income earner in a partnered family is up to $4 380, the full FTB-B
rate is paid. Thereafter, FTB-B is reduced by 20 cents for each
dollar of income above that amount. In certain circumstances, the
lower earner can earn up to $22 302 and still be eligible for some
FTB-B. This resembles the old Dependant Tax Spouse Rebate, which
was available to a person with a partner with low income,
regardless of the amount of that person s own taxable income.
An answer to a question on notice in Senate Budget Estimates has
demonstrated that under the current FTB-B income test, some
families with substantially high incomes can access FTB-B.[4]
Under the proposed income test, for the first time an income
limit will apply for sole parent families for access to FTB-B.
Currently, where the claimant is a sole parent, there is no income
test. The new income limit will be $150 000 or less. The amendments
in the Bill index this income limit once a year on 1 July to
movements in the CPI.
For partnered families, for the first time, the income of the
primary income earner will be tested and will need to be $150 000
or less for access to FTB-B. Currently, the income of the highest
earner in a partnered family is disregarded. It is the income of
the lowest earner that is tested and currently needs to be below
$22 302 per annum for the person to be able to qualify for some
payment. The income test for the secondary earner is not altered by
these proposed changes.
The government stated that the income test will ensure that
family payments are targeted to families on the basis of
need.[5] The
government has indicated that it estimates the FTB-B income test
will affect about 40 000 families.[6]
The proposed $150 000 income limit for both sole parent and
partnered parent families will go some way towards addressing the
issue of family assistance payments being provided to high income
families. The income limit of $150 000 is still comparatively high.
The allowable income limit for a family (sole parent or partnered)
to access Family Tax Benefit Part A (FTB-A) is $97 845 for one
child aged 0 to 17 years.
This new income test limit for FTB-B also does not address the
issue of horizontal equity. That is, where the income of a
partnered family is earned by one of the partners, the FTB-B
payable to the other partner means they have an advantage over
partnered families with the same overall income, where the income
earned is shared equally between both partners.
The BB was introduced from 1 July 2004.[7] That Act provided for the BB amount to
be $3 000 from 1 July 2004, and increase to $4 000 from 1 July
2006 and than further increase to $5 000 from 1 July 2008. The Act
also provided for the twice-yearly indexation of the BB to
movements in the CPI in March and September each year.
Consequently, the BB amount is currently $4 258.
Schedule 2 presents four main changes to the
provision of the BB. These are:
- an income test of $150 000 a year from 1 January 2009,
- the BB to be paid in 13 fortnightly instalments instead of as a
lump-sum from 1 January 2009,
- the indexation of the BB once a year on 1 July instead of twice
yearly on 20 March and 20 September, to commence from 1 July 2008,
and
- the expansion of access to the BB for the adoption of a child
from the current aged below 2 years up to the age of below 16
years, from 1 January 2009.
Currently, the BB does not have an income test. The government
announced the introduction of an income test for the BB in the
2008-09 Budget.[8]
The proposed income test is to limit the BB to families with an
income of $75 000 or less in the 6 month period after the birth of
a child or the adoption of a child. This will require the claimant
to provide an estimate of anticipated family income for the 6 month
period. This will not be an unusual process for FTB and Child Care
Benefit (CCB) claimants, as they currently have to provide a
forward estimate of their income for the financial year.
Given that all other income testing for FTB and CCB is based on
annual income, it seems strange that a 6 month income test is to
apply for access to the BB. This is not properly explained in the
Explanatory Memorandum. This is probably being driven by the fact
the proposed periodic payment of the BB, is to be in 13 fortnightly
instalments (over a 26 week period), and the government wants to
tightly target the means testing to the period of the payment
receipt.
The allowable time a person may claim the BB will be extended to
52 weeks. This is mainly to allow for families, who originally
anticipated that their income would be in excess of the $75 000
limit in the 6 month period, and therefore didn t claim, to lodge a
claim later. This will be for cases where the family subsequently
didn t earn $75 000 in the 6 month period.
In 2006 07, the BB was paid in respect of 291 876 children,
including 315 adopted children.[9] While the Budget papers do not directly indicate
how many families are expected to be no longer eligible for the BB
from 1 January 2009, the Budget papers elsewhere give an estimate
of the numbers of children and families to be paid the BB in
2008-09. This is in respect of 285 000 children from 281 000
families.[10] This
figure includes 330 adopted children. Jenny Macklin, the Minister
for Families, Housing, Community Services and Indigenous Affairs,
has indicated that as a result of the income test, some 16 000 high
income families will no longer be able to access the BB.[11]
The Explanatory Memorandum presents estimated savings of $52.4
million in 2008-09, $96.5 million in 2009-10, $101.0 million in
2010-2011 and $104.7 million in 2011-2012.[12] These savings will be achieved by
reduced numbers of persons qualifying for the BB and, while it is
estimated to cost $22.6 million to administer, it is estimated to
realise a total net savings of $354.5 million over four
years.[13]
Part 2 of Schedule 2 proposes to alter the way
the BB is paid, to pay the BB in 13 fortnightly instalments. This
initiative was announced in the 2008-09 Budget.[14]
Currently, in most cases, the BB is paid as a lump sum to new
mothers, although either parent can claim. There is the option to
pay the BB in instalments and in some circumstances it may be more
appropriate to pay the BB by fortnightly instalments or as a
combination of a lump sum and fortnightly instalments. If an
applicant's personal preference is to receive the BB in fortnightly
instalments, the instalment option can be used. For applicants aged
17 or under the BB must be paid in 13 equal fortnightly
instalments.
With the BB rate scheduled to increase to $5 000 from 1 July
2008, this will then mean 13 payments of $384.62 per fortnight.
Currently, the BB is indexed twice a year on 20 March and 20
September. The amendments in Part 3 of
Schedule 2 propose to alter this to a once a year
indexation on 1 July. The current twice yearly indexation of the BB
to movements in the CPI refers to CPI movements over a 6 month
period and the proposed once a year indexation will refer to CPI
movements over a 12 month period, so overall there shouldn t be any
impact on the rate of BB paid. This change will bring the BB
indexation into line with the current indexation for most other
family assistance payment rates and income test limits, which are
indexed once a year on 1 July to annual movements in the CPI.
This will have a minimal cost impact there will be a six month
delay in receiving the increase, however the quantum of the
increase will cover the same period and amount.
This initiative was announced in the 2008-09 Budget.[15]
When the original BB legislation was introduced from 1 July
2004, the BB was only payable in respect of a child who entered
care within their first 26 weeks. 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 was
altered in 2005 to allow access for adoptions where the child was
aged up to 2 years.[16]
This initiative was grouped with the other BB initiatives in the
Budget and a separate cost figure for this individual change was
not provided in the Budget papers or in the Explanatory Memorandum.
The whole of the BB initiatives included in this Bill are estimated
to achieve net savings of $354.5 million over four years, but
obviously expanding access to the BB for adoptions aged up to 16
years will cost extra money, but the net savings figure for all of
the BB initiatives is realised by the $150 000 income test
initiative.
Currently, a newly adopted child can qualify for the BB but the
child needs to be aged under 2 years of age when the child was
adopted.[17]
Part 4 of Schedule 2 proposes to
raise the age for which an adopted child can qualify for BB from
the current under age 2 to under age 16.
This issue of providing the BB to those who adopt a child has
gained increased impetus recently with the tabling of the A New
Tax System (Family Assistance) (Improved Access to Baby Bonus)
Amendment Bill 2008 in the parliament. The Bill was tabled in
the Senate on 20 March 2008. That Bill was very similar to the
amendments to the BB presented in Part 4, although
it used a different drafting technique to refer to the age which
the BB should apply to adoptions. The Bill wanted the BB to apply
to adoptions, where the child was under the age of consent as set
out in the Social Security Act 1991 (SSA).[18]
[19]
The number of adoptions in the age groups of age 2 to 14 in the
table above shows some 187 adoptions in this age group occurred in
2006-07. This is 33 per cent of all 568 adoptions. If all of the
187 adoptions were otherwise eligible for the BB, at $5 000 per
payment, that equals $935 000 in expenditure. The raising of the
age of the qualifying adopted child to under age 16 will be of some
financial benefit to adoptive families.
The government announced the proposal to collect a Tax File
Number (TFN) from Commonwealth Seniors Health Card (CSHC) claimants
in the 2008-09 Budget.[20] Currently, CSHC claimants are not required to provide a
TFN, they are just required to provide evidence of their adjusted
taxable income, usually by way of their last tax notice of
assessment.
This initiative complements other initiatives announced by the
government in the 2008-09 Budget, being the changes to the adjusted
taxable income for the CSHC, adding in gross income from
superannuation income streams from a taxed source and also to
include income that is salary sacrificed to superannuation.[21]
The Budget papers detailed that the Schedule 3
initiative will cost $13.5 million over 5 years to administer and
will provide net savings of $82.4 million over 5 years.[22] This is made up of
expenditure of $4.6 million in 2008-09 followed by savings of $24.3
million in 2009-10, $28.6 million in 2010-11 and $34.0 million in
2011-12.[23]
The CSHC was introduced from July 1994. The CSHC was available
to people of pension age who were not eligible for the age pension
(or service pension) for reasons other than the income test, for
example, insufficient length of residence or asset holdings
exceeding the asset test limits.
The original purpose of the CSHC was to provide assistance to
low-income retired aged persons but who were not eligible for the
age pension (or service pension). When introduced, the income
limits for the CSHC were the same as for the age pension, so the
vast majority of retired persons issued with a CSHC were those who
were on low income but asset rich, mainly farmers.
The CSHC primarily provides access to concessional prescription
medicines under the Pharmaceutical Benefits Scheme (PBS). The CSHC
may also provide access to other services which may include:
- bulk-billed GP appointments, at the discretion of the general
practitioners,
- a reduction in the cost of out-of-hospital medical expenses
above a concessional threshold, through
Medicare Safety Net, and
- in some instances, additional health, household, transport,
education and recreation concessions which may be offered by State,
Territory and local governments and private providers.
Note: these providers offer these concessions at their own
discretion, and the availability of these concessions may vary
regionally.
- A CSHC holder may also be entitled to receive the following
allowances:
-
Seniors Concession Allowance of $500 per year - to help with
regular bills such as energy, rates and motor vehicle registration
fees that are not available at a concessional rate.
-
Telephone Allowance - if the card holder has a telephone
connected in Australia in their own or their partner's name.
From its inception in 1994, the CSHC used the income test
applied under the Social Security Act 1991 (SSA). From
January 1999, the income test for the CSHC was changed to one based
on adjusted taxable income[24] and also the income test limits were substantially
increased.[25] The
SSA uses a different measurement of income than the Income Tax
Assessment Act 1936 (ITAA1936) and the Income Tax
Assessment Act 1997 (ITAA1997), mainly featuring
gross income rather than net taxable income. Deductions are
allowed, being those directly incurred in earning the income, but
many tax deductions allowed under the ITAA are not allowed under
the SSA.
Set out below are the CSHC
income limits as they have changed over time. The 2001 limits are
still the current limits.
|
Status
|
Income test
limits
Up to Dec
1998(1)
|
Income test
limits
From Jan 1999
|
Current income
test limits
From Sept 2001
|
|
Single
|
$21 460.40
|
$40 000
|
$50 000
|
|
Partnered
(combined)
|
$35 859.20
|
$67 000
|
$80 000
|
1. These income limits were
the then cut-off limits for the pensions income test.
With the income test limits being set at $50 000 single and $80
000 partnered, the CSHC is now no longer a low-income health
card.
In an answer to a Question on Notice No. 116 on 19 June 2008, it
was detailed that there were about 277 000 holders of the
CSHC.[26]
The fact that currently CSHC claimants are not required to
provide a TFN is uncommon. The provision of a TFN is usually
required for claimants for an income support or income supplement
payment and has been in place since the late 1980s.[27] It provides support
for the identity of the claimant and also allows data matching with
Australian Tax Office (ATO) records. Data matching allows the
verification of income information provided to claim the CSHC and
similar information provided by the claimant to the ATO. The
provision of a TFN by CSHC claimants will allow Centrelink to
obtain information from the ATO about adjusted taxable income.
The main impetus to require the provision of a TFN by CSHC
claimants is to identify those with income from a superannuation
income stream from a taxed source. Since 1 July 2007,
superannuation income from a taxed superannuation fund source for
those aged 60 or more has not been taxable income.[28] There may be a few CSHC
claimants claiming the CSHC with salary sacrificed into
superannuation, but comparatively fewer than those with
superannuation income from a taxed superannuation source. The
identification of salary sacrificed superannuation and non-taxable
income from a superannuation source will still be relevant for the
purposes of the adjusted taxable income test for the CSHC.
The amendments presented in Schedule 5 are to
allow an income support or income supplement recipient to volunteer
to have their payments subject to the Income Management Regime
(IMR) arrangements.
The IMR payment arrangements for welfare payments were
introduced with the passage of the Social Security and Other
Legislation Amendment (Welfare Payment Reform) Act
2007.[29] In
brief, the IMR provisions provide for the quarantining of welfare
payments, in part or in full, to be paid into a special account for
an individual. The individual can then draw on that account for
essential and agreed expenditure like paying rent, electricity,
food and other necessary items.
The IMR provisions apply differently in different
parts of Australia. An individual can become subject to an IMR for
one of the following reasons:
- for the protection of the child of that individual,
- the individual s child is deemed to have unsatisfactory school
attendance,
- the individual is a resident of a specified area of the NT,
or
- the individual is subject to the jurisdiction of the Queensland
Family Responsibilities Commission and the Commission requests that
the provisions be applied.
Although there are no provisions specifically
targeting indigenous individuals, it is acknowledged that the
majority of residents in declared areas of the Northern Territory
(NT) and those subject to the Queensland Family Responsibilities
Commission in Cape York are indigenous. Part of the provisions
under the legislation enabling IMRs suspends the operation of Part
II of the Racial Discrimination Act 1975, which
includes the operative provisions prohibiting racial
discrimination.
However, for other IMR purposes like in Western
Australia (WA), the child protection and child unsatisfactory
attendance at school provisions of the IMR legislation can be
applied. This is also not indigenous specific in theory the IMR
provisions can be applied to an individual anywhere in Australia,
using the child protection or child unsatisfactory attendance at
school provisions.
As said, in cases outside the designated areas of
the NT, or a Queensland Commission referred case, application of
IMR provisions essentially requires either the child attendance at
school or the child protection provisions to apply. It is probable
there are Constitutional difficulties in the Commonwealth
legislating for the application of the IMR provisions on an area
basis in the States, as was done in the Northern Territory. If
either of these provisions do not apply, the IMR provisions cannot
be applied.
The proposed amendments in Schedule
4, will allow for a person to volunteer to have their
welfare payments provided under the IMR processes. The Explanatory
Memorandum does not provide any detail or description as to the
sort of circumstances where a person might want to volunteer for
the IMR arrangements. The Minister said in the second reading
speech that anecdotal evidence had indicated some people wanted the
option of volunteering to have their welfare payments controlled
under the IMR arrangements.[30] No description was provided as to why they might
want to volunteer. Presumably some families facing difficulties
managing their finances might find the discipline of the IMR
processes of some assistance.
The amendments allow the welfare payment recipient, who has
volunteered to be placed under IMR payment arrangements, to elect
to relinquish the IMR arrangements at any time.
Schedule 5 presents amendments to the
Veterans Entitlements Act 1986 (VEA) to alter the
qualifying age for access to the partner service pension. This
initiative was announced in the 2008-09 Budget.[31]
A person can qualify for partner service pension if they
are:
- legally married to and living with a veteran, or
- living with a veteran as their partner; and
- the veteran is receiving an age service pension or an
invalidity service pension; or
A person is also eligible for partner service pension if they
are a member of a couple, their partner is a veteran having
rendered qualifying service, and the person is eligible for an age
pension.
Unless the partner qualifies for an age pension, the partner
must also meet one of the following criteria:
- be at least 50 years of age,
- have a dependent child or children when the claim is made,
- their veteran partner receives the totally and permanently
incapacitated (T&PI) disability pension, or
- their veteran partner is receiving, or eligible to receive, a
Special Rate Disability Pension (SRDP) under the Military
Rehabilitation and Compensation Act 2004 (MRCA).
Partner service pension may be paid to a former partner who is
legally married to, but separated from a veteran. Former partners
are eligible if the veteran is receiving or is eligible to
receive:
-
the partner is at least 50 years of age, or
- the partner
has a dependent child or dependent children.
The amendments presented in Schedule 5 will
raise the qualifying age for access to the partner service pension
from age 50 to the service pension age. This is age 60 for males or
age 58.5 years for females.[32] This raised qualification age is not to apply
where the person is a partner of a Totally and Permanently
Incapacitated (T&PI) disability pensioner or has a dependent
child.
The Budget papers detailed that the estimated cost savings for
this initiative are net savings of $34.6 million over four years.
This will be made up of $0.3 million in 2007-08, $4.3 million in
2008-09, $7.7 million in 2009-10, $10.4 million in 2010-11 and
$12.6 million in 2011-12.[33]
These estimated savings in the Budget papers are only against
outlays for the Veterans Affairs portfolio. There is no estimate
provided about what the partners, who would have otherwise
qualified for partner service pension, would otherwise claim. Most
will probably claim Newstart Allowance under the SSA so the overall
net savings will be somewhat less.
Essentially partner service pension is an income support payment
for a person who is the partner of a service pensioner. Compared to
income support payments provided under the SSA, partner service
pension is a bit anachronistic. The passive and/or dependency based
income support payments provided under the SSA have been phased out
as follows:
- no more new grants of wife pension from 1 July 1995,
- no more new grants of widow B pension from 20 March 1997,
- no more new grants of widow allowance from 1 July 2005, unless
born on or before 1 July 1955,
- no more new grants of partner allowance from 20 September 2003,
and
- no more new grants of mature age allowance from 20 September
2003.
Successive governments have made these changes to
the income support arrangements for persons of working age, in
order that support is no longer provided to a person just because
they are the partner (or former partner) of an income support
recipient. Likewise, passive income support payments like Mature
Age Allowance, where persons of working age are not required to
look for and accept employment to support themselves, are also
being phased out. Essentially, persons of working age should
qualify for income support in their own right.
In most cases, the alternative income support
payment persons will qualify for is Newstart Allowance, which
requires the person to satisfy work search and work participation
requirements. Some may qualify for other payments like Disability
Support Pension or Carer Payment. The reason these payments are
being phased out, rather than just being cancelled, is in
recognition that for some older aged female persons with little, or
no recent attachment to the workforce, they may have difficulty
satisfying the work search and participation requirements.
Schedule 6 contains amendments to the A New
Tax System (Family Assistance) Act 1999 (FAA), the A New
Tax System (Family Assistance) (Administration) Act 1999
(FAAA), the Child Support Legislation Amendment (Reform of the
Child Support Scheme - New Formula and Other Measures) Act
2006 (CSLARCSSA), Child Support (Registration and
Collection) Act 1988 (CSRCA) and the SSA. The amendments to
these various acts arise from the passage of the CSLARCSSA and the
commencement of the new CSS and child support maintenance formula
arrangements from 1 July 2008.[34]
The Explanatory Memorandum details that the financial impact of
the amendments presented in Schedule 6 are
negligible.[35]
The recognition of shared care in the FTB rate calculations and
also in the CSS maintenance formula are to be aligned to reflect
the recommendations in the response to the Howard government s
Ministerial Taskforce on Child Support and its report In the
Best Interests of the Children.[36] The Howard government s
response to the Taskforce Report was announced on 28 February 2006
and the response contained major changes to the CSS child support
maintenance formula.[37] The major legislation then arising from the changes was
the Child Support Legislation Amendment (Reform of the Child
Support Scheme - New Formula and Other Measures) Act 2006
(CSLARCSSA).[38]
The new shared care rules do not recognise a carer for FTB rate
splitting purposes, where a person has less than 35 per cent of the
shared care. This contrasts with the current arrangements where up
to a 90 per cent and 10 per cent shared care arrangement can be
recognised in the splitting of the FTB rate. The new arrangements
mean the FTB will be wholly provided to the person who is the
principle carer, that is, has care for 65 per cent or more of the
time. There may be a splitting of the FTB rate payable for the
child where care is shared from between 35 per cent to 65 per cent
of the time. Where a person has care from between 14 per cent to 35
per cent, while they may not be able to access any part rate FTB,
the costs associated with their care can be taken into account for
the CSS maintenance formula.
Most of the principle amendments to the FAA and the FAAA for the
application of the new FTB rules to apply from 1 July 2008 were
made with the passage of the CSLARCSSA.[39] The Explanatory Memorandum details
that the amendments to the FAA and the FAAA presented in
Schedule 6 are minor and aim to ensure the reforms
are applied as intended.[40] In short it is legislative catch up and
housekeeping.
Item 2 inserts a new clause into the FAA to
detail that a FTB-B rate is to be nil where the individual s
adjusted taxable annual income is more than $150 000. Item
2 also inserts provisions to ensure that, where the
claimant is partnered, their partner s income is also taken into
account in applying the $150 000 annual income limit.
Item 7 provides for the application of the
proposed new $150 000 annual income limit from the 2008-09
year.
Part 2 of Schedule 1 amends
the ITAA1936 in reference to access to various tax offsets. These
tax offsets are the Dependent Spouse Tax Offset, Child-Housekeeper
Tax Offset, Invalid Relative Tax Offset and Parent/Parent-in-law
Tax Offset. The aim of the amendments is to deny access to these
tax offsets where the claimant s taxable income for the year of
claim is more than $150 000. There are no references to adjusted
taxable income in these amendments to the ITAA1936, being the test
used for access to FTB-B, so in effect it is a different test.
Reference is only made to taxable income and so it does not adjust
for foreign income, negatively geared property losses or reportable
fringe benefits. This means there will be persons whose adjusted
taxable income will exceed the $150 000 limit and therefore will
not qualify for FTB-B but their taxable income may be less than
$150 000 and they may qualify for some tax offsets.
Item 3 inserts new provisions to apply an
income test for qualification to the BB. This will require that
that the claimant s estimated adjusted taxable income (and also
their partner s if they have one) for the 6 month period beginning
on the day of the child s birth, will need to be equal to or less
than $75 000. Item 6 does the same as Item
3 but refers to a case where the claimant is not the child
s parent and refers to the 6 month period commencing on the day the
child came into the claimant s care. This refers to cases where the
claimant qualifies for BB and they have not adopted the child. BB
can be paid where a person has the care of a newborn child within
13 weeks of the child's birth and are likely to continue to have
care for no less than 13 weeks and the person is eligible for FTB
(excluding the income test) within 13 weeks of the child's birth or
of the child being entrusted to their care.
Item 10 inserts provisions in reference to
adoption cases and applies the $75 000 limit to the income estimate
for adjusted taxable income for the 6 month period commencing from
the date the child came into care.
Items 14 and 15 provide for the annual
indexation to the CPI of the income limit for the BB ($75 000) on 1
July each year. Item 16 inserts a provision which
will mean a BB claim will not be effective unless it contains an
income estimate for the next 6 months.
Items 18 and 19 change references to 26 weeks
to 52 weeks and Items 20 and 21 change references
to 13 weeks to 26 weeks in the FAA. Currently, a child must be
entrusted to the care of the claimant (or their partner) within 13
weeks of the birth. Recognising the new income test limit for FTB-B
applies a 26 week test, these changes will allow greater
flexibility for claimants to lodge a claim. Likewise the current
requirement that the care will continue for at least 13 weeks is
extended to 26 weeks. This is a narrowing of the qualification
requirements and may restrict access for some claimants. Continuing
on with the theme of these time changes, the current requirement
that the claimant be eligible for FTB (disregarding the income
test) within 13 weeks is to be extended to 26 weeks. This is an
expansion of the qualification requirements and will allow greater
flexibility for persons to claim and qualify.
The changes allowing a claim to be lodged within 52 weeks (up
from the current 26 weeks) will allow persons who, at a later date,
discover their income is below the $75 000, greater flexibility to
make a claim.
Item 24 inserts new provisions to provide for
the payment of the BB by 13 instalments. Item 28
inserts provisions to allow some flexibility of the payment of the
BB by instalments. It may be that the care of the child (and
therefore qualification to the BB) might change during the 13
periodic payments period. Where the change of care for the child
occurs and the new care provider meets all the BB qualification
requirements, then the residual payments owing after the date the
child entered care can be paid to the new care provider.
Item 35 replaces the current twice yearly
indexation of the amount of the BB with a once a year indexation to
the CPI.
Subsection 36(5) of the FAA sets out the age qualification
criterion for access to the BB. Item 37 amends
paragraph 36(5) to change the relevant age limit to access the BB
from less than age 2 to less than age 16.
Item 1 amends the definition of personal
assistance in the Data-matching Program (Assistance and Tax)
Act 1990 (DMATA) to add in CSHC. This will expose the CSHC to
the provisions of the DMATA. Item 3 adds
provisions to the SSA to require that a TFN be supplied for a
person to qualify for the CSHC. Item 4 does
likewise to the Social Security (Administration) Act 1999
(SSAA). Item 5 empowers the requesting of a TFN
from a CSHC claimant and Items 6 to 9 basically
provides for a 28 day period for the claimant to comply with the
TFN request for the claim to be granted.
Items 12 to 18 amend the VEA to provide for
like provisions for persons claiming a CSHC and to provide a
TFN.
Schedule 4 amends the SSAA to make provisions
for a person to volunteer to be subject to the IMR payment
arrangements. Item 1 provides for a person to
volunteer for the IMR arrangements. Item 3 allows
a person to volunteer for the IMR arrangements, but only if their
usual place of residence is within a declared volunteer IMR
designated area. Item 5 empowers the Minister, by
way of a Legislative Instrument, to declare a State, or an area, or
a Territory as an area that volunteer IMR provisions can apply. A
Legislative Instrument would be a disallowable instrument under the
Legislative Instruments Act (LIA).[41] Therefore this is an instrument that
is disallowable by the parliament.
Item 7 inserts provisions detailing which
welfare payments the voluntary IMR provisions are to apply to. The
two categories of payments are category H and category I payments.
Category H payments for IMR purposes are defined in section 123TC
of the SSAA as:
category H welfare payment means:
(a) a
social security benefit; or
(b) a
social security pension; or
(c) a
payment under the scheme known as the ABSTUDY scheme that includes
an amount identified as living allowance; or
(d) a
service pension; or
(e)
income support supplement; or
(f)
Defence Force Income Support Allowance.
Category H payments are essentially the income support payments
provided under the SSA and also under the VEA.
Category I payments for IMR purposes are defined in section 123TC
of the SSAA as:
category I welfare payment means:
(a) a
category H welfare payment; or
(b)
double orphan pension; or
(c)
family tax benefit under the Family Assistance Act; or
(d)
family tax benefit advance under the Family Assistance
Administration Act; or
(e)
baby bonus under the Family Assistance Act; or
(f)
maternity immunisation allowance under the Family Assistance Act;
or
(g)
carer allowance; or
(h)
mobility allowance; or
(i)
pensioner education supplement; or
(j)
telephone allowance under Part 2.25 of the 1991 Act; or
(k)
telephone allowance under Part VIIB of the Veterans Entitlements
Act; or
(l)
utilities allowance under Part 2.25A of the 1991 Act; or
(m)
utilities allowance under Part VIIAC of the Veterans Entitlements
Act; or
(n) a
distance education payment under the scheme known as the Assistance
for Isolated Children Scheme, where the payment relates to a child
or children at a Homelands Learning Centre; or
(o) a
payment under the scheme known as the ABSTUDY scheme that includes
an amount identified as pensioner education supplement; or
(p) a
social security bereavement payment; or
(q) a
veterans entitlement bereavement payment; or
(r) a
Northern Territory CDEP transition payment; or
(s)
an advance payment under Part 2.22 of the 1991 Act; or
(t)
an advance pharmaceutical allowance under Part 2.23 of the 1991
Act; or
(u) a
mobility allowance advance under section 1045 of the 1991 Act;
or
(v)
an advance payment under Part IVA or VIIA of the Veterans
Entitlements Act.
The category I payments include the category H payments and also
includes the income supplement payments, which are add ons for
specific circumstances or needs, like the care of children, to help
pay for private rent.
Volunteering for IMR can only occur where the volunteer is
receiving a category H payment, that is, an income support payment.
This means where the person is receiving an income supplement
payment alone, they cannot volunteer. Where they are receiving an
income support payment, then any income supplement payment they
receive (in category I), can also have the IMR provisions
applied.
Amounts withheld under IMR arrangements for category I payments
paid by instalments is to be normally 70 per cent of the
payment.
Item 1 amends the VEA to change the age
qualification age for access to the partner service pension from
age 50 to the age service pension qualifying age.[42]
Item 2 inserts a new section
25A into the FAAA detailing that, where a person cares for
a child from between 14 per cent to 35 per cent of the time, they
are taken to be a regular care person of the child. This doesn t
have any impact on access to FTB but the cost of providing care to
the child can be taken into account for the new CSS maintenance
formula arrangements.
Item 7 amends subclause 20B(2) of the FAA to
ensure that where a notional assessment of child support has
components within it for disability expense maintenance, then the
notional assessment is not to include the amount of disability
expense maintenance. Disability expense maintenance is provided by
a non-custodial parent to a custodial parent for expenses arising
directly from a physical, intellectual or psychiatric disability;
or a learning difficulty of a child of the individual. To be exempt
as income, the disability expense maintenance must be
received from a parent of the child, or the partner or former
partner, of a parent of the child.
Items 12 to 14 refer to the assessment of
adjusted taxable income for FTB and for CCB and the assessment of
reportable fringe benefits. There were changes to the definition of
reportable fringe benefits for the income assessment for FTB, CCB
made by the Child Support Legislation Amendment (Reform of the
Child Support Scheme - New Formula and Other Measures) Act
2006.[43] The
changes were a part of aligning the adjusted taxable income test
used for FTB and CCB with the adjusted taxable income test used for
the CSS maintenance test. The report of the Ministerial Taskforce
into Child Support had made recommendations that for the purposes
of the CSS formula, the current definition of adjusted taxable
income should be broadened to include certain non-taxable payments
such as certain forms of income support, currently exempt and also
that the definitions of income for child support and FTB should be
consistent and the components should be the same.[44]
The Child Support Legislation Amendment (Reform of the Child
Support Scheme - New Formula and Other Measures) Act 2006 then
made the alignment change to the FTB/CCB income test to take into
regard gross reportable fringe benefits.
From 1 July 2008 the assessments are to refer to gross
reportable fringe benefits. When an employer reports to the
Australian Tax Office (ATO) amounts of reportable fringe benefits
paid to an employee, they are required to gross up the amount. The
fringe benefits gross up rates are set out below. The employer than
pays Fringe Benefits Tax (45 per cent) on this grossed up
amount.
Gross-up rates for fringe
benefits tax
|
Gross-up
rate
|
FBT year
ending 31/3/2009
|
FBT year
ending 31/3/2008
|
FBT year
ending 31/3/2007
|
FBT year
ending 31/3/2006
|
Explanation
|
|
Type 1
Higher gross-up rate
|
2.0647
|
2.0647
|
2.0647
|
2.1292
|
This rate is used where the
benefit provider is entitled to a GST credit in
respect of the provisions of a benefit.
|
|
Type
2
Lower gross-up rate
|
1.8692
|
1.8692
|
1.8692
|
1.9417
|
This rate is used if the
benefit provider is not entitled to claim GST
credits.
(Regardless of whether the
benefits provided are type 1 or type 2, only the lower gross-up
rate is used for reporting on employees payment summaries.)
|
So for example, if an employer paid $16,000 to an employee in
fringe benefits, the amount reported to the ATO would be $16,000 X
2.0647 which equals $33,035. Why are they required to gross it up?
Firstly, it has a revenue collection purpose. Secondly, if an
employer pays salary to an employee, there is the gross amount
(before tax) paid, and also the net amount (after tax) paid. The
grossing up is designed to factor in the equivalent of the gross
amount for fringe benefit provided to the employee, as if they had
been paid in wages or salary, rather than as a fringe benefit.
The amendments clarify that the assessment of adjusted fringe
benefits grossed up amounts refers to assessments for the 2008-09
year and also for FTB/CCB Centrelink provided indexed income
estimates.
In some cases Centrelink can provide an indexed estimate of
income. Normally it is the claimant for FTB or CCB who provides an
estimate of their income. It isn t common that Centrelink makes an
estimate, but in cases where the claimant cannot make an estimate,
Centrelink has the power under the FAAA[45] to make an indexed estimate. This
estimate mostly is based on past year s income, current activities
and probable future activities that might vary that amount. The
amendments provide that estimates for 2008-09 income and onwards
are to be based on gross amounts of reportable fringe benefits.
The government has announced that it would provide for changes
to the FAA to reverse the application of the grossing up of
reportable fringe benefits amounts from 1 July 2008.[46] This change was
largely instigated by concerns about the adverse impact on
employees of charitable organisations and in the not-for-profit
sector.
The taking into regard of the grossed up amount of a reportable
fringe benefit does seem to disadvantage employees provided with
this form of employment remuneration, in terms of their adjusted
taxable income. Perhaps it signals a need to examine whether the
method of using grossed up amounts of reportable fringe benefits is
also appropriate for income assessments under the Child Support
(Assessment) Act 1989.
Items 16 and 17 are essentially transitional
provisions dealing with CSS agreements that are to apply before and
after 1 July 2008, recognising the application of the new CSS
maintenance formula arrangements from 1 July 2008.[47]
Concluding comments
This Bill features the provisions necessary for the
implementation of a $150 000 income limit for the BB and the FTB-B,
in both cases for the first time.
The FTB-B $150 000 limit is to apply to sole parents, the first
time since July 2000 that an income limit has applied for sole
parents claiming FTB-B. Likewise, the $150 000 limit is to apply to
the primary income earner (in a partnered family), the first time
an income limit has applied to the primary income earner. The
families who will be precluded from access to the BB and the FTB-B
will be those with income in excess of $150 000, that is high
income families. The income limit of $150 000 is comparatively high
compared to the other income limits that apply to FTB.
Since it was introduced from July 2004, the BB has been paid by
way of a lump sum. This Bill changes that to pay the BB by way of
13 fortnightly instalments. Access to the BB is significantly
expanded for adoptive parent/s from children aged up to 2 to
children aged up to age 16. This is a significant expansion of
access to the BB for adoptive families.
The changes to definitions of adjusted taxable income for the
CSHC to add in superannuation from taxed superannuation sources and
also salary sacrificed superannuation is driving the initiative to
require a TFN from CSHC claimants. Not many CSHC holders will have
salary sacrificed superannuation but many will have superannuation
from taxed superannuation funds, which, since July 2007 for those
aged 60 or more, is not taxable income. The change to the CSHC
income test arrangements in 1999 to adjusted taxable income
certainly provided for more generous income testing. The
requirement to provide a TFN is common for claims to income support
and income supplement payments.
The amendments providing for volunteers to have their welfare
payments provided under the IMR arrangements are fairly benign,
allowing volunteers to opt out at any time. However, no proper
explanation is provided in the Explanatory Memorandum, or in the
Minister s second reading speech, as to the origins of this
initiative and what sort of cases or situations IMR volunteering
might apply to.
The raising of the qualifying age to be applied for access to
the partner service pension from age 50 to age service pension age
is in line with changes to other passive and dependency based
income support programs over the past 10 years.
[3]. L. Lang, D.
Daniels and P. Yeend, A New Tax System (Family Assistance) Act 1999
, Bills Digest No. 175, Parliamentary Library,
Canberra, 10 May 1999.
http://www.aph.gov.au/library/pubs/bd/1998-99/99bd175.htm#Contact
[6]. The Hon. Jenny
Macklin, MP, Minister for Families, Housing, Community Services and
Indigenous Affairs, Simpler and Fairer Family Payments, media
release, Canberra, 13 May 2008.
http://www.jennymacklin.fahcsia.gov.au
/internet/jennymacklin.nsf/content/budget08_family_13may08.htm
(accessed on 16 June 2008)
[7]. Family
Assistance Legislation Amendment (More Help for Families
Increased Payments) Act 2004, http://parlinfoweb.parl.net/parlinfo/browse.aspx?NodeID=889
[9]. Department of
Families and Community Services and Indigenous Affairs, 2006-07
Annual Report, Canberra, 2007, p. 169. http://www.facs.gov.au/annualreport/2007/pdf.htm
[10]. Australian
Government, Portfolio Budget Statements 2008-09, Budget related
paper No. 1.7, Families, Housing, Community Services and Indigenous
Affairs Portfolio, Canberra, 13 May 2008, p. 88. http://www.fahcsia.gov.au/internet/
[28]. Les Nielson, Tax Laws Amendment (Simplified
Superannuation) Bill 2006, Bills Digest No. 65 2006-07,
parliamentary Library, Canberra, 24 January 2007.
http://www.aph.gov.au/library/pubs/SearchResults.asp
[29]. Peter Yeend and Coral Dow, Social Security and Other
Legislation Amendment (Welfare Payment Reform) Bill
2007, Bills Digest No. 27 2007-08,
Parliamentary Library, Canberra, 13 August 2007. http://www.aph.gov.au/library/pubs/bd/2007-08/08bd027.htm
This formed a part of a package of Bills commonly referred to as
the Northern Territory Intervention.
[32]. Pension age
for a female is being raised by six months every two years so that
by 1 January 2014, female and male pension ages will be the same.
The table below show when females qualify.
Date of Birth Qualifying age
Before 1 July 1949 Eligible
1
July 1949 to 31 December 1950 58.5
1
January 1951 to 30 June 1952 59
1
July 1952 to 31 December 1953 59.5
1
January 1954 and later 60
[43]. Peter Yeend, Child Support
Legislation Amendment (Reform of the Child Support Scheme - New
Formula and Other Measures) Bill 2006, Bills Digest
No. 43 2006-07, Parliamentary Library,
Canberra, 18 October 2006. http://www.aph.gov.au/library/pubs/SearchResults.asp
Peter Yeend
23 June 2008
Bills Digest Service
Parliamentary Library
© Commonwealth of Australia
This work is copyright. Except to the extent of uses permitted
by the Copyright Act 1968, no person may reproduce or transmit any
part of this work by any process without the prior written consent
of the Parliamentary Librarian. This requirement does not apply to
members of the Parliament of Australia acting in the course of
their official duties.
This work has been prepared to support the work of the Australian
Parliament using information available at the time of production.
The views expressed do not reflect an official position of the
Parliamentary Library, nor do they constitute professional legal
opinion.
Feedback is welcome and may be provided to: web.library@aph.gov.au. Any
concerns or complaints should be directed to the Parliamentary
Librarian. Parliamentary Library staff are available to discuss the
contents of publications with Senators and Members and their staff.
To access this service, clients may contact the author or the
Library’s Central Entry Point for referral.
Back to top