Bills Digest no. 50 2015–16
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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.
Michael Klapdor
Social Policy Section
18 November 2015
List
of abbreviations
Purpose of the Bill
Background
Committee consideration
Policy position of non-government parties/independents
Position of major interest groups
Financial implications
Statement of Compatibility with Human Rights
Key issues and provisions
Concluding comments
Date introduced: 21
October 2015
House: House of
Representatives
Portfolio: Social
Services
Commencement: Schedule
1 and Part 3 of Schedule 3 commence on 1 July 2018; Schedule 2 and Part 1 of
Schedule 3 on 1 July 2016; Part 2 of Schedule 3 on 1 July 2017; remaining
sections on Royal Assent.
Links: The links to the Bill,
its Explanatory Memorandum and second reading speech can be found on the
Bill’s home page, or through the Australian
Parliament website.
When Bills have been passed and have received Royal Assent, they
become Acts, which can be found at the ComLaw
website.
Abbreviation
|
Definition
|
ACOSS
|
Australian Council of Social Service
|
ATI
|
Adjusted taxable income
|
ATO
|
Australian Taxation Office
|
CPI
|
Consumer Price Index
|
DSP
|
Disability Support Pension
|
FA Act
|
A New Tax System (Family Assistance) Act 1999
|
FTB
|
Family Tax Benefit
|
FTB-A
|
Family Tax Benefit Part A
|
FTB-B
|
Family Tax Benefit Part B
|
GDP
|
Gross Domestic Product
|
No. 4 Bill
|
Social Services and Other Legislation
Amendment (2014 Budget Measures No. 4) Bill 2014
|
No. 6 Bill
|
Social Services and Other Legislation
Amendment (2014 Budget Measures No. 6) Bill 2014
|
SkB
|
Schoolkids Bonus
|
SS Act
|
Social Security Act 1991
|
The Social Services Legislation Amendment (Family Payments
Structural Reform and Participation Measures) Bill 2015 (the Bill) amends the A
New Tax System (Family Assistance) Act 1999 (the FA Act)[1],
the A New Tax System (Family Assistance) (Administration) Act 1999[2]
and the Social Security Act 1991 (the SS Act)[3]:
- from
1 July 2018, increase the fortnightly rate of Family Tax Benefit Part A (FTB-A)
by $10.08 and increase by $10.44 per fortnight the rate of Youth Allowance for
those aged under 18 and living at home, and the rates of Disability Support
Pension (DSP) paid to a single recipient aged under 18 who is living in their
parent’s home due to a medical condition (as well as some related payment
rates)
- from
1 July 2016:
- increase
the standard rate of Family Tax Benefit Part B (FTB-B) by $1000.10 per year for
families whose youngest child is aged under one
- reduce
the rate of FTB-B for single parents with a youngest child aged 13–16 to
$1000.10 per annum (from the 2015–16 rate of $2,784.95 per annum) and remove
FTB-B in respect of children 17–18
- reduce
the rate of FTB-B for grandparent carer couples with a youngest child in their
care aged 13–16 to $1000.10 per annum and remove FTB-B in respect of children
17–18 and
- remove
FTB-B for couple families (other than grandparent carers) with a youngest child
aged 13 or over
- phase
out the FTB-A and FTB-B supplements by:
- reducing
the FTB-A supplement from the 2015–16 rate of $726.35 per child to $602.25 for
2016–17, to $302.95 for 2017–18 and removing the supplement from 1 July 2018
- reducing
the FTB-B supplement from the 2015–16 rate of $354.05 per family to $302.95 for
2016–17, to $153.30 for 2017–18 and removing the supplement from 1 July 2018.
Overall, the measures will see an increase in FTB-B rates
for families whose youngest child is aged under one year, accompanied by a
reduction in payment rates for all FTB-A families, a significant reduction in
FTB-B payment rates for single parents and grandparent carers with teenagers,
and the loss of FTB-B for couple families whose youngest child is aged 13 or
over, and for single parents and grandparent carers whose youngest child is
aged 17 or 18.
FTB-A and FTB-B are the two main forms of direct financial
assistance the Commonwealth provides to families with children. Both payments are
means tested to target assistance at lower-income families. FTB-A is available
to all families who meet the care, residence and income test requirements.[4]
Different income test requirements for FTB-B restrict the payment to single
parent families and couple families where one parent has a low income or is not
in paid employment.[5]
2014–15 budget measures
In its 2014–15 Budget, the Abbott Government proposed a
range of savings measures targeting family payments. These included:
- lowering
the income cut-off point for FTB-B for single parents and primary earners in a
couple from $150,000 per annum down to $100,000 per annum
- limiting
FTB-B to families with a child under six years
- introducing
a new FTB allowance for single parents on maximum rate of FTB-A who have a
child aged six to twelve years, worth $750 per child, to partially makeup for
the loss of access to FTB-B
- limiting
the FTB-A Large Family Supplement to families with four or more children
- maintaining
FTB payments for two years, that is, they would not be indexed
- not
indexing some of the FTB-A and FTB-B income test thresholds for three years
- removing
the FTB-A ‘per child add-on’, a component of the FTB income test which reduced
the payment withdrawal rate for those with more than one child and
- reducing
the FTB-A and FTB-B supplements to their 2004 values ($600 per FTB-A child and
$300 per FTB-B family).[6]
The Government stated that the intent of the measures was
to ‘ensure the family payments system is sustainable in the long
term’ and is ‘better targeted to support those who need it most’.[7] Expenditure savings of
$8.5 billion over five years to 2017–18 were anticipated.[8]
The Government attempted to legislate these
measures, together with a range of other social security measures, in two
omnibus Bills: the Social Services and Other Legislation Amendment (2014 Budget Measures
No. 1) Bill 2014 (the No. 1 Bill) and the Social Services and Other Legislation Amendment (2014 Budget Measures
No. 2) Bill 2014.[9]
Neither of these Bills proceeded beyond the second reading stage in the Senate,
most likely because the Government was unable to secure their passage due to
opposition to various measures from the Labor Opposition, the Australian
Greens, minor parties and independent senators. Both Bills were discharged from
the Notice Paper in the Senate on 28 October 2014.
On 2 October 2014, the Government
reintroduced the measures in four new Bills. The family payments measures were
contained in the Social Services and Other Legislation Amendment (2014 Budget Measures
No. 4) Bill 2014 (the No. 4 Bill) and the Social Services and Other Legislation Amendment (2014 Budget Measures
No. 6) Bill 2014 (the No. 6 Bill).[10] The No. 6 Bill contained
the measures that the Opposition had offered to support. This Bill passed both
Houses on 17 November 2014. The family payment measures it included were:
- the limit on the Large Family Supplement to families with four or more
children
- the removal of the FTB-A per child add-on and
- the
lowering of the income cut-off point for FTB-B for single parents and primary
earners in a couple from $150,000 per annum down to $100,000 per annum.
The remaining measures were included in the No. 4 Bill
which has been before the Senate since 28 October 2014.
2015–16 Budget
In its 2015–16 Budget, the Abbott Government included its
stalled measures and announced that it would move to abolish the Large Family
Supplement altogether.[11]
The Government also linked the savings from the 2014–15 family payment budget
measures with funding for its Families Package—primarily the $3.5 billion in
additional funding allocated to replace two existing child care fee assistance
payments with a single payment, the Child Care Subsidy, and to overhaul the
funding programs for non-mainstream services.[12]
Stalled measures now dropped
In introducing the Bill, the Minister for Social Services
Christian Porter stated that it would ‘supersede measures’ that had stalled in
the Senate.[13]
Treasurer Scott Morrison stated that, as Minister for Social Services, he had
worked with ‘crossbench senators over many, many months to reengineer the
measures that have been put forward in the 14–15 Budget.’[14]
The savings from the measures proposed in the Bill have again been linked with
the 2015–16 Budget’s childcare measures.[15]
Senate Community Affairs
Legislation Committee
The Bill has been referred to the Senate Community Affairs
Legislation Committee for inquiry and report by 30 November 2015.
Details of the inquiry are available on the committee
website.[16]
Senate Standing Committee for the
Scrutiny of Bills
The Senate Scrutiny of Bills Committee had no comment on the
Bill.[17]
The Opposition has stated that it will only support the
measure to remove FTB-B for couple families (other than grandparent carers)
with a youngest child aged 13 or over and will oppose all remaining measures in
the Bill. A joint media release from the Opposition Leader Bill Shorten, Shadow
Treasurer Chris Bowen and Shadow Minister for Families and Payments Jenny
Macklin stated:
Labor will oppose the Liberal Government’s unfair cuts to low
and middle income families and fight its plans to introduce a new $1,000 baby
bonus.
In particular, our position will protect grandparent carers
and single parent families from the Government’s harsh cuts.
It’s both fair and fiscally responsible ...
Malcolm Turnbull says fairness means the burden should be
“borne by the best able to pay it.”
But these harsh cuts fail that fairness test—they will hurt
millions of low and middle income families and should be rejected.[18]
The Opposition characterised the proposed increased FTB-B
rate of children under one year as a ‘new baby bonus’, referring to the payment
for families with new children abolished by the Labor Government in 2014 (and
replaced with the Newborn Upfront Payment and Newborn Supplement components of
FTB-A):[19]
This new baby bonus was all about Malcolm Turnbull buying off
the National Party to get the top job. Australians shouldn’t have to pay the
price for this Liberal/National deal.
If ever there was a demonstration of how out of touch Malcolm
Turnbull and the Liberals are with the lives of Australian families, this is
it.[20]
The Australian Greens have stated that they will oppose
the Bill and have criticised the Opposition for supporting the removal of FTB-B
for couple families with a youngest child aged 13 or over. In a joint media
release, Leader of the Australian Greens Richard Di Natale and spokesperson on
families and community services Rachel Siewert stated:
The Government's package of cuts targets some of the most
vulnerable members of our community.
The Australian Greens will also not support Labor’s proposal
for a revised cut that will only target coupled families on a low income with
children over 13.
...
Raising teenagers is also expensive for low income coupled
families. It is still fundamentally unfair that both the Turnbull Government
and Labor party are seeking to make savings at the expense of such families.[21]
Media reports suggest crossbench Senators Lambie and
Lazarus were concerned about cuts to families while Senators Day, Muir and Wang
were undecided.[22]
Senator Xenophon has said that the government had ‘made some effort to improve
things, but there’s a lot of consultation and negotiation to be done’.[23]
Senator John Madigan was quoted as saying that there are ‘other segments of the
Australian population far better placed to do the heavy lifting when it comes
to budgetary repair than hard-working Australian mums and dads’.[24]
Liberal Democrat Senator David Leyonhjelm has stated that
he will support the Bill ‘if it meant less spending on “middle class welfare” ’.[25]
The Australia Council of Social Service (ACOSS) has
criticised the measures in the Bill. ACOSS Chief Executive, Cassandra Goldie,
stated:
We cannot support this. Single parents and their children
have already been hit hard with cuts over the last few years which have reduced
their safety net significantly. On the latest analysis, we have over 600,000
children living below the poverty line and children in single-parent households
are in poverty at over twice the rate of children living with two parents.[26]
ACOSS has stated that it supports reform of FTB-B,
particularly limiting access for couple families with children over 13 while
increasing FTB-A rates. ACOSS, however, has argued that support for single
parent families needs to be increased, and the indexation of family payments
should be linked to wage growth.[27]
According to the Explanatory Memorandum, the Bill will
provide net savings of around $4.8 billion over the forward estimates.[28]
This consists of:
- a
cost of $584.2 million to increase FTB-A rates and the rates of some income
support payments for young people
- a
saving of $1,361.8 million from changing payment rates of FTB-B and
- a
saving of $4,063.9 million from phasing out the FTB-A and FTB-B supplements. [29]
This compares with the $4.6 billion in savings anticipated
from the measures stalled in the Senate.[30]
As required under Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the
Bill’s compatibility with the human rights and freedoms recognised or declared
in the international instruments listed in section 3 of that Act. The
Government considers that the Bill is compatible.[31]
Parliamentary Joint Committee on
Human Rights
The Parliamentary Joint Committee on Human Rights considered
the Bill in its Thirtieth Report of the 44th Parliament. The
Committee questioned whether the limitations on the rights to social security
and to an adequate standard of living (under articles 9 and 11(1) of the
International Covenant on Economic, Social and Cultural Rights, respectively)
posed by the reduced rates of FTB-B for single parent families were justified,
and found that the statement of compatibility did not sufficiently justify the
limitations for the purposes of international human rights law.[32]
The Committee made similar findings in regards to the removal of the FTB-A and
FTB-B supplements.[33]
The Committee has sought further information from the Minister on these issues.
The role of family assistance
payments
FTB-A and FTB-B are payments intended to help families with
the cost of raising children.[34]
The role of these payments is separate to the role of income support payments,
as the report of the Australia’s Future Tax System Review (the Henry Review)
explains:
Parents have primary responsibility for the financial support
of their children. However, some families do not have a level of private income
sufficient to adequately support their children. As income support payments are
designed to be adequate only for their recipients, these families need
additional income to adequately support their dependent children.
The primary role of family payments, as distinct from income
support payments, is to ensure all children have access to a basic acceptable
standard of living ... The provision of a basic acceptable standard of living
encompasses both poverty alleviation and social inclusion objectives.[35]
FTB-A and FTB-B, were introduced in July 2000, as part of a
broader reform and simplification of the existing family payments.[36]
The reforms coincided with the introduction, and compensated for the impact, of
the Goods and Services Tax in July 2000.[37]
FTB-A and FTB-B were more generous than previous payments and provided more
immediate assistance to families (many of the previous forms of family
assistance were paid via the tax system as lump sums or rebates at the end of
the financial year).[38]
FTB-A replaced Family Allowance, Family Tax Assistance Part A and Family Tax
Payment Part A.[39]
FTB-B replaced a number of payments and income tax rebates for sole-parents and
single-income families: Guardian Allowance, Basic Parenting Payment, Family Tax
Payment Part B, Family Tax Assistance Part B, Sole Parent Rebate and Dependent
Spouse Rebate (with Children).[40]
At the time of their introduction, then Prime Minister John
Howard emphasised that the reforms were partly intended to provide greater
choice to families as to how they balanced work and family
responsibilities—particularly to allow for one parent in couple families to
remain out of the paid workforce to provide care for their children:
The philosophy of the Government and the
personal philosophy of the Prime Minister in this area has always been that
maximising choice is the desirable thing. It is not the role of the Prime
Minister or the role of the Government to stereotype a particular pattern of
family behaviour or to say what families ought to do in relation to the
arrangements of their infant children. It is the responsibility of the
Government, within the bounds of fiscal capacity, to give maximum choice. And
one of the features you will find as you absorb the detail of the new
arrangements regarding family payments is that not only are they more generous,
not only will we be achieving the consolidation of 12 payments down into three,
not only will we be simplifying their delivery to the public by the
establishment of a special family office, but they will particularly enhance
the choices available to parents in relation to their young children. And they
will capture the need that many of us are very familiar with, of having a tax
and welfare system that allows people to go from a situation of two parents in
full-time work to one for a period of time and then one of those back to
part-time work and then one of those, over another period of time, back into
the full-time workforce.[41]
FTB-B was partly intended to provide additional assistance
to single parent families (on top of the assistance provided by FTB-A) but was
also intended to address the issue where single earner families pay higher
income tax than dual-income families with the same total household income (dual
income families benefit from two tax‑free thresholds).[42]
The role of the FTB supplements
The FTB supplement amounts were not included in the FTB
program introduced in 2000. They were introduced later (the FTB-A supplement in
2004 and the FTB-B supplement in 2005). At the time the FTB-A supplement was
introduced, as part of the More Help for Families package, it was described as
an ‘increase of $600 a year in the maximum and base rates of FTB (A) for each
dependent child’.[43]
The increase was paid as lump sum at the end of the financial year, mainly in response
to the large number of FTB recipients who ended up with small debts after their
end of year reconciliation.[44]
Debts arose as the vast majority of FTB recipients choose to be
paid by way of fortnightly instalments during the year, rather than claiming a
lump-sum at the end of the year when they lodge their tax return. When an FTB
recipient is paid by instalment, they are required to estimate their adjusted
taxable income (ATI) for the year of payment and the rate of FTB paid is based
on their estimate. Once the financial year finishes and they lodge their tax
return, their actual ATI (as assessed) is reconciled against the FTB paid to
them for the year. As it is often difficult to estimate ATI over the year
ahead, many families end up either underpaid (and then paid their arrears) or
overpaid (creating recoverable debt).
While the supplement is included in an
individual’s total FTB entitlement calculation, the value of the supplement is
not paid until after the reconciliation process. As such, it can be used to
offset any debts (partly or in full). Tax return payments from the Australian
Taxation Office (ATO) can also be withheld to offset any debts. If any debt
amount remains, fortnightly payment rates for the following year can be reduced
to recover the outstanding amount (or other debt recovery actions can be taken
if the person is no longer entitled to FTB). If the reconciliation process
finds that a person has been underpaid, then any supplement entitlement will be
added to the amount outstanding and paid as a top-up payment.[45]
For the 2013–14 financial year, only four per
cent of the 1,963,640 FTB ‘customers’ had no change made to their entitlements
following reconciliation.[46]
Around 79 per cent received a top-up payment (in addition to what they had been
paid during the year) and eight per cent (163,380) were deemed to have been
overpaid (with an average overpayment amount of $1,672).[47] A further three per cent
were granted FTB following reconciliation and for around five percent of
customers their reconciliation process had not been completed.[48]
Most FTB debts are for small amounts and the
end-of-year supplement was aimed at mitigating the adverse impacts of FTB
families incurring a debt. For the 2002–03 year, there were 560,633 families
with an end-of-year FTB debt and the average debt was $860.80.[49] The end-of-year supplement
payments of $600 for each FTB-A qualifying child commenced for the 2003–04 year
and served to eliminate the majority of small debts arising from families
understating their ATI for the year.
The end-of-year supplement for FTB-B was
introduced for the 2004–05 year (it was initially worth $300 but only a
half-rate was payable for the 2004–05 year).[50]
The introduction of the FTB-B end-of-year supplement was done for basically the
same reasons as was previously done for FTB-A, that is, to ameliorate the impact
of FTB recipients having small debts after FTB reconciliation. The legislation
also provided for annual indexation of these amounts to the CPI to ensure the
amounts did not fall behind the primary payment rate of FTB payments (also
indexed annually to the CPI).[51]
At the time the FTB-B supplement was
introduced, then Minister for Family and Community Services Kay Patterson
stated the lump-sum amounts were beneficial for reasons other than covering
small debts: ‘Parents have told me the lump sum allowed
them to purchase items such as school uniforms, replace household goods, pay
for a special sporting activity and provide a boost to saving for their
children’s future’.[52]
The National Welfare Rights Network has stated that many families continue to
make use of the lump sum payments in this way, using the payments for larger
purchases that they cannot afford within their weekly budget including car
registration, the replacement of household goods and insurance costs.[53]
Number of recipients
The 2012–13 financial year is the most recent for which the
reconciliation process has been completed. In 2012–13, there were 1.81 million eligible
customers for FTB-A with 94 per cent (1.69 million) paid in the form of
fortnightly instalments.[54]
In the same year, there were 1.58 million eligible customers for FTB-B with 95
per cent (1.5 million) receiving their payment in fortnightly instalments.[55]
Around 39 per cent of all FTB-A recipients received the
maximum rate (the rest receiving reduced rates under the income test) in 2012–13.[56]
Around 71 per cent of FTB-B recipients received the maximum rate (49 per cent of
FTB-recipients were single parent families receiving the maximum rate).[57]
Expenditure on FTB
The 2015–16 Budget estimated that total expenditure on the
FTB program would be $20.1 billion in 2015–16.[58]
FTB-A represents $14.8 billion of this total, and FTB-B $4.2 billion.[59]
The remaining $1.1 billion is for the Schoolkids Bonus (paid to FTB-A
recipients with school-age children and an ATI under $100,000). The Schoolkids
Bonus will cease from December 2016.[60]
In 2014–15, actual expenditure on the FTB program totalled $21.0 billion.[61]
While nominal expenditure on the FTB programs has doubled
over the last 15 years, real expenditure has plateaued since around 2008-09
when the Rudd Government commenced a series of measures to slow expenditure
growth.[62]
These measures included the introduction of the primary income earner limit on
FTB-B (of $150,000), changes to the way income is defined for the purposes of
the income test, removing the link between FTB-A indexation and pension
indexation, indexation pauses on some income test thresholds and pausing
indexation of the FTB-A and FTB-B supplements.[63]
Chart 1 shows nominal and real expenditure (adjusted for inflation) on the FTB
program (excluding the Schoolkids Bonus) since 2000–01.
Chart 1: Expenditure on the Family Tax Benefit program
Notes: 2001–01 to 2012–13 actual expenditure figures; *2013–14
and 2014–15 estimated actual expenditure; ** 2015–16 Budget estimate.
Sources: Parliamentary Library estimates. Expenditure data from
Australian Government, Additional
Estimates Statements and Portfolio Budget Statements for Social Services;
Families, Housing, Community Services and Indigenous Affairs; Families,
Community Services and Indigenous Affairs; and Families and Community Services Portfolios,
2000-01 to 2015–16, accessed 10 November 2015.
The 2015–16 Budget estimated that expenditure on the FTB
program would decline to around $18.1 billion in 2018–19 had all the proposed
savings measures passed.[64]
Up to date estimates have not been published.
The 2015 Intergenerational Report anticipated a reduction
in spending on family assistance payments, primarily as a result of demographic
change (the proportion of the population aged less than 15 is projected to fall
from 18.8 per cent in 2014–15 to 17.5 per cent in 2054–55).[65]
The Treasury estimated that, based on the existing FTB arrangements,
expenditure on assistance to families (which includes childcare payments) would
fall as a percentage of Gross Domestic Product (GDP) from 1.8 per cent in
2014–15 to 0.9 per cent in 2054–55.[66]
If all the 2014–15 Budget measures were implemented, Treasury estimated that
assistance to families would reach 0.8 per cent of GDP by 2054–55.[67]
Rationale for the changes
Apart from offering replacement savings measures to those
stalled in the Senate (which have been linked to the funding for the proposed
childcare payment reforms), the Government has outlined other reasons for the
measures in the Bill:
- to
simplify the payment structure of the FTB system
- to
provide ‘more assistance to families when they need it most’ and
- to
support ‘family choice to spend more time with their children when they are
very young if they wish to do so’.[68]
Simplifying the system
Minister for Social Services Christian Porter stated in his
second reading speech that the ‘fundamental and critical reform component
inherent in the changes now proposed is that the measures reduce the number of
supplements in the system’. The Minister cited the report of Patrick McClure’s
Reference Group on Welfare Reform, A new system for better employment and
social outcomes (the McClure Report), in saying that there were ‘far too
many payments and supplements’ and that ‘the system is unworkable’.[69]
The McClure Report recommended a reduction in the number of
income support and family assistance payment categories, and suggested that all
supplement payments should be reviewed by the Government alongside the
development of these new payment categories.[70]
In regards to supplements for family payments the McClure Report found that it
would ‘be appropriate in the new system to cover the ongoing costs of children
through the new Child and Youth Payment rather than through specific
supplements’.[71]
Supplements would be reserved for specific extra costs, such as the costs of a
new born baby.[72]
The ‘Child and Youth Payment’ recommended by the Report would be a single,
means tested payment that recognised the cost of dependent children and young
people, and ‘would increase with the age of children at defined life transition
points’.[73]
The proposed measure to phase-out the FTB-A and FTB-B
supplements does not directly align with the McClure Report’s recommendations.
The Report suggested that supplements be reviewed alongside broader reforms of the
welfare system. It also suggested that the main benefit payments should be
designed to cover the relevant costs of the target group so that supplementary
payments would only be needed for specific costs. The Bill proposes a small
increase in the rate of the main FTB-A payment, equivalent to around 36 per cent
of the current value of the FTB-A supplement. The Bill will remove the
supplements without the recommended review or broader reform of the welfare
system; and will reduce the level of support available through the main
payments without an assessment of the design of the payment and its adequacy.
The proposed changes to FTB-B eligibility and rates for
children over the age of 13 run counter to the McClure Report’s recommendations
that family assistance increase with the age of children. Having examined research
on the costs of children, the McClure Report found:
The costs of children increase markedly at the following
points in the lifecycle: starting primary school, starting secondary school and
entering the final two years of secondary school. The new Child and Youth
Payment will better reflect this and be higher for older children than for
younger children.
Payments for low income families with children and young
people should support children to finish their education and transition to the
workforce.[74]
The Bill’s proposed changes to FTB-B will instead reduce or
remove the financial assistance provided by that payment when children enter
secondary school, and will remove the payment for all currently eligible
families with children entering the final two years of secondary school. The
Minister did not refer to this particular section of the McClure Report in his
second reading speech but stated that limiting FTB-B for couple families to
those with children under the age of 13 ‘strongly supports the policy imperative
that families be encouraged and enabled to re-enter the workforce as their
children begin secondary school’.[75]
This statement suggests FTB-B’s role—as a dual purpose payment aimed at
providing additional support to single parents and at improving horizontal
equity between dual and single-earner couple families—is to be limited to
families with younger children in order to encourage work participation. While
the proposed changes are not as dramatic as those proposed in the 2014–15
Budget, they signify a step away from the Howard Government’s view of the role
FTB-B would play.
Removing the FTB supplements does simplify the system but
the other changes proposed by the Bill will further complicate the array of
different rates and eligibility conditions for different family assistance
payments. Increasing the FTB-A rate for children under one year of age will add
a fifth FTB-A payment rate category, and will add to the existing payments for
infant children—currently, families may be eligible for the Newborn Upfront
Payment and Newborn Supplement components of FTB-A, or they may receive Paid
Parental Leave Pay.[76]
The changes to FTB-B will add two new payment rate categories (single parents
and grandparent carer couples with children over the age of 13) to the two
existing rates and add new eligibility conditions based around the age of
children and marital status.
Increasing fortnightly rates while
reducing total annual entitlements
The Minister’s argument that the FTB-A rate increase will
provide ‘more assistance to families when they need it most’ is based on the
position that fortnightly payments provide the most relevant assistance for
families managing a budget and the supplement payments are no longer fit for
purpose:
If I might put to you all ‐ one of the virtues of this
approach is that – and again we've listened on this – is that family expenses
and family budgets flow in this fortnightly cycle. Things that happen at the
end of the year are separate to that fortnightly cycle. So, the cost of living
has happened at this fortnightly cycle so we are taking savings from a payment
that is no longer fit for purpose in the end of year supplements, transferring
it to the child care package and then using some part of it to buttress up and increase
the fortnightly payment so that as the daily living cycle and weekly living
cycle and fortnightly living cycle goes on, families are better equipped to
cope with that rhythmic fortnightly pattern and the real‐time demands of
fortnightly budgeting.[77]
The Government holds that the issue the supplements were
partly intended to address—small debts arising from the reconciliation
process—will not be an issue in the near future as the ATO will be introducing
a ‘single touch payroll system’ in 2018–19.[78]
This system is intended to automatically report payroll information to the ATO
when employees are paid.[79]
The ATO can share this data on income with Centrelink in ‘real-time’, allowing
Centrelink to make adjustments to an individual’s FTB entitlements if there are
any discrepancies with that individual’s ATI estimate for the year. The new
payroll reporting system was intended to be introduced from July 2016 but the
commencement date has been pushed back to within ‘a couple of years’.[80]
In October 2015, an ATO spokesperson stated:
Consultation is continuing on the scope and timing for the
Single Touch Payroll initiative and the feasibility of conducting targeted
pilots subject to a final Government decision to proceed with the initiative.[81]
The new system should, if it works, reduce the number of
people who are overpaid FTB but the Government is yet to make a final decision
to implement the system. The Bill will phase out the supplements partly aimed
at minimising the impact of small debts on FTB recipients, based on the uncertain
prospect that the new payroll reporting system will be implemented within the
same timeframe and will actually work to minimise the number of FTB overpayments.
As noted above, some have suggested that the provision of
lump-sum supplements (as opposed to increased instalment payments) are
beneficial in that they allow families to make large, one-off, purchases or
make large annual payments such as car registration and insurance. Thus, it is
unclear whether all families will appreciate the loss of the annual supplement
payment in exchange for a small increase in their fortnightly rate,
particularly when, for most recipients, the overall rate of assistance provided
via FTB is being reduced. The Government has argued that many families will
also benefit from increased childcare assistance in the proposed ‘Jobs for
Families’ package, and will therefore be better off overall.[82]
It is difficult to assess the financial impact of the proposed childcare
package as the legislation implementing the package is yet to be introduced.
Also, those families not using childcare, particularly those with older
children, will not receive any benefit from this package to offset the
reduction in their FTB entitlements.
Additional support for families
with infants
Increasing the maximum FTB-A rate for children under the age
of one by $1,000.10 is intended to support ‘family choice to spend more time
with their children when they are very young’.[83]
The increase has also been linked with a deal between Prime Minister Malcolm
Turnbull and The Nationals, securing their status as Coalition partner
following the ousting of Tony Abbott as Prime Minister—it was described at the
time as an extra $1,000 payment for ‘stay-at-home mums’.[84]
The higher payment rate will be in addition to the existing
FTB-A components paid to new parents who do not receive Paid Parental Leave Pay—the
Newborn Supplement and the Newborn Upfront Payment. Together, these two
components provide a maximum annual increase in FTB-A of $2,091.84 for a first
child, and $1,046.25 for second and subsequent children (for 2015–16).[85]
The increased support for FTB-A eligible families with very
young children contrasts with the Government’s moves to restrict access to Paid
Parental Leave Pay for parents able to access equivalent (or greater) employer‑provided
paid parental leave entitlements.[86]
Currently, eligible parents can access Paid Parental Leave Pay and any
employer-provided entitlements.
Impact of the measures
At Senate Supplementary Budget Estimates hearings, the
Department of Social Services provided some information on the estimated number
of people expected to be affected by the proposed measures:
- 76,000
couple families with a youngest child aged 13 or over will lose eligibility for
FTB-B when the measures commence on 1 July 2016
- 136,000
single parent families with a youngest child aged 13–16 will receive a reduced
FTB-B payment (from $3,139 to $1,000 per annum)
- 3,900
grandparents will receive the reduced FTB-B rate for children aged between
13–16
- 1.2
million families will receive the increase in the fortnightly FTB-A rate
- 15,600
Youth Allowance (aged 18 and living at home) recipients; 4,390 DSP recipients;
1,050 Abstudy recipients; and, around 1,160 Special Benefit (under 18 and
living at home) recipients will receive an increase in payment rates (so that
the rates are equivalent to the relevant FTB-A rate) and
- 1.5
million FTB-A recipient families and 1.3 million FTB-B recipient families will
receive a reduced entitlement as a result of the phasing out of the end of year
supplements (there will be significant overlap in the number of families
affected by this particular measure).[87]
Cameos
In terms of the direct financial impact on families,
little information has been published by the Government. The Minister for
Social Services’ media release announcing the measures included four ‘cameos’ representing
the fortnightly cash impact on different family-types resulting from the FTB
changes and the proposed new childcare package in 2018–19, but inexplicably excluded
the impact of the supplement loss.[88]
To illustrate the fortnightly cash impact of the Bill’s
proposed measures, Table 1 presents calculations of the current FTB
entitlements for different families compared with estimates of what these
entitlements would be if the proposed changes were implemented now. The
estimates of entitlements under the proposed changes calculate the impact of
the changes in FTB-A and B rates, the abolition of the end-of-year supplements,
and changes in age of eligibility for FTB-B as if they applied to the current
FTB rates and income test settings. This means that the impact of indexation on
FTB rates and income test thresholds is not taken into account­­. As such, the
estimates should only be considered as indicative of the impact the changes
will have. Childcare payments (both current and proposed) have been excluded as
these entitlements depend on the use and cost of childcare services (as well as
family income) and the table is intended to reflect only the possible impact of
the FTB changes. The impact of the abolition of the Schoolkids Bonus (SkB),
from January 2017, is included as it is currently part of the FTB program and
the removal of this payment will affect many of the same families at the same
time.
Table 1: Estimates of the impact of the proposed changes
to Family Tax Benefit on different family types
Family circumstances
|
Current rates (including all supplements), pa
|
2018 changes applied now, pa
|
Difference between current and proposed FTB
entitlements
|
Single parent, one child aged 13 years, no private income,
Newstart Allowance
|
FTB-A: $6,942
FTB-B: $3,190
SkB: $856
|
FTB-A: $6,479
FTB-B: $1,051
SkB: $0
|
-$3,458
|
Single parent, one child aged 13 years, $70,000 in
earnings
|
FTB-A: $3,148
FTB-B: $3,190
SkB: $856
|
FTB-A: $2,684
FTB-B: $1,051
SkB: $0
|
-$3,459
|
Couple family, two children aged 14 and 16 years, Parent 1
with $80,000 in earnings, Parent 2 with $0 in earnings
|
FTB-A: $8,090
FTB-B: $3,190
SkB: $1,712
|
FTB-A: $7,163
FTB-B: $0
SkB: $0
|
-$5,829
|
Couple family, two children aged 14 and 16 years, Parent 1
with $60,000 in earning, Parent 2 with $30,000 in earnings
|
FTB-A: $6,090
FTB-B: $0
SkB: $1,712
|
FTB-A: $5,162
FTB-B: $0
SkB: $0
|
-$2,640
|
Couple family, two children aged 9 months and 3 years,
Parent 1 with $80,000 in earnings, Parent 2 with $0 (no PPL Pay)
|
FTB-A: $6,260
FTB-B: $4,413
SkB: $0
|
FTB-A: $5,333
FTB-B: $5,059
SkB: $0
|
-$281
|
Notes: FTB amounts include the FTB-A and FTB-B supplements, the
Energy Supplement, and the Newborn Supplement/Newborn Upfront Payment where
applicable. Amounts rounded to the nearest dollar.
Source: Parliamentary Library estimates. Payments rates and
income test thresholds from DHS, A
guide to Australian Government payments: 20 September­–30 December 2015,
DHS, Canberra, 2015, accessed 5 November 2015.
For families with older children, the financial impact of
the proposed changes will be dramatic, with a reduction in assistance ranging
from $2,000 to $6,000 (in the examples above). For the single parent on
Newstart, the loss of $3,500 is equivalent to around 13 per cent of their total
income (under current settings). Larger families stand to lose more, as a
result of losing both the per-child FTB-A supplement and any Schoolkids Bonus
payments. Even those with very young children who will benefit from the
increased FTB-B rates for children under one and the increased FTB-A rates
could still face a financial loss due to the abolition of the FTB supplements.
While many low income families with younger children will
benefit from the proposed childcare package, those who do not use childcare and
those who will not qualify under the package, will not receive any such offset for
the reduction in FTB entitlements.
Main provisions
Schedule 1
A New Tax System (Family
Assistance) Act 1999
Item 1 inserts new clause 7 at Part 2 of
Schedule 4 of the FA Act to provide for a one-off increase in the
standard per child rates of FTB-A of $262.80 (there are two rates: one for an
FTB child aged under 13 years and one for an FTB child who has reached 13
years).[89]
This will increase the maximum annual rate of FTB-A for 2018­‑19 on top
of the usual indexation to this rate that occurs on 1 July 2018 and is
equivalent to an additional increase of around $10.08 per fortnight.
Social Security Act 1991
Items 3 and 4 substitute the annual and fortnightly
maximum basic rates of Disability Support Pension (DSP) for recipients aged
under-18, with no dependent children, considered not independent and living at
home, currently set out in table item 1 of the table at Point 1066A-B1 of the SS
Act with references to ‘annual linked rate’ and ‘fortnightly linked rate’
respectively.[90]
The definitions of the linked rates are inserted by item 6 as new points
1066A-B2 and 1066A-B3. The annual linked rate is the standard FTB-A
rate for an FTB child aged over 13 years (the amount under column 2 of table
item 2 in clause 7 of Schedule 1 of the FA Act). The fortnightly
linked rate is worked out by dividing the annual rate by 365 and
multiplying the result by 14. Currently, the DSP rate for those aged under-18,
not independent and living at home is $233.60 per fortnight compared to the
FTB-A rate for children over 13 years of $233.94 per fortnight.[91]
The amendments align the rates of the two payments to ensure these DSP
recipients also benefit from the proposed FTB-A rate increase.
Items 7–10 make similar amendments at point
1066B-B1 for blind DSP recipients aged under-18 in the same circumstances as
the above child, to link the DSP rate for these recipients with the FTB-A rate
for children over 13 years.
Item 11–15 make similar amendments at point
1067G-B2 and 1067G-B3 to link the Youth Allowance rates for those aged
under-18, not considered independent and still living at home and for those
aged under-18, considered independent and living in supported state care, with
the FTB-A rate for children over 13 years. These Youth Allowance rates are
currently the same as the rate for DSP recipients aged under-18, not
independent and living at home ($233.60).[92]
Schedule 2
A New Tax System (Family
Assistance) Act 1999
Item 1 inserts new subparagraph 22B(1)(a)(ia)
into the FA Act, so that FTB-B will no longer be payable for secondary school
children aged 17 or 18.[93]
Currently, for a parent/carer to be eligible for FTB-B in respect of a child
aged 16 or over, the child must meet the definition of secondary school child
at section 22B of the FA Act. This definition currently allows FTB-B to be
paid in respect of children aged 16, 17 or 18 (where the calendar year in which
the child turned 18 has not ended) if they meet the schooling requirements
(also set out at section 22B). The new subparagraph will amend the definition
of secondary school child for the purposes of calculating a person’s FTB-B rate
so that it only applies to children aged 16 (where the calendar year in which
the child turned 16 has not ended) who meet the schooling requirements. Older
children will still meet the definition for the purposes of other sections of
the FA Act (for example, for the purposes of calculating FTB-A rates)
due to consequential amendments by items 2 and 3.
Item 4 inserts new clause 28D at Subdivision
AA of Division 1 of Part 4 of Schedule 1 of the FA Act so that an
individual who is a member of a couple and whose youngest child is aged 13
years or over will have a nil rate of FTB-B unless that individual is
considered a grandparent of the child. The new clause sets out relationships
that can be considered biological parent-child relationships for the purposes
of determining whether the individual is a ‘grandparent’ including: adoptive
parents, step-parents and relationship-parents.
Item 6 repeals clause 30 at Division 2 of Part 4 of
Schedule 1 of the FA Act which sets out the two standard rates of FTB-B,
and inserts new clause 30 which provides for four different standard
rates. They are:
- where
the family’s youngest child is aged under one year, the annual rate will be
whatever the current rate for children under five years would be on 1 July 2016
if it were indexed under the existing settings, plus $1000.10
- where
the family’s youngest child is aged over one year but under five years of age,
the annual rate will be whatever the current rate for children under five years
would be on 1 July 2016 if it were indexed under the existing settings
- where
the family’s youngest child is at least five years of age but not yet 13 years
of age, the annual rate will be whatever the current rate for children at least
five years of age would be on 1 July 2016 if it were indexed under the existing
settings and
- where
the family’s youngest child is at least 13 years of age but not yet 17 years of
age, the annual rate will be $1000.10 (where the claimant is a single parent or
grandparent carer).[94]
This complicated arrangement provides for the rate
provided to families with a youngest child under one-year of age to receive an
increase of $1000.10 from 1 July 2016, and for the rate provided to single
parents and grandparent carers with a youngest child aged 13–16 from 1 July
2016 to be reduced to $1000.10. The wording of this clause is complex and could
be simplified closer to 1 July 2016 once the relevant indexation factor has
been determined. The new rates will be indexed for the first time on 1 July
2017.
Schedule 3
A New Tax System (Family
Assistance) Act 1999
Schedule 3 contains three parts, which will gradually
reduce the FTB-A and FTB-B supplements over two years before abolishing the
supplements from 1 July 2018. Items 1–8 make amendments to the FTB-B
supplement amount set out at subclause 31A(2) and the FTB-A supplement
amount at subclause 38A(3) of Schedule 1 of the FA Act, and
related provisions, to:
- reduce
the FTB-B supplement from the current per family rate of $354.05 to $302.95 on
1 July 2016 (the same rate as when it was introduced), and then to $153.30 from
1 July 2017
- reduce
the FTB-A supplement from the current per child rate of $726.35 to $602.25 on 1
July 2016, and then to $302.95 on 1 July 2017.
From 1 July 2018, items 13 and 16 remove references
to the FTB-A supplement in the method statements at clauses 3 and 25 of
Schedule 1 which are used to calculate an individual’s FTB-A rate. Items
17–19 remove references to the FTB-B supplement in the rules for
calculating an individual’s FTB-B rates at clauses 29 and 29A of Schedule 1. Items
14 and 15 remove references to the FTB-A supplement used for calculating an
individual’s maintenance income test ceiling, by repealing a method statement
step at clause 24N of Schedule 1 and repealing clause 24R of
Schedule 1. The maintenance income test ceiling is part of the
calculation of how child support payments affect an individual’s FTB rate where
there are both child support and non-child support children in the family, or
where the individual has two or more child support cases.[95]
The maintenance income test ceiling ensures that any child support received
only reduces the above base-rate amounts of FTB-A paid for the child support
children.[96]
Items 20 and 21 repeal Division 2A
of Part 4 and Division 2A of Part 5 of Schedule 1 which set out the
rates of the FTB-B and the FTB-A supplements, respectively.
These amendments effectively abolish the FTB supplements from 1 July 2018.
The Bill attempts to present a more palatable range of FTB
savings measures than those contained in Bills stalled before the Senate.
Rather than stop FTB-B payments to eligible families when their youngest child
turns six, the Bill proposes that the cut off for couple families will be when the
youngest child turns 13 and single parents and grandparent carers can continue
to receive a reduced rate until their youngest turns 17. To offset the lost
savings from this softer approach to FTB-B, the Bill proposes to completely
phase out the end-of-year supplement amounts (which goes much further than the
previous proposal to slightly reduce these supplement amounts). This measure
effectively constitutes an overall reduction in the rate of FTB-A and FTB-B.
While the cut is tempered by a small increase in fortnightly rate of FTB-A, it
still equivalent to a 7–9 per cut in the current maximum per child rate of
FTB-A, and an 8–11 per cent cut in the current maximum family rate of FTB-B.
The new savings proposals spread the financial impact on a
broader group of family assistance recipients than those proposed in the
2014–15 Budget. Vulnerable groups such as single parent and grandparent carer
families still face a significant loss of income and a much larger group of
families now face the loss of thousands of dollars in financial assistance from
the Government.
The new proposals have not received a particularly welcoming
reception, though there is some support from the Opposition and welfare groups
for measures limiting FTB-B assistance to couple families. If it insists on
drawing savings from the family assistance program, the Government may need to
look at measures that minimise the impact on vulnerable families and instead
target higher income groups (through changes to the income test).
Alternatively, the Government could pursue real structural reform of the family
assistance system, as recommended by the reports of the Henry and McClure
reviews.
Members, Senators and Parliamentary staff can obtain
further information from the Parliamentary Library on (02) 6277 2500.
[1]. A New Tax System (Family
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[2]. A New Tax System (Family
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[3]. Social Security Act 1991
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[4]. Department
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[5]. Ibid.
[6]. P
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[10]. Parliament
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[11]. Australian
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[12]. T Abbott (Prime Minister) and S Morrison (Minister for Social
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[14]. S
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[15]. C
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[19]. M
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[20]. B
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[21]. R
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[24]. J
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[25]. J
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[26]. Australian
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[27]. Ibid.
[28]. Explanatory
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[29]. Ibid.
[30]. C
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[31]. The
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[32]. Parliamentary
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[33]. Ibid.,
pp. 59–60.
[34]. DHS,
‘Family
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[35]. Australia’s
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[36]. A
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[37]. D
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[38]. Ibid.,
p. 18, 55.
[39]. Ibid.,
p. 18.
[40]. Ibid.,
p. 55.
[41]. J
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[42]. Henry
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[43]. Australian
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[44]. Family
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[45]. Department
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[46]. Ibid.,
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[47]. Ibid.
[48]. Ibid.
[49]. Department of Families and Community Services (FaCS), Annual report 2003–04: volume 2, FaCS,
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[51]. Ibid.
[52]. K
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[53]. National
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[54]. DSS,
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[55]. Ibid.,
p. 35.
[56]. Ibid.,
p. 34.
[57]. Ibid.,
p. 35.
[58]. Australian
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[59]. Ibid.
[60]. DSS,
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[61]. DSS,
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[62]. P
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[64]. Australian
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[65]. Australian
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[66]. Ibid.,
p. 75.
[67]. Ibid.
[68]. C
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7–8.
[69]. Ibid.,
p. 8; S Morrison (Treasurer), C Porter (Minister for Social Services), S
Birmingham (Minister for Education and Training), Transcript
of joint press conference: Canberra, op. cit., p. 3.
[70]. Reference
Group on Welfare Reform (P McClure, chair), A
new system for better employment and social outcomes (McClure Report),
report prepared for DSS, DSS, Canberra, 2015, pp. 37–38, 92, accessed 2
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Australia’s welfare system fairer, more effective, coherent and sustainable and
encourage people to work’. DSS, ‘Review of
Australia’s Welfare System’, DSS website, accessed 10 November 2015.
[71]. McClure
Report, op. cit., p. 92.
[72]. McClure
Report, op. cit., p. 93.
[73]. McClure
Report, op. cit., p. 87.
[74]. McClure
Report, op. cit., p. 88.
[75]. C
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