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 - Tax
Reform Package
Background - Family
Benefits
Main Provisions
Concluding Comments
Endnotes
Contact Officer and Copyright Details
A New Tax System (Family Assistance)
Bill 1999
Date Introduced: 31 March 1999
House: House of Representatives
Portfolio: Family and Community Services
Commencement: After the commencement of
specified goods and services tax legislation(1) proposed to
commence 1 July 2000.
The purpose of
the A New Tax System (Family Assistance) Bill 1999 (the Bill), is
to introduce a simplified structure and delivery mechanism for the
provision of family assistance through the tax and social security
systems.
1. Tax
Reform Package
On 13 August 1998 the Federal Government
released proposals for reform of the Australian tax system(2) of
which, a goods and services tax (GST) was the centrepiece.
The tax reform plan proposes to:
-
- Introduce a GST which eliminates sales tax and a range of nine
other indirect taxes
-
- Change Commonwealth-State financial relations by providing
States and Territories with an independent revenue base
-
- Implement significant changes to individual marginal tax
rates
-
- Implement a major rationalisation of family assistance
-
- Replace the various existing taxation payment and reporting
systems of company tax, provisional tax, PAYE,(3) PPS(4) and RPS(5)
by one quarterly tax payment system, PAYG(6)
-
- Introduce a new universal business number system
-
- Move toward an entity taxation system which is directed toward
the elimination of tax advantages between different business
structures, and
-
- Simplify the imputation system and introduce refunds for excess
franking credits.
As part of the tax reform package to implement a
major rationalisation of family assistance the Government proposes
to simplify the structure and delivery of family assistance.
Accordingly, twelve family benefits are proposed to be reduced to
three and a new Family Assistance Office will deliver the new set
of simplified family assistance programs.(7)
On 25 November 1998, the Senate referred issues
relating to the GST and the new tax system to a Select Committee
and three of its Reference Committees.(8) In February 1999 the
Senate Select Committee produced its First Report.(9) The three
Reference Committees produced their reports in March 1999.(10) In
April 1999 the Senate Select Committee released its second
report.(11)
2. Family Assistance
Initiatives
The rationalisation of family assistance
programs is intended to compliment other reforms contained in the
tax reform package which provide extra assistance to families and
attempt to remedy, to a degree, problems associated with poverty
traps.
Poverty traps arise from the combination of
losing entitlement to income support payments and paying tax, which
ensures individuals or families retain very little of any extra
money they earn.
The tax reform package boosts the amount of
income tax cuts that families receive and improves work incentives
for families by making changes to the family tax initiative
payment, the family allowance income test free area and family
allowance income test taper rate.
These changes:
-
- realise direct and immediate financial assistance to those
families with incomes in excess of the free area amount who are
currently on reduced payments
-
- provide incentive and encouragement to those on the maximum
rate of payment to increase family income and thereby (when
combined with personal income tax cuts) ease the problem of the
poverty trap, and
-
- allow greater access to entitlement to the family allowance due
to the increase in the income test free area, the reduction in the
taper rate and consequently the raising of the income test cut-off
limits.
For additional information in relation to family
assistance initiatives and compensation measures contained in the
tax reform package please refer to the Bills Digests for A New Tax
System (Compensation Measures Legislation Amendment) Bill 1998 and
A New Tax System (Personal Income Tax Cuts) Bill 1998.
Financial assistance to families with children
was until 1941 provided primarily through tax concessions for
children and dependant spouses. The only exception was a lump sum
Maternity Allowance introduced in 1912. In 1941 Child Endowment,
the first periodic cash payment, was introduced. Since then
assistance has been provided by varying combinations of payments
and tax concessions. Table 1 gives a brief chronology of major
changes to the structure of family assistance since 1941.
From 1941 until the mid 1980s modest assistance
was available to families with children means test free. Families
dependent on pensions and benefits were entitled to additional
limited assistance. Increased awareness of child poverty in the
1980s led to increases in rates and the introduction of assistance
for low income working families. To help pay for this increase in
assistance and to target it at lower income people, means testing
was introduced for most family assistance payments. Annual taxable
income was used rather than current income (used for pensions and
benefits) to reduce the complexity and intrusiveness of the income
testing process. Taxable income proved to be a less than effective
measure of and need for assistance. So taxable income has been
modified over time to include the value of some fringe benefits,
losses on rental property and foreign income. It is still a matter
of debate as to whether taxable income with these adjustments
affectively identifies need. This debate in other areas has seen
the development of the Family Actual Means Test (for Youth
Allowance).
Assistance with the costs of childcare was also
introduced in the mid 1980s. The extension of eligibility to people
using commercial childcare in 1990 resulted in rapid growth in the
numbers using that assistance. The Child Care Cash Rebate
introduced in 1994 extended assistance to higher income groups and
to those using informal care.
Moves toward rationalisation and simplification
of the growing number of targeted payments commenced in 1993 when
all the most stringently means tested payments were combined to
form Additional Family Payment. This trend was continued in 1996
with the merger of Basic Family Payment and Additional Family
Payment.
During the same period, however, new payments
targeted at the needs of specific groups were introduced. The need
for further rationalisation was clear by the time that the Family
Tax Initiative package of payments and concessions was added to the
growing list of family assistance measures.
Table 1. Family Assistance 1941 to
1999
Year introduced
|
Payment or Tax Concession introduced or
altered
|
Government responsible
|
1941
|
Child Endowment for second and subsequent children
Most tax concessions for children abolished
|
Menzies
|
1942
|
Tax concessions for children partially restored
|
Curtin
|
1943
|
Child Allowance for the first child of incapacitated pensioners
and widow pensioners
|
Curtin
|
1945
|
Additional Benefit for the first child of unemployment and
sickness beneficiaries
|
Curtin
|
1950
|
Child Endowment for the first child
Tax concessions for children fully restored
|
Menzies
|
1956
|
Additional Pension for all children of incapacitated pensioners
and widow pensioners
|
Menzies
|
1962
|
Additional Benefit for all children of unemployment and sickness
beneficiaries
|
Menzies
|
1963
|
Mothers Allowance for widows with children
|
Menzies
|
1965
|
Additional Pension for all children of age pensioners
Guardian Allowance for single pensioners with children
|
Menzies
|
1975
|
Dependent Spouse Rebate replaced deductions for spouses
Sole Parent Rebate
|
Whitlam
|
1976
|
Family Allowance replaced Child Endowment and tax
concessions
|
Fraser
|
1978
|
Maternity Allowance abolished
|
Fraser
|
1983
|
Family Income Supplement for low income working families
|
Fraser
|
1984
|
Mothers/Guardians Allowance for single beneficiaries with
children
Fee Relief for children attending not for profit long day care
centres
|
Hawke
|
1985
|
Multiple Birth Allowance for triplets etc
|
Hawke
|
1986
|
Family allowance income test for 16 and 17 year olds
|
Hawke
|
1987
|
Family Allowance tapered income test for all recipients
Family Allowance Supplement replaced Family Income Supplement
for low income working families
Rent Assistance payable to Family Allowance Supplement
recipients
|
Hawke
|
1988
|
Family Allowance Supplement Assets Test
|
Hawke
|
1990
|
Fee Relief extended to children attending commercial child care
centres
|
Hawke
|
1991
|
Family Allowance income test taper removed
|
Hawke
|
1992
|
Family Allowance Assets Test
|
Hawke
|
1993
|
Family Allowance renamed Basic Family Payment
Family Allowance Supplement, Additional Pension and Additional
Benefit merged to form Additional Family Payment Mothers/Guardian
Allowance and Rent Assistance payed as additions to Additional
Family Payment
|
Hawke
|
1994
|
Home Child Care Allowance replaced Dependant Spouse Rebate (with
Children)
Child Care Cash Rebate for children attending formal and
informal child care
|
Keating
|
1995
|
Parenting Allowance for members of couples caring full-time for
children
Home Child Care Allowance became a minimum rate of Parenting
Allowance
|
Keating
|
1996
|
Basic family payment and additional Family Payment merged to
form Family Payment
|
Keating
|
1997
|
Maternity Allowance introduced
Family Tax Payment Part A, Family Tax Assistance Part A for
families with children
Family Tax Payment Part B and Family Tax Assistance Part B for
single income families with a child under 5 years
|
Keating
Howard
|
1998
|
Family Payment renamed Family Allowance
|
Howard
|
1. Summary
The Bill introduces a proposed new family
benefits structure that will reduce the existing payment mechanisms
from twelve to three.
The Bill also relocates Maternity Allowance from
the Social Security Act 1991 to the Bill. This is to
ensure that all family assistance benefits are located in one
Act.
It is proposed that there will be three distinct
family benefits:
- Family Tax Benefit Part A
Family Tax Benefit Part A (FTB-Part A) will provide assistance to
families to raise children.
- Family Tax Benefit Part B, and
Family Tax Benefit Part B (FTB-Part B) will provide additional
assistance for single income families with children
- Child Care Benefit
Child Care Benefit (CCB) will provide assistance with the costs of
childcare outside the home.
An individual's annual rate of family tax benefit is the sum of
FTB-Part A and
FTB-Part B.
Maternity Allowance (MA), assistance in the form of a one-off
payment to meet additional costs at the time of the birth of a
child, will continue to be available with some minor changes.
2. Family Tax Benefit Part
A
2.1 Current benefits to be merged into
proposed FTB-Part A
There are four forms of assistance currently provided to
families that are proposed to be merged into FTB-Part A:
-
- Minimum Family Allowance
-
- Family Allowance
-
- Family Tax Payment Part A, and
-
- Family Tax Assistance Part A.
2.2 Summary of FTB-Part A
2.2.1
Eligibility
Proposed Division 1 of
Part 3 contains the provisions relating to
eligibility for family tax benefit.
Under proposed clause 21 of
Subdivision A an individual is eligible for family
tax benefit if:
-
- the individual has at least one FTB child(12), and
-
- is an Australian resident, and
-
- the individual's rate of family tax benefit is greater than
nil.
Under proposed clause 31 of
Subdivision B an individual remains eligible for
family tax benefit for 14 weeks after the death of a child.
Under proposed clause 34 of
Subdivision C an approved care organisation is
eligible for family tax benefit for an individual if:
-
- the individual is aged under 18
-
- is a client of the organisation, and
-
- is an Australian citizen.
2.2.2 Rate
Proposed Division 1 of
Part 4 contains the provisions relating to the
rate of family tax benefit.
Under proposed subclause 58(1)
an individual's annual rate of family tax benefit is to be
calculated in accordance with the Family Tax
Benefit Rate Calculator in
Schedule 1.
An individual's annual rate of family tax
benefit is worked out by adding the individual's Part A rate and
Part B rate (proposed clause 1(1) of
Schedule 1).
-
- There are two methods of calculating an individual's Part A
rate
- Method 1 (standard rate)
If the individual's adjusted taxable income (13)(income) does not
exceed the 'higher income free area,' (14) Method 1 is used. Under
this Method, the Part A rate is the greater of the Income and
Maintenance Tested Rate(15) and the Base Rate.(16) (Method 1 is
contained in Part 2 of Schedule
1)
- Method 2 (base rate)
If the individual's income exceeds the 'higher income free area,'
Method 2 is used.(17) (Method 2 is contained in Part
3 of Schedule 1)
- The main difference between Method 1 and Method 2 is found in
the calculation of the maximum rate(18) and in the exclusion of a
maintenance income test in Method 2.
-
- The maximum standard rate of FTB-Part A will be
$2,920-00 per annum (FTB child under 13yrs),$3,697-45 per annum
(FTB child 13yrs to 15yrs) and $956-30 per annum (FTB child 16yrs
to 18yrs) (excluding additional allowances) and will have an income
test threshold of $28,200 per annum (proposed clause
19 of Schedule 1)
-
- The maximum base rate of FTB-Part A will be $956-30
per annum and will have an income test threshold of $73,000 plus
$3,000 per child (after the first) (proposed clause
2 of Schedule 1)
-
- Both the standard rate and base rate of
payment will have an income test taper rate of 30 per cent
(although the maintenance income test taper will be 50 per cent)
(proposed clauses 18, 20 and
28 of Schedule 1)
-
- FTB-Part A will be indexed in July each year, in line with CPI
(Consumer Price Index) increases (proposed Parts 1
to 4 of Schedule 4) , and
-
- Payment of rent assistance, multiple birth allowance and large
family supplement will remain unchanged.
Under proposed subclause 58(2)
an approved care organisation's annual rate of family tax benefit
for an individual is $956.30 per year.(19)
2.3 Summary of changes
-
- the income test free area for the standard rate will
increase from $24,350 per annum(20) to $28,200 per annum. This will
be a singular threshold regardless of the number of children
-
- the upper income test free area for the base rate has
increased from $66,403 plus $3,322 per child (after the first) to
$73,000 plus $3,000 per child (after the first)
-
- the income test taper will be reduced from fifty per cent to
thirty per cent
-
- the income test taper will apply to the base rate
previously subject to immediate cut-off(21), thereby allowing
greater access to entitlement to payment
-
- calculation of income will be based on current year income
-
- removal of the assets test which currently applies to family
allowance
-
- a rate increase of $140 per annum, and
-
- indexation in line with CPI in July each year.
2.4 Comments
-
- Increased rates, higher thresholds and lower taper rates will
result in both the base rate and the standard
rate being available at least in part to people on higher
incomes than was the case under the present system. For example
families with two children and annual incomes between $40,000 and
$54,000 will be eligible for more than the base rate of
payment depending on the ages of their children and whether they
are renters. Page 62 of Tax Reform: Not a New Tax, a New Tax
System contains a chart, which gives a comparison of
entitlements under the present and the new arrangements. One of the
main justifications for this reform is the reduced effective
marginal tax rates that will result.
-
- The removal of the assets test and the easing of the income
test mentioned above will reverse the trend towards tighter
targetting of family assistance to those most in need which became
evident in the mid 1980s. Those excluded by the assets test
(farmers and other self-employed people in particular) will benefit
greatly.
-
- Taxable income adjusted to take into account fringe benefits,
foreign income, net rental property loss and certain tax free
pensions will be used to measure income under the income test.
Unlike the present Family Allowance income test current year
taxable income will be used. This change will better reflect the
current means of recipients. However questions arise about how
current income will be calculated before income tax assessments are
available and how discrepancies between estimates of adjusted
taxable income and actual taxable income will be resolved. Frequent
overpayments and under payments would seem to be inevitable under
this arrangement. A New Tax System (Family
Assistance)(Administration) Bill 1999 should clarify this
issue.
3. Family Tax Benefit Part
B
3.1 Current benefits to be merged into
proposed FTB-Part B
There are six forms of assistance currently
provided to families that are proposed to be merged into FTB-Part
B:
For sole parents:
-
- Guardian Allowance
-
- Sole Parent Rebate
For single income families:
-
- Basic Parenting Payment
-
- Dependent Spouse Rebate (with children)
For both:
-
- Family Tax Payment Part B
-
- Family Tax Assistance Part B.
3.2 Summary of FTB-Part B
3.2.1
Eligibility
Proposed Division 1 of
Part 3 contains the provisions relating to
eligibility for family tax benefit.
The eligibility criteria apply for FTB-Part A
and FTB-Part B. Please refer to paragraph 2.2.1 of the Main
Provisions section of this Bills Digest for additional
information.
3.2.2 Rate
Proposed Division 1 of
Part 4 contains the provisions relating to the
rate of family tax benefit.
Under proposed subclause 58(1)
an individual's annual rate of family tax benefit is to be
calculated in accordance with the Family Tax
Benefit Rate Calculator in
Schedule 1.
An individual's annual rate of family tax
benefit is worked out by adding the individual's Part A rate and
Part B rate (proposed clause 1(1) of
Schedule 1).
- There are two methods of calculating the Part B rate
- Individual not a member of a couple
An individual's Part B rate is the individual's Standard
Rate.
The Standard Rate is dependent upon whether the youngest FTB child
is under 5 years of age.
If the youngest FTB child is under 5 years of age the Standard Rate
is $2,569.60.
If the youngest FTB child is 5 years of age or older the Standard
Rate is $1,781.20.
(Proposed subclause 29(1) and clause
30)
- Individual is a member of a couple
The individual's Part B rate is the individual's Standard Rate (the
same as if the individual were not a member of a couple) less any
reduction, after applying the income test, for adjusted taxable
income.(22)
(Proposed subclause 29(2) and clauses
32 and 33)
For the purposes of calculating an individual's Part B rate, the
adjusted taxable income of the individual's partner may be used if
it is less than the adjusted taxable income of the
individual.
(Proposed subclause 3(2) of Schedule
3)
-
- FTB-Part B will be indexed, in line with CPI (Consumer Price
Index) increases (proposed Parts 1 to
4 of Schedule 4).
3.3 Summary of changes
-
- the cut-out point for assistance for partnered families will
rise to $10,500 per annum (projected July 2000)(23) of caring
parent's income, because the income test free area will be $1,616
and the income test taper rate will be reduced from 50 per cent to
30 per cent (24)
-
- the income test on FTA/FTP(25) on working partners' (or sole
parents') income that currently applies at $65,000 will be
abolished (currently no income test applies to Basic Parenting
Payment, Sole Parent Rebate or Dependent Spouse Rebate)
-
- the income test taper will be reduced from 50 per cent to 30
per cent
-
- calculation of income will be based on current year income
-
- there will be a rate increase of $350 where the youngest child
is under 5 years of age and $61 where the youngest child is over 5
years of age, and
-
- indexation in line with CPI in July each year.
3.4 Comments
-
- Increased rates of payment, reduced taper rates, higher
thresholds and no assets test will result in increased assistance
to single income couple families. The removal of all income and
assets testing for sole parents will result in many gaining
considerable increases in assistance.
-
- The amalgamation of payments for sole parents and the alignment
of the rates of those payments with those for single income couple
families will result in a reduction in entitlements for sole
parents in the private income range $10,000 to $ 30,000 per annum.
The bottom chart on page 65 of Tax Reform: Not a New Tax, a New
Tax System shows this reduction clearly. However income tax
cuts and increases in other social security payments should result
in overall gains to this group from the tax package.
-
- The use of annual rather than fortnightly income under the
income test will preclude many families who rely on one income for
short periods from access to FTB Part B. For example, families with
very young children where the parents consider childcare
inappropriate. At present Basic Parenting Payment is income tested
using current fortnightly income, so that people in this situation
can receive assistance for short periods.
-
- See 2.4 above for comments on the use of current taxable income
in the income test and the abolition of the assets test
4. Child Care
Benefit
4.1 Current benefits to be merged into
proposed child care benefit
There are two forms of assistance currently
provided to families in relation to child care that are proposed to
be merged into CCB:
-
- Childcare Cash Rebate, and
-
- Child Care Assistance
4.2 Summary of CCB
4.2.1
Eligibility
Proposed Division 4 of
Part 3 contains provisions relating to eligibility
for CCB.
The individual will generally be entitled to CCB
and not the child care service as is currently the position. In
addition the individual will have the choice of receiving CCB by
instalment and paid directly to the child care service or by lump
sum in arrears. Proposed Subdivision A provides
the mechanism for the payment to be received by instalment and
proposed Subdivision B provides the means for CCB
to be received in a lump sum during or at the end of the financial
year.
Under proposed Subdivision A
(payment by instalment option) an individual's eligibility for CCB
by instalment to an approved child care service is determined by a
dual process:
-
- an individual becomes conditionally eligible(26) for CCB under
proposed clause 41, and then,
- eligible for CCB(27) under proposed clause
42.
In the first instance, conditional eligibility for CCB is given to
both the individual and the child care service. The child care
service will, presumably continue to receive money in advance and
then reduce the individual's periodic child care fees. The trigger
for eligibility is acceptance of the accuracy of the calculations
in the statement provided by the child care service to the
Secretary.
This structure reflects the process that currently applies upon
the consideration of an individual's eligibility for child care
assistance but not the terminology.
We may expect that the criteria for conditional eligibility,
which will be contained in the proposed, A New Tax System
(Family Assistance)(Administration) Act 1999 may mirror those
set out in proposed Subdivision B.
Under proposed Subdivision B
(lump sum option) an individual is eligible for CCB for past
periods of care provided by an approved child care service if:
-
- the child is an FTB child of the individual
-
- the care is provided in Australia
-
- a liability has been incurred to pay for the past care
- the individual is an Australian resident or receiving
Commonwealth financial assistance in relation to a course of
study
- where the child is under 7, the child meets certain
immunisation requirements, and
- the individual is not conditionally eligible for CCB.
Under proposed Subdivision C an approved child
care service is eligible for CCB in special circumstances,
primarily where the child care service believes the child is at
risk of serious abuse or neglect.
Under proposed Subdivision D an individual is
eligible for CCB for past periods of care provided by registered
carers if:
-
- the child is an FTB child of the individual and not of the
registered carer
-
- the care is provided in Australia
-
- a liability has been incurred to pay for the past care
- the individual is an Australian resident or receiving
Commonwealth financial assistance in relation to a course of
study
- where the child is under 7, the child meets certain
immunisation requirements, and
- the individual satisfies the work/training/study test.(28)
Under proposed Subdivision E
there are limitations on eligibility for CCB, including:
-
- no multiple eligibility for same care
-
- no eligibility where the child is under care pursuant to a
child welfare law, and
-
- situations where child care service is limited to 20 or 50
hours per week.
4.2.2 Rate
Proposed Division 4 of
Part 4 contains the provisions relating to the
rate of CCB.
Under proposed subclause 70(1)
an individual's rate of CCB is worked out using Schedule
2.
-
- an individual's rate of CCB is basically the Standard Hourly
Rate (generally $2.40) multiplied by an Adjustment Percentage. The
Standard Hourly Rate is adjusted up or down to take into account an
income test, the number of children in care and whether or not they
are at school
-
- the individual's rate of CCB is multiplied by the number of
hours of child care (to a maximum of 50 hours per week) to produce
the amount of child care benefit that may be paid for care provided
to a child in a week. This amount cannot exceed the amount actually
charged by the child care service
-
- this will generally mean a CCB of $120 per week for one child
who is not in school, who receives standard care of 50 hours per
week, if the individual's adjusted taxable income does not exceed
$28,200 per annum, and
-
- CCB will be subject to an income test threshold of $28,200 per
annum with taper rates varying between 10 per cent and 35 per cent
according to the level of income (higher for incomes over $66,000
per annum) and the number of children. The income test will not
apply once the minium rate ($20-10) has been reached (at an income
level of $81,000 per annum) in order to preserve average
entitlements to assistance currently available to higher income
families.
-
- CCB will be indexed in July each year, in line with CPI
(Consumer Price Index) increases (proposed Parts 1
to 4 of Schedule 4)
4.3 Summary of Changes
-
- the minimum rate will not be based on out of pocket expenses
but on hours of care charged by a child care service
-
- increase in the income test lower limit to $28,200 per
annum
-
- maximum rate of assistance will taper down to a minimum rate
(different to current Child Care Assistance)
-
- the individual becomes the one entitled to the payment and not
the child care service, and
-
- the individual may elect to receive CCB by instalments paid
directly to the child care service or in a lump sum in arrears
during or at the end of the financial year.
4.4 Comments
-
- The new arrangements will deliver modest increases in
assistance to families using childcare. The greatest gains will go
to those receiving the maximum rate of assistance.
-
- There will be one category of individuals who may be worse-off.
Presently under the Childcare Cash Rebate arrangements the weekly
amount paid as a rebate is calculated as a percentage of fees paid
(after the first $19.50) up to a maximum amount. This allows many
families using part-time child care to receive the full rebate
available according to their income. Under the new arrangements
assistance is paid on a per hour basis. The hourly rate is reduced
in line with the income test until it reaches a 40.2 cents minimum
rate. At the minimum rate for example a family needs to use 50
hours of childcare (up to about $200 per week) to gain the $20-10
minimum rate. At present they need only pay around $120 per week in
fees for the current minimum rate.
5. Maternity
Allowance
5.1 Maternity allowance benefits
relocated from Social Security Act 1991
The Bill relocates Maternity Allowance (MA) and
Maternity Immunisation Allowance (MIA) from the Social Security
Act 1991 to the Bill. This is to ensure that all family
assistance benefits are located in one Act, to be administered by
one office - the Family Assistance Office.
5.2 Summary of MA and MIA
5.2.1
Eligibility
Proposed Division 2 of
Part 3 contains the provisions relating to
eligibility for MA.
Under proposed clause 36 an
individual is eligible for MA for a child, if the individual is
eligible for FTB-Part A and:
-
- the individual is the parent of the child, or
-
- the child, not more than 13 weeks old, is entrusted to the care
of the individual for a period of not less than 13 weeks, or
-
- the child is stillborn, or
-
- during an adoption process, the child, not more than 26 weeks
old, is entrusted to the care of an individual
Proposed Division 3 of
Part 3 contains the provisions relating to
eligibility for MIA.
Under proposed clause 39 an
individual is eligible for MIA for a child if:
-
- the child is alive within 18 months of birth and satisfies the
immunisation requirements(29)
-
- the child is stillborn and the individual is entitled to
MA
-
- the child dies within 2 years of birth and the individual is
entitled to MA or FTB-Part A
5.2.2 Rate
Proposed Division 2 of
Part 4 contains the provisions relating to the
amount of MA.
Under proposed clause 66 MA is
a one-off lump sum payment which is the greater of:
-
- $780, or
-
- 2.4 times the amount of the maximum basic rate payable for
Parenting Payment where a person is partnered. That amount is
currently $293-80.
Proposed Division 3 of
Part 4 contains the provisions relating to the
amount of MIA.
Under proposed clause 67 MIA is
a one-off lump sum payment which is the greater of:
-
- $208, or
-
- 0.6 times the amount of the maximum basic rate payable for
Parenting Payment where a person is partnered. That amount is
currently $293-80.
5.3 Summary of changes
-
- structural changes consequent upon relocating the provisions to
the Bill from the Social Security Act 1991, and
-
- MA may be paid in relation to adopted children who are not more
than 26 weeks old, currently the child must not be more than 13
weeks old.
1. Complexity - Problem
Overcome?
The reduction of twelve payments into three is
undoubtedly a significant step in the right direction in terms of
simplification of the family benefit system.
Similarly, the fact that the Bill contains only
a few multiple payment categories within the three new payments, is
a positive step toward rationalisation.
Having said that, however, there remain areas
within the Bill that are complex, particularly in relation to child
care benefit. The calculations for CCB are complicated and the dual
process of conditional eligibility and eligibility have been
maintained, presumably to permit CCB payments by instalment to be
made to a child care service in advance.
There is, of course, a balance to be achieved
between simplicity and the requirement to target specific groups
within the population for assistance. The more the assistance is
targeted, the more complex the legislation becomes.
2. Rules governing claims,
determination of claims and payment of benefits in an Act not yet
introduced
The provisions in the Social Security Act
1991 and Child Care Payments Act 1997 that govern the
making of a claim for benefits, determinations of claims, payment
of benefits, recipient obligations and termination of payments in
relation to family assistance will all be repealed by A New Tax
System (Family Assistance) (Consequential and Related Measures) Act
(No.1) 1999.
The administrative provisions that will be
repealed are not contained in the Bill. Presumably they will be
contained in the proposed A New Tax System (Family Assistance)
(Administration) Act 1999.
The A New Tax System (Family Assistance)
(Consequential and Related Measures) Act (No.1) 1999 will
commence immediately after the A New Tax System (Family
Assistance) Act 1999 and A New Tax System (Compensation
Measures Legislation Amendment) Act 1999. It is not
conditional upon the enactment of the A New Tax System (Family
Assistance) (Administration) Act 1999.
Thus there is potential for the administrative
provisions relating to family assistance payments to be absent from
the legislative framework.
There is, however, provision in the A New Tax
System (Family Assistance) (Consequential and Related Measures)
Bill (No.1) 1999 for the Governor-General to make regulations
providing for matters of a transitional nature in respect of the
enactment of the Bill and the A New Tax System (Family
Assistance)(Administration) Act 1999. Presumably this will be
the mechanism utilised, if necessary, to bridge the gap.
3. Child Care Benefit -
Eligibility dependent on an Act not yet introduced
Eligibility for CCB depends upon the individual
and child care service being conditionally eligible for CCB under
the A New Tax System (Family Assistance)(Administration) Act
1999.
The rules governing such conditional eligibility
will be set out in the abovenamed Act. The Bill for the Act has not
yet been introduced and therefore no assessment can be made at this
stage of the rules that will impact upon eligibility.
The significance of the interaction between the
Bill and the A New Tax System (Family
Assistance)(Administration) Act 1999 for CCB is that, unlike
FTB-Part A and FTB-Part B, eligibility itself is contingent upon
provisions contained in the A New Tax System (Family
Assistance)(Administration) Act 1999.
The comments in paragraph 2 above are relevant
to CCB.
4. Issues in relation to the
proposed delivery mechanism
The Bill refers in numerous clauses to the
'Secretary', a term that is not defined. References to the
Secretary, are presumably, references to the Secretary of the
Department of Family and Community Services. This will be
confirmed, one assumes, in the A New Tax System (Family
Assistance)(Administration) Bill 1999.
This issue is important because it impacts upon
ultimate responsibility for the making of determinations in
relation to the FTB-Part A, FTB-Part B and CCB. This in turn
affects recipients' rights of appeal upon the making of such
determinations.
The introduction of a Family Assistance Office
further complicates matters. While intending to simplify the
delivery of family benefits, it may cause confusion in relation to
determining who under the legislation 'made' any particular
decision that may be the subject of appeal.
It appears that the Family Assistance Office,
may be a joint venture between the Health Insurance Commission, the
Department of Family and Community Services and the Australian
Taxation Office, to allow delivery of payments by any one of the
three agencies. Therefore, there may not be a Family Assistance
Office as such, but families may elect to receive payments through
any one outlet.
Something akin to this is proposed in the A New
Tax System (Bonuses for Older Australians) Bill 1998 (BOA
Bill).
The BOA Bill proposes that payments will be
authorised by one of three Commonwealth agencies (the Department of
Family and Community Services, the Repatriation Commission and the
Australian Taxation Office) depending on whose customer or client
the individual is.
Under the BOA Bill, individuals do not actually
have an unrestricted choice of which agency to use. If they lodge a
tax return they are clients of the ATO for the purposes of claiming
the bonus payment.
If a review of any decision in relation to a
determination in respect of a bonus payment arises it will be dealt
with under the procedures contained in the legislation applicable
to the relevant agency.
It remains to be seen for the family assistance
Bill if the position with respect to review of determinations will
follow the BOA Bill, that is, legislation governing each agency
will apply, or if review of determinations will be made in
accordance with procedures in the Social Security Act
1991. It is difficult to predict, but one may suggest that the
incorporation into the Bill of responsibility for the making of
determinations by the 'Secretary' indicates that the review
mechanism will be the procedures contained in the Social
Security Act 1991. (However, 'Secretary' may be defined to
include the Commissioner of Taxation and this could indicate a
system similar to that contained in the BOA Bill).
Clarification of this issue will most likely be
forthcoming in the A New Tax System (Family
Assistance)(Administration) Bill 1999.
-
- Section 1-2 of the A New Tax System (Goods and Services Tax)
Act 1999; Section 2 of the A New Tax System (Goods and Services Tax
Imposition - Excise) Act 1999; Section 2 of the A New Tax System
(Goods and Services Tax Imposition - Customs) Act 1999 Section 2 of
the A New Tax System (Goods and Services Tax Imposition - General)
Act 1999; and Section 2 of the A New Tax System (Goods and Services
Tax Administration) Act 1999.
- Treasurer, Tax Reform: not a new tax - a new tax system; Tax
Reform Plan, 13 August 1998, Commonwealth of Australia.
- Pay As You Earn.
- Prescribed Payments System.
- Reportable Payments System.
- Pay As You Go.
- Treasurer, Tax Reform: not a new tax - a new tax system; Tax
Reform Plan, 13 August 1998, Commonwealth of Australia, pp. 52-55.
- Senate Select Committee on A New Tax System; Senate Community
Affairs References Committee; Senate Employment, Workplace
Relations, Small Business and Education References Committee and
Senate Environment, Communications, Information Technology and the
Arts References Committee.
- Senate Select Committee on A New Tax System, First Report,
February 1999.
- Senate Community Affairs References Committee, The Lucky
Country Goes Begging, Report on the GST and a New Tax System, March
1999; Senate Employment, Workplace Relations, Small Business and
Education References Committee, Report of the Inquiry into the GST
and A New Tax System, March 1999 and Senate Environment,
Communications, Information Technology and the Arts References
Committee, Inquiry into the GST and a New Tax System, March 1999.
- Senate Select Committee on A New Tax System, Main Report,
February 1999.
- FTB child has the meaning given by proposed Subdivision
A of Division 1 of Part 3. Basically an
individual is an FTB child of an adult if:
-
- the individual is aged 18 and under
- the adult is legally responsible for the day-to-day care,
welfare and development of the individual
- the individual is in the adult's care, and
- the individual is an Australian resident or living with the
adult
-
- For the purposes of the Bill an individual's adjusted taxable
income is worked out in accordance with proposed Schedule
3 and is the sum of the following income components:
-
- taxable income
- adjusted fringe benefits total
- target foreign income
- net rental property loss, and
- tax free pension of benefit less the amount of the individual's
deductible child maintenance expenditure.
-
- The 'higher income free area' is defined in clause
2 of Schedule 1 to be the basic amount of
$73,000 plus an additional amount of $3000 for each FTB child after
the first.
- To calculate the Income and Maintenance Tested Rate, Steps 1,2
and 3 of the Method statement contained in proposed clause
3 of Division 1 of Part
2 must be followed.
Step 1: Calculate the Standard Rate and (if
applicable) add the individual's large family supplement, multiple
birth allowance and rent assistance
This is the Maximum Rate
Step 2: Apply the Income Test and subtract any reduction for
adjusted taxable income
This is the Income Tested Rate
Step 3: Apply the Maintenance Income Test and subtract any
reduction for maintenance income.
This is the Income and Maintenance Tested Rate
- Base Rate is the Maximum Rate worked out in accordance with
Method 2. To calculate the Maximum Rate, Step 1 of the Method
statement contained in proposed clause 25 of
Division 1 of Part 3 must be
followed.
Step 1: Calculate the Standard Rate and (if applicable) add the
individual's large family supplement and multiple birth
allowance.
This is the Maximum Rate
- To calculate the Part A rate under Method 2, steps 1 and 2 of
the Method Statement contained in proposed clause
25 of Division 1 of Part
3 must be followed.
Step 1: Calculate the Standard Rate and (if applicable) add the
individual's large family supplement and multiple birth
allowance.
This is the Maximum Rate
Step 2: Apply the Income Test and subtract any reduction for
adjusted taxable income.
This is the Part A rate
- For both Methods 1 and 2 the Maximum Rate is the Standard Rate
plus specified allowances.
The Maximum Rate in Method 2 does not include a component for rent
assistance.
In addition the Standard Rate is calculated by reference to FTB
child rates. The sum of FTB child rates produces the Standard Rate.
The FTB child rate under Method 1may, in certain situations, be
more than the FTB child rate under Method 2.
- This is the same as the FTB child rate for the purposes of
calculation of the Part A rate in Method 2 and, depending on the
age of the child, in some situations in Method 1.
- Current income test free area that applies to family allowance.
- The income test for family allowance does not currently have a
taper.
- If an individual's adjusted taxable income does not exceed the
'income free area' of $1,616 there will be no reduction to the
Standard Rate.
If an individual's adjusted taxable
income exceeds $1,616, the 'income free area' of $1,616 is deducted
from the adjusted taxable income to produce the individual's
'income excess'. The Standard Rate is then reduced by 30 per cent
of the 'income excess'.
(Proposed subclause 29(2) and clause
32).
-
- Current cut-out points for assistance are: $4,587 per annum for
FTP-Part B, $4,606 per annum for Basic Parenting Payment and $6,090
for Dependent Spouse Rebate.
- The income test taper rate currently applies to the higher rate
of family allowance
- FTA means Family Tax Assistance Part B and FTP means Family Tax
Payment Part B.
- Under proposed subclause 41(1) an individual
will be conditionally eligible for CCB by instalment to a child
care service if:
-
- the individual has an FTB child, and
- is an Australian resident or receiving Commonwealth financial
assistance in relation to a course of study, and
- the child care service is not receiving CCB in special
circumstances, such as where the child is at risk of abuse or
neglect, and
- the child care service is conditionally eligible for CCB
pursuant to the proposed A New Tax System (Family
Assistance)(Administration) Act 1999.
- Under proposed subclause 42(1) an individual
is eligible for CCB by instalment to a child care service if:
-
- the individual is conditionally eligible for CCB pursuant to
the proposed A New Tax System (Family
Assistance)(Administration) Act 1999, and
- the child care service gives the Secretary a Statement in the
approved form containing details of the amount of the CCB.
- The meaning of 'satisfies the work/training/study test' is
found in proposed clauses 14, 15,
16 and 17 of Division
3 of Part 2.
- Pursuant to proposed clause 6 of
Division 2 of Part 2 a child
satisfies immunisation requirements if the child has been immunised
or the adult has declared in writing that he or she has a
conscientious objection to the child being immunised.
Lesley Lang, Dale Daniels and Peter Yeend
10 May 1999
Bills Digest Service
Information and Research Services
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ISSN 1328-8091
© Commonwealth of Australia 1999
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