Family assistance, social security and veterans' affairs legislation amendment (2005 budget and other measures) Bill 2006
The Family Assistance, Social Security and
Veterans' Affairs Legislation Amendment (2005 Budget and Other Measures) Bill 2006
(the Bill) was introduced into the House of
Representatives on 16 February 2006.
On 1 March 2006, the Senate,
on the recommendation of the Selection of Bills Committee (Report No. 2 of
2006), referred the provisions of the Bill to
the Committee for report.
In recommending the reference of the Bill
to the Committee, the Selection of Bills Committee stated that the reason for
referral was to examine the viability and operation of the provisions of the Bill
and its impact on relevant groups.
The Committee considered the Bill
at a public hearing on 14 March 2006.
Details of the public hearing are referred to in Appendix 2. The Committee
received 10 submissions relating to the
Bills and these are listed at Appendix 1. The submissions
and Hansard transcript of evidence may be accessed through the Committee's
website at http://www.aph.gov.au/senate_ca
This omnibus Bill gives effect to several 2005 Budget
initiatives and several other measures that include:
raising the income test free area for the income
test that applies for the Family Tax Benefit Part A (FTB-A);
indexing income estimates made by claimants for
FTB-A and Family Tax Benefit Part B (FTB-B) and for Child Care Benefit (CCB);
modifying the definition of 'returns to paid
work' as described in the Family Assistance Act (FAA) for the FTB-B;
providing for the recovery of CCB debts from the
claimant's tax refunds as currently is provided for in the recovery of FTB
debts from tax refunds;
providing for the movement of unallocated child
care places from area to area;
providing for the backdating of Carer Allowance
(CA) claims caring for either a child or an adult for a maximum of 12 weeks;
clarifying the circumstances in which payments
may be extended beyond 13 weeks to a person temporarily overseas seeking
life-saving medical treatment overseas; and
allowing for the extension of fixed term income
streams and other minor changes to the treatment of income streams in line with
similar tax treatment changes for income streams.
Details of the financial impact of each of these
amendments can be found at Appendix 3.
Changes to Family Tax Benefit Part A (FTB-A)
The FTB income payments for families with dependent
children (FTB-A and FTB-B) were introduced from 1
July 2000. They replaced a range of income supplement
and tax assistance arrangements for families, being Family Allowance, Family
Tax Payment Parts A and B, Family Tax Assistance Parts A and B, Guardian
Allowance, the Dependant Spouse Tax Rebate and the Sole Parent Tax Rebate.
The initiative contained in the Bill aims to raise the
FTB-A income test free area threshold, thus helping low income families to earn
more money before they incur reduced tax benefit payments. The threshold
increase is a part of the Welfare to Work initiatives announced in the 2005-06
Budget and is designed to address the barriers faced by families in attempting
to increase their earnings from employment and at the same time seeing
decreases in government assistance and having to pay more tax. Indeed, the
Department of Families, Community Services and Indigenous Affairs (FaCSIA)
submitted that around 400 000 families stand to see their entitlement
increase by an average of $24 under the changes, and that an extra 40 000
families would become newly eligible for a Health Care Card.
Indexing of estimates of adjusted taxable
income for family tax benefit and
child care benefit purposes
These amendments allow for the use of an estimate of a
claimant's adjusted taxable income that has been indexed to average weekly earnings
(AWE). This income estimate could then be used to determine the rate of assistance
The Family Tax Benefit can be paid in two ways. First,
by way of fortnightly payments during the year with the payment rate based on
the claimant's estimate of their income for that year. Secondly, FTB can also
be paid at the end of the year by claiming in the tax return and the amount paid
is based on the actual adjusted taxable income for the year past. Obviously,
the second method does not require an income estimate as the year has passed
and the actual adjusted taxable income is known. The fortnightly instalments
payment method requires the claimant to make an estimate of their income for
the coming year. The majority, about 95 per cent, of FTB-A recipients take
their payments fortnightly during the year, and as a result the accurate
estimation of a claimant's income is important.
The benefits of an indexed-estimate model were described
by the Minister for Families, Community Affairs and Indigenous Affairs, Mr Brough, as follows:
The bill will help reduce
family tax benefit and child-care benefit debts by improving the way customers’
estimates of income are managed in working out their entitlements ... Income
estimates will be updated at the beginning of each income year and in certain
circumstances where actual income for the most recent income year becomes
known. Importantly, however, customers will continue to have the option of
providing a reasonable estimate of income that would then be used to calculate
their family tax benefit entitlements or child-care benefit fee reductions
instead of the automatically updated amount - that is, customers will continue
to have responsibility for their estimate of income.
This amendment aims to reduce the likelihood of
payments being made to claimants based on inaccurate estimates. The Department
estimated that around 150 000 families per annum would avoid overpayment
or have a reduced overpayment due to the measure, and that the level of debt
being carried by families due to overpayment would reduce by $115.2 million
over 4 years.
to paid work
1.12 The amendments propose to change the definition of 'returns
to work' in the Family Assistance Act so that persons who have a child and take
paid leave, then return to work, then take unpaid leave, then return to work
for a second time should not gain the benefit of being entitled to FTB-B up
until they start work for the second time. It is anticipated that only a small
number of recipients will be affected by this change.
Recovery of child care benefit debts
Debts can arise where payment of Child Care Benefit is
based on an estimate of annual income and the estimate understates the level of
income actually received during the year. Once the assessment of tax is done at
the end of the year and the actual adjusted taxable income for the year known,
if too much CCB was paid based on the income estimate, then the excess payment
is an overpayment and a debt.
This amendment proposes to tap into tax refunds to
clear CCB debts. Under the current family assistance legislation, tax refunds
and end-of-year top-up payments cannot be drawn upon to offset CCB debts
arising from previous year. At present only FTB debts owing from previous years
can be offset using tax refunds and end-of-year top-up payments.
Increased flexibility in the distribution of
child care places
The number of subsidised child care places allocated to
an individual service provider for family day care services, in-home services,
occasional care services and outside school hours care services is based on use
and demand of those services in the past. This sometimes results in an
inefficient allocation of available spaces between providers from year to year.
The proposed changes are designed to provide greater
flexibility to respond to changes in demand and use by allowing approvals for
unused places to be transferred to other providers with excess demand.
The Department submitted that it is working with sector
peak bodies on the implementation of this measure, and that they were
supportive of it. Their support is derived from the improvement in efficiency
which the amendment offers, and by the fact that the amendment merely
formalises existing practice with little effect on the provision of existing
Carer allowance backdating provisions
Carer Allowance (CA) is an income supplement payment
provided to a person providing care to a child or an adult at home. The person
being cared for must meet minimum disability requirements so that the care
requirements are substantive. There are two main types of CA payments: CA - caring
for a child and CA - caring for an adult. It is tax free and income and assets
test free and the current rate is $94.70 per fortnight.
Currently, the commencement date for the start of
payment for CA – caring for a child can be backdated for up to 52 weeks prior
to the date of claim. Likewise, the commencement date for the start of payment
for CA – caring for an adult can be backdated for up to 26 weeks prior to the
date of claim. The proposal in Schedule 6 of the Bill is
to amend the Social Security Act (SSA) to reduce the commencement date for the
start of payments to 12 weeks prior to the date of claim for both CA for
children and for adults.
Portability and Medical Treatment Overseas
Under current legislation, a person may not be paid an
income support or income supplement payment while overseas for more than 13
weeks, except in prescribed circumstances which can give rise to the exercise
of an administrative discretion.
The Bill proposes to add to the circumstances to
allow the discretionary payment for more than 13 weeks where the person is
receiving financial assistance under the Medical Treatment Overseas Program
provided for under the National Health Act 1953. This will remedy the lack of discretion
over withdrawal of social security payments to those seeking medical care
overseas, and their carers.
These amendments, contained in Schedules 8 and 9,
concern the treatment of income streams under income and assets tests. First,
the amendments seek to extend the maximum allowable term over which life
expectancy and market-linked investments can be paid. Under the amendments,
payments may continue to the recipient up to the age of 100 years, and even
longer where a life expectancy exceeding 100 years is calculated. This will
reduce the likelihood that those with higher-than-average life expectancy will
outlive their income entitlements under their chosen income stream arrangements.
Second, they seek to prescribe the amount of
flexibility that will be allowed for a one-off extraordinary withdrawal from
the standard regular withdrawal amount prescribed in investment - plus or minus
10 per cent from the standard regular withdrawal amount – while still being
able to claim concessional income and asset test treatment. This amendment is
mainly aimed at countering the use of large one-off withdrawals from a self-managed
income stream product to avoid income test rules for income stream products
which attract concessional tax and asset-test treatment.
makes other minor amendments in this area, including to improve or enhance the
operation of the income stream rules and to allow certain non-superannuation
annuities to be split as part of a divorce property settlement.
Aspects of the inquiry touched on during the Committee's
deliberations were varied, and included discussion of the provisions relating
to welfare payments to a carer who is caring for a patient seeking medical
treatment overseas, as well as the administration and allocation of
government-subsidised childcare places.
However, the majority of submissions singled out the
proposed reduction in the allowable number of weeks an application for Carers
Allowance may be backdated as the amendment of primary concern. Typical of the concerns expressed were
those contained in the submission from Vision Australia:
Australia is concerned by the proposed reduction in
the maximum backdating period for the claim lodgement date by carers of both
children and adults. The proposed reduction in both circumstances is both
unrealistic and unreasonable. Standardizing backdating periods should not mean
reducing time periods in such a way that individuals and families, facing
massive emotional and physical challenges, are also then deprived of their
rightful financial assistance. 
Witnesses submitted that this lack of realism and
reasonableness was derived from the fact that carers are very often preoccupied
with the care of their patient, and less focussed on complying with
bureaucratic demands. This point was made by a parent as part of a submission
by the Australian Association for Families of Children with Disability (AFFCD):
My daughter was one month off 3 years old before doctors were able to ascertain
her disability of cerebral palsy. Prior to that, there were a myriad of
appointments ... that we had to go through as well as we tried all sorts of aids
and facilities trying to get a finger on the problem. We were too worried about
trying to determine our daughter's problem without getting through the social
security support system discovery problem ...
Other witnesses gave evidence on a kind of denial which
they entered when their child's disability began to make itself apparent. This
causes further delays on lodgement of a claim. Another member of AAFCD put it
child] was 2 years old before we applied and we had a diagnosis at 9 months but
it took me that long to begin to accept it. Denial is a complex and valuable
defence mechanism that needs to be considered for families in these situations.
Back payment for up to one year should be available. Anything less is cruel and
FaCSIA indicated that backdating provisions operate in
addition to provisions which allow for between 2 and 13 additional weeks for a
claim to be lodged after an initial 'intent to claim' has been communicated to
Centrelink. The Department stated that:
legislation allows two weeks for a claim to be lodged from notification of
'intent to claim'. Up to an additional 11 weeks may be granted if the claimant
was caring for a person suffering from a medical condition that had an adverse
effect on the claimant's ability to claim earlier or in special circumstances where
it was not reasonably practicable for the claimant to lodge earlier.
FaCSIA pointed out that while only new applicants for Carer's
Allowance will be affected by the changes as the measure will not impact on
existing recipients, the need for extensive backdating provisions is mitigated
by the fact that eligibility for Carer's Allowance is determined by application
of the Child and Adult Disability Assessment Tools, which look to actual
functional ability and care needs rather than strict medical diagnoses. The
changes to the eligibility criteria, combined with reform of Centrelink's
processing regimes, have further streamlined the application and approval
process for carers.
The Department stated that around 42 000 new
customers each year will be eligible to access the backdating provisions though
'for some, this measure may mean a reduced amount of backdating will be
payable'. The Committee acknowledges the concerns
expressed in evidence and considers that in a small proportion of cases,
particularly those in which claimants are suffering particular hardship, there
should be some capacity to provide for the backdating of the Carer's Allowance
over a longer period than 12 weeks.
The other substantial criticism levied on the changes
by respondents referred to the extent to which potential recipients are aware
of their entitlements. Typical of the experiences relayed to the Committee was
that of Ms Clark, a parent of a child living with severe
... Even though I am a
well-educated member of the community and even though my child was diagnosed as
having a disability from 3 months of age, I was not made aware of the [Carers]
Allowance until my daughter was about 4 years of age and, even then, I was
never advised that it could be back-dated.
The Department submitted that care payments are much
more widely publicised than in past years. However, the majority of submissions
received by the Committee reported that community awareness of carer
entitlements was less than adequate, and made the obvious point that awareness
of a benefit being available was a natural prerequisite to a claim being
A number of witnesses, including the Department, also submitted
that ignorance by many potential recipients about the existence of the Carer's
Allowance was difficult to remedy. It was suggested by some witnesses that
this was due to the fact that many carers are not in receipt of other welfare
payments and were therefore 'unknown' to Centrelink.
Other witnesses, such as those representing Vision
Australia, made the point that, although their clients are often in receipt of
benefits through Centrelink such as aged care or disability support pensions,
they are not queried by the agency on the status of their carer or whether
their carer is in receipt of the Carer's Allowance or other forms of assistance
such as respite. This lack of knowledge, combined with a
feeling amongst many carers that caring was a private and often a family
matter, works against an effective and targeted identification campaign.
It is evident to the committee that medical
professionals, particularly general practitioners, are a critical source of
information for patients and their carers in relation to their entitlements. This
is in no small part due to the fact that GPs commonly conduct the assessment of
the functional ability and care needs of their patient, which is then relied on
by carers seeking to claim the Carer's Allowance. It was widely submitted that both
patients and doctors suffer under the misapprehension that a medical diagnosis
is necessary before Centrelink will approve Carer's Allowance. As outlined
above, the assessment criteria go to actual care needs rather than medical
diagnosis. Such a misapplication of the assessment criteria often serve to slow
the lodgement of a claim by a carer.
In a situation where the backdating of claims was being
restricted, the Committee agrees with the widespread observation by witnesses
that the need for potential claimants to be aware of their entitlement assumes
particular importance. The committee therefore encourages the Government to develop
and implement an education program for GPs and other health professionals
charged with attesting to the care needs of their patients. The program should
aim to achieve two primary objectives. First, it should accurately convey the
assessment criteria used by Centrelink for those seeking Carer's Allowance.
Second, it should assist in reminding doctors of the existence of the Carer's
Allowance in the expectation that knowledge about the entitlement will be
passed on to patients and their carers in appropriate cases.
1.38 The Committee recommends the development and
implementation of a comprehensive education campaign aimed at medical
practitioners and others charged with assessing the care needs of individuals
in order to improve awareness of, and the dissemination of information about,
the availability of assistance for carers. This campaign should emphasise the
existence of the Carer's Allowance entitlement, and the correct application of
the Centrelink care assessment criteria.
1.39 The Committee recommends that the legislation be
amended to allow a discretion for the backdating of Carer's Allowance for a
period in excess of 12 weeks where:
(a) it would have
been unreasonable in all the circumstances for a claimant to have made an
earlier claim for the Carer's Allowance, and
(b) a failure to backdate would occasion
significant financial hardship.
1.40 The Committee reports to the Senate that it has
considered the Family Assistance, Social Security and Veterans' Affairs
Legislation Amendment (2005 Budget and Other Measures) Bill 2006 and recommends
that, subject to recommendation 2, the Bill be
Senator Gary Humphries
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