Family
and Community Services Legislation Amendment (Family Assistance and
Related Measures) Bill 2005
Date
Introduced:
26 May 2005
House:
House of Representatives
Portfolio:
Family and Community Services
Commencement:
The various amendments presented in the Bill
have differing dates of commencement, from the day on which the Act
receives Royal Assent, 1 January 2006 or 1 July 2005. Section 2
contains a table setting out the commencement dates for each part
of the Bill.
The Bill contains the largely unrelated
measures listed below:
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A new method for calculating Family Tax Benefit Part B (FTBB)
entitlement for those who return to the workforce after the birth
of a child
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A change to Maternity Payment (MP) eligibility criteria to allow
payment for adopted children who enter the care of their adoptive
parents up to the age of two years
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A number of changes to the treatment of Family Tax Benefit debts
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A minor change to the FTBB income test, and
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Two minor changes to the payment of rent assistance.
FTBB was introduced in 2000 as a payment for parents
who stayed home to look after their children on a full-time or nearly
full-time basis.(1) An income test was used as a means
of excluding people who worked for more than few hours a week from
receiving the payment. However, the inevitable result of such an income
test was increased disincentives for parents to return to work after
their youngest child was no longer an infant.
Concern about disincentives produced by income testing
of family assistance and other income support payments is not new.
The design of the Family Tax Benefit introduced in 2000 was influenced
by a desire to reduce disincentives. However, recent research indicates
that disincentives are still of concern.(2)
The 2004 Budget included two measures to address
this issue: the measure in this Bill and a measure to ease the income
test to allow part payment of FTBB to parents who worked part-time
and earned up to about $19,000 per annum. This second measure was
introduced from 1 July 2004.
The change included in this Bill addresses the situation
of parents who would face the prospect of a FTB debt if they returned
to the workforce part way through a financial year. FTBB eligibility
is assessed on an annual basis in line with an estimate of income
made at the start of the financial year. Commencing paid employment
part way though a year can mean that eligibility for FTBB for the
whole year is lost or at least that entitlement is reduced. Any payments
already received can become an overpayment debt.
This measure ensures that the parent returning to
work retains eligibility for FTBB for the part of the financial year
before they return to work. Their income will only reduce entitlement
for the period after they return to work. This change significantly
reduces the work disincentives faced by parents in this situation.
The MP was introduced from July 2004. It replaced
the Maternity Allowance introduced in February 1996. Eligibility for
the new payment was limited to children who entered the care of their
adoptive family before the age of 26 weeks. This effectively excluded
most adopted children because only a minority were adopted before
that age. Overseas adoptions were particularly affected. This change
ensures that eligibility is available where the adopted child enters
the care of their new family up to the age of two years.
There were 502 adoptions of children in Australia
in 2003–04, an increase of 6 per cent from 472 adoptions in 2002–03.
74 per cent (370) of the adoptions were inter–country placement adoptions,
14 per cent (73) were local placement adoptions and 12 per cent (59)
were ‘known’ child adoptions.(3)
Almost half of all children adopted (43 per
cent) were aged less than 1 year. In local placement adoptions 88
per cent of all children were aged less than 1 year, while in inter–country
adoptions 41 per cent of children were aged less than 1 year and a
further 30 per cent were 1 year of age. ‘Known’ child adoptions differed
in that 96 per cent of the children were aged 5 years or more.(4)
While there were only 59 ‘known’ child adoptions,
almost all were aged over 5 years, so these adoptions will not gain
access to the MA with this change.
The Bill contains several measures designed to ensure
that parents who separate are not disadvantaged by the non-lodgement
of income tax returns by their ex-partner. The reconciliation process,
where FTB and Child Care Benefit (CCB) entitlements are finalised,
relies on tax returns for both ex–partners being lodged. If the lodgement
of an ex–partner’s tax return is delayed for longer than the two year
lodgement period allowed, there is no entitlement to a top–up where
family income had been over estimated. This Bill ensures that non–lodgement
by an ex–partner does not reduce access to a top–up. The Bill also
provides that where separation occurs more than two years after the
FTB entitlement year any non–lodger debt incurred because the ex–partner
had not lodged a tax return may be written off.
Rent assistance for a past period can only be claimed
in conjunction with FTB if fortnightly instalments of FTB are claimed
at the same time. If FTB is claimed as a lump–sum, rent assistance
cannot be claimed. In 2004 the time limit for claiming FTB as a lump–sum
was extended from one to two years after the end of the entitlement
year. The Bill adjusts the A New Tax System (Family Assistance)
Act 1999 (FAA) to make it clear that rent assistance cannot be
claimed along with a lump–sum of FTB in either the first or the second
year after the entitlement year.
Certain child support debts may be recovered from
FTB entitlements. However, they may not be recovered from FTB advances.
To ensure that this does not provide a means for debtors to avoid
debt recovery, the Bill ensures that advances will not be made available
to child support debtors in the same way that they are not available
to people who have a social security or family assistance debt.
The Bill makes a minor adjustment to the FTBB income
test. From January 2005 a FTBB supplement was introduced. It is paid
as a lump sum at the time of reconciliation after the end of the entitlement
year. This amendment merely specifies that the standard rate of FTBB
will be reduced by the income test before the supplement is affected.
The Bill makes two changes to the administration
of rent assistance. First, amendments ensure that double payments
of rent assistance through FTB and through a social security or veteran’s
entitlements payment cannot occur. If they do through administrative
error they will be recoverable.
Second, amendments ensure that where a rent certificate
review is not submitted, only the rent assistance portion of a person’s
FTB or social security payment will be cancelled, rather than the
whole payment as at present.
Item 2 provides a definition of ‘passive employment
income’ to include income from paid leave, or compensation payment
etc. This definition is inserted to prevent this sort of income from
being defined as ‘returns from paid work’.
Item 4 inserts a definition of ‘secondary
income earner’. Normally the ‘secondary income earner’ of a couple
is the partner with the lesser amount of income, but where both partners
have the same income the ‘secondary income earner’ is to be the one
who returns to work first in any one year. These sorts of cases where
both partners have the same income are very rare.
Item 5 inserts various definitions such as
‘paid work’, ‘returns to paid work’. ‘Paid work’ is not just minimal
paid work but requires a ‘substantial degree of exertion’. This is
then defined under ‘returns to paid work’ as of at least 10 hours
per week for 4 consecutive weeks.
‘Returns to paid work’ also requires the person to
notify Centrelink in writing within the year of work. Notification
within the year that FTBB is paid for should not be a problem as recipients
will want to gain the advantage of the beneficial application of this
new treatment of paid employment income under the FTBB income test.
Notification in writing is somewhat exceptional as in most other notification
requirements, verbal notification by phone is usually sufficient.
Item 8 amends the FTBB income test sections
in the FAA to calculate the rate where the recipient ‘returns to work
after the birth of a child etc’. While it refers to returning to
work after the birth of a child, it really refers to any employment
income earned during the year where previously there was no employment
income earned.
Item 1 adjusts the age limit of the child
under which an adopted child can qualify an adoptive parent for MA
from 26 weeks to 2 years of age.
Item 2 stipulates that where the child is
adopted from overseas the child must have been aged less than 2 years
on arrival in Australia as part of the adoption process. This means
where the child was aged less than two on arrival but the adoption
processes only commenced after arrival, the child would not qualify
the adoptive parent for MA.
Item 3 requires the claim for MA to be made
within 26 weeks of the adopted child coming into the claimant’s care.
This is the same rule that currently applies for children adopted
from inside Australia.
Item 5 provides for the commencement of these
changed MA provision to go back to when MA originally commenced, being
from 1 July 20004. The other requirement to claim within 26 weeks
of the child coming into care would otherwise undermine this, so Item
6 provides for transitional provisions to get around this problem.
Item 7 allows only one MA payment to be made
in respect of a child.
Item 8 makes amendments to the section 28
of the FAA to allow a separated partner entitlement to any top–up
payment after two years, even though the other partner has not lodged
their tax return. Currently unless both separated partners lodge
their tax returns within two years of the year FTB was paid for, no
top–up payment owed to the partner who has lodged their return can
be made.
Item 16 inserts amendments into the FAA to
allow the write–off of FTB and CCB debts in certain circumstances.
The circumstances are where one partner of a separated couple has
not lodged a tax return within two years of the relevant payment year,
for which FTB or CCB was paid.
Item 3 amends the FAA to allow the payment
of RA for a period of up to two years in the past. This might apply
where the claim for FTB is lodged up to two years after the end of
the relevant year for which FTB is being paid. The Item 3
amendments also ensure the rate of RA paid attached to FTB takes into
account any RA paid for the same period attached to qualification
to any other income support payment paid under the SSA. Item 3
also requires the RA payable attached to FTB to likewise take into
account any RA paid attached to an income support payment provided
under the Veterans’ Entitlements Act 1986 (VEA).
Item 31 allows the amount of RA deemed to
be payable to be varied on its own, separate to the amount of FTB
payable.
Item 36 places a new section in the SSA to
allow the separate cancellation of RA payable, where the rent certificate
is not provided. The main income support payment can still be paid,
rather than it also being cancelled.
Item 37 allows the increase of the rate of
assistance payable (the RA amount) to be restored where the rent certificate
is later provided.
Endnotes
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A New Tax System (Family Assistance) Bill 1999, Bills Digest
No. 175, 1998-99.
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Examples of research in this area are: G. Beer ‘Work Disincentives
under A New Tax System: The distribution of effective marginal
tax rates in 2002’, Paper presented to the 2002 Conference of
Economists, 30 September 2002. Full text at: http://www.natsem.canberra.edu.au/publication.jsp?titleID=CP0306
M. Toohey and G. Beer, ‘Is it worth working now? :Financial incentives
for working mothers under Australia’s new tax system’. Paper presented
to the 2003 Australian Social Policy Conference 9 July 2003. Full
text at: http://www.natsem.canberra.edu.au/publication.jsp?titleID=CP0212
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Australian Institute of Health and Welfare, Adoptions Australia
2002–04, Child Welfare Series No. 35, Canberra, 26 November 2004,
p. X. http://www.aihw.gov.au/publications/index.cfm/title/10073
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ibid.
