BILLS DIGEST NO. 125, 2017–18
PDF version [610KB]
Lauren Cook
Social Policy Section
20
June 2018
Contents
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
Date introduced: 10
May 2018
House: House of
Representatives
Portfolio: Social
Services
Commencement: 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 Federal
Register of Legislation website.
All hyperlinks in this Bills Digest are correct as at
June 2018.
Purpose of the Bill
The purpose of the Social Services Legislation Amendment
(Maintaining Income Thresholds) Bill 2018 (the Bill) is to:
- amend
the A New Tax
System (Family Assistance) Act 1999 to extend the indexation pause of
the Family Tax Benefit Part A (FTB A) family higher income free area, and
the Family Tax Benefit Part B (FTB B) primary earner income limit until
30 June 2021
- amend
the A New Tax System (Family Assistance) Act to pause the indexation of
the FTB A and FTB B end-of-year supplements until 30 June 2021
and
- amend
the Paid
Parental Leave Act 2010 to extend the indexation pause of the Parental
Leave Pay (PLP) and Dad and Partner Pay (DAPP) income limits until
30 June 2021.
The measures were announced in the 2017–18 Mid-Year
Economic and Fiscal Outlook (MYEFO) and will commence on Royal Assent.[1]
The pauses to indexation are expected to provide combined
savings of approximately $321.9 million over four years.[2]
Background
Family Tax Benefit
Family Tax Benefit (FTB) is the main form of direct
financial assistance the Australian Government provides to families with
children. There are two FTB payments: FTB A and FTB B. Both payments
are means tested to target higher levels of assistance at lower income
families. FTB A is available to all families who meet the care, residence
and income test requirements.[3]
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.[4]
FTB A income test
In calculating FTB A entitlements, two different
income tests are generally applied with the one that provides the highest rate
being used.[5]
The first test (Method 1) reduces the maximum rate of FTB A by
20 cents for each dollar of adjusted taxable income above $52,706 (this
amount is known as the lower income free area).
The maximum fortnightly rate is currently $182.84 for each
child aged 0–12 years and $237.86 for each eligible teenager.[6]
The second test (Method 2) reduces the base rate of FTB A
by 30 cents for each dollar above $94,316 (the higher income free area). The
fortnightly base rate is $58.66 per fortnight.
Families with income under $80,000 per annum are also
eligible for the annual end-of-year FTB A supplement of $737.30 per child.[7]
The income test methods are applied in the following way:
- families
with income equal to, or below $52,706 receive the maximum rate of FTB A
- families
whose income falls in the range of $52,706–$94,316 receive either the reduced
rate worked out under Method 1 or the base rate of FTB A (whichever is
higher) and
- families
with income over $94,316 receive the rate worked out under Method 1 or Method 2
(whichever is higher).
FTB B income test
A family is not entitled to FTB B where the higher
income earner in a couple, or a single parent, has an income of $100,000 per
year or more.[8]
Families receiving FTB B are also eligible for the annual
end-of-year FTB B supplement of $357.70 per family.[9]
Parental Leave Pay and Dad and
Partner Pay
PLP is a short term payment for the primary carer of a
newborn or newly adopted child while they are on leave from work, for a maximum
period of 18 weeks.[10]
DAPP is a short term payment for the biological father of a child, the partner
of a birth mother, or an adoptive parent while they are on leave from work, for
a maximum of two weeks.[11]
Under the income test, a person is not eligible for PLP or
DAPP if they have an individual adjusted taxable income over $150,000 in the
financial year prior to the date of their claim, or the date of birth or
adoption, whichever is earlier.[12]
Proposed change
Indexation in the family assistance system is the
automatic adjustment of certain amounts or limits in line with movements in
prices, as measured by the Consumer Price Index (CPI). The affected amounts are
usually indexed once a year to maintain their real value over time.
The relevant threshold amounts to be affected by the
proposed measures are:
- the
FTB A higher income free area of $94,316 (plus $3,796 for each child after
the first) – under the FTB A Method 2 income tests, the basic rate of FTB A
reduces by 30 cents for each dollar above this ‘free area’ until it reaches
zero[13]
- the
FTB B upper income limit of $100,000 – if the higher income earner in a
couple, or a single parent, has an annual adjusted taxable income over this
amount then they will not be eligible for FTB B[14]
- the
FTB A supplement ($737.30 per child) and the FTB B supplement ($357.70
per family) – these supplements are paid to families in receipt of FTB A and
earning under $80,000 and to families in receipt of FTB B at the end of
the financial year[15]
and
- the
upper income limit of $150,000 for claimants of PLP and DAPP – if a potential
recipient has adjusted taxable income over this amount in the year prior to the
date of claim, or the date of birth or adoption, then they are not eligible for
these payments.[16]
The FTB A higher income free area has not been
indexed since 1 July 2008.[17]
Under the current legislation, the FTB A higher income free area is to be
next indexed on 1 July 2020.[18]
The FTB B upper income limit was introduced from July
2008. While the limit was reduced from $150,000 to $100,000 from 1 July 2015,
the limit has not been indexed to date.[19]
Under the current legislation, the FTB upper income limit is to be indexed for
the first time on 1 July 2020.[20]
Indexation for the FTB A and FTB B end-of-year
supplements did not occur from 1 July 2011 to 1 July 2016.[21]
On 1 July 2017, the supplement amounts were indexed for the first
time in six years and will continue to be indexed every July.[22]
The upper income limit for claimants has not been indexed
since it was introduced for PLP in 2010, and for DAPP in 2012.[23]
Under the current legislation, the upper income limit for PLP and DAPP is to be
indexed for the first time on 1 July 2020.[24]
These indexation freezes produce savings as a result of
families gradually earning more income and moving above these limits, in which
case they either lose eligibility or receive a lower rate of payment. In the
case of the FTB A and FTB B supplements, savings are produced by
preventing entitlements increasing.
The ongoing freeze on the indexation of various limits and
payments to families will produce significant savings to the Budget over the
forward estimates period and will primarily affect those with higher incomes.
Concerns have been raised by some commentators in the past that the pursuit of
these savings may have inadvertent effects, such as increasing rates of child
poverty (as payment levels do not keep pace with growth in income), and
decreasing public and political support for the family assistance system (as
fewer families find that they are eligible for the payments).[25]
Committee
consideration
Senate Standing Committee for
Selection of Bills
On 10 May 2018, the Senate Standing Committee
for the Selection of Bills deferred consideration of the Bill until its next
meeting.[26]
Senate Standing Committee for the
Scrutiny of Bills
At the time of writing, the Senate Standing Committee for
the Scrutiny of Bills had not reported on the Bill.
Policy
position of non-government parties/independents
At the time of writing, there have not been any publicly
expressed policy positions on the Bill by non-government parties or
independents.
Position of
major interest groups
The Australian Council of Social Service (ACOSS) has
criticised the extension of the indexation freeze to FTB supplements and income
thresholds, stating that the extension means ‘families will have to cover
higher living costs with less’.[27]
Financial
implications
According to the Explanatory Memorandum, the pauses to
indexation are expected to provide combined savings of approximately
$321.9 million over four years.[28]
In response to a question on notice from a Senate
Estimates hearing on 1 March 2018, the Department of Social Services
provided a breakdown of this saving.
Table 1: financial impact
| Measure |
Financial
impact over the forward estimates |
| Family assistance measures (FTB) |
Savings of
$312.6 million |
| Paid parental leave measures (PLP and DAPP) |
Savings of
$9.3 million |
Source: Senate Community Affairs Legislation Committee, Answers
to Questions on Notice, Social Services Portfolio, Additional Estimates 2017–18,
Question
SQ18-000035.
Statement of Compatibility with Human Rights
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.[29]
Parliamentary Joint Committee on
Human Rights
The Parliamentary Joint Committee on Human Rights considers
that the Bill does not raise human rights concerns.[30]
Key issues
and provisions
Family Tax Benefit
Numbers affected
On 10 May 2018, the Minister for Social
Services, Dan Tehan, announced that extending the indexation freeze for
the FTB A higher income free area would affect around 132,600 families. Of
those families, around 119,400 families would receive a reduced rate of FTB A,
and around 13,200 families would no longer be entitled to receive FTB A.[31]
Additionally, the Minister stated that extending the
indexation freeze for the FTB B upper income limit would affect around
9,300 families who would no longer be eligible to receive FTB B.[32]
The Minister for Social Services did not provide figures
for the numbers of families that would be affected by introducing a pause on
indexation for the FTB A and FTB B end-of-year supplements for three
years. In 2015–16 there were:
- 1,246,710
recipients of FTB A earning less than $80,000 who would have been entitled
to receive the FTB A end-of-year supplement and
- 1,344,466
recipients of FTB B who would have been entitled to receive the FTB B
end-of-year supplement.[33]
Provisions
Item 1 repeals current subclause 3(7) of Schedule 4
of the A New Tax System (Family Assistance) Act 1999 that states that the
FTB A higher income free area and the FTB B upper income limit are
not to be indexed between 1 July 2009 and 1 July 2019.
In its place, proposed subclause 3(7) will extend
this indexation pause by 12 months. As a result, the FTB A higher income
free area and the FTB B upper income limit will not be indexed on
1 July 2018, 1 July 2019, and 1 July 2020. The
next indexation date for these income limits would be 1 July 2021.
Item 1 also repeals subclause 3(8) of Schedule 4 of
the A New Tax System (Family Assistance) Act, which states that the FTB A
and FTB B supplement amounts were not to be indexed between 1 July 2011
and 1 July 2016.
In its place, proposed subclause 3(8) will
introduce an indexation pause for three years. As a result, FTB A and
FTB B supplement amounts will not be indexed on 1 July 2018,
1 July 2019, and 1 July 2020. The next indexation date for
these supplement amounts would be 1 July 2021.
However, if the Bill does not receive Royal Assent by
1 July 2018, indexation for FTB A and FTB B supplements will
occur on this date.
Parental Leave Pay and Dad and
Partner Pay
Numbers affected
There have been no announcements on the number of people estimated
to be affected by extending the indexation pause for PLP and DAPP income limits.
Provisions
Items 2 to 5 amend the Paid Parental Leave Act
2010 by extending the indexation freeze for the PLP and DAPP income limit for
twelve months. In doing so, the next indexation date for this income limit
would be 1 July 2021.
Members, Senators and Parliamentary staff can obtain further
information from the Parliamentary Library on (02) 6277 2500.
[1]. S
Morrison (Treasurer) and M Cormann (Minister for Finance), Mid-year
economic and fiscal outlook 2017–18, p. 179.
[2]. Explanatory
Memorandum, Social Services Legislation Amendment (Maintaining Income
Thresholds) Bill 2018, p. 1.
[3]. Department
of Human Services (DHS), ‘Family
tax benefit’, DHS website, last updated 12 May 2018.
[4]. Ibid.
[5]. DHS,
A
guide to Australian Government payments: 20 March-30 June 2018, DHS,
Canberra, p. 3.
[6]. Ibid.,
p. 2.
[7]. Ibid.,
pp. 2–3.
[8]. Ibid.,
p. 6.
[9]. Ibid.,
p. 5.
[10]. Ibid.,
p. 7.
[11]. Ibid.,
p. 8.
[12]. Ibid.,
pp. 7–8.
[13]. A New Tax System
(Family Assistance) Act 1999, Schedule 1, clauses 3 and 28; Department
of Social Services (DSS), ‘3.1.8.10
Method 2 – calculating the maximum rate of FTB Part A’, Family
Assistance Guide, version 1.203, released 7 May 2018, DSS website,
last updated 20 March 2017.
[14]. A New Tax System (Family
Assistance) Act 1999, Schedule 1, clause 28B.
[15]. A New Tax System
(Family Assistance) Act 1999, Schedule 1, clauses 31A and 38A; DSS, ‘3.1.1.20
Current FTB rates & income test amounts’, Family Assistance Guide,
version 1.203, released 7 May 2018, DSS website, last updated 3 July 2017.
[16]. Paid Parental Leave
Act 2010, sections 31, 37, 115CB and 115CG; DSS, ‘1.1.I.20
Income test’, Paid Parental Leave Guide, version 1.50, released 7
May 2018, DSS website, last updated 3 July 2017.
[17]. Social Security
and Family Assistance Legislation Amendment (2009 Budget Measures) Act 2009,
Schedule 2, clause 1; Family Assistance
and Other Legislation Amendment Act 2011, Schedule 2, clause 1; Social Services
and Other Legislation Amendment Act 2014, Schedule 9, clause 7; Budget Savings
(Omnibus) Act 2016, Schedule 17, clause 1.
[18]. A New Tax System
(Family Assistance) Act 1999, Schedule 4, subclause 3(7).
[19]. Social Services
and Other Legislation Amendment (2014 Budget Measures No. 6) Act 2014, Schedule
9, clause 4; A
New Tax System (Family Assistance) Act 1999, Schedule 4, subclause
3(7).
[20]. A New Tax System
(Family Assistance) Act 1999, Schedule 4, subclause 3(7).
[21]. Family Assistance
and Other Legislation Amendment Act 2011, Schedule 2, clause 2; Social Services
and Other Legislation Amendment Act 2014, Schedule 9, clause 9.
[22]. DSS,
‘3.6.1 FTB
Part A - historical rates’, Family Assistance Guide, version 1.203,
released 7 May 2018, DSS website, last updated 3 July 2017; DSS ‘3.6.3 FTB Part B
- historical rates’, Family Assistance Guide, version 1.203,
released 7 May 2018, DSS website, last updated 3 July 2017; A New Tax System
(Family Assistance) Act 1999, Schedule 4, subclause 3(8).
[23]. Family Assistance
and Other Legislation Amendment Act 2011, Schedule 2, clauses 3-5; Social Services
and Other Legislation Amendment Act 2014, Schedule 9, clauses 11-14; Budget Savings
(Omnibus) Act 2016, Schedule 17, clauses 2-5.
[24]. Paid Parental Leave
Act 2010, section 42.
[25]. G
Redmond and P Whiteford, ‘Middle
class welfare – are we hitting the target?’, The Conversation,
16 May 2013.
[26]. Senate
Standing Committee for Selection of Bills, Report,
5, 2018, The Senate, 10 May 2018.
[27]. Australian
Council of Social Services (ACOSS), Goods
new in MYEFO undone by more mean-spirited social security cuts, media
release, 18 December 2017.
[28]. Explanatory
Memorandum, op. cit., p. 1.
[29]. The
Statement of Compatibility with Human Rights can be found at page 5 of the
Explanatory
Memorandum to the Bill. However the Statement of Compatibility with Human
Rights is incorrectly labelled page 1.
[30]. Parliamentary Joint Committee on Human Rights, Report, 5, 2018, Canberra, 19 June 2018, p.
53.
[31]. D
Tehan (Minister for Social Services), ‘Second
reading speech: Social Services Legislation Amendment (Maintaining Income
Thresholds) Bill 2018’,
House of Representatives, Debates, 10 May 2018, p. 3643.
[32]. Ibid.
[33]. DSS,
Annual
report 2016–17, DSS, Canberra, 2017, p. 204.
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