Chapter 2


Chapter 2

Age of eligibility for Family Tax Benefit Part A

Purpose

2.1        The first of the suite of measures in the bill would amend the A New Tax System (Family Assistance) Act 1999 to lower the maximum age of eligibility for a child for Family Tax Benefit Part A (FTB A) from 24 to 21 years, commencing from 1 January 2012.[1]

2.2        This change aligns FTB A with the age of independence used for access to Youth Allowance, which, commencing from 1 January 2012, changes from 24 to 22 years.[2] Both of these changes reflect that young people aged 22 and over are considered independent.[3]

2.3        Transitional arrangements will allow families with a young person who is already enrolled in a course of education which started before 1 January 2012 to continue to receive FTB A until that course finishes.[4]

Background

2.4        Family payments are designed to support families with the costs of raising children while they are dependent. In 2000, the government simplified a range of family payments, replacing them with:

  • FTB (Part A) which provided income tested assistance for each dependent child;
  • FTB (Part B) which provided a payment for parents who stayed at home to care for children; and
  • Child Care Benefit to bring two existing child care fee subsidies into one payment.[5]

Who is eligible for FTB A?

2.5        FTB A assists families with the cost of raising children and is paid per child. Basic conditions of eligibility require that a parent, guardian, carer (including foster carer), eligible grandparents or approved care organisation must:

  • have a dependent child aged under 16; or
  • have a dependent child aged 16–20 years who has completed a Year 12 or equivalent qualification, or who is undertaking full-time education or training leading to a Year 12 or equivalent qualification, or who is exempt; or
  • have a dependent full-time student aged 21 to 24; and
  • have care of the child for 35 per cent of the time; and
  • meet residential requirements; and
  • have income under a certain amount (the amount varies depending on number and age of children).[6]

2.6        A child or student cannot be a dependant if they are:

  • receiving a pension or benefit (such as Youth Allowance) or a labour market program payment; or
  • aged five to 15, not studying full-time and their annual income is $13,010 or more; or
  • aged 16 to 24 and their annual income is $13,010 or more or they are receiving a prescribed education scheme payment such as ABSTUDY.[7]

Alignment with age of independence for Youth Allowance

2.7        As part of an overhaul of Youth Allowance in 2010, the government revised the eligibility requirements to lower the age of independence to 22 from 1 January 2012.[8]

2.8        This 2010 reform will allow Youth Allowance to be accessed by young people aged 22 and over in full-time study. Eligibility is independent of their parents' income, although means testing and academic progress requirements do apply.

Financial impact

2.9        The government expects that this measure will deliver a saving of
$29.2 million over four years from 2011–12.[9] Over the forward estimates, the yearly financial impact is set out below:[10]

2011–12

2012–13

2013–14

2014–15

$0.6m

­-$7.6 m

-$10.4m

-$11.8m

Issues raised during the inquiry

2.10       Some submissions to the inquiry noted that the proposed amendment to the age of eligibility for FTB A could have flow-on effects on eligibility for other payments, including Youth Allowance.  They were concerned that this could mean that a certain cohort of people could miss out on payments to which they would otherwise have been entitled had the amendment not been made.  

2.11      Concerns raised by submitters to the inquiry included the potential for a discrepancy where different residency requirements for access to FTB A and to Youth Allowance may mean that some people 'fall through the gaps'. Other effects such as the potential impact of the change on eligibility for other family payments were also raised.

Residency requirements

2.12      The National Welfare Rights Network (NWRN) noted that the proposed change could mean that a 'significant number of people' may miss out on payments as:

...they would have qualified for Family Tax Benefit, but would not qualify for Youth Allowance by reason of either their residency status or parental means.

...The largest group of our clients likely to be unable to access income support based on their residency status because of the proposed Bill will be New Zealanders, who meet the residential criteria for Family Tax Benefit but not for Youth Allowance. The second largest group is likely to be the families of provisional partner visa holders.

The proposed Bill effectively strips these families of three years' worth of payments in respect of each child, having a significant impact on those families' ability to subsist and to provide for their families' basic needs during this time.[11]

2.13      NWRN's submission went on to state that:

Welfare Rights Centres in each state and territory are contacted regularly by many families and young people from New Zealand who are unable to access Australian social security payments under the International Agreement with New Zealand who are in situations of extreme financial hardship ...

The changes included in the proposed Bill are likely to increase instances of extreme financial hardship as experienced by New Zealanders living permanently in Australia.[12]

2.14      The Welfare Rights Centre Inc also raised concerns about residency requirements that could affect:

...a great number of New Zealand Citizens and persons on visas such as Spousal visa, Temporary Protection, Humanitarian Protection and the many visas relating to application processing and pending statuses.[13]

2.15      The Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA) acknowledged at the hearing that this could be the case:

The family tax benefit is paid in respect of children regardless of their length of residence, whereas Youth Allowance is an income support payment, and income support payments are subject to a residency rule. The residency rule for Youth Allowance is two years residence.[14]

2.16      The bill itself does not however introduce new residency rules for each payment. The proposed change to the age of eligibility for FTB A may mean that some individuals could be unable to access Youth Allowance even if they meet the 'age of independence' limit (22 or over from 1 January 2012), because they have been in Australia for less than two years.

Income tests and flow-on effects to other family payments

2.17      Concerns were also raised about whether families would be able to qualify for FTB A but not for other payments:

In particular there are families who would be prevented from accessing Youth Allowance by reason of the Family Actual Means Test which would have previously been permitted to receive Family Tax Benefit.

We are also concerned about the flow-on effect of alteration to the definition of Family Tax Benefit child to other payments. For example, currently a person qualifies for Double Orphan Pension in respect of a Family Tax Benefit child. There are potentially groups of people responsible for adult orphans in this situation likely to be left without payments as a result of the proposed changes.[15]

2.18      FaHCSIA responded:

...to receive FTB for a child aged 22 to 24, the child's income has to be less than the child income limit, which is about $13,000. That is a sudden-death cut-off. For Youth Allowance, there is a free area and then a tapered means test so you may be able to qualify for Youth Allowance but not for FTB because of income, or you may qualify for a broken rate of Youth Allowance but qualify for the maximum rate of FTB. Other than that, because it is only a personal income test that applies in this situation, not a parental income test, there is no real group that is precluded.[16]

2.19      When asked specifically about the example of orphans, FaHCSIA indicated that they did not believe there would be flow-on effects for this group.[17]

2.20      The House of Representatives' Standing Committee on Social Policy and Legal Affairs, which also held an inquiry into this bill, noted:

...this amendment reflects the view that families do not require family payments for children who are no longer dependent. Independent children can instead receive direct support if they meet Youth Allowance eligibility requirements and are studying full-time.

Effectively, the Australian Government will be transferring benefits from the parents of 22–24 year old full-time students through FTB Part A directly to 22–24 year old full-time students through Youth Allowance.[18]

Committee view

2.21      The committee acknowledges concerns expressed by some submitters about the impact the decrease in the age of eligibility for FTB A might have on those young people who are non-citizens but are residents of Australia and on families in receipt of other payments such as the Double Orphan Pension. However, the committee is confident the government will resolve any such issues should they arise.

2.22      The committee supports the proposed change in the upper age limit for FTB A eligibility from 24 to 21 years as a way to ensure that the family payments system is better targeted to support families while their dependent children are in study or training. Given that from 1 January 2012 the government will recognise that young people aged 22 and over are considered independent for the purposes of Youth Allowance, it is the view of the committee that aligning the FTB A eligibility age with this age is appropriate.

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