Chapter 2
Key issues
2.1
Most submitters and witnesses supported reforms to the family tax
benefit (FTB) payments system to ensure it is simpler, fairer and better
targeted. However, most submitters and witnesses opposed the proposed changes
outlined in the Social Services Legislation Amendment (Family Payments
Structural Reform and Participation Measures) Bill 2015 (Bill) and expressed
concerns about the following measures:
-
changes to the FTB Part B rates for vulnerable families,
particularly those with children aged over 13 years of age;
-
phasing out of FTB Part A and FTB Part B supplements; and
-
linking proposed savings to the government's childcare package.
2.2
In his second reading speech, the Minister for Social Services
(Minister), the Hon Christian Porter MP, noted that the measures outlined in
the Bill:
...demonstrates the government's commitment to assisting
families; providing additional assistance to families when they need it the
most; supporting family choice to spend more time with children when they are
very young, if they wish to do so; recognising that families still have caring
responsibilities when their children are in secondary school; and recognising
that the most vulnerable families in the secondary schooling years, such as
grandparent carers, should receive some additional support during a child's
adolescent years.[1]
Changes to FTB Part B payments
2.3
Some submitters and witnesses supported the proposal to increase the
fortnightly FTB Part A payment by $10.08 for each child in the family aged up
to 19 years, with equivalent increases in youth allowance and disability
support pension payments for those aged under 18 and living at home. The Commissioner
for Children and Young People Western Australia supported the measure noting it
would:
...assist low income families in raising and supporting their
children so that they can be safe and healthy, so that they can attend quality
child care, pre-school, primary and secondary school, and have access to life
opportunities.[2]
2.4
However, most submitters and witnesses did not support the proposed changes
to FTB Part B payments, noting that for most families the proposed increase in
FTB Part A may be less than the proposed reductions to FTB Part B. These
submitters expressed concern that the proposed reduction in payments risks
placing families in financial hardship, particularly families in vulnerable
groups such as single parents, low-income families, families in regional and
remote areas and Aboriginal and Torres Strait Islander families.[3]
For example, the Secretariat of National Aboriginal and Islander Child Care
submitted that the reductions would have a disproportionate impact on
Aboriginal and Torres Strait Islander families:
Many of our people are already really struggling to meet the
day-to-day needs of their
families. These reductions will inconsistently further reduce the ability of
many parents to care for their children...[4]
2.5
A number of submitters and witnesses expressed concern about the impact
of the proposed reduction of the FTB Part B payment on families with a youngest
child aged over 13 years of age. These submitters and witnesses suggested that removing
payments risks placing these children at a disadvantage as the cost of raising
children increases as children grow older.[5]
For example, the Centre for Excellence in Child and Family Welfare submitted
that children:
...the costs of caring for children continue to rise as
children grow older. Reducing the income available for families who are already
struggling financially at a time when expenses are increasing will exacerbate
the challenges for these families and is likely to increase child poverty.[6]
2.6
The Australian Youth Affairs Coalition (AYAC) expressed particular
concern about the impact of removing FTB Part B payments for young people aged
16 to 18 years of age who are not eligible for youth allowance.[7]
Mr Leo Fieldgrass, National Director of the AYAC told the committee:
We are concerned that replacing the current rate of family
tax benefit part B, for single parents and grandparents with older children
between 12 and 16, with the lower payment will leave a gap for children between
16 and 18 that was previously covered by part B and not receiving youth
allowance.[8]
2.7
Representatives from the Department of Social Services (department) told
the committee that the 'vast majority' of FTB Part A recipients would receive
an increase in fortnightly assistance, with around 1.2 million families
(including 2.2 million children) receiving an additional $10.08 per fortnight.[9]
At Supplementary Budget Estimates, the committee was advised that 516 000
single parents (43 per cent of the 1.2 million families) would benefit from the
increase, and 22 200 children aged under 18 years of age receiving youth
allowance, disability support pension, Abstudy or special benefit would also
benefit.[10]
2.8
The department clarified that the changes to FTB Part B payments are
intended to provide an incentive for parents to re-enter the workforce as their
children grow older:
FTB [Part] B is a payment which is provided to single income
families to recognise that, for example, a member of a couple has withdrawn
from the workforce as part of the family's arrangements to support the children...the
intention of removing the payment at 13 is to provide an incentive for those
parents to become more engaged in the workforce.[11]
2.9
The department highlighted that FTB Part A is the family payment
designed to specifically assist families with the increasing costs of raising
children over the age of 13, and that part of this Bill's objective is to
increase workforce participation for families as the youngest child becomes
more independent and requires less direct care:
FTB [Part] A is really the payment which is intended to
assist families with the direct costs of children and it increases at age 13,
in line with the recognised increasing cost of children; FTB [Part] B, which is
the payment which is being reduced as part of these proposals, is assisting
single income couples.
I think the gist of the government's policy is that, at that
age, single income couples are in a position to increase their workforce
participation and therefore specific assistance them is not so much required.
That is why they are making the change. But that is not to do with the cost of
children; that is to do with a recognition that the family may have more
capacity to increase their own hours of work and their own level of
participation in the workforce to contribute to the total costs of the family.[12]
Incentives to enter the workforce
2.10
Submitters questioned whether the removal of FTB Part B payments is the most
appropriate mechanism to increase workforce participation. Ms Lin Hatfield
Dodds, National Director of UnitingCare Australia told the committee that
reductions in payments do not provide sufficient incentive and should be
accompanied by investment in job creation:
In our experience over many decades working with unemployed
Australians, if a person is unable to work or cannot find employment, despite
attempting to do so, reducing payments is not an effective incentive if someone
is genuinely looking for work. To be effective in attaching unemployed people
to jobs, we believe our focus needs to be, beyond training and employment
support, on investment in job creation.[13]
2.11
In its submission, National Welfare Rights Network (NWRN) acknowledged
that in some circumstances removal of payments may act as an incentive for
parents to re-engage with the workforce 'and as a result be better off'.
However, NWRN also noted that in many other circumstances, parents:
...will never be in a position to take up paid work due to
disability or caring responsibilities or other factors. The Bill undermines the
adequacy of payments to families and children for those who are unable to enter
the workforce or will be unsuccessful in doing so.[14]
2.12
In evidence to the committee, the department noted the positive
consequences of increasing workforce participation once a family's youngest
child commences secondary schooling and requires less direct care:
...the intention of the policy is that families that are
currently single income families could replace that money through increases in
their workforce participation and, as a result, they get the money to meet
those costs of their children through self-provision rather than through
government assistance.[15]
2.13
The department also explained that the expected savings from the Bill
would offset the Jobs for Families package to enable parents with
younger children to access greater childcare support when contemplating
re-entering the workforce:
A common theme across both the childcare package and this
package is some priority for encouraging families to provide for themselves as
much as possible, and the cost of child care is a significant inhibitor of
participation for families, particularly where the person planning to work has
a low wage rate and where the cost of child care could be quite a high
proportion of their wage rate. So improving assistance through child care is an
important element of enabling low-income families and low-wage workers to
participate in the workforce.[16]
Exemptions for grandparent carers
2.14
A number of submissions were supportive of this Bill's exemption of
grandparent carers from the changes to FTB Part B.[17]
However, some submitters questioned why the exemption for grandparents was not
extended to other vulnerable groups such as foster carers and kinship carers.[18]
Mr Brian Lawrence, Chairman of the Australian Catholic Council for Employment
Relations (ACCER) told the committee:
We would want all carers of children to be included in the
benefits and to have the full benefits. We think it is wrong to discriminate
against children by reference to the status of their carer or, to put it
another way, to discriminate against carers by reference to their relationship
with the children...that is, the separation out of sole parents, grandparents,
coupled parents, of course the leaving aside of other carers, is
discriminatory. We think they all should be treated equally.[19]
2.15
The committee notes that the Bill provides a range of protections for
vulnerable families including single parent and grandparent led households.
This includes $1000.10 per year for grandparent carers with a youngest child
aged 13 to 16 years of age. A reduced rate of $1000.10 will also be provided to
single parents with children in the same age bracket.[20]
Representatives from the department noted that these protections acknowledge
that grandparent carers and single parents have less capacity to engage in the
workforce:
...removing the FTB [Part] B from when the child is aged 13 is
to do with workforce incentives. Clearly grandparents, who are either at
retirement age or nearing retirement age, will have less capacity to increase
their workforce participation—as is the case with sole parents.[21]
Phasing out of FTB Part A and FTB Part B supplements
2.16
A number of submitters and witnesses expressed concern that the phasing
out of the FTB Part A and FTB Part B supplements would risk further
disadvantaging vulnerable groups, particularly single parents and low-income
families.[22]
Mr Martin Cowling from UnitingCare Australia told the committee:
...many of our organisations deal with people whose finances
are very finely balanced all the time, and that any shift in those finances can
push a family into crisis.[23]
2.17
The committee heard that low-income families rely on the supplement for
significant expenses that can't be met through fortnightly payments. Ms Terese
Edwards, CEO of the National Council for Single Mothers and their Children,
told the committee:
The reconciling of the end-of-year supplements is factored
into household budgets and provides a much required capacity to enable families
to pay those large costs that often cannot be met within the weekly budget.
Such items may include outstanding school fees, car registration and
replacement of household appliances.[24]
2.18
In his second reading speech, the Minister highlighted that the purpose
of the supplements when they were introduced in 2004 and 2005 was to 'offset
potential family tax benefit overpayments arising from underestimates by
recipients of their FTB relevant annual income'.[25]
Representatives from the department estimated that only eight per cent of
current supplement recipients incur a debt at the end of the financial year, with
12 per cent having a debt that is covered by the supplement and 80 per cent
receiving the full supplement.[26]
2.19
The Minister also noted that the phasing out of supplements was consistent
with one of the recommendations from the 2015 report by the Reference Group on
Welfare Reform to the Minister for Social Services, A New System for Better
Employment and Social Outcomes: Final Report (McClure Report).[27]
The McClure Report recommended implementing a 'new architecture for the income
support system that is employment focused' that would be 'simpler, more
coherent and clearly reward work'.[28]
This new system should include 'fewer supplements and they should have clearly
defined purposes and be for specific additional costs', and the government
should 'review all supplements alongside the detailed development of the new
payment architecture'.[29]
2.20
The Minister further noted that the need for the supplement would be
reduced by impending changes to the way FTB payments are estimated:
In the near future, the Australian Taxation Office is
introducing a single-touch payroll system, a system which will allow for
accurate fortnightly reporting of income...[this system] will very significantly
reduce the problem of family tax benefit debts.[30]
2.21
Some submitters expressed concern that the proposed Single Touch Payroll
is not yet advanced enough to resolve the problem of overpayments. The
Australian Council of Social Service (ACOSS) submitted that the supplements
should not be phased out until the system is fully operational:
The IT interface between the Department of Social Services
and the Australian Tax Office is not yet advanced enough to prevent over and
underpayments, which end of year supplements were designed to address. Until
the IT system is up to the task, the supplements should not be phased out and
any phase out should be done very gradually and offset by other increases for
low income families.[31]
2.22
Representatives from the department clarified that the Single Touch
Payroll system:
...has the potential to assist us to work with the customer to
get their estimates more accurate under the current estimation rules. We will
see what stream of income the customer is actually receiving and will be able
to identify circumstances in which it is apparent that their estimate seems to
be not appropriate against what we are actually seeing the customer receive. It
will assist in relation to those kinds of cases, in identifying and adjusting
estimates for families where their estimate does not seem to line up with what
is actually happening. It also offers us the potential over the longer term to
consider alternative ways of assessing income rather than using income
estimates, because we will have real-time information about their circumstances
which could be used to directly assist their entitlements in the future.[32]
Linking savings to child care reforms
2.23
A number of submitters and witnesses expressed concern about the
proposal to use the savings from the FTB reductions to fund the $3.5 billion
child care package outlined in the 2015 Budget. These submitters and witnesses
did not support reducing family support payments to fund child care.[33]
Mr Brian Lawrence from ACCER suggested instead that child care support should
be funded from general tax revenue:
Our view is that child care is a responsibility of the
community as a whole and it should come out of the general tax system.
Employers have to pay something towards it; the whole community has to pay
something towards it—it is a community responsibility and not the
responsibility of low-paid people who are struggling to look after their kids
and give them a decent standard of living.[34]
2.24
In his second reading speech, the Minister noted that:
The measures in this bill have been introduced in order to
make sure the Jobs for Families package that was introduced in the
2015-16 budget is fully paid for. This present package contains the required
savings to offset the additional investment in the childcare package, which, as
well as helping families and encouraging workforce participation, also
represents substantive reform of a complicated inflationary childcare system.[35]
2.25
Representatives from the department clarified that the savings would
make childcare more accessible:
The government is investing almost $40 billion in child care
over the next four years. This includes an extra $3.5 billion to make child
care simpler, more flexible and more accessible. The government wants to help
families find affordable child care. This is an important productivity measure
that will boost female workforce participation.
The overall effect of these reforms will increase ongoing
day-to-day financial assistance and provide families with more choice, with
many families receiving an increase of between $30 and $60 in fortnightly
payments, depending on their particular situation. Families will have access to
a better, simpler, more flexible childcare system while ensuring parents who
choose to stay at home when their children are very young are not
disadvantaged. The government believes the package strikes the right balance
between improving the sustainability of family payments and providing
sufficient financial support to families most in need.[36]
Committee view
2.26
The committee supports the proposed increases to FTB Part A payments
which acknowledge and attempt to offset some of the costs associated with
raising children, and would benefit 1.2 million families. The committee notes
that FTB Part A is a means tested payment and as such targets those most in
need.
2.27
The committee acknowledges concerns about the proposed changes to FTB Part
B payments and the impact on vulnerable families. The committee considers that
these changes will provide an incentive for parents to re-engage in the
workforce, recognising that as children grow older, parents have increased
capacity to participate in the workforce. The committee acknowledges that the
Bill contains appropriate safeguards for grandparent carers and single parents
who have limited capacity to find employment.
2.28
The committee acknowledges concerns about the impact of phasing out FTB
Part A and FTB Part B supplements. The committee recognises that a small
proportion of families use the supplement for its original purpose to offset
debts incurred as a result of FTB overpayments. The committee is satisfied that
under the Single Touch Payroll system, families will be able to more accurately
estimate payments and less likely to incur a debt. The committee also recognises
that reducing the number of income support supplements is consistent with the
recommendations of the McClure Report to improve the sustainability of
Australia's welfare system.
2.29
The committee acknowledges concerns about linking the expected savings
from the proposed changes to FTB Part B payments to the government's childcare
package. The committee considers that using the savings for this purpose is
justified and will contribute to increasing productivity and boosting the
participation of parents in the workforce. The committee notes that the
combination of these measures, together with the Jobs for Families
childcare package, will help to support families to support themselves and
reduce their dependence on welfare payments.
Recommendation 1
2.30
The committee recommends that the Bill be passed.
Senator Zed Seselja
Chair
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