Michael Klapdor
In Budget 2017–18, the Government announced that it would no
longer proceed with a wide range of Family Tax Benefit (FTB) savings measures that
it has been unable to legislate and the relevant Bills have since been removed
from the notice paper. Instead, it proposed a more modest change to the Family
Tax Benefit Part A (FTB-A) income test that will reduce payments for some
higher-income families. The Government has also announced an extension of the
No Jab, No Pay measure from the 2015–16 Budget. This measure will reduce
fortnightly payments of FTB-A for those families who do not meet the
immunisation requirements.
The two new measures will require legislation.
Dropped measures
Since the 2014–15 Budget, the Coalition Government has
attempted to pass a wide range of savings measures affecting the FTB program
but it has been unable to win support in the Senate for all of these. Some
measures have passed, however, including:
-
the tightening of the Family Tax Benefit Part B (FTB-B) income
test
- closing FTB-B to couple families with children aged 13 years or
older
- closing the FTB-A end of year supplement to families with income
over $80,000 per annum
- indexation pauses (so that income test thresholds and some
payment rates do not increase in line with inflation)
- reductions in the level of assistance provided to large families and
- closing off the Energy Supplement payment to new FTB recipients.
The 2017–18 Budget confirms that the Government will not
proceed with any of its previously announced but unlegislated FTB measures,
including:
- the phase out of the FTB-A and FTB-B end of year supplements—which
was estimated to save $4.7 billion over the forward estimates
- the increase in fortnightly rates of FTB-A (as well as some
related youth payment rates)—which was estimated to cost $2.4 billion (intended
to partly offset the supplement phase-out) and
- reduction in FTB-B rates for single parents with a youngest child
aged 13–17 and removal of FTB-B for single parent families from 1 January in
the calendar year their youngest child turns 17 (with some older parents and
grandparent/great-grandparent carers exempt)—which was estimated to save $787.9 million
over the forward estimates.[1]
FTB-A income test change
This measure will amend one of the FTB-A income tests from 1
July 2018 for estimated savings of $415.4 million over five years.[2]
FTB-A rates are calculated based on the number of dependent children in the
family, the age of the children and the family’s adjusted taxable income. The
rate calculation process is complex and uses maximum and minimum payment rates,
multiple income thresholds and different rates of withdrawal. The budget
measure does little to reduce the complexity of the income test but will see a
reduction in payment rates for some higher income families.
In calculating FTB-A entitlements, two different income
tests are generally applied with the one that provides the highest rate being
used. The first test (Method 1) reduces the maximum rate of FTB-A by 20 cents
for each dollar of adjusted taxable income above $51,903. The maximum
fortnightly rate is currently $182.84 for each child aged 0–12 years and
$237.86 for each eligible teenager. The second test (Method 2) reduces the base
rate of FTB-A by 30 cents for each dollar above $94,316. The fortnightly base
rate is $58.66 per fortnight.[3]
The methods are applied in the following way:
- families with income equal to, or below $51,903 receive the
maximum rate of FTB-A
-
families whose income falls in the range of $51,903–$94,316
receive either their reduced rate worked out under Method 1 or the base
rate of FTB-A, whichever is higher
- families with income over $94,316 receive the rate worked out
under Method 1 or Method 2, whichever is higher.
The budget measure will see the Method 1 rate adjusted, so
that that the 20 cent reduction of the maximum rate will apply for each dollar
of income between $51,903 and $94,316, but each dollar of income over $94,316
(if any) will reduce the individual’s rate by 30 cents. Families will still
receive the higher of the rates worked out using Method 1 and Method 2.
Under the current income test design, families with income
over $94,316 who have their rate determined using Method 1 are generally those
with three or more children. As such, it will likely be larger families
affected by the proposed measure. For example, currently, a family with annual
income of $108,000 with three children aged 12, 13 and 15 would be entitled to
around $5,950 in FTB-A. Under the proposed measure, the family would receive
around $4,582 (a loss of around $1,368).
The Government estimates that 24,900 families will lose
access to FTB-A and 71,800 will see a reduction in their payment rates as a
result of the measure.[4] Media reports suggest
that the average household income for those who will lose eligibility for FTB-A
is $125,490, and for those who will see a reduction it is $107,622.[5]
As the measures only affect higher income earners, they are unlikely to be as
controversial as the dropped measures—the impact of which was spread across all
FTB-A recipients.
No Jab, No Pay
The Government will extend its No Jab, No Pay measure from
the 2015–16 Budget to reduce the fortnightly payment rates of FTB-A recipients
whose children do not meet immunisation requirements. The 2015–16 measure
removed an exemption for those who submitted a conscientious objection to
immunisation. It also extended immunisation requirements for these payments to
children of all ages (not just those aged under seven years) and was part of a
package of measures aimed at boosting rates of immunisation.[6]
The requirements are for children to be immunised in line with vaccination
schedules in order for their parents/carers to be eligible for the FTB-A
end-of-year supplement or any child care fee assistance payments.[7]
Exemptions are granted only in special circumstances.
The new measure will see $28 withheld from a FTB-A
recipient’s fortnightly rate for each child who does not meet the immunisation
requirements. It is unclear whether the withheld amount will be paid if the
child later meets the immunisation requirements or if there will be exemptions
where circumstances prevent a child from meeting the requirements.
The $28 reduction will also apply to FTB-A recipients who
receive an income support payment (such as a pension or allowance), or whose
partner receives an income support payment, and who do not meet the Healthy
Start for School (HSS) requirements. The HSS requirements are for a health
check to be carried out in the financial year the payment recipient’s child
turns four (or the financial year after they turn four) for the recipient to be
eligible for the FTB-A end-of-year supplement.[8]
The Government has claimed that its policy has increased
immunisation rates. The period from December 2015 to March 2017 saw the
immunisation rate for one year olds increase by 1.35 percentage points to 93.63
per cent; for two year olds by 1.75 percentage points to 90.06 per cent; and
for five year olds by 0.73 percentage points to 93.32 per cent.[9]
However, some health researchers have questioned the effectiveness of using
financial penalties to boost vaccination rates, particularly when many of those
who reject vaccination come from higher-income groups, and many of those who
fail to meet immunisation requirements do so because of reasons such as
difficulties in accessing health services.[10]
The Government expects savings of $15.0 million over four
years from the measure which suggests that only a relatively small number of
people will be affected by the new payment reductions.
[1].
Explanatory
Memorandum, Social Services Legislation Amendment (Omnibus Savings and
Child Care Reform) Bill 2017, p. 6 and Explanatory
Memorandum, Social Services Legislation Amendment (Family Payments
Structural Reform and Participation Measures) Bill 2016, p. 2.
[2].
The budget figures in this brief have taken from the following
document unless otherwise sourced: Australian Government, Budget measures:
budget paper no. 2: 2017–18, 2017.
[3].
Families with income under $80,000 per annum are eligible for the
FTB-A supplement of $726.35 per child. It is included in the rate calculation
process but not paid until the end of the financial year.
[4].
Department of Social Services (DSS), Welfare—other
measures: 2017 Budget, Factsheet, DSS, Canberra, 2017, p. 1.
[5].
R Morton, ‘Big
family welfare cut down to size’, The Australian, 10 May 2017.
[6].
M Klapdor and A Grove, ‘”No
Jab No Pay” and other immunisation measures’, Budget review 2015–16,
Research paper series, 2014–15, Parliamentary Library, Canberra, 2015, pp.
85–86.
[7].
DSS, ‘2.1.3
Immunisation & health check requirements’, Guide to social security
law, DSS website, last reviewed 20 March 2017.
[8].
DSS, ‘2.1.3
Immunisation & health check requirements’, op. cit.
[9].
C Porter (Minister for Social Services) and G Hunt (Minister for
Health), Further
strengthening No Jab, No Pay, media release, 1 May 2017.
[10].
J Leask and M Danchin, ‘Imposing
penalties for vaccine rejection requires strong scrutiny’, Journal of
Paediatrics and Child Health, 53(5), 6 February 2017, pp. 439–444.
All online articles accessed May 2017.
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