Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2008-2009-2010
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
CARBON POLLUTION REDUCTION SCHEME AMENDMENT (HOUSEHOLD ASSISTANCE) BILL
2010
EXPLANATORY MEMORANDUM
(Circulated by the authority of the
Minister for Families, Housing, Community Services and Indigenous Affairs,
the Hon Jenny Macklin MP)
CARBON POLLUTION REDUCTION SCHEME AMENDMENT (HOUSEHOLD ASSISTANCE) BILL
2010
OUTLINE
This bill implements the Government's commitment to assist low and middle-
income households with expected increases in the cost of living arising
from the introduction of the Carbon Pollution Reduction Scheme.
It is anticipated that the Carbon Pollution Reduction Scheme will result in
increases in the cost of living of 0.4 per cent in 2011-12 and 0.8 per cent
in 2012-13, resulting from an initial $10 per tonne fixed carbon price in
2011-12 and a flexible carbon price in 2012-13.
The Government will provide upfront support to low and middle-income
households from 2011-12 through a package of direct cash assistance and tax
offsets to help in adjusting to a low pollution future.
Low-income households will receive additional support, above indexation, to
meet fully the expected increase in the cost of living flowing from the
scheme. Middle-income households will receive additional support, above
indexation, to help meet the expected increase in the cost of living
flowing from the scheme.
Because assistance for the cost of living increase provided through certain
payments will be brought forward, subsequent indexation arrangements will
be adjusted to avoid duplication.
Financial impact statement
The financial impact of this bill, revised to take account of amendments to
the bill as last introduced (in October 2009) and parameter revisions since
the 2009-10 Budget, is:
Increases in payments
| |Total expense - |
| |all portfolios |
|2009-10 | - |
|2010-11 | - |
|2011-12 |$1,071.9m |
|2012-13 |$2,713.1m |
Increases in tax offsets
| |Revenue |
| |implications |
|2009-10 | - |
|2010-11 | - |
|2011-12 |-$406.7 m |
|2012-13 |-$1644.7 m |
CARBON POLLUTION REDUCTION SCHEME AMENDMENT (HOUSEHOLD ASSISTANCE) BILL
2010
NOTES ON CLAUSES
Clause 1 sets out how the Act is to be cited, that is, as the Carbon
Pollution Reduction Scheme Amendment (Household Assistance) Act 2010.
Clause 2 provides that most of the Act commences on 1 July 2011 (or on
1 July 2012 for Part 2 of Schedule 5, dealing with amendments to certain
Acts in relation to the 2012-13 and later years of income). However, if
the Carbon Pollution Reduction Scheme Act 2010 does not commence on or
before 1 July 2011, this Act will not commence at all.
Clause 3 provides that each Act that is specified in a Schedule is amended
or repealed as set out in that Schedule.
This explanatory memorandum uses the following abbreviations:
. 'Carbon Pollution Reduction Scheme' means the scheme established by
the Carbon Pollution Reduction Scheme Act 2010;
. 'Family Assistance Act' means the A New Tax System (Family Assistance)
Act 1999;
. 'Family Assistance Administration Act' means the A New Tax System
(Family Assistance)(Administration) Act 1999;
. '1936 Tax Act' means the Income Tax Assessment Act 1936;
. 'ML Act' means the Medicare Levy Act 1986;
. 'Military Rehabilitation and Compensation Act' means the Military
Rehabilitation and Compensation Act 2004;
. 'Pension Reform Act' means the Social Security and Other Legislation
Amendment (Pension Reform and Other 2009 Budget Measures) Act 2009;
. 'Social Security Act' means the Social Security Act 1991;
. 'Social Security Administration Act' means the Social Security
(Administration) Act 1999;
. 'Veterans' Entitlements Act' means the Veterans' Entitlements
Act 1986; and
. 'Veterans' Pension Reform Act' means the Veterans' Affairs and Other
Legislation Amendment (Pension Reform) Act 2009.
Schedule 1 - Assistance under the Social Security Act
Part 1 - Main amendments
Summary
In broad terms, Part 1 of this Schedule introduces increases to social
security benefits, allowances, and pensions to compensate recipients of
those payments for anticipated increases in the cost of living as a result
of the introduction of the Carbon Pollution Reduction Scheme.
Background
This bill takes into account amendments that have already been legislated
in the Pension Reform Act. Timing discrepancies between the introduction
of this bill and the Pension Reform Act mean that all the provisions
contained in Part 1 of this Schedule are superfluous. Certain instrument-
making powers were provided for in this part of the bill as originally
introduced, essentially to overcome the fact that the new pension
supplement, on which the Carbon Pollution Reduction Scheme payments to
pensioners are to be based, had not at that time been introduced. The
Pension Reform Act was passed in June 2009 and Schedule 5 to that Act
repeals and substitutes the provisions contained in Part 1 of Schedule 1 to
this bill including the instrument-making powers.
Any attempt to remove this part from the bill would necessarily involve
complicated amendments to the provisions of the Pension Reform Act, which
were legislated to address the original timing discrepancy.
Once this bill is passed and assented to, the operation of the various
provisions will be as follows:
1. This schedule will insert various provisions for increases to benefits
and pensions and will include provisions for instrument-making powers.
2. Immediately after this schedule commences, Schedule 5 to the Pension
Reform Act will commence and replace all the provisions for increases
to benefits and pensions, and will provide for Carbon Pollution
Reduction Scheme increases to pensions to be paid through the new
pension supplement.
3. Immediately after Schedule 5 to the Pension Reform Act commences,
Schedule 2 to this bill will commence to adjust the Carbon Pollution
Reduction Scheme increases and subsequent adjustment of future
indexation, as provided for in the pension reform legislation, to
account for a lower expected carbon price in the second year of the
Scheme.
Explanation of the changes
Amendments to the Social Security Act
Insertion of new Division 8 - Increases related to Carbon Pollution
Reduction Scheme
Subdivision A - Introduction
Item 1 inserts a new note 3 at the end of subsection 1192(2). The note
directs the reader to the possible adjustments to indexation that may occur
under new Subdivisions C and D of new Division 8, which is being inserted
by item 2.
Item 2 inserts a new Division 8 into Part 3.16 of the Social Security Act.
In broad terms, new Division 8 provides rules for increasing the relevant
social security rates by 2.8 per cent over two years. The new Division
sets out the increases to payments to assist with anticipated cost of
living increases arising out of the Carbon Pollution Reduction Scheme.
New subsection 1206GF(1) provides that the objects of the Division are to
increase certain amounts that affect the rate at which payments are made to
individuals under the social security law and that the increases are to be
provided by way of assistance in respect of expected rises in the cost of
living as a result of the implementation of the Carbon Pollution Reduction
Scheme. This subsection sets out that the following payments will be
increased:
a) age pension;
b) austudy payment;
c) bereavement allowance;
d) carer payment;
e) disability support pension;
f) newstart allowance;
g) parenting payment;
h) partner allowance;
i) sickness allowance;
j) widow allowance;
k) widow B pension;
l) wife pension;
m) youth allowance;
n) payments of kinds specified under new section 1206GM.
Subsection 1206GF(2) specifies that the second object of the Division is to
adjust future indexation of payments to avoid duplicating assistance. The
increases provided for in this bill include a bring forward of the
anticipated increases to the Consumer Price Index (CPI) that will result
from the introduction of the Carbon Pollution Reduction Scheme. To avoid
duplication of the amounts brought forward, which would ordinarily flow to
payments after the CPI increase occurs, subsequent indexation arrangements
are to be adjusted.
Subdivision B - Increases
New section 1206GG applies increases to the rates specified in the table.
The table also sets out the rounding base that is to apply for each
payment.
New paragraph 1206GG(1)(a) identifies the first set of rates to which the
increases will apply. These base amounts are listed in Column 1 of the
table (a brief description of the rate is provided in column 2 of that
table).
New paragraph 1206GG(1)(b) identifies the second set of rates to which the
increases will apply. These amounts will be specified in accordance with
new section 1206GN.
A note at the end of new section 1206GG indicates to the reader that the
base amounts listed in the table are as indexed or adjusted from time to
time under Division 2 of Part 3.16 of the Social Security Act.
New section 1206GH provides for a 1 per cent increase to the base amount of
those payments set out in the table in section 1206GG on 1 July 2011. The
effect of the section is that, on 1 July 2011, each base amount is replaced
with an amount (the replacement amount) that is worked out by first
calculating the provisional replacement amount and then applying the
rounding rules to that figure.
By virtue of new paragraph 1206GH(a), the provisional replacement amount is
calculated by determining a figure that is 1 per cent greater than the base
amount.
New paragraph 1206GH(b) needs to be read in conjunction with the rounding
bases specified in column 3 of the table in new section 1206GG.
New paragraph 1206GH(b) provides that, if the provisional replacement
amount (that is, the amount that has been increased by 1 per cent) is a
multiple of the relevant rounding base, then the provisional replacement
amount is the replacement amount. That is, the provisional replacement
amount will become the new rate. If the provisional replacement amount is
not a multiple of the relevant rounding base, then it is rounded up or down
to the nearest multiple of the rounding base and the resultant amount is
the replacement amount. If the provisional replacement amount is a
multiple of half the rounding base, then the provisional replacement amount
is rounded up to the nearest multiple of the rounding base.
New section 1206GI provides for a 1.8 per cent increase to the base amount
on 1 July 2012. The effect of the section is that, on 1 July 2012, each
base amount is replaced with an amount (the replacement amount) that is
worked out by first calculating the provisional replacement amount and then
applying rounding rules to that figure.
By virtue of new paragraph 1206GI(a), the provisional replacement amount is
calculated by determining a figure that is 1.8 per cent greater than the
base amount.
New paragraph 1206GI(b) needs to be read in conjunction with the rounding
bases specified in column 3 of the table in the new section 1206GG.
New paragraph 1206GI(b) provides that, if the provisional replacement
amount (that is, the amount that has been increased by 1.8 per cent) is a
multiple of the relevant rounding base, then the provisional replacement
amount is the replacement amount. That is, the provisional replacement
amount will become the new rate. If the provisional replacement amount is
not a multiple of the relevant rounding base, then it is rounded up or down
to the nearest multiple of the rounding base and the resultant amount is
the replacement amount. If the provisional replacement amount is a
multiple of half the rounding base, then the provisional replacement amount
is rounded up to the nearest multiple of the rounding base.
Subdivision C - Adjustment of indexation
New section 1206GJ and new section 1206GK provide for adjusted CPI
indexation of the amounts that were subject to the increases provided for
under new section 1206GH and new section 1206GI.
The relevant social security rates will be increased by a total of 2.8 per
cent over the first two years of the scheme. This includes a 1 per cent
increase from 1 July 2011 and a further 1.8 per cent increase on 1 July
2012, including upfront indexation.
The 1 per cent increase on 1 July 2011 incorporates a 0.4 per cent
component that represents a bring forward of future CPI increases. The
1.8 per cent increase on 1 July 2012 incorporates a 0.8 per cent component
that represents a bring-forward of future CPI increases. The 0.4 per cent
and the 0.8 per cent figures represent the expected effects on the CPI from
the Carbon Pollution Reduction Scheme.
The new subsection 1206GJ(1) provides for special rules around indexation
of some amounts on or after 20 March 2012.
By virtue of section 1193 of the Social Security Act, payment rates are
indexed in accordance with CPI, as per the table in section 1191, by the
application of an 'indexation factor'.
For youth allowance and Austudy, the indexation factor is applied on
1 January each year. For the other amounts to which the new Subdivision B
of Division 8 applies, the indexation factor is applied on 20 March and
20 September each year.
New subsection 1206GJ(1) states that, for the indexation factors that apply
after 20 March 2012, the indexation factor is to be reduced by the brought
forward indexation amount, but that the indexation factor is not to fall
below 1.
New subsection 1206GJ(2) creates a definition of brought forward indexation
amount for the purposes of this section. The brought forward indexation
amount is 0.004 less any reduction made under this section for a previous
indexation day.
A note is inserted at the end of the new subsection 1206GJ(2) to state
that, once the brought forward indexation amount equals zero, there is no
further reduction of the indexation factor that would ordinarily apply by
virtue of section 1193 of the Social Security Act.
An example is also inserted at the end of the new subsection 1206GJ(2) to
provide the reader with a clear picture of how the adjustment of the
indexation provisions will apply.
New subsection 1206GJ(3) states that this section is only to apply to a
person's rate of payment if that rate of payment was previously affected by
new section 1206GH.
The new subsection 1206GK(1) provides for special rules around indexation
of some amounts on or after 20 March 2013.
By virtue of section 1193 of the Social Security Act, payment rates are
indexed in accordance with CPI, as per the table in section 1191, by the
application of an 'indexation factor'.
For youth allowance and Austudy, the indexation factor is applied on
1 January each year. For the other amounts to which new Subdivision B of
Division 8 applies, the indexation factor is applied on 20 March and
20 September each year.
New subsection 1206GK(1) states that, for the indexation factors that apply
after 20 March 2013, the indexation factor is to be reduced by the brought
forward indexation amount, but that the indexation factor is not to fall
below 1.
New subsection 1206GK(2) creates a definition of brought forward indexation
amount for the purposes of this section. The brought forward indexation
amount is 0.008 less any reduction made under this section for a previous
indexation day.
A note is inserted at the end of the new subsection 1206GK(2) to state
that, once the brought forward indexation amount equals zero, there is no
further reduction of the indexation factor that would ordinarily apply by
virtue of section 1193 of the Social Security Act.
An example is also inserted at the end of the new subsection 1206GK(2) to
provide the reader with a clear picture of how the adjustment of the
indexation provisions will apply.
New subsection 1206GK(3) states that this section is only to apply to a
person's rate of payment if that rate of payment was previously affected by
new section 1206GI.
Subdivision D - Other provisions for increases and adjustments of
indexation
Subdivision D states that the Minister may provide for increases of payment
rates and adjustments of subsequent indexation factors by way of
legislative instrument.
This section was included to reflect amendments to the Social Security Act
flowing from the Government's Secure and Sustainable Pension Reform
package. Those amendments had not been finalised when these Carbon
Pollution Reduction Scheme provisions were originally drafted and,
therefore, capacity was built into this bill to address these aspects by
way of a legislative instrument.
However, the legislative instrument provisions will no longer be used.
Instead, the substantive amendments provided by the pension reform
legislation to this current bill (amendments which will commence when this
current bill is enacted) will reflect the pension reforms.
More specifically, the pension reform legislation removes the legislative
instrument provision and provides for increases (arising from the Carbon
Pollution Reduction Scheme) to age pension, bereavement allowance, carer
payment, disability support pension, widow B pension, and wife pension
through the new pension supplement created by the provisions of the pension
reform legislation.
The descriptions in this explanatory memorandum of the legislative
instrument provisions should be read in this context.
It is proposed that the increases in assistance to recipients of the
pension payments listed in new paragraph 1206GL(1)(a) will be by the same
percentages as set out in new section 1206GH and section 1206GI.
New paragraph 1206GL(1)(a) provides that the Minister may make a
legislative instrument to provide for increases on 1 July 2011 and
1 July 2012, on account of expected changes in the CPI as a result of the
Carbon Pollution Reduction Scheme, to rates of the following payments:
a) age pension;
b) bereavement allowance;
c) carer payment;
d) disability support pension;
e) parenting payment;
f) widow B pension;
g) wife pension;
h) payments of kinds specified under new section 1206GM.
New paragraph 1206GL(1)(b) provides that the Minister may make a
legislative instrument to provide for adjustment of indexation to the
abovementioned payments that would ordinarily apply by virtue of
section 1191 and section 1193 of the Social Security Act. The adjustment
of indexation would reflect the fact that, if an amount is increased under
new paragraph 1206GL(1)(a), a portion of that increase will be a 'bringing
forward' of the anticipated CPI increases. It is anticipated that the
adjustment to indexation would be by the same amounts as set out in new
section 1206GJ and new section 1206GK.
New subsection 1206GL(2) provides that the legislative instrument made by
the Minister pursuant to subsection 1206GI(1) will have effect in
accordance with its terms irrespective of any other provision contained in
this bill.
New subsection 1206GL(3) provides that the legislative instrument can
specify a method for increasing an amount of payment specified in new
paragraph 1206GL(1)(a) by reference either to the amount to be increased,
or to another amount affecting the rate at which the same or a different
kind of payment is made, or both. This covers the possibility of the
increases being paid via a particular portion of a payment rather than the
payment as a whole.
New subsection 1206GL(4) states that the legislative instrument may provide
for adjustment of an amount that affects the rate of a payment (the
affected payment) set out in paragraph 1206GL(1)(a), whether or not that
amount, or an amount affecting that payment, was increased as a result of
paragraph 1206GL(1)(a), provided that the recipient of the affected payment
received a payment that was increased by virtue of the power given under
paragraph 1206GL(1)(a).
New subsection 1206GL(5) provides that subsection 1206GL(3) and
subsection 1206GL(4) are not intended to limit the scope of the legislative
instrument to be made by the Minister pursuant to new
subsection 1206GL(1).
Subdivision E - Extending scope of this Division
As stated above in relation to Subdivision D, amendments to the Social
Security Act affecting pension payments were introduced to Parliament after
the original drafting of this bill. The precise effect of the provisions
contained in the pension reform bill were not finalised at the time of that
drafting and, accordingly, legislative instrument provisions were included
in this bill.
However, the provisions will not now be used. The descriptions of the
legislative instrument provisions in this explanatory memorandum should be
read in this context.
This Subdivision includes capacity for the Minister to specify, by
legislative instrument, that the provisions relating to increases and
adjustment of indexation apply to certain payments.
This provision could be used where additional social security payments are
subsequently identified that ought to be increased to account for the
Carbon Pollution Reduction Scheme (and subsequent indexation adjusted
accordingly) and these could be increased directly by the provisions
contained in the new section 1206GH and new section 1206GI rather than by a
scheme created by legislative instrument.
New subsection 1206GM(1) provides that the Minister may, by legislative
instrument, specify further kinds of payments in the Social Security Act to
which Division 8 applies.
A note is inserted at the end of new subsection 1206GM(1) that directs the
reader to subsection 13(3) of the Legislative Instruments Act 2003 for the
rules relating to specification by class.
New subsection 1206GM(2) provides that the Minister may specify the kinds
of payments to which this subdivision applies by either or both of the
following:
a) the persons to whom payments are to be made; or
b) the circumstances in which payments are to be made.
New subsection 1206GM(3) states that subsection 1206GM(2) is not to limit
the operation of subsection 1206GM(1).
New section 1206GN states that the Minister may, by legislative instrument,
specify that Subdivision B of the new Division 8 applies to a specified
amount that affects the rate at which a kind of payment under this Act is
made. That is, the Minister may specify that the increases to payments
apply to a particular portion of a payment, rather than the payment in its
entirety.
A note is inserted at the end of new subsection 1206GN(1) that directs the
reader to subsection 13(3) of the Legislative Instruments Act 2003 for the
rules relating to specification by class.
A second note is inserted at the end of new subsection 1206GN(1), after the
note mentioned above, that states a specified kind of payment could be a
kind of payment specified under the new section 1206GM.
New subsection 1206GN(2) states that, if a Minister does specify a payment,
or a portion of a payment under the new subsection 1206GN(1), the Minister
must also specify the rounding base that is to apply for that specified
payment, or portion of payment, for the purposes of the rounding provisions
contained in the new section 1206GH and the new section 1206GI.
New subsection 1206GN(3) states that the Minister may specify an amount by
reference to the fact that it affects the rate at which a specified kind of
payment under the Social Security Act is made to specified persons or in
specified circumstances.
New subsection 1206GN(4) states that an instrument made by the Minister
under subsection 1206GN(1) may specify that Subdivision B of new Division 8
applies to an amount so far as it affects the rate at which a specified
kind of payment under the Social Security Act is made to specified persons
or in specified circumstances.
New subsection 1206GN(5) provides that subsection 1206GN(3) and
subsection 1206GN(4) are not intended to limit the ability of the Minister
to make a legislative instrument pursuant to new subsection 1206GN(1).
New subsection 1206GN(6) provides that the legislative instrument made by
the Minister pursuant to subsection 1206GN(1) will have effect in
accordance with its terms irrespective of any other provision contained in
this bill.
Schedule 1 - Assistance under the Social Security Act
Part 2 - Transitional payment
Summary
Part 2 of this Schedule provides for transitional payments to be made to
independent adults in low-income households who do not receive sufficient
assistance from the other measures set out in this bill.
Two payments will be made to qualifying individuals. The first payment
will be available from 1 July 2012 and will be a flat $200 per claimant.
The second payment, available from 1 July 2013, will be a flat $550 per
claimant.
The first carbon pollution reduction transitional payment will be payable
to qualifying individuals from 1 July 2012 and will be assessed with
reference to the claimant's income for the 2011-12 financial year. The
second carbon pollution reduction transitional payment will be payable to
qualifying individuals from 1 July 2013 and will be assessed with reference
to the claimant's income in the 2012-13 financial year.
Background
In broad terms, Part 2 of this Schedule introduces new transitional
payments to be made to individuals who meet residence and income tests, and
who can show that they have not received adequate assistance for the
estimated cost of living impacts of the Carbon Pollution Reduction Scheme
through increases to payments or tax offsets as set out in this bill.
Explanation of the changes
Division 1 - Amendment of the social security law
Social Security Act
Item 3 inserts a definition of carbon pollution reduction transitional
payment into subsection 23(1) by reference to the provisions of new
Part 2.28.
Item 4 inserts new Part 2.28 into Chapter 2 of the Social Security Act.
New Part 2.28 contains the provisions relevant to the carbon pollution
reduction transitional payment.
New section 1061ZAAX sets out the availability of the carbon pollution
reduction transitional payment. Subsection 1061ZAAX(1) states that the
carbon pollution reduction transitional payment will only be available to
qualified individuals for the 2011-12 and 2012-13 income years.
Subsection 1061ZAAX(2) states that a person can only receive one carbon
pollution reduction transitional payment in respect of each income year.
New paragraph 1061ZAAY(a) provides that a person is qualified for a carbon
pollution reduction transitional payment for an income year if they satisfy
the income requirements of the new section 1061ZAAZ, the excluded payment
requirements set out in new section 1061ZAAZA and the remaining
requirements set out in new section 1061ZAAZB.
Paragraph 1061ZAAY(b) requires a person to lodge a claim for the carbon
pollution transitional payment. In addition, the new paragraph 1061ZAAY(c)
provides that, at the time of lodging the claim for the payment, the
individual must: be an Australian resident or a special category visa
holder residing in Australia; be in Australia; and not be in a psychiatric
institution or in gaol.
New section 1061ZAAZ sets out the income thresholds that will apply for
people claiming the carbon pollution transitional payment.
Subsection 1061ZAAZ(1) states that a person will satisfy the income
requirement where their adjusted taxable income for the relevant income
year is less than:
a) $30,000 for singles without a dependent child;
b) $45,000 for couples without a dependent child;
c) $60,000 for singles with a dependent child;
d) $60,000 for couples with a dependent child;
New subsection 1061ZAAZ(2) defines adjusted taxable income for the purposes
of this section as the sum of:
a) the person's adjusted taxable income within the meaning of the
Family Assistance Act; and
b) superannuation benefits received in relation to the income year to
the extent that they are non-assessable non-exempt income within
the meaning of the Income Tax Assessment Act 1997.
New section 1061ZAAZA sets out the excluded payment requirements that must
be satisfied for a claimant to qualify for a carbon pollution transitional
payment. By virtue of the new subsection 1061ZAAZA(1), a claimant will
satisfy this section if there were at least 13 weeks of the relevant income
year when:
a) the claimant was not entitled to family tax benefit; and
b) the claimant did not receive any of the payments set out in
subsection 1061ZAAZA(2); and
c) the claimant's partner, if any, was not entitled to family tax
benefit; and
d) the claimant's partner, if any, did not receive any of the
payments set out in subsection 1061ZAAZA(2).
Subsection 1061ZAAZA(2) provides that a person is qualified for a carbon
pollution reduction transitional payment if neither the person nor their
partner, if any, received any of the following payments for more than 25
weeks in the relevant income year:
a) an income support payment;
b) a social security payment;
c) an allowance under ABSTUDY that included living allowance;
d) a payment under Part 5 or 6 of the Farm Household Support
Act 1992;
e) a pension under Part II or IV of the Veterans' Entitlements
Act 1986;
f) a payment of weekly compensation under Part 2 of Chapter 4, or
section 233, of the Military Rehabilitation and Compensation Act;
g) a Special Rate Disability Pension (within the meaning of
section 198 of the Military Rehabilitation and Compensation Act);
h) a payment under the Military Rehabilitation and Compensation Act
Education and Training Scheme worked out by reference to the
maximum basic rate of youth allowance;
i) a payment under the Veterans' Children Education Scheme worked out
by reference to the maximum basic rate of youth allowance.
The new section 1061ZAAZB sets out the remaining requirements that must be
met for a person to qualify for the carbon pollution transitional payment.
To qualify for a carbon pollution transitional payment, a person must, at
all times during the year: have been an Australian resident or a special
category visa holder living in Australia; have remained in Australia for at
least 39 weeks of year; and not have been subject to a newly arrived
resident's waiting period.
Additionally: the claimant must not have been a dependent child of another
person for more than 25 weeks of the year; the claimant must not have been
in gaol or a psychiatric institution for more than 25 weeks of the year;
and no other person must have been entitled to claim family tax benefit for
the claimant for more than 25 weeks of the year.
Finally, a claimant who is not a member of a couple must have received:
a) in 2011-12, a combined amount of less than $150 in additional tax
offsets realised from the low income tax offset and dependency tax
offsets; or
b) in 2012-13, a combined amount of less than $280 in additional tax
offsets realised from the low income tax offset and dependency tax
offsets.
A claimant who is a member of a couple will be eligible for the carbon
pollution transitional payment if they and their partner combined:
a) in respect of the 2011-12 reference year, realised a combined
amount of less than $210 in additional tax offsets from the low
income tax offset and dependency tax offsets; or
b) in respect of the 2012-13 reference year, realised a combined
amount of less than $385 in additional tax offsets from the low
income tax offset and dependency tax offsets.
For the purposes of the above, additional tax offset in respect of the 2011-
12 reference year means:
a) in respect of the Low Income Tax Offset, the additional $150 in
(maximum) tax offset provided for in this Bill as CPRS assistance;
b) in respect of the Dependency Tax Offsets, the additional $60 in
(maximum) tax offset provided for in this Bill as CPRS assistance.
Further, additional tax offset in respect of the 2012-13 reference year
means:
a) in respect of the Low Income Tax Offset, the additional $280 in
(maximum) tax offset provided for in the Bill as CPRS assistance;
b) in respect of the Dependency Tax Offsets, the additional $105
(maximum) tax offset provided for in this Bill as CPRS assistance.
The new section 1061ZAAZC sets out the amount of the carbon pollution
reduction transitional payment. For the 2011-12 income year, the amount of
the carbon pollution reduction transitional payment is $200 per claimant,
and, in the 2012-13 income year, the amount of the payment is $550 per
claimant.
Item 5 inserts a new section 1223ABAAC into Part 5.2 of Chapter 5 of the
Social Security Act. This new provision sets out when a carbon pollution
reduction transitional payment is a debt to the Commonwealth. In broad
terms, a debt would only arise where some or all of the payment was
incorrectly paid because a relevant individual knowingly made a false or
misleading statement or knowingly provided false or misleading information.
Where an individual is paid a carbon pollution reduction transitional
payment because of a determination under Part 3 of the Administration Act
and that determination is later changed and the reason, or one of the
reasons, for the change was that the relevant individual knowingly made a
false or misleading statement or knowingly provided false or misleading
information, then the carbon pollution reduction transitional payment paid
would be a debt. The relevant rules are in new subsection 1223ABAAC(1).
New subsection 1223ABAAC(2) states that, with the exception of
section 1224AA of the Social Security Act, other provisions in relation to
the raising of debts do not apply to carbon pollution reduction
transitional payments.
Item 6 inserts the words 'carbon pollution reduction transitional payment'
after the words 'economic security strategy payment' at the end of
paragraph 1231(1AA)(b). This paragraph states that the Secretary is not to
deduct any amount from the carbon pollution reduction transitional payment
in repayment of an existing debt to the Commonwealth unless the relevant
individual has requested that the Secretary do so.
Social Security Administration Act
Item 7 inserts a new section 19 into the Social Security Administration Act
to state that, if a person and that person's partner apply for the carbon
pollution reduction transitional payment, the two claims may be made
together on the one form as approved by the Secretary for the purposes of
this section.
Item 8 inserts a new Subdivision FB into Division 1 of Part 3 of the Social
Security Administration Act. New section 27B provides that a claim for the
carbon pollution reduction transitional payment must be made within the
two years following the relevant income year. That is, for the 2011-12
income year, claimants have until 30 June 2014 to make a claim, and, for
the 2012-13 income year, claimants have until 30 June 2015 to make a claim
for the payment.
Item 9 inserts a new paragraph (k) at the end of subsection 47(1) to
include the carbon pollution reduction transitional payment in the
definition of lump sum benefit.
Item 10 inserts a new section 47D into the Social Security Administration
Act to provide that the carbon pollution reduction transitional payment
must be paid to the individual as a single lump sum in such a manner as the
Secretary determines
Item 11 repeals the heading to Subdivision DB of Division 5 of Part 3B and
substitutes the heading 'Subdivision DB - Other payments'.
Item 12 inserts new section 123XPE to deal with the deduction of amounts
from a person's carbon pollution reduction transitional payment if the
person is subject to the income management regime.
New subsection 123XPE(1) and new subsection 123XPE(2) provide that, if a
person is subject to the income management regime and a carbon pollution
reduction transitional payment is payable to that person, then the
Secretary must deduct the net amount of the carbon pollution reduction
transitional payment and credit the person's income management account and
the Income Management Special Account accordingly. (The terms income
management account, net amount and Special Account are defined in section
123TC.) The treatment of carbon pollution reduction transitional payments
under new subsections 123XPE(1) and 123XPE(2) is consistent with the
existing treatment of other lump sum payments under Part 3B of the Social
Security Administration Act.
New subsection 123XPE(3) states that the 'deductible portion' of the carbon
pollution reduction transitional payment is 100 per cent.
The phrase subject to the income management regime is defined in
section 123TC of the Social Security Administration Act. A person can be
subject to the income management regime because of the operation of any of
the following sections contained in Part 3B of the Social Security
Administration Act: section 123UB (the Northern Territory scheme of income
management); section 123UC (the child protection scheme of income
management); section 123UD or 123UE (school enrolment or attendance
requirements); section 123UF (the Cape York Welfare Reform trials);
section 123UFA (voluntary income management agreements).
Items 13 to 15 make consequential amendments to the table in section 11-15
and to section 52-10 of the Income Tax Assessment Act 1997, inserting
references to the carbon pollution reduction transitional payments. The
effect of these amendments is to make the carbon pollution reduction
transitional payments exempt from income tax.
Schedule 2 - Other Social Security Act amendments
Summary
The main purpose of the amendments made by this Schedule is to make
adjustments to the increases that will apply to social security payments on
1 July 2012. These adjustments arise due to the lower expected carbon
price and a lower estimated cost of living impact in the 2012-13 income
year.
Amendments in this schedule are made to the provisions of the Social
Security Act as inserted by the Pension Reform Act. Timing discrepancies
between the introduction of this bill and the Pension Reform Act mean that
all the amendments in this schedule refer to sections of the Social
Security Act as inserted by Schedule 5 to the Pension Reform Act.
Once this bill is passed and assented to, the operation of the various
provisions will be as follows:
1. Schedule 1 to this bill will insert various provisions for increases
to benefits and pensions and will include provisions for instrument-
making powers.
2. Immediately after Schedule 1 to this bill commences, Schedule 5 to the
Pension Reform Act will commence and replace all the provisions for
increases to benefits and pensions, and will provide for CPRS
increases to pensions to be paid through the new pension supplement.
3. Immediately after Schedule 5 to the Pension Reform Act commences, this
schedule will commence to adjust the CPRS increases and subsequent
adjustment of future indexation, to account for a lower expected
carbon price in the second year of the Scheme.
Background
These amendments to the Carbon Pollution Reduction Scheme household
assistance arise due to a lower expected carbon price of $26 per tonne in
2012-13, reflected in the 2009-10 Mid-Year Economic and Fiscal Outlook
(down from $29 per tonne forecast in the 2009-10 Budget). The lower carbon
price will reduce the expected price increases in goods and services, which
leads to a smaller overall rise in the estimated cost of living of 1.1 per
cent over the first two years of the Scheme (down from 1.2 per cent).
These adjustments to the household assistance package will result in an
increase of 2.5 per cent (over two years) in pensions, allowances and
maximum rates of Family Tax Benefit, rather than 2.8 per cent.
Proportionate changes will also be made to other payments such as the Low
Income Tax Offset, the Dependency Tax Offsets and the Transitional Payment.
The Government is also adjusting the income threshold at which eligible
families begin to benefit from the special per-family end of year
supplement to $58,000 (currently $60,000).
These amendments will assist low and middle-income households to help meet
the expected increase in the cost of living flowing from the scheme.
These adjustments are part of a broader package of changes the Government
is providing to help low and middle-income Australian households maintain
their standard of living while moving to a low pollution future.
Explanation of the Changes
Item 1 inserts a new paragraph (c) into the definition of adjusted taxable
income in subsection 1061ZAAZ(2) for the purposes of the income test
applicable to claims for the carbon pollution reduction transitional
payment. This ensures that superannuation pension income from a claimant's
partner is also included in the assessment of a couple's income when
determining whether they satisfy the income test to qualify for the carbon
pollution transitional payment.
Item 2 amends subparagraph 1061ZAAZB(1)(g)(v) to change the maximum amount
of the CPRS component of dependant, housekeeper or low income tax rebates
that an individual will be able to receive and still qualify for the carbon
pollution transitional payment from $280 to $240.
Item 3 amends subparagraph 1061ZAAZB(1)(h)(iv) to change the maximum amount
of the CPRS component of dependant, housekeeper or low income tax rebates
that a couple, or one member of that couple, will be able to receive and
still qualify for the carbon pollution transitional payment from $385 to
$330.
Item 4 adjusts the amount of the CPRS transitional payment that will be
paid for the 2012-13 income year from $550 to $500.
Item 5 amends paragraph 1206GI(a) so that the increase that will apply to
social security payments on 1 July 2012 is adjusted from 1.8 per cent to
1.5 per cent. The note to item 5 confirms for the reader that the heading
to section 1206GI is also amended to reflect the same percentage
adjustment.
Item 6 repeals and substitutes the note at the end of section 1206GI. The
new note advises the reader that the 1.5 per cent increase provided for in
section 1206GI includes a 'brought forward' increase of 0.7 per cent. The
changes to the note reflect the adjustment of the increase and confirm the
adjustment in the estimated cost of living impact from 0.8 per cent to
0.7 per cent.
Item 7 omits the figure of 0.008 and substitutes a new figure of 0.007 in
the definition of brought forward indexation amount in
subsection 1206GM(2).
Item 8 omits the figure of 1.005 and substitutes a new figure of 1.004 in
the example at the end of subsection 1206GM(2). By changing this figure,
the second part of the example at the end of this subsection remains
mathematically correct even after taking into account the change to the
brought forward indexation amount.
Item 9 omits the figure of 0.008 and substitutes a new figure of 0.007 in
the example at the end of subsection 1206GM(2). This amendment reflects
the adjustment to the brought forward indexation amount.
Item 10 amends the definition of CPRS amount in paragraph 1206GR(3)(a), by
omitting all references to 1.8 per cent wherever they occur and
substituting them with references to 1.5 per cent. The note to item 10
confirms for the reader that the heading to section 1206GR is also amended
to reflect the same percentage adjustment.
Item 11 amends the note at the end of subsection 1206GR(3) by repealing the
note and substituting a new note. The new note advises the reader that the
1.5 per cent increase provided for in the section includes a 'brought
forward' increase of 0.7 per cent. The changes to the note reflect the
adjustment to the increase and confirm the adjustment in the estimated cost
of living increase from 0.8 per cent to 0.7 per cent.
Item 12 omits the figure of 1.005 and substitutes a figure of 1.004 in the
example at the end of subsection 1206GS(1). By changing this figure, the
second part of the example at the end of this subsection remains
mathematically correct even after taking into account the change to the
brought forward indexation amount.
Item 13 omits the figure of 0.008 and substitutes a new figure of 0.007 in
the example at the end of subsection 1206GS(1). This amendment reflects
the adjustment to the brought forward indexation amount.
Item 14 omits the figure of 1.005 and substitutes a new figure of 1.004 in
the example at the end of subsection 1206GS(3). By changing this figure,
the second part of the example at the end of this subsection remains
mathematically correct even after taking into account the change to the
brought forward indexation amount.
Item 15 omits the figure of 0.008 and substitutes a new figure of 0.007 in
the example at the end of subsection 1206GS(3). This amendment reflects
the adjustment to the brought forward indexation amount.
Item 16 omits the reference to 0.008 and substitutes a reference to 0.007
in the definition of brought forward CPI indexation amount in
subsection 1206GS(4).
Item 17 omits the figure of 0.008 and substitutes a new figure of 0.007 in
the definition of brought forward PBLCI indexation amount in
subsection 1206GS(4).
Item 18 omits the figure of 1.005 and substitutes a new figure of 1.004 in
the example at the end of subsection 1206GU(3). By changing this figure,
the second part of the example at the end of this subsection remains
mathematically correct even after taking into account the change to the
brought forward indexation amount. The note to item 18 confirms for the
reader that the heading to subsection 1206GU(2) is also amended to reflect
the same percentage adjustment.
Item 19 omits the figure of 0.008 and substitutes a new figure of 0.007 in
the example at the end of subsection 1206GU(3). This amendment reflects
the adjustment to the brought forward indexation amount.
Item 20 omits the figure of 0.008 and substitutes a new figure of 0.007 in
the definition of brought forward CPI indexation amount in
subsection 1206GU(4).
Item 21 amends the definition of CPRS amount in subsection 1206GU(4) by
omitting all references to 1.8 per cent wherever they occur and
substituting them with references to 1.5 per cent.
Item 22 repeals the note at the end of subsection 1206GU(4) and substitutes
a new note with adjusted figures. The new note advises the reader that the
1.5 per cent increase provided for in the section includes a 'brought
forward' increase of 0.7 per cent. The changes to the note reflect the
adjustment to the increases and confirm the adjustment in the estimated
cost of living increase from 0.8 per cent to 0.7 per cent
Schedule 3 - Assistance to families
Summary
This Schedule provides for an increase in certain family tax benefit (FTB)
rates on 1 July 2011 and again on 1 July 2012, in addition to usual
indexation on those dates.
On 1 July 2011, the per-child maximum standard rates of FTB Part A for
children aged under 16, the per-family standard rates of FTB Part B, and
the FTB Part A and Part B supplements are increased by 1 per cent. The per-
child base standard rate of FTB Part A for children aged 0-17 and
equivalent maximum standard rate for children aged 16 and 17 are increased
by 2.7 per cent. The same increase will apply to the rate of FTB for an
approved care organisation. The per-child base standard rate and
equivalent maximum standard rate for children aged 18-24 are increased by
2.5 per cent. These percentage increases (1 per cent, 2.7 per cent and 2.5
per cent) are on top of the usual indexation.
On 1 July 2012, these rates are again increased by a gross percentage of
1.5 per cent, 4.4 per cent and 4.2 per cent respectively. This is on top
of the usual indexation.
As assistance will be provided in part through a bring forward of FTB
indexation increases, subsequent FTB indexation arrangements will be
adjusted to avoid duplication of assistance.
These percentage increases include a bring forward of the Scheme's expected
increase in the cost of living as well as an ongoing real increase. The 1
July 2011 increases include a bring forward of the Scheme's estimated cost
of living increase of 0.4 per cent for 2011-12, which is accounted for by
reducing the 1 July 2012 gross percentage increases by 0.4 per cent
(resulting in net percentage increases on 1 July 2012 of 1.1 per cent,
4.0 per cent or 3.8 per cent as relevant). This avoids duplication of CPI
increases. The 1 July 2012 net percentage increases include a bring
forward of the Scheme's estimated cost of living increase of 0.7 per cent
for 2012-13, which is accounted for by modifying the indexation
arrangements for 1 July 2013 and, if necessary, 1 July of subsequent years,
again to avoid duplication of CPI increases.
A table summarising the percentage increases to FTB rates is shown below.
The bill also introduces a new FTB combined supplement. This would be a
supplementary payment of up to $240 for 2011-2012 and up to $620 for
subsequent income years for certain families who receive FTB Part A and FTB
Part B. The payment would be available on reconciliation of FTB after the
end of the relevant financial year.
|Percentage increases to |FTB Part A |FTB Part A |FTB Part A |
|FTB rates |under 16 |under 18 base|18-24 base |
| |maximum |standard rate|standard and|
| |standard |and 16-17 |maximum |
| |rates, FTB |maximum |standard |
| |Part B |standard |rates |
| |standard |rate, and FTB| |
| |rates, and FTB|rate for | |
| |Part A and |approved care| |
| |Part B |organisation | |
| |supplements | | |
|1 July 2011 |
|Bring forward |0.4% |0.4% |0.4% |
|Real increase |0.6% |2.3% |2.1% |
|Total increase (in Year 1)|1.0% |2.7% |2.5% |
|1 July 2012 |
|Bring forward |0.7% |0.7% |0.7% |
|Real increase |0.8% |3.7% |3.5% |
|Gross increase (in Year 2)|1.5% |4.4% |4.2% |
|* | | | |
| |
|Gross two year total * |2.5% |7.1% |6.7% |
* FTB indexation arrangements for 1 July 2012 and 1 July 2013 and, if
necessary, 1 July of subsequent years, will be adjusted to avoid
duplication of assistance.
Background
As part of the household assistance package of the Carbon Pollution
Reduction Scheme, certain FTB rates are increased on 1 July 2011 and again
on 1 July 2012, in addition to the usual indexation on those dates.
On 1 July 2011, the per-child maximum standard rates of FTB Part A for
children aged under 16, the per-family standard rates of FTB Part B, and
the FTB Part A and Part B supplements are increased by 1 per cent. This is
the first category of FTB rates to be increased. The affected rates, in
Schedule 1 to the Family Assistance Act, are:
. the FTB child rate for an FTB child who is under 13 years of age in
item 1 of the table in clause 7;
. the FTB child rate for an FTB child who has reached 13 but is under 16
years of age in item 2 of the table in clause 7;
. standard rates set out in the table in clause 30;
. FTB (B) gross supplement amount in clause 31A; and
. FTB gross supplement amount in clause 38A.
The 1 per cent increase has two components. The first component will bring
forward the Scheme's estimated cost of living increase of 0.4 per cent for
2011-12 that would normally flow through at a later time under automatic
indexation. The second component provides an ongoing real increase of
0.6 per cent.
The per-child base standard rate of FTB Part A for children aged 0-17 and
equivalent maximum standard rate for children aged 16-17 are increased by
2.7 per cent on 1 July 2011. This is the second category of FTB rates to
be increased. The affected rates, in Schedule 1 to the Family Assistance
Act, are:
. the FTB child rate for an FTB child who has reached 16 but is under
18 years of age in item 3 of the table in clause 7; and
. the FTB child rate for an FTB child who has not turned 18 in
paragraph 26(2)(a).
The rate of FTB for an approved care organisation (ACO) will similarly
increase by 2.7 per cent.
The 2.7 per cent increase includes a bring forward of the 0.4 per cent
expected increase in the cost of living and a further ongoing real increase
of 2.3 per cent.
The per-child base standard rate and equivalent maximum standard rate for
children aged 18-24 are increased by 2.5 per cent on 1 July 2011. This is
the third category of FTB rates to be increased. The affected rates, in
Schedule 1 to the Family Assistance Act, are:
. the FTB child rate for an FTB child who has reached 18 but is under
25 years of age in item 4 of the table in clause 7; and
. the FTB child rate for an FTB child who has turned 18 in
paragraph 26(2)(b).
The 2.5 per cent increase includes a bring forward of the 0.4 per cent
expected increase in the cost of living and a further ongoing real increase
of 2.1 per cent.
The indexation arrangements for 1 July 2012 are adjusted to take account of
the 0.4 per cent brought forward increase on 1 July 2011 (to avoid
duplication of CPI indexation), as well as a second round of rate
increases. The effect is that on 1 July 2012, the first category of FTB
rates are increased by 1.5 per cent less the 0.4 per cent brought forward
increase, resulting in a net increase of 1.1 per cent. Similarly, the
second category of FTB rates are increased by 4.4 per cent less 0.4 per
cent, resulting in a net increase of 4.0 per cent. The third category of
FTB rates are increased by 4.2 per cent less 0.4 per cent, resulting in a
net increase of 3.8 per cent.
These second increases include a bring forward of the Scheme's expected
increase in the cost of living of 0.7 per cent for 2012-13, as well as an
ongoing real increase. As the 0.7 per cent component of the increase
brings forward the expected increase under future automatic CPI indexation,
the indexation arrangements for 1 July 2013 and, if necessary, 1 July of
subsequent years are modified to avoid duplication of CPI indexation
increases.
There is also to be a new 'supplementary' payment of up to $240 for 2011-
2012 and up to $620 for subsequent income years (paid on reconciliation)
for certain families who receive FTB Part A and FTB Part B, where the
primary earner's adjusted taxable income (ATI) exceeds $58,000. This new
payment will be called the FTB combined supplement.
Explanation of the changes
Increase certain FTB rates
Item 6 inserts a new Part 4 into Schedule 4 to the Family Assistance Act.
New Part 4 provides for increases in the relevant FTB amounts on
1 July 2011 and 1 July 2012 through adjusting indexation arrangements on
those days. The increases include an ongoing real increase and a bring
forward of an expected future CPI increase. The brought forward estimated
cost of living increase is taken into account in subsequent indexation to
avoid duplication of CPI indexation increases.
New clause 10 provides for the increases that occur on 1 July 2011.
New subclause 10(1) increases specified amounts by 1 per cent on
1 July 2011. The specified amounts (using the abbreviations provided for
in the table in clause 2 of Schedule 4 to the Family Assistance Act) are:
. FTB under 13 child rate (A1);
. FTB 13-15 child rate (A1);
. FTB gross supplement amount (A);
. FTB standard rate (B); and
. FTB gross supplement amount (B).
The 1 per cent increase is achieved by increasing what would otherwise be
the indexation factor for the relevant amount (under clause 5 of Schedule
4) by 0.01.
New subclause 10(2) increases the following amounts by 2.7 per cent on
1 July 2011. These amounts (using the abbreviations provided for in the
table in clause 2 of Schedule 4) are:
. FTB 16-24 child rate (A1), to the extent that it applies to item 3 of
the table in clause 7 of Schedule 1 (that is, the FTB child rate for a
child who has reached 16 but is under 18 years of age);
. FTB child rate (A2), to the extent that it applies to paragraph
26(2)(a) of Schedule 1 (that is, the base FTB child rate for a child
who has not turned 18); and
. FTB ACO rate.
The 2.7 per cent increase is achieved by increasing what would otherwise be
the indexation factor for the relevant amount on 1 July 2011 (under clause
5) by 0.027.
New subclause 10(3) increases the following amounts by 2.5 per cent on
1 July 2011. These amounts (using the abbreviations provided for in the
table in clause 2 of Schedule 4) are:
. FTB 16-24 child rate (A1), to the extent that it applies to item 4 of
the table in clause 7 of Schedule 1 (that is, the FTB child rate for a
child who has reached 18 but is under 25 years of age); and
. FTB child rate (A2), to the extent that it applies to paragraph
26(2)(b) of Schedule 1 (that is, the base FTB child rate for a child
who has turned 18).
The 2.5 per cent increase is achieved by increasing what would otherwise be
the indexation factor for the relevant amount on 1 July 2011 (under clause
5) by 0.025.
In each instance, the increased indexation factor is then used to work out
the indexed amount using the method statement in clause 4 of Schedule 4.
Notes at the end of each new subclause indicate to the reader that the
increases provided for by new clause 10 include the Scheme's estimated cost
of living increase of 0.4 per cent for 2011-2012 which has been brought
forward. This brought forward increase is then accounted for in new clause
11 (through an adjustment in the indexation factor for 1 July 2012).
New clause 11 provides for the increases that occur on 1 July 2012.
Under new subclause 11(1), the following amounts are increased by
1.1 per cent on 1 July 2012:
. FTB under 13 child rate (A1);
. FTB 13-15 child rate (A1);
. FTB gross supplement amount (A);
. FTB standard rate (B); and
. FTB gross supplement amount (B).
The 1.1 per cent increase is achieved by increasing what would otherwise be
the indexation factor for the specified amount (under clause 5 of Schedule
4) by 0.011.
The 1.1 per cent increase represents an increase of 1.5 per cent less 0.4
per cent (brought forward estimated cost of living increase included in the
1 July 2011 rate increase). The 1.1 per cent net increase includes the
Scheme's estimated cost of living increase of 0.7 per cent for 2012-2013,
which has been brought forward. This brought forward increase is then
accounted for in new clause 12 (through an adjustment in the indexation
factor for 1 July 2013 and, if necessary, 1 July of subsequent years). A
note at the end of new subclause 11(1) explains this.
New subclause 11(2) increases the following rates by 4.0 per cent:
. FTB 16-24 child rate (A1), to the extent that it applies to item 3 of
the table in clause 7 of Schedule 1 (that is, the FTB child rate for a
child who has reached 16 but is under 18 years of age);
. FTB child rate (A2), to the extent that it applies to paragraph
26(2)(a) of Schedule 1 (that is, the base FTB child rate for a child
who has not turned 18); and
. FTB ACO rate.
This is achieved by increasing what would otherwise be the indexation
factor for the relevant amount on 1 July 2012 (under clause 5) by 0.04.
The 4.0 per cent increase represents an increase of 4.4 per cent less
0.4 per cent (brought forward estimated cost of living increase included in
the 1 July 2011 rate increase). The 4.0 per cent increase includes the
Scheme's estimated cost of living increase of 0.7 per cent for 2012-2013
which has been brought forward. This brought forward increase is then
accounted for in new clause 12 (through an adjustment in the indexation
factor for 1 July 2013 and, if necessary, 1 July of subsequent years). A
note at the end of new subclause 11(2) explains this.
New subclause 11(3) increases the following rates by 3.8 per cent:
. FTB 16-24 child rate (A1), to the extent that it applies to item 4 of
the table in clause 7 of Schedule 1 (that is, the FTB child rate for a
child who has reached 18 but is under 25 years of age); and
. FTB child rate (A2), to the extent that it applies to paragraph
26(2)(b) of Schedule 1 (that is, the base FTB child rate for a child
who has turned 18).
This is achieved by increasing what would otherwise be the indexation
factor for the relevant amount on 1 July 2012 (under clause 5) by 0.038.
The 3.8 per cent increase represents an increase of 4.2 per cent less
0.4 per cent (brought forward estimated cost of living increase included in
the 1 July 2011 rate increase). The 3.8 per cent increase includes the
Scheme's estimated cost of living increase of 0.7 per cent for 2012-2013
which has been brought forward. This brought forward increase is then
accounted for in new clause 12 (through an adjustment in the indexation
factor for 1 July 2013 and, if necessary, 1 July of subsequent years). A
note at the end of new subclause 11(3) explains this.
New clause 12 provides for the adjustment of the indexation factor for each
of the amounts that are increased under new clause 11 on each indexation
day on and after 1 July 2013 as necessary. The indexation factor is to be
reduced by the brought forward indexation amount (defined in new subclause
12(2)), but not below 1. The 'brought forward indexation amount' means
0.007 (representing the brought forward estimated cost of living increase
component of the 1 July 2012 increases) less any adjustments made under new
clause 12 for a previous indexation day. An example is included at the end
of new clause 12 to show how the subsequent adjustment in the indexation
factor will work.
Clause 5 of Schedule 4 sets out the rules for working out the indexation
factor for an amount. Item 5 makes a consequential amendment to this
provision, making it subject to the rules in new clauses 10 to 12.
FTB combined supplement
This Schedule also introduces a new supplementary payment, the FTB combined
supplement. An amount of up to $240 would be available for 2011-2012,
payable on reconciliation. An amount of $620 would be available for
subsequent income years, again payable on reconciliation.
The FTB combined supplement would be a new and separate component of FTB.
An individual's annual rate of FTB would therefore be worked out by adding
together:
. the individual's Part A rate (calculated under Part 2, Part 3 or Part
3A of Schedule 1 as relevant);
. the individual's Part B rate (calculated under Part 4 of Schedule 1);
and
. the individual's FTB combined supplement rate (calculated under new
Part 6 of Schedule 1).
The rate calculation process set out in clause 1 of Schedule 1 to the
Family Assistance Act is amended by item 1 to reflect this.
Item 2 inserts a new Part 6 at the end of Schedule 1 to the Family
Assistance Act. New Part 6 contains the eligibility rules for the new FTB
combined supplement (new clause 40) and a method statement outlining the
calculation process for the new supplement (new clause 41).
Under new clause 40, an FTB combined supplement is to be added to an
individual's annual rate of FTB if three conditions are met. First, the
individual must have a Part A rate greater than nil. Second, the
individual's Part B rate must also be greater than nil. The third
condition is that the individual's ATI exceeds $58,000. A note at the end
of new clause 40 refers the reader to clause 3 of Schedule 3, which defines
an individual's ATI where the individual is a member of a couple.
Item 4 makes a related amendment to clause 3 of Schedule 3 by adding a new
subclause (3) which defines what is meant by an individual's ATI for the
purposes of new Part 6 of Schedule 1 where the individual is a member of a
couple. In the context of new Part 6, an individual's ATI means the higher
of the individual's ATI and their partner's ATI.
Where the individual is not a member of a couple, the individual's ATI is
relevant for the purposes of new Part 6.
Item 3 makes a technical amendment to the opening words in subclause 3(1)
of Schedule 3 to ensure that the general rule in that provision does not
apply in relation to new Part 6 of Schedule 1.
New clause 41 in Part 6 of Schedule 1 sets out a method statement for
working out the annual amount of an individual's FTB combined supplement.
The annual amount of an individual's FTB combined supplement would depend
on the individual's ATI. For each whole $1 above an ATI of $58,000, the
amount of the individual's FTB combined supplement would be increased in
4 cent increments. In relation to 2011-2012, a maximum amount of $240
would be payable when ATI is $64,000 or more. In 2012-13 and subsequent
income years, a maximum amount of $620 would be payable when ATI is $73,500
or more.
This calculation process is reflected in the method statement in clause 41.
Neither the $58,000 income threshold for the FTB combined supplement nor
the maximum amount of FTB combined supplement ($240 or $620, as the case
may be) would be subject to indexation.
Amendments are also made to various provisions in the Family Assistance
Administration Act to ensure that the new FTB combined supplement, like the
existing FTB Part A and Part B supplements, is not included in the FTB rate
calculation process until reconciliation of FTB at the end of the relevant
income year.
Section 32A of the Family Assistance Administration Act ensures that the
FTB Part A and Part B supplements are not included in the rate calculation
process for FTB (under Schedule 1 to the Family Assistance Act) until the
individual concerned has satisfied the relevant FTB reconciliation
conditions for the relevant income year. The FTB reconciliation conditions
are then set out in sections 32B to 32R.
Item 8 amends subsection 32A(2) to insert a reference to new clause 40
(eligibility for FTB combined supplement) in a new paragraph (ca). The
effect is to disregard the new FTB combined supplement in calculating an
individual's rate of FTB until the individual satisfies the relevant FTB
reconciliation conditions for the income year (that is, on reconciliation).
A note changes the heading to section 32A to include reference to the new
FTB combined supplement.
Section 105A of the Family Assistance Administration Act broadly
requires the Secretary to review a determination which, when made or
varied, disregarded the FTB supplements, if the individual subsequently
satisfies the FTB reconciliation conditions for each same rate benefit
period in the relevant income year. The resulting review under section
105 of the Family Assistance Administration Act must take account of
the supplements (but other matters can also be considered in the
context of the review). Items 9 and 10 amend section 105A so that
these rules also apply in relation to the FTB combined supplement.
A note changes the heading to section 105A to include reference to the new
FTB combined supplement.
Schedule 4 - Assistance under the Veterans' Entitlements Act
Part 1 - Main Amendments
Summary
The Carbon Pollution Reduction Scheme will be introduced with an initial
$10 per tonne fixed carbon price in 2011-12 and a flexible carbon price in
2012-13. This is expected to result in increases in the cost of living of
1.1 per cent in the first two years.
In order to provide assistance with the cost of living impacts of the
scheme, the Government will provide upfront support to low and middle-
income households from 2011-12 through a package of direct cash assistance
and tax offsets to help in adjusting to a low pollution future.
Maximum rate service pensions, disability pensions and war widow and
widower pensions will be increased by 2.5 percent over two years commencing
on 1 July 2011. This includes a 1 per cent increase from 1 July 2011 and a
further 1.5 per cent increase on 1 July 2012, including upfront indexation.
Because assistance for the cost of living increase provided through certain
payments will be brought forward, subsequent indexation arrangements will
be adjusted to avoid duplication.
Background
In broad terms, Part 1 of this Schedule introduces increases to veterans'
entitlements pensions to assist recipients of those payments with the
anticipated increases in the cost of living as a result of the introduction
of the Carbon Pollution Reduction Scheme.
Explanation of the changes
Veterans' Entitlements Act
Item 1 inserts a new Division 5 - Increases related to Carbon Pollution
Reduction Scheme - before section 199 of the Veterans' Entitlements Act.
In broad terms, new Division 5 provides rules for increasing the relevant
veterans' entitlements rates by 2.8 per cent over two years.
Division 5 - Increases related to Carbon Pollution Reduction Scheme
Subdivision A - Introduction
New section 198P(1) sets out that the object of the Division is to increase
certain amounts that affect the rate at which payments are made to
individuals under the Veterans' Entitlements Act and that increases are to
be provided by way of assistance for expected rises in the cost of living
as a result of the implementation of the Carbon Pollution Reduction Scheme.
This subsection sets out that the following payments will be increased:
a) disability pensions
b) war widow and war widower pensions
c) service pensions and
d) payments of kinds specified under new section 198W.
Subsection 198P(2) specifies that the second object of the division is to
adjust the future indexation of payments in order to avoid duplicating
assistance. Part of the increases proposed in this bill bring forward the
expected cost of living increases associated with the Scheme which would
otherwise flow through into payment rates via the Consumer Price Index
(CPI). To avoid duplication of the increases, which would ordinarily flow
to payments 12 to 18 months after the CPI increase occurs, subsequent
indexation arrangements are to be adjusted.
Subdivision B - Increases in disability pension
New section 198Q provides that subdivision B applies to each amount, that
is later referred to as the base amount, of each item in the Table in
subsection 27(1). The table in subsection 27(1) sets out rates in respect
of an incapacity from a war-caused injury or a war-caused disease.
New section 198R provides for a 1 per cent increase to the base amounts
referred to in section 198Q on 1 July 2011. The effect of the section is
that on 1 July 2011, each base amount is replaced with an amount that is
worked out by first calculating the provisional replacement amount and then
applying the rounding rules to that figure.
By virtue of new paragraph 198R(a), the provisional replacement amount is
calculated by determining a figure that is 1 per cent greater than the base
amount.
New paragraph 198Q(b) specifies the rounding rules for the calculation.
New paragraph 198Q(b) provides that if the provisional replacement amount
(that is, the amount that has been increased by 1 per cent) is a multiple
of the relevant rounding base, then the provisional replacement amount is
the replacement amount. That is, the provisional replacement amount will
become the new rate. If the provisional replacement amount is not a
multiple of the relevant rounding base, then it is rounded up or down to
the nearest multiple of the rounding base and the resultant amount is the
replacement amount. If the provisional replacement amount is a multiple of
half the rounding base then the provisional replacement amount is rounded
up to the nearest multiple of the rounding base.
New section 198S provides for a 1.8 per cent increase to the base amount on
1 July 2012. The effect of the section is that, on 1 July 2012, each base
amount is replaced with an amount that is worked out by first calculating
the provisional replacement amount and then applying rounding rules to that
figure.
By virtue of new paragraph 198S(a), the provisional replacement amount is
calculated by determining a figure that is 1.8 per cent greater than the
base amount.
New paragraph 198SI(b) specifies the rounding rules for the calculation.
New paragraph 198SI(b) provides that, if the provisional replacement amount
(that is, the amount that has been increased by 1.8 per cent) is a multiple
of the relevant rounding base, then the provisional replacement amount is
the amount. That is the provisional replacement amount will become the new
rate. If the provisional replacement amount is not a multiple of the
relevant rounding base, then it is rounded up or down to the nearest
multiple of the rounding base and the resultant amount is the replacement
amount. If the provisional replacement amount is a multiple of half the
rounding base, then the provisional replacement amount is rounded up to the
nearest multiple of the rounding base.
Subdivision C - Adjustment of indexation of disability pension
New section 198T and new section 198U provide for the adjustment of CPI
indexation of the amounts that were subject to the increases provided for
under new section 198R and new section 198S.
The 1 per cent increase on 1 July 2011 incorporates a 0.4 per cent
component that represents a bring forward of future expected CPI increases.
The 1.8 per cent increase on 1 July 2012 incorporates a 0.8 per cent
component that represents a bring forward of future expected CPI increases.
The 0.4 per cent and the 0.8 per cent figures are the estimated rises in
the CPI that will result from the introduction of the Carbon Pollution
Reduction Scheme in 2011-12 and 2012-13 respectively.
The new subsection 198T(1) provides for special rules around indexation of
some amounts on or after 20 March 2012.
By virtue of subsections 198(5) and 198D(5) of the Veterans' Entitlements
Act, payment rates are indexed in accordance with CPI by the application of
an 'indexation factor'.
New subsection 198T(1) states that, for the indexation factors that apply
after 20 March 2012, the indexation factor is to be reduced by the brought
forward indexation amount, but that the indexation factor is not to fall
below 1.
New subsection 198T(2) creates a definition of brought forward indexation
amount for the purposes of this section. The brought forward indexation
amount is 0.004 less any reduction made under this section for a previous
indexation day.
A note is inserted at the end of the new subsection 198T(2) to state that,
once the brought forward indexation amount equals zero, there is no further
adjustment of the indexation factor.
An example is also inserted at the end of the new subsection 198T to
provide the reader with a clear picture of how the adjustment of the
indexation provisions will apply.
The new subsection 198U(1) provides for special rules around indexation of
some amounts on or after 20 March 2013.
By virtue of subsections 198(5) and 198D(5) of the Veterans' Entitlements
Act, payment rates are indexed in accordance with CPI by the application of
an 'indexation factor'.
New subsection 198U(1) states that, for the indexation factors that apply
after 20 March 2013, the indexation factor is to be reduced by the brought
forward indexation amount, but that the indexation factor is not to fall
below 1.
New subsection 198U(2) creates a definition of brought forward indexation
amount for the purposes of this section. The brought forward indexation
amount is 0.008 less any reduction made under this section for a previous
indexation day.
A note is inserted at the end of the new subsection 198U(2) to state that,
once the brought forward indexation amount equals zero, there is no further
adjustment of the indexation factor.
An example is also inserted at the end of the new subsection 198U(2) to
provide the reader with a clear picture of how the adjustment of the
indexation provisions will apply.
Subdivision D - Other provision for increases and adjustments of indexation
Subdivision D states that the Minister may provide for increases of payment
rates and adjustments of subsequent indexation factors by way of
legislative instrument.
The rationale for the legislative instrument enabling provisions inserted
by this Schedule is the same as described above for the equivalent
provisions inserted into the social security law by Schedule 1 to this
bill.
It is proposed that the increases to pension payments listed in new
paragraph 198V(1)(a) will be by the same percentages as set out in new
section 198R and section 198S.
New paragraph 198V(1)(a) provides that the Minister may make a legislative
instrument to provide for increases on 1 July 2011 and 1 July 2012, on
account of expected changes in the CPI as a result of the Carbon Pollution
Reduction Scheme, to rates of the following payments:
i) disability pensions - this relates to pensions, including war widow
and widower pensions, payable under Part II or IV other than pensions
payable under sections 27 and 30;
j) war widow and war widower pensions payable under subsection 30(1); and
k) service pensions payable under Part III.
New paragraph 198V(1)(b) provides that the Minister may make a legislative
instrument to provide for adjustment of indexation to the above mentioned
payments that would ordinarily apply under the Veterans' Entitlements Act.
The adjustment of indexation would reflect that if an amount is increased
under the new paragraph 198V(1)(a) a portion of that increase will be a
'bringing forward' of the anticipated CPI increases. It is anticipated
that the adjustment to indexation would be by the same amounts as set out
in new section 198T and new section 198U.
New subsection 198V(2) provides that the legislative instrument made by the
Minister pursuant to subsection 198V(1) will have effect in accordance with
its terms irrespective of any other provision contained in this bill.
New subsection 198V(3) provides that the legislative instrument can specify
a method for increasing an amount of payment specified in new
paragraph 198V(1)(a) by reference to either the amount to be increased, or
to another amount affecting the rate at which the same or a different kind
of payment is made, or both. This covers the possibility of the increases
being paid via a particular portion of a payment rather than the payment as
a whole.
New subsection 198V(4) states that the legislative instrument may provide
for adjustment of an amount that affects the rate of a payment (the
affected payment) set out in paragraph 198V(1)(a), whether or not that
amount, or an amount affecting that payment, was increased as a result of
paragraph 198V(1)(a), provided that the recipient of the affected payment
received a payment that was increased by virtue of the power given under
paragraph 198V(1)(a).
New subsection 198V(5) provides that subsection 198V(3) and
subsection 198V(4) are not intended to limit the scope of the legislative
instrument to be made by the Minister pursuant to new subsection 198V(1).
Subdivision E - Extending scope of this Division
New subsection 198W(1) provides that the Minister may, by legislative
instrument, specify the kinds of payments in the Veterans' Entitlements Act
to which Division 5 applies.
Again, the rationale for the legislative instrument provision is the same
as for the social security amendments described above.
A note is inserted at the end of new subsection 198W(1) that directs the
reader to subsection 13(3) of the Legislative Instruments Act 2003 for the
rules relating to specification by class.
New subsection 198W(2) provides that the Minister may specify the kinds of
payments to which this subdivision applies by either or both of the
following:
a) the persons to whom payments are to be made; or
b) the circumstances in which payments are to be made.
New subsection 198W(3) states that subsection 1206GM(2) is not to limit the
operation of subsection 198W(1).
Part 2 - Related amendments
Division 1 - Amendments whose commencement depends on another Act
Veterans' Entitlements Act
Item 2 inserts the heading 'Division 1 - Saving and transitional
provisions' before section 1987A.
Item 3 inserts the heading 'Division 2 - Limits on scope of this Act'
before section 197.
Item 4 inserts the heading 'Division 3 - Indexation and some one-off
increases' before section 198.
Item 5 adds a note at the end of subsection 198(5) advising that on and
after 20 March 2013, the factor may be affected by section 198U.
Item 6 adds a note at the end of subsection 198D(5) advising that on and
after 20 March 2013, the factor may be affected by section 198U.
Item 7 inserts the heading 'Division 7 - Provisions about the Commission'
before section 200.
Item 8 inserts the heading 'Division 8 - International agreements' before
section 203.
Item 9 inserts the heading 'Division 9 - Overpayments and debts' before
section 205.
Item 10 inserts the heading 'Division 10 - Offences and evidence' before
section 208.
Item 11 inserts the heading 'Division 11 - Administration' before section
212.
Item 12 inserts the heading 'Division 12 - Regulations' before section 216.
Division 2 - Amendments whose commencement depends on 2 other Acts
Veterans' Entitlements Act
Item 13 inserts the heading, 'Division 4 - Termination of certain pension'
before section 198N. Section 198N is being inserted by the Veterans'
Affairs Legislation Amendment (Budget Measures) Bill 2009.
Part 3 - Amendments indirectly depending on main amendment
Amendments to Veterans' Entitlements
The purpose of this Schedule is to make adjustments, on 1 July 2012, to the
increases that will apply to payments under the Veterans' Entitlements Act.
These adjustments arise due to the lower assumed carbon price and a lower
estimated cost of living impact in the 2012-13 income year.
As a result of the lower assumed carbon price, the overall rise in the cost
of living for households is estimated to be lower (revised down from
1.2 per cent to 1.1 per cent over the first two years of the Scheme).
A note explains that this Part is to amend the Veterans' Entitlements Act
as amended by Schedule 5 to the Veterans' Pension Reform Act. Schedule 5
to the Veterans' Pension Reform Act repealed and substituted Division 5 of
Part XII of the Veterans' Entitlements Act. Division 5 of Part XII of the
Veterans' Entitlements Act is to be inserted by Part 1 of this Schedule.
Item 14 amends paragraph 198S(a) so that the increase that will apply to
the rates of disability pension specified in section 198Q on 1 July 2012,
is adjusted from 1.8 per cent to 1.5 per cent. The note to item 14
confirms for the reader that the heading to section 198S is also amended to
reflect the same percentage adjustment.
Item 15 amends the note at the end of section 198S so that it refers to an
increase of 1.5 per cent instead of 1.8 per cent.
Item 16 amends the note at the end of section 198S so that it refers to an
increase of 0.7 per cent instead of 0.8 per cent. This change to the note
reflects the adjustment in the estimated cost of living impact from 0.8 per
cent to 0.7 per cent.
Item 17 omits the figure of 1.005 and substitutes a new figure of 1.004 in
the example at the end of subsection 198V(1). By changing these figures
the second half of the example at the end of this subsection remains
mathematically correct even after taking into account the adjustment to the
brought forward indexation amount.
Item 18 omits the figure of 0.008 and substitutes a new figure of 0.007 in
the example at the end of subsection 198V(1). This amendment reflects the
adjustment to the brought forward CPI indexation amount.
Item 19 omits the figure of 1.005 and substitutes a new figure of 1.004 in
the example at the end of subsection 198V(2). By changing these figures
the second half of the example at the end of this subsection remains
mathematically correct even after taking into account the adjustment to the
brought forward indexation amount.
Item 20 omits the figure of 0.008 and substitutes a new figure of 0.007 in
the example at the end of subsection 198V(2). This amendment reflects the
adjustment to the brought forward PBLCI indexation amount.
Item 21 omits the figure of 0.008 and substitutes a new figure of 0.007 in
paragraph (b) of the definition of brought forward CPI indexation amount in
subsection 198V(3).
Item 22 omits the figure of 0.008 and substitutes a new figure of 0.007 in
paragraph (b) of the definition of brought forward PBLCI indexation amount
in subsection 198V(3).
Item 23 omits the figure of 1.005 and substitutes a new figure of 1.004 in
the example at the end of subsection 198W(1). By changing these figures
the second half of the example at the end of this subsection remains
mathematically correct even after taking into account the adjustment to the
brought forward indexation amount.
Item 24 omits the figure of 0.008 and substitutes a new figure of 0.007 in
the example at the end of subsection 198W(1). This amendment reflects the
adjustment to the brought forward CPI indexation amount.
Item 25 omits the figure of 0.008 and substitutes a new figure of 0.007 in
the definition of brought forward CPI indexation amount in subsection
198W(2).
Item 26 amends paragraphs (a) and (b) of the definition of CPRS amount in
subsection 198ZB(3) so that the increase that will apply to a person's
pension supplement on 1 July 2012, is adjusted from 1.8 per cent to 1.5 per
cent. The note to item 26 confirms for the reader that the heading to
section 198ZB is also amended to reflect the same percentage adjustment.
Item 27 amends the note at the end of subsection 198ZB(3) so that it refers
to an increase of 1.5 per cent instead of 1.8 per cent.
Item 28 amends the note at the end of section 198ZB(3) so that it refers to
an increase of 0.7 per cent instead of 0.8 per cent. This change to the
note reflects the adjustment in the estimated cost of living impact from
0.8 per cent to 0.7 per cent.
Item 29 omits the figure of 1.005 and substitutes a new figure of 1.004 in
the example at the end of subsection 198ZC(1). By changing these figures
the second half of the example at the end of this subsection remains
mathematically correct even after taking into account the adjustment to the
brought forward indexation amount.
Item 30 omits the figure of 0.008 and substitutes a new figure of 0.007 in
the example at the end of subsection 198ZC(1). This amendment reflects the
adjustment to the brought forward CPI indexation amount.
Item 31 omits the figure of 1.005 and substitutes a new figure of 1.004 in
the example at the end of subsection 198ZC(3). By changing these figures
the second half of the example at the end of this subsection remains
mathematically correct even after taking into account the adjustment to the
brought forward indexation amount.
Item 32 omits the figure of 0.008 and substitutes a new figure of 0.007 in
the example at the end of subsection 198ZC(3). This amendment reflects the
adjustment to the brought forward PBLCI indexation amount.
Item 33 omits the figure of 0.008 and substitutes a new figure of 0.007 in
paragraph (b) of the definition of brought forward CPI indexation amount in
subsection 198ZC(4).
Item 34 omits the figure of 0.008 and substitutes a new figure of 0.007 in
paragraph (b) of the definition of brought forward PBLCI indexation amount
in subsection 198ZC(4).
Item 35 amends paragraph 198ZF(a) so that the increase that will apply, on
1 July 2012, to the amounts in subsection 30(1), is adjusted from 1.8 per
cent to 1.5 per cent. The note to item 35 confirms for the reader that the
heading to section 198ZF is also amended to reflect the same percentage
adjustment.
Item 36 amends the note at the end of section 198ZF so that it refers to an
increase of 1.5 per cent instead of 1.8 per cent.
Item 37 amends the note at the end of section 198ZF so that it refers to an
increase of 0.7 per cent instead of 0.8 per cent. This change to the note
reflects the adjustment in the estimated cost of living impact from 0.8 per
cent to 0.7 per cent.
Item 38 omits the figure of 1.005 and substitutes a new figure of 1.004 in
the example at the end of subsection 198ZG(1). By changing these figures
the second half of the example at the end of this subsection remains
mathematically correct even after taking into account the adjustment to the
brought forward indexation amount.
Item 39 omits the figure of 0.008 and substitutes a new figure of 0.007 in
the example at the end of subsection 198ZG(1). This amendment reflects the
adjustment to the brought forward CPI indexation amount.
Item 40 omits the figure of 1.005 and substitutes a new figure of 1.004 in
the example at the end of subsection 198ZG(2). By changing these figures
the second half of the example at the end of this subsection remains
mathematically correct even after taking into account the adjustment to the
brought forward indexation amount.
Item 41 omits the figure of 0.008 and substitutes a new figure of 0.007 in
the example at the end of subsection 198ZG(2). This amendment reflects the
adjustment to the brought forward PBLCI indexation amount.
Item 42 omits the figure of 0.008 and substitutes a new figure of 0.007 in
paragraph (b) of the definition of brought forward CPI indexation amount in
subsection 198ZG(3).
Item 43 omits the figure of 0.008 and substitutes a new figure of 0.007 in
paragraph (b) of the definition of brought forward PBLCI indexation amount
in subsection 198ZG(3).
Schedule 5 - Assistance under the Military Rehabilitation and Compensation
Act
Summary
To provide assistance to low and middle-income members and former members
of the Australian Defence Force, the maximum rate weekly permanent
impairment compensation, weekly compensation for wholly dependant partners
and Special Rate Disability Pension will be increased by 2.5 percent over
two years commencing on 1 July 2011.
Background
In broad terms, this Schedule introduces increases to Military
Rehabilitation and Compensation pensions to assist recipients of certain
compensation payments for the expected cost of living increase resulting
from the introduction of the Carbon Pollution Reduction Scheme.
Explanation of the changes
The Carbon Pollution Reduction Scheme (CPRS) increases to apply to Special
Rate Disability Pension and weekly compensation for wholly dependant
partners will occur automatically through increases to special rate pension
under section 24 of the Veterans' Entitlements Act and increases to the
rate of war widow and war widower pension under subsection 30(1) of the
Veterans' Entitlements Act respectively.
Military Rehabilitation and Compensation Act 2004
Item 1 makes a technical amendment to subsection 404(3) by omitting the
word 'The' and substituting the words 'Subject to sections 404A and 404C,
the'.
Item 2 inserts three new sections at the end of Part 1 of Chapter 11 of the
Military Rehabilitation and Compensation Act.
New section 404A provides that, for the indexation year commencing on
1 July 2011 and for the dollar amount mentioned in subsection 74(1), the
indexation factor worked out under section 404, for 1 July 2011, is to be
increased by 0.01.
A note at the end of new section 404A explains the Carbon Pollution
Reduction Scheme's 1 per cent increase.
New section 404B provides that for the indexation year commencing on
1 July 2012 and for the dollar amount mentioned in subsection 74(1), the
indexation factor worked out under section 404, for 1 July 2012, is to be
increased by 0.011.
A note at the end of new section 404B explains the Carbon Pollution
Reduction Scheme's 1.1 per cent increase.
New subsection 404C (1) states that, for the dollar amount mentioned in
subsection 74(1), the indexation factor, worked out under subsection 404
for each indexation year that commences on or after 1 July 2013 is to be
reduced by the brought forward indexation amount, but not below 1.
New subsection 404C(2) specifies that the brought forward indexation amount
in relation to an indexation year, means 0.007 less any adjustment made
under this section for a previous indexation year.
Schedule 6 - Assistance under the tax law
Summary
The Carbon Pollution Reduction Scheme will be introduced with an initial
$10 per tonne fixed carbon price in 2011-12 and a flexible carbon price in
2012-13. This is expected to result in increases in the cost of living of
0.4 per cent in 2011-12 and 0.7 per cent in 2012-13.
In order to provide assistance with the cost of living impacts of the
scheme, the Government will provide upfront support to low and middle-
income households from 2011-12 through a package of direct cash assistance
and tax offsets to help in adjusting to a low pollution future.
This Schedule contains amendments to increase various tax offsets.
The low income tax offset will increase to $1,650 for the 2011-12 income
year and to $1,890 for the 2012-13 income year and later income years.
This will increase the taxable income up to which a taxpayer is entitled to
an amount of low income tax offset to $71,250 in the 2011-12 income year
and to $77,250 in the 2012-13 income year and later income years.
The increases in the low income tax offset will increase the income level
above which senior Australians eligible for the senior Australians tax
offset begin to pay tax. For the 2011-12 income year, eligible senior
Australians will have no tax liability until their income reaches $31,474
for singles and $27,680 for each member of a couple. For the 2012-13
income year and later income years, eligible senior Australians will have
no tax liability until their income reaches $32,737 for singles and $29,280
for each member of a couple.
The increase in the low income tax offset also causes an increase in the
Medicare levy low-income and phase-in thresholds for taxpayers who are
eligible for the senior Australians tax offset. The Medicare levy low-
income threshold for singles will increase to $31,474 and the phase-in
limit to $37,028, for the 2011-12 income year. For the 2012-13 income year
and later income years, the low income threshold will increase to $32,737
and phase-in limit will increase to $38,514.
The Medicare levy family low-income threshold that applies to taxpayers who
are eligible for the senior Australians tax offset will increase to $45,000
and the phase-in limit to $52,942, for the 2011-12 income year. For the
2012-13 income year and later income years, the low income threshold will
increase to $46,000 and phase-in limit will increase to $54,118.
For the 2011-12 income year only, the dependency tax offsets will increase
by $60, in addition to the increases that will occur to those offsets due
to automatic indexation. For the 2012-13 income year only, the offsets
will increase by $90, in addition to the increase that will occur due to
automatic indexation. These increases will apply to the dependent spouse
offset, the child-housekeeper offset, the invalid relative offset, the
parent/parent-in-law offset and the housekeeper offset only.
Background
On 15 December 2008, the Government released details of its plan to address
the long term challenge of climate change in its Carbon Pollution Reduction
Scheme: Australia's Low Pollution Future White Paper. In the White paper,
the Government committed to provide a package of cash assistance, tax
offsets and other measures to help Australian households maintain their
standard of living while moving to a low pollution future.
On 4 May 2009, the Government announced the commencement of the Carbon
Pollution Reduction Scheme will be delayed by one year to 1 July 2011, to
manage the impacts of the global recession. Further, in the first year of
the Scheme the price of permits will be fixed at $10 per tonne of carbon.
From 1 July 2012, the Scheme will transition to full market trading of
permits.
As a consequence of these changes, variations to the proposed amounts of
tax offset and transfer system payments outlined in the White Paper are
necessary in order to give effect to the Government's commitments regarding
assistance to low- and middle-income households. Assistance through the
tax system will continue to be provided through two mechanisms: increases
to the low income tax offset and increases to the dependency tax offsets.
However, the increases will now be phased-in over two years - the 2011-12
income year and 2012-13 income year.
Low income tax offset
The low income tax offset provides taxation relief to low income taxpayers
under section 159N of the 1936 Tax Act. In 2010-11, a taxpayer with
taxable income of less than $30,000 will be entitled to the maximum amount
of $1,500 of low income tax offset. The offset is reduced at the rate of
four cents for every dollar that a taxpayer's taxable income exceeds
$30,000. The offset phases out completely by $67,500.
Senior Australians tax offset
The senior Australians tax offset provides taxation relief to senior
Australians of Age Pension age under section 160AAAA of the 1936 Tax Act.
When combined with the low income tax offset, the senior Australians tax
offset ensures that eligible single taxpayers can have income up to $30,685
in 2010-11 before their incur an income tax liability. An eligible
taxpayer who is a member of a couple can earn up to $26,680 in 2010-11
without paying income tax.
Medicare levy low-income thresholds
The Medicare levy (low-income) threshold for taxpayers eligible for the
senior Australians tax offset under section 160AAAA of the 1936 Tax Act
ensures that taxpayers in this cohort do not face a Medicare levy liability
until they incur an income tax liability. The threshold for eligible
single senior Australians is specified in subsection 3(1) of the ML Act.
Senior Australian couples for whom the threshold for single senior
Australians is not sufficient to ensure that they incur no Medicare levy
liability until they incur an income tax liability (for example, because
one partner earns significantly more than the other) are able to access a
senior family threshold. The family threshold is specified in subsection
8(7) of the ML Act.
When the taxable income of a taxpayer exceeds the low-income threshold, the
amount of Medicare levy payable by the person phases in at the rate of
10 per cent (subsection 7(2) of the ML Act) until the phase-in threshold is
reached - specified in subsection 3(1) of the ML Act. A taxpayer with
income above the phase-in threshold is liable for the full amount of the
Medicare levy.
In 2010-11, the Medicare levy low-income threshold for a single taxpayer
eligible for the senior Australians tax offset will be $30,685 and the
phase-in threshold will be $36,100. The Medicare levy family low-income
threshold for taxpayers eligible for the senior Australians tax offset will
be $44,500 and the phase-in threshold will be $52,353.
Dependency tax offsets
Taxation relief is provided to taxpayers who maintain a dependent through
various offsets detailed under sections 159J and 159L of the 1936 Tax Act
(known collectively as the 'dependency tax offsets'). To qualify for the
offsets, a taxpayer and their dependant must have income below particular
thresholds.
A taxpayer cannot claim both the dependent spouse offset and either the
housekeeper or child-housekeeper tax offset in respect of the same year or
period of a year. Further, a taxpayer cannot claim both the housekeeper
and child-housekeeper offset in respect of the same period in a year
(subsection 159L(3) of the 1936 Tax Act).
In addition, a taxpayer is unable to claim the dependent spouse,
housekeeper or child-housekeeper offset for any part of an income year
where they or their spouse are eligible for Family Tax Benefit (Part B).
The dependency tax offsets are increased each year by reference to the
consumer price index, in accordance with the indexation provisions set out
in section 159HA of the 1936 Tax Act.
Dependent spouse offset
The dependent spouse offset provides taxation relief to a taxpayer who
contributes to the maintenance of a resident spouse (section 159J of the
1936 Tax Act).
The maximum amount of dependent spouse offset for the 2008-09 income year
is $2,159 (subsection 159J(2) of the 1936 Tax Act).
From 1 July 2009, a taxpayer must have adjusted taxable income of less than
$150,000 for the income year to be eligible for the offset (subsection
159J(1AB) of the 1936 Tax Act).
The tax offset is reduced by $1 for every $4 by which the dependent
spouse's adjusted taxable income exceeds $282 (subsection 159J(4) of the
1936 Tax Act).
Housekeeper and child-housekeeper offset
The housekeeper offset provides taxation relief to a taxpayer in respect
for any person who was wholly engaged in keeping house in Australia for the
taxpayer and in caring for particular dependents of the taxpayer (section
159L of the 1936 Tax Act). The child-housekeeper provides taxation relief
to a taxpayer in respect for any child of the taxpayer who was wholly
engaged in keeping house for the taxpayer during the income year (section
159J of the 1936 Tax Act).
The maximum amount of housekeeper and child-housekeeper offset for the 2008-
09 income year is $2,108 (if the taxpayer has a dependent child or student)
or $1,759 (in all other cases) (subsection 159L(2) and 159J(2) of the 1936
Tax Act).
From 1 July 2009, the taxpayer and their spouse must have a combined
adjusted taxable income of less than $150,000 for the income year to be
eligible for the offset (subsection 159L(3B) and 159J(1AC) of the 1936 Tax
Act).
The (taxpayer's) housekeeper (or child-housekeeper) offset is not reduced
if the housekeeper (or child-housekeeper) derives income, as long as that
income does not prevent the housekeeper (or child-housekeeper) from being
wholly engaged in keeping house for the taxpayer.
Invalid relative offset
The invalid relative offset provides taxation relief to a taxpayer who
maintains a person aged 16 or more who is a child (including an adopted
child, step-child or ex-nuptial child), brother or sister of the taxpayer
and who is in recipient of a Disability Support Pension or a special needs
Disability Support Pension (or equivalent rehabilitation allowance) paid
under the Social Security Act 1991, or is certified by an appropriate
medical officer or medical practitioner as having a continuing inability to
work within the meaning of Part 2.3 of the Social Security Act 1991
(section 159J of the 1936 Tax Act).
The maximum amount of invalid relative offset for the 2008-09 income year
is $792 (subsection 159J(2) of the 1936 Tax Act).
From 1 July 2009, the taxpayer and their spouse must have a combined
adjusted taxable income of less than $150,000 for the income year to be
eligible for the offset (subsection 159J(1AC) of the 1936 Tax Act).
The offset is reduced by $1 for every $4 by which the dependent's (the
invalid relative) adjusted taxable income exceeds $282 (subsection 159J(4)
of the 1936 Tax Act).
Parent/parent-in-law offset
The parent/parent-in-law offset provides taxation relief to a taxpayer who
maintains either the taxpayer's or taxpayer's (legal or de facto) spouse's
parents (but not grandparents) (section 159J of the 1936 Tax Act).
The maximum amount of parent/parent-in-law offset for the 2008-09 income
year is $1,583 (subsection 159J(2) of the 1936 Tax Act).
From 1 July 2009, the taxpayer and their spouse must have a combined
adjusted taxable income of less than $150,000 for the income year to be
eligible for the offset (subsection 159J(1AC) of the 1936 Tax Act).
The tax offset is reduced by $1 for every $4 by which the dependent's (the
parent/parent-in-law) adjusted taxable income exceeds $282
(subsection 159J(4) of the 1936 Tax Act).
Explanation of the changes
Changes to the low income tax offset
For the 2011-12 income year, taxpayers will be entitled to an amount of low
income tax offset if their taxable income is less than $71,250 [Schedule 5,
Part 1, item 3, subsection 159N(1) of the 1936 Tax Act]. The maximum
amount of the tax offset will increase from $1,500 to $1,650 per year
[Schedule 5, Part 1, item 4, subsection 159N(2) of the 1936 Tax Act].
For the 2012-13 income year and later income years, taxpayers will be
entitled to an amount of low income tax offset if their taxable income is
less than $77,250 [Schedule 5, Part 2, item 11, subsection 159N(1) of the
1936 Tax Act]. The maximum amount of the tax offset will increase from
$1,650 to $1,890 per year [Schedule 5, Part 2, item 12, subsection 159N(2)
of the 1936 Tax Act].
The low income tax offset will continue to phase out at a rate of four
cents for each dollar over $30,000.
Changes to Medicare levy thresholds for senior Australians
As a result of the increases in the low income tax offset from $1,500 to
$1,890 by the 2012-13 income year, the income level above which Australians
eligible for the senior Australians tax offset begin to pay tax will also
increase.
This means that eligible single, senior Australians will have no tax
liability until their income reaches $31,474 for the 2011-12 income year
and $32,737 for the 2012-13 income year and later income years.
To ensure that senior Australians do not pay the Medicare levy until they
are liable to pay income tax, the Medicare levy threshold for single
seniors will increase from $30,685 to $31,474 for the 2011-12 income year
[Schedule 5, Part 1, item 6, subsection 3(1) (paragraph (a) of the
definition of threshold amount, ML Act and to $32,737 for the 2012-13
income year and later income years [Schedule 5, Part 2, item 14, subsection
3(1) (paragraph (a) of the definition of threshold amount, ML Act].
The phase-in limit, below which a single taxpayer eligible for the senior
Australians tax offset pays less than the full Medicare levy rate, will be
raised to $37,028 for the 2011-12 income year [Schedule 5, Part 1, item 5,
subsection 3(1) (paragraph (a) of the definition of phase-in limit , ML
Act] and to $38,514 for the 2012-13 income year and later income years
[Schedule 5, Part 2, item 13, subsection 3(1) (paragraph (a) of the
definition of phase-in limit, ML Act].
To ensure senior Australian's in a couple who are eligible for the senior
Australians tax offset do not pay the Medicare levy until they are liable
to pay income tax, the family threshold will be increased from $44,500 to
$45,000 for the 2011-12 income year [Schedule 5, Part 1, item 7, subsection
8(7) of the ML Act] and to $46,000 for the 2012-13 income year and later
income years. [Schedule 5, Part 2, item 15, subsection 8(7) of the ML Act]
Changes to the dependency tax offsets
For the 2011-12 income year only, the indexation rule set out in section
159HA will be amended to allow for a $60 uplift in the dependent spouse
offset, child-housekeeper offset, invalid relative offset, parent/parent-in-
law offset and housekeeper offset, in addition to the increase that will
occur to these offsets due to automatic indexation. [Schedule 5, Part 1,
item 2, subsection 159HA(1A) of the 1936 Tax Act]
For the 2012-13 income year only, the indexation rule set out in section
159HA will be amended to allow for a $90 uplift in the dependent spouse
offset, child-housekeeper offset, invalid relative offset, parent/parent-in-
law offset and housekeeper offset, in addition to the increase that will
occur to these offsets due to automatic indexation. [Schedule 5, Part 2,
item 10, subsection 159HA(1B) of the 1936 Tax Act]
Notional (dependency) rebates
Usually amendments are required to the following provisions to reflect an
increased amount of the dependent spouse tax offset. Assistance provided
under the Carbon Pollution Reduction Scheme does not apply to the notional
dependency rebates.
The (higher) dependent spouse with child tax offset is notional and has
been replaced by Family Tax Benefit (Part B). It is made available for the
purposes of calculating, and can only be claimed through, the zone, armed
forces and UN forces rebate and for the Medicare levy family income
threshold:
. United Nations forces under section 23AB of the 1936 Tax Act;
. zone tax offset under section 79A of the 1936 Tax Act;
. tax offset for defence force members serving overseas under section 79B
of the 1936 Tax Act; and
. Medicare levy family income threshold under section 8 of the ML Act.
Schedule 7 - Minor technical amendments
Summary
The amendments to this schedule ensure that the commencement provisions
contained in the Pension Reform Act and the Veterans' Pension Reform Act
will operate correctly and refer to the correct Act once this bill is
enacted.
Background
Due to timing discrepancies in the introduction of this bill and the
pension reform legislation in 2009, the commencement provisions in
section 2 of the Pension Reform Act and section 2 of the Veterans' Pension
Reform Act refer to the Carbon Pollution Reduction Scheme Amendment
(Household Assistance) Act 2009. Once this bill is enacted, it will be the
Carbon Pollution Reduction Scheme Amendment (Household Assistance) Act 2010
and amendments are therefore required to the Pension Reform Act and the
Veterans' Pension Reform Act.
Explanation of the changes
Social Security and Other Legislation Amendment (Pension Reform and Other
2009 Budget Measures) Act 2009
Item 1 omits the reference to Carbon Pollution Reduction Scheme Amendment
(Household Assistance) Act 2009 in table item 6 in subsection 2(1) of the
Pension Reform Act and inserts a reference to the Carbon Pollution
Reduction Scheme Amendment (Household Assistance) Act 2010. This ensures
that the commencement provisions of the Pension Reform Act refer to the
correct Act once this bill is enacted.
Veterans' Affairs and Other Legislation Amendment (Pension Reform) Act 2009
Item 2 omits the reference to Carbon Pollution Reduction Scheme Amendment
(Household Assistance) Act 2009 in table item 13 in subsection 2(1) of the
Veterans' Pension Reform Act and inserts a reference to the Carbon
Pollution Reduction Scheme Amendment (Household Assistance) Act 2010. This
ensures that the commencement provisions of the Veterans' Pension Reform
Act refer to the correct Act once this bill is enacted.