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2010
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
SENATE
FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS AND OTHER
LEGISLATION AMENDMENT (BUDGET AND OTHER MEASURES) BILL 2010
REVISED EXPLANATORY MEMORANDUM
(Circulated by the authority of the
Minister for Families, Housing, Community Services and Indigenous Affairs,
the Hon Jenny Macklin MP)
FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS AND OTHER
LEGISLATION AMENDMENT (BUDGET AND OTHER MEASURES) BILL 2010
OUTLINE
The Bill contains one 2010 Budget measure and several non-Budget measures,
as described below.
Special disability trusts
The Bill introduces a 2010 Budget measure that amends the special
disability trust provisions in the social security and veterans'
entitlements legislation to widen the appeal of the provisions. The
amendments relax the purpose and work capacity tests in relation to these
trusts, and give trustees greater flexibility to meet costs relating to the
beneficiary's health, wellbeing, recreation, independence and social
inclusion.
Residence required to qualify for disability support pension
An ongoing requirement for residence in Australia will be introduced for
disability support pension, bringing the pension into line with other
workforce age payments.
Family tax benefit
Amendments are made to ensure that students studying overseas full-time are
treated for family tax benefit purposes in the same way as full-time
students undertaking Australian study.
Pension reform measures
The Bill makes amendments to address two minor anomalies arising from the
pension reform legislation enacted in 2009.
Minor corrections
Minor amendments are made to reinsert an unintentionally omitted reference
in the social security confidentiality provisions, and to make two
technical corrections.
Financial impact statement
Special disability trusts
Total resourcing
|2010-11 |2011-12 |2012-13 |2013-14 |
|$0.4 m |$0.1 m |$0.2 m |$0.3 m |
Residence required to qualify for disability support pension
Total change in resourcing (FaHCSIA and Centrelink)
|2010-11 |2011-12 |2012-13 |2013-14 |
|$0.4 m |- $2.6 m |- $2.9 m |- $3.3 m |
The remaining measures in this Bill have no financial impact.
FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS AND OTHER
LEGISLATION AMENDMENT (BUDGET AND OTHER MEASURES) BILL 2010
NOTES ON CLAUSES
Abbreviations used in this explanatory memorandum
. 'Social Security Act' means the Social Security Act 1991; and
. 'Veterans' Entitlements Act' means the Veterans' Entitlements Act
1986.
Clause 1 sets out how the new Act is to be cited, that is, as the Families,
Housing, Community Services and Indigenous Affairs and Other Legislation
Amendment (Budget and Other Measures) Act 2010.
Clause 2 provides a table that sets out the commencement dates of the
various sections in, and Schedules to, the new Act.
Clause 3 provides that each Act that is specified in a Schedule is amended
or repealed as set out in that Schedule.
Schedule 1 - Special disability trusts
Summary
This Schedule introduces a 2010 Budget measure that amends the special
disability trust provisions in the social security and veterans'
entitlements legislation to widen the appeal of the provisions. The
amendments relax the purpose and work capacity tests in relation to these
trusts, and give trustees greater flexibility to meet costs relating to the
beneficiary's health, wellbeing, recreation, independence and social
inclusion.
Background
Special disability trusts were established in 2006 to assist family
members, who have the financial means to do so, to make private financial
provision for the current and future care and accommodation needs of their
family member with a severe disability.
The Senate Standing Committee on Community Affairs inquired into why more
families were not making use of the special disability trust provisions and
made various recommendations to make special disability trusts more
attractive to families of people with severe disabilities.
This measure helps address a number of the recommendations contained in the
Standing Committee's report - in particular, the relaxation of the work
capacity and trust purpose requirements.
This Schedule makes amendments to both Division 1 of Part 3.18A of Chapter
3 of the Social Security Act and Division 11B of Part IIIB of the Veterans'
Entitlements Act in relation to special disability trusts.
The amendments made by this Schedule commence on 1 January 2011.
Explanation of the changes
Amendments to the Social Security Act
Item 1 inserts a new paragraph 1209L(ea) after paragraph 1209L(e) to
include a requirement that special disability trusts meet the expenditure
requirements to be inserted by item 5 below.
Item 2 repeals paragraph 1209M(2)(c) and substitutes a new
paragraph 1209M(2)(c).
Subsection 1209M(2) provides the impairment or disability conditions that a
principal beneficiary, who has reached 16 years of age, must have in order
to be the principal beneficiary for the purposes of this Part.
New paragraph 1209M(2)(c) changes the work capacity tests in the
beneficiary requirements to provide a greater scope for beneficiaries to
work and still meet the criteria for special disability trusts. New
subparagraph 1209M(2)(c)(i) provides that a person can be working for up to
seven hours a week at or above the relevant minimum wage and still meet the
beneficiary requirements. New subparagraph 1209M(2)(c)(ii) provides that a
person can be working for wages determined in accordance with the supported
wage system and still meet the beneficiary requirements.
Item 3 omits the word 'sole' in subsection 1209N(1) and substitutes the
word 'primary'. Subsection 1209N(1) provides that the primary purpose,
during the beneficiary's lifetime, must be to meet the beneficiary's
reasonable care and accommodation needs.
The amendment is a relaxation of the purpose test and provides that a trust
can still meet the criteria for a special disability trust, even if it has
purposes other than meeting the reasonable care and accommodation needs of
the beneficiary, provided that remains the primary purpose of the trust.
As reflected in the note to item 3, the heading to subsection 1209N(1) is
also amended by omitting the word 'sole' and substituting the word
'primary'.
Item 4 repeals subsections 1209N(2), (3) and (4) and substitutes new
subsections 1209N(2), (3) and (4).
New paragraph 1209N(2)(a) provides that a trust can have purposes that are
both ancillary to the primary purpose and necessary or desirable to
facilitate the primary purpose. This new paragraph effectively replicates
the old subsection 1209N(2).
New paragraph 1209N(2)(b) provides that a trust can also have purposes that
are primarily for the benefit of the principal beneficiary.
Note 1 at the end of new subsection 1209N(2) confirms for the reader that a
particular purpose of a trust may fulfil the matters set out in both of
paragraphs 1209N(2)(a) and (b).
Note 2 at the end of new subsection 1209N(2) alerts the reader to the new
trust expenditure requirements inserted by item 5 below.
New paragraph 1209N(3)(a) provides that the reasonable care and
accommodation needs of a beneficiary of a special disability trust must be
decided in accordance with any guidelines made under new
subsection 1209N(4). New paragraph 1209N(3)(b) provides that purposes that
are for the primary benefit of the principal beneficiary of a special
disability trust must be decided in accordance with any guidelines made
under new subsection 1209N(4).
New subsection 1209N(4) gives the Secretary a discretionary power to make
guidelines, by legislative instrument, for deciding what are, or are not,
reasonable care and accommodation needs, and what are, or are not, purposes
that are primarily for the benefit of the principal beneficiary.
Item 5 inserts a new section 1209RA into Division 1 of Part 3.18A of
Chapter 3, immediately after section 1209R.
New section 1209RA sets out the trust expenditure requirements that a trust
must meet to be considered a special disability trust.
Subsection 1209RA(1) provides that, if there is a determination made under
subsection 1209RA(3), and a trust has one or more purposes (other than the
primary purpose) that are primarily for the benefit of the principal
beneficiary, the trust must comply with the determination made in
accordance with subsection 1209RA(3).
New subsection 1209RA(2) provides that a decision about whether a trust's
purposes are primarily for the benefit of the principal beneficiary must be
made in accordance with any guidelines made by the Secretary in accordance
with subsection 1209N(4).
New subsection 1209RA(3) gives the Secretary discretionary power to
determine the value of income and assets that may be applied by a trust, in
each financial year, for purposes that primarily benefit the principal
beneficiary.
Amendments to the Veterans' Entitlements Act
Item 6 inserts new paragraph 52ZZZW(ea).
Section 52ZZZW sets out the provisions which detail the requirements that
must be complied with in order for a special disability trust to be
regarded as such for the purposes of the Veterans' Entitlements Act.
New paragraph 52ZZZW(ea) includes the 'trust expenditure requirements' that
are referred to in new section 52ZZZWEA (inserted by item 10).
Item 7 repeals and substitutes paragraph 52ZZZWA(2)(c).
Section 52ZZZWA sets out the conditions of impairment and disability that
the beneficiary of the special disability trust must meet in order to
satisfy the requirements of the provision.
New paragraph 52ZZZWA(2)(c) provides that the beneficiary of the special
disability trust must have a disability as a result of which:
. the beneficiary is not working and is not likely to work for more than
seven hours a week for a wage that is equal to or higher than the
'relevant minimum wage' within the meaning of subsection 23(1) of the
Social Security Act; or
. the beneficiary works for wages that have been set in accordance with
the Commonwealth program known as the 'supported wage system'.
Items 8 and 9 amend section 52ZZZWB. Section 52ZZZWB provides that the
sole purpose of a trust that is to be regarded as a special disability
trust is to provide for the 'care and accommodation' of the principal
beneficiary of the trust.
The amendments provide for a relaxation of the purpose test. They provide
that a trust can still meet the criteria for a special disability trust,
even if it has purposes other than meeting the reasonable care and
accommodation needs of the beneficiary, provided that those needs remain
the primary purpose of the trust.
Subsection 52ZZZWB(1) is amended by replacing the reference to the 'sole'
purpose of the special disability trust with a reference to the 'primary'
purpose of the special disability trust, as provided by the trust deed,
being to meet the reasonable care and accommodation needs of the principal
beneficiary.
As a consequence, the heading to subsection 52ZZZWB(1) is also amended to
describe the provision as referring to the 'primary purpose - care and
accommodation for (the) principal beneficiary'.
Subsections 52ZZZWB(2), (3) and (4) are repealed and substituted by item 9.
New subsection 52ZZZWB(2) provides that the trust may have other purposes
if those other purposes:
. have the function of being both ancillary to the primary purpose and
necessary or desirable in facilitating the achievement of the primary
purpose; or
. are primarily for the benefit of the principal beneficiary.
There is a distinction to be made between 'ancillary' purposes and 'other'
purposes.
In referring to the 'ancillary purposes' of the trust, subsection
52ZZZWB(2) is referring to those provisions of the trust that are necessary
or desirable in facilitating the primary purpose.
The relevant provisions would generally concern the maintenance and the
practical administration of the trust, and are not matters which would need
to be addressed in the guidelines determined under subsection 52ZZZWB(4).
The 'other purposes' that the trust may refer to and which are subject to
the guidelines determined under subsection 52ZZZWB(4) are those purposes,
other than the primary purpose, that will benefit the principal
beneficiary.
Note 1 to subsection 52ZZZWB(2) refers to the possibility of a particular
purpose being both ancillary and primarily for the benefit of the principal
beneficiary.
Note 2 to subsection 52ZZZWB(2) refers to the guidelines made under section
52ZZZWEA (inserted by item 10) that provide for the limits on the values of
income and assets that may be applied for purposes other than the primary
purpose, for the benefit of the principal beneficiary.
New subsection 52ZZZWB(3) refers to the guidelines made under the
provisions of new subsection 52ZZZWB(4) and provides that:
. the reasonable care and accommodation needs of the principal
beneficiary of a special disability trust must be decided in
accordance with the guidelines in the circumstances where the
guidelines refer to those needs; and
. purposes which are other than the primary purpose that are primarily
for the benefit of the principal beneficiary must be decided in
accordance with the guidelines in the circumstances where the
guidelines refer to those purposes.
New subsection 52ZZZWB(4) provides the Repatriation Commission with a
discretionary power to make (by legislative instrument) guidelines that are
to be used for deciding either or both of the following:
. what are, and what are not, to be regarded as being the reasonable
care and accommodation needs for the beneficiaries of a special
disability trust;
. what are, and what are not, to be regarded as purposes of the trusts,
other than the primary purpose, that are primarily for the benefit of
the beneficiaries of the trusts.
Item 10 inserts new section 52ZZZWEA.
New section 52ZZZWEA sets out the expenditure requirements for trusts that
are to be regarded as special disability trusts.
New subsection 52ZZZWEA(1) is applicable in the circumstances where the
Repatriation Commission has made a determination under
subsection 52ZZZWEA(3) that specifies the total value of income and assets
of the special disability trust that can be applied for purposes other than
the primary purpose for each tax year.
New subsection 52ZZZWEA(1) provides that, where a special disability trust
has one or more purposes that are primarily for the benefit of the
principal beneficiary, other than the primary purpose referred to in
subsection 52ZZZWB(1), the total value of the income and assets of the
special disability trust that are applied for other purposes, other than
the primary purpose, are not to exceed the value that is specified in the
determination for that tax year.
New subsection 52ZZZWEA(2) is applicable where special disability trust
guidelines have been made under paragraph 52ZZZWB(4)(b). In those
circumstances, the question as to whether a purpose for which the income
and assets of a special disability trust have been applied is one of the
other purposes referred to in subsection 52ZZZWEA(1), is to be decided in
accordance with those guidelines.
The note to subsection 52ZZZWEA(2) refers to paragraph 52ZZZWB(4)(b)
providing for the determination of guidelines that decide what are, and
what are not, the other purposes (other than the primary purpose) that are
primarily for the benefit of the beneficiaries of the special disability
trusts.
New subsection 52ZZZWEA(3) provides the Repatriation Commission with the
discretionary power to make a determination as to the total value of income
and assets of a special disability trust that may be applied in each tax
year for purposes, other than the primary purpose referred to in
subsection 52ZZZWB(1), where those other purposes are primarily for the
benefit of the principal beneficiary of the special disability trust.
Item 11 is an application provision and provides that the amendments made
by this Schedule will apply to all trusts, irrespective of whether they
were created before, on or after commencement of this Schedule and whether
or not they met the criteria for being a special disability trust before
commencement of this Schedule.
It is intended that, by applying the new provisions to existing, as well as
new, trusts, more families will be able to benefit from the concessions
Accordingly, an existing trust, that may not have previously met the
criteria for a special disability trust, will not be prevented from being
considered a special disability trust under the new criteria simply as a
result of when it was created. In fact, it is intended that the relaxation
of the purpose and the work capacity rules will result in more existing
trusts meeting the criteria and the concessions provided being taken up by
families.
While the effect of these provisions means that the trust expenditure
requirements will be imposed on trusts midway through a trust's reporting
period, there will be no undue burden placed on trusts (or trustees) as all
these changes are beneficial.
Schedule 2 - Residence required to qualify for disability support pension
Summary
This Schedule will introduce an ongoing requirement for residence in
Australia for disability support pension, bringing the pension into line
with other workforce age payments.
Background
These amendments will close a loophole that has allowed continued payment
of disability support pension to people who live permanently overseas but
return to Australia every 13 weeks in order to retain their pension.
It is not the intention of the 13-week portability period to allow people
to live overseas and return to Australia for only short periods every 13
weeks to maintain payment. The 13-week portability period is designed to
allow disability support pensioners who reside permanently in Australia
sufficient time to deal with personal matters that may arise from time to
time overseas. This is consistent with the purpose of disability support
pension, which is to assist people with the cost of living in Australia,
and is designed to engage people of workforce age in activities in
Australia that will lead to greater levels of economic and social
participation.
Section 7 of the Social Security Act lists the factors to which regard must
be had in deciding whether or not a person is an Australian resident. Part
2.3 of the Social Security Act provides the qualification rules for
disability support pension. Subdivision A of Division 1 of that Part
provides how a person is qualified for disability support pension. Those
provisions are to be amended to provide that a person must be an Australian
resident to qualify for disability support pension.
The new qualification requirement for disability support pension will not
apply to a pensioner whose disability support pension is portable under an
international social security agreement. The new requirement will also not
apply to a pensioner who is grandfathered from certain portability changes
made in 2000 and 2004. Lastly, the new requirement will not apply to a
pensioner who is severely disabled and terminally ill, and who is overseas
to be with a family member or to return to the person's country of origin.
The amendments made by this Schedule commence on 1 January 2011.
Explanation of the changes
Item 1 provides for the amendment of section 94 (Qualification for
disability support pension) of the Social Security Act by the insertion of
new paragraph 94(1)(ea), which requires that a disability support pensioner
either be an Australian resident or be absent from Australia and remain
eligible for disability support pension under section 1218AA.
Item 2 provides for the amendment of section 94A (Qualification for
disability support pension - person transferring to that pension) of the
Social Security Act by the insertion of paragraph 94A(1)(ja), which
requires that a disability support pensioner either be an Australian
resident or be absent from Australia and remain eligible for disability
support pension under section 1218AA.
Item 3 adds a note to subsection 94A(1), referring to section 7 as the
source of the definition of Australian resident.
Item 4 provides for the amendment of section 95 (Qualification for
disability support pension - permanent blindness) of the Social Security
Act by the insertion of paragraph 95(1)(d), which requires that a
disability support pensioner either be an Australian resident or be absent
from Australia and remain eligible for disability support pension under
section 1218AA.
Item 5 provides for the amendment of section 1212 of the Social Security
Act by the addition of a new definition of Australian resident disability
support pensioner.
Item 6 provides for the amendment of section 1212 of the Social Security
Act by the addition of a new definition of terminally ill overseas
disability support pensioner.
Item 7 provides for the amendment of the table in section 1217, relating to
portability of social security payments, by repealing item 3 of that table
and substituting two new items to provide for portability of an Australian
resident disability support pensioner (item 2) and of a terminally ill
overseas disability support pensioner (item 3).
Item 8 adds new clause 150 to Schedule 1A to the Social Security Act. This
provides an exemption from the requirement to be an Australian resident to
qualify for disability support pension for certain pensioners whose
entitlement to disability support pension is otherwise maintained.
Schedule 5 - Family tax benefit
Summary
The amendments made by this Schedule ensure that students studying overseas
full-time are treated for family tax benefit (FTB) purposes in the same way
as full-time students undertaking Australian study.
Background
An FTB child, in relation to FTB, has the meaning given in Subdivision A of
Division 1 of Part 3 of the A New Tax System (Family Assistance) Act 1999
(Family Assistance Act) - see section 3. An FTB child may be aged up to 24
- see section 22.
The Family Assistance Legislation Amendment (Participation Requirement) Act
2009 introduced an activity test for the first time for children aged 16 to
20, commencing for most claimants on 1 July 2010, although the measure came
into effect for new claimants from 1 January 2010. However, the measure
unintentionally excluded from the definition of FTB child those children or
young people who were studying overseas full-time.
The amendments made by this Schedule extend entitlement for these claimants
in respect of such children or young people.
Under subsection 22(3) of the Family Assistance Act, an individual aged 16
to 17 is an FTB child of an adult who has care of the individual, provided
the individual meets certain residence requirements and satisfies or is
exempt from the FTB activity test. Equally, under subsection 22(4) of the
Family Assistance Act, an individual aged 18 to 20 is an FTB child of an
adult who has care of the individual, provided the individual meets certain
residence requirements and satisfies or is exempt from the FTB activity
test. The concept 'satisfies the FTB activity test' is defined in
section 17B of the Family Assistance Act. Amendments will ensure that the
FTB activity test may be met by a student studying overseas full-time.
Under subsection 22(6) of the Family Assistance Act, an individual aged 21
to 24 is an FTB child of an adult who has care of the individual, provided
the individual meets certain residence requirements and is undertaking full-
time study. Amendments will provide that studying overseas full-time will
also result in a young person in this age-group being an FTB child.
An individual who is aged five or more and less than 16 cannot be an FTB
child of an adult if the individual is not undertaking full-time study or
primary education and has adjusted taxable income that equals or exceeds
the cut-out amount (see item 1 of the table in subsection 22A(1) of the
Family Assistance Act and supporting definitions in section 22A). The
amendments will ensure that income over the cut-out amount is not a
disqualifying factor if the student is studying overseas full-time.
There are similar rules that define the concept of an eligible child where
an approved care organisation claims payment of FTB in respect of a child.
These rules are set out in sections 34 and 35 of the Family Assistance Act.
Amendments will provide for studying overseas full-time to substitute for
the existing rules relating to undertaking Australian study.
If an FTB child dies and, immediately prior to the child's death, an
individual was eligible for FTB in respect of the child, then the
individual remains eligible for FTB for a bereavement period of 14 weeks
after the child's death. However, the bereavement period does not include
any day on or after the day upon which the young person would have turned
25, and the requirement is repeated that the young person must have been
undertaking full-time study (see paragraph 31(3)(a)). The amendments
similarly extend the bereavement period for those young people studying
overseas full-time.
Where an FTB child has died, section 32 provides that a lump sum of FTB may
be payable in substitution for the continuing 14 weeks of eligibility under
section 31. The calculation of the bereavement lump sum is dealt with by
section 65, and repeats the requirement that the FTB child be aged under 25
and undertaking full-time study (see paragraph 65(2)(a)). The amendments
also extend the calculation of the bereavement lump sum to include those
young people studying overseas full-time.
The rate calculation for FTB is dealt with in Schedule 1 to the Family
Assistance Act. The rate calculation process for FTB Part B disregards an
FTB child who has turned 16 years of age unless the child is undertaking
full-time study and the calendar year in which the child turned 18 has not
ended. The relevant rule is in subclause 29(3) of Schedule 1 to the Family
Assistance Act. Similarly, in calculating the amount of multiple-birth
allowance as part of FTB rate, a child aged 16 or more is disregarded
unless they are undertaking full-time study (paragraph 36(2)(b) of Schedule
1). For the purposes of the rate calculation process for FTB Part B and
for multiple birth allowance, amendments will include an FTB child where
the child is studying overseas full-time and meets all the other criteria.
Additionally, the term 'undertaking full-time study' is used in
paragraph 32K(1)(b) of the A New Tax System (Family Assistance)
(Administration) Act 1999 (Family Assistance Administration Act) in
relation to the relevant reconciliation time for FTB eligibility in respect
of a child or young person who is not undertaking full-time study but who
has an income (that is, the situation mentioned in table item 1 of
subsection 22A(1) of the Family Assistance Act). The amendments will
provide for the relevant reconciliation time under section 32K in respect
of a child or young person who is not studying overseas full-time and whose
income is then relevant to FTB eligibility.
The amendments made by this Schedule commence on the day of Royal Assent.
Explanation of the changes
Amendments to the Family Assistance Act
Item 1 inserts a definition of the new term studying overseas full-time
into subsection 3(1) of the Family Assistance Act, the meaning of which is
set out in new section 3C (inserted by item 2).
Studying overseas full-time in new section 3C of the Family Assistance Act
has the meaning given by a legislative instrument made by the Minister for
the purposes of this section.
Item 3 inserts new paragraph 17B(1)(c) as an alternative way to satisfy the
FTB activity test in subsection 17B(1) of the Family Assistance Act.
New paragraph 17B(1)(c) provides that an individual may satisfy the FTB
activity test by studying overseas full-time in a way that would, in the
Secretary's opinion, assist or allow the individual to complete his or her
final year of secondary school or an equivalent level of education.
Item 4 is a consequential amendment to item 3
Item 5 amends paragraph 17B(4)(a) of the Family Assistance Act to provide
authority for the Secretary to set guidelines, by legislative instrument,
for the exercise of the Secretary's discretion under new paragraph
17B(1)(c).
Item 6 amends subsection 17B(5) of the Family Assistance Act to require the
Secretary to have regard to any such guidelines.
Item 7 inserts the words 'or is studying overseas full-time' into
paragraph 22(6)(d) of the Family Assistance Act. This has the effect of
extending the definition of FTB child to include 21 to 24 year-olds who are
studying overseas full-time.
A note provides for the heading to subsection 22(6) to be amended to
include reference to studying overseas full-time.
Item 8 repeals and substitutes paragraph (a) of a particular cell of table
item 1 of subsection 22A(1) of the Family Assistance Act. The effect of
this is to include within the definition of FTB child individuals who are
aged five or more and less than 16 if they have adjusted taxable income
that equals or exceeds the cut-out amount but are studying overseas full-
time.
Item 9 inserts the words 'or was studying overseas full-time' after the
words 'undertaking full-time study' as they appear in paragraph 31(3)(a) of
the Family Assistance Act, relating to the bereavement period.
Paragraph 31(3)(a) of the Family Assistance Act currently excludes from
continued eligibility for FTB those individuals, among others, whose FTB
child would have been aged 25 or over if he or she had not died and was
undertaking full-time study. This amendment will extend eligibility in
respect of young people studying overseas full-time, and is consistent with
the above amendments to the definition of FTB child for 21 to 24 year olds.
Item 10 inserts the words 'or is studying overseas full-time' after the
words 'undertaking full-time study' as they appear in subparagraph
34(1)(a)(iii). This insertion will result in an approved care organisation
being eligible for FTB in respect of an individual aged 21 to 24 who is
studying overseas full-time and meets the other prescribed requirements.
Item 11 repeals and substitutes paragraph (a) of a particular cell of table
item 1 of subsection 35(1) of the Family Assistance Act to include
reference to studying overseas full-time. The effect of this is that an
approved care organisation may be eligible for FTB for an individual aged
five or more and less than 16 despite the fact the individual has adjusted
taxable income that equals or exceeds the cut-out amount if the individual
is studying overseas full-time.
Item 12 inserts the words 'or was studying overseas full-time' after the
words 'undertaking full-time study' as they appear in paragraph 65(2)(a) of
the Family Assistance Act.
The calculation of the lump sum payable where an FTB child has died is
dealt with by section 65. This insertion prevents the exclusion of days
from the lump sum period where an FTB child aged under 25 was studying
overseas full-time.
Item 13 inserts the words 'or is studying overseas full-time' after the
words 'undertaking full-time study' as they appear in paragraph 29(3)(a) of
Schedule 1 to the Family Assistance Act.
The rate calculation process for FTB Part B currently disregards an FTB
child who has turned 16 unless the child is undertaking full-time study and
the calendar year in which the child turned 18 has not ended
(subclause 29(3) of Schedule 1 to the Family Assistance Act refers). This
amendment will allow the inclusion of an FTB child who is studying overseas
full-time.
Items 14 and 15 insert the words 'or is studying overseas full-time' after
the words 'undertaking full-time study' as they appear in
subparagraphs 36(2)(b)(i) and 36(2)(b)(ii) of Schedule 1 to the Family
Assistance Act.
In calculating the amount of multiple-birth allowance as part of an
individual's rate of FTB, a child aged 16 or more is disregarded unless he
or she is undertaking full-time study and the calendar year in which the
first born of the children in the multiple birth who are undertaking full-
time study turned 18 has not ended (paragraph 36(2)(b) of Schedule 1 of the
Family Assistance Act refers). This amendment will allow the inclusion of
an FTB child who is studying overseas full-time.
Amendments to the Family Assistance Administration Act
Item 16 repeals and substitutes paragraph 32K(1)(b) of the Family
Assistance Administration Act. Section 32K currently sets out the relevant
reconciliation time for FTB eligibility in respect of an FTB child who is
not undertaking full-time study or primary education. This amendment will
extend the provision to provide for the reconciliation time for FTB
eligibility in respect of FTB children who are not studying overseas full-
time.
Application
Item 17 sets out the application rules for the amendments made by
Schedule 5.
Subitem 17(1) provides that the amendments made by items 3 to 8, 10, 11 and
13 to 16, apply in relation to working out an individual's or approved care
organisation's entitlement (if any) to FTB in respect of days occurring on
or after the commencement of those items (that is, on Royal Assent).
Subitem 17(2) provides that the amendments made by items 9 and 12 (relating
to the bereavement period and the bereavement lump sum) apply in relation
to deaths occurring on or after the commencement of those items (that is,
on Royal Assent).
Schedule 6 - Pension reform measures
Summary
This Schedule makes amendments to address two minor anomalies arising from
the pension reform legislation enacted in 2009.
The amendments ensure that leave payments taken as part of an ongoing
employment relationship will be treated in the same way as the income that
would have been earned if the employee had not taken leave.
The amendments also ensure that members of a couple who receive separate
income support payments from Centrelink and the Department of Veterans'
Affairs will be able to benefit from the work bonus rules in the same way
as a couple benefits from the work bonus rules where they receive their
income support payment from the same agency.
Background
These amendments are to clarify, and provide certainty around the
application of, certain provisions inserted by the Social Security and
Other Legislation Amendment (Pension Reform and Other 2009 Budget Measures)
Act 2009 (the Pension Reform Act) and the Veterans' Affairs and Other
Legislation Amendment (Pension Reform) Act 2009.
The current definitions of employment income in subsection 8(1C) of the
Social Security Act and subsection 46AB(1) of the Veterans' Entitlements
Act specifically exclude leave payments received by an individual.
Employment income and leave payments are treated differently under the
various rate calculators in the Social Security Act and the Veterans'
Entitlements Act.
Since the commencement of clause 146 in Schedule 1A to the Social Security
Act (inserted by the Pension Reform Act), there has been uncertainty in the
treatment of leave payments. This has resulted in possible unintended
consequences for people whose rates of pension are calculated in accordance
with clause 146.
A similar problem does not arise under the Veterans' Entitlements Act as
that Act does not include the same daily employment income attribution
rules as those located in Division 1AA of Part 3.10 of Chapter 3 of the
Social Security Act.
Under the social security law, it is possible that a person, during a
period of leave such as annual leave, will, because of the different income
attribution rules applying to employment income as opposed to leave
payments, no longer satisfy the requirements of the transitional
arrangements. This may happen, for example, where leave income is
attributed to a single day in an instalment period and not spread out over
the entire instalment period under section 1073B.
Because the beneficial transitional arrangements operate such that, once a
person loses access to them, they cannot ever have access to them again, it
is possible for the person, once they return from leave, to receive a lower
rate of payment than they were receiving before they went on leave. This
may be the case even if, during their leave period, the amount that was
paid to them as leave payments was equivalent to the amount that they would
otherwise have received as employment income.
It is also not clear that leave payments can be counted towards the income
concession amount calculated under section 1073AA of the Social Security
Act or section 46AA of the Veterans' Entitlements Act. The income
concession amount under section 1073AA or section 46AA is only worked out
with respect to employment income. Because the current definition
specifically excludes leave payments (as defined), a person can have their
payment rate reduced during a period of leave even if their leave payments
are equivalent to the employment income they would have otherwise received
because the income concession provisions in section 1073AA or section 46AA
do not apply to leave payments.
Currently, section 1073AA of the Social Security Act provides for people
over age pension age to benefit from an income concession amount, which is
an amount of employment income that is disregarded for the purposes of the
ordinary income test used in determining their rate of pension. There is
an equivalent provision (section 46AA) in the Veterans' Entitlements Act to
provide that recipients of payments under that Act also benefit from an
income concession amount if they have employment income.
The amendments in this Schedule correct these anomalies in relation to
leave payments so that people get the beneficial effect of the provisions
that they were intended to have.
Similarly, the work bonus amendments will clarify that an eligible couple,
where one member is in receipt of a social security pension or veterans'
entitlements income support pension and the other is in receipt of a
payment under the Veterans' Entitlements Act or a social security pension,
will be treated the same as a couple where both members receive a social
security pension or a veterans' entitlements income support pension.
Currently, a member of a couple receiving a relevant social security
payment whose partner is receiving a veterans' payment will not receive the
full benefit of the social security pension reform work bonus amendments.
The amendments made by this Schedule commence on the day of Royal Assent.
Explanation of the changes
Amendments to the Social Security Act
Item 1 repeals paragraph 8(1A)(b) and substitutes a new paragraph 8(1A)(b)
that will ensure leave payments made to employees who have an ongoing
employment arrangement with their employer are included in the definition
of employment income.
Item 2 repeals paragraph 8(1A)(e) and substitutes a new paragraph 8(1A)(e)
that confirms leave payments made to a person when their employment ends
are not included in the definition of employment income.
Item 3 omits the reference to paragraph (1A)(e) in subsection 8(1C) and
inserts a reference to subsection (1A) to reflect the changes to the
definition of employment income made by items 1 and 2.
Item 4 omits the words 'sick leave' and substitutes the words
'personal/carer's leave' into the definition of leave payment in
subsection 8(1C). This item is intended to reflect current terminology and
does not mean that a payment of sick leave is not to be counted as a leave
payment for the purposes of the social security law. Sick leave would fall
within the definition of personal/carer's leave for the purposes of this
provision.
Item 5 repeals subsection 1073AA(6) and substitutes a new
subsection 1073AA(6) to clarify that the income concession amount is to be
applied to the employment income earned, derived or received by each member
of the couple before the ordinary income test in the rate calculators is
applied.
Item 6 amends the first example at the end of subsection 1073AA(6) by
adding the words 'and subsection (1) applies to David and Amy' after the
word 'couple'. This amendment confirms that, for the work bonus to apply
to both members of a couple, they both need to have reached age pension age
and be in receipt of either age pension, wife pension, disability support
pension, carer payment, disability wage supplement, bereavement allowance
or widow B pension.
Item 7 amends the second example at the end of subsection 1073AA(6) by
adding the words 'and subsection (1) applies to Ian and Simone' after the
word 'couple'. This amendment confirms that, for the work bonus to apply
to both members of a couple, they both need to have reached age pension age
and be in receipt of either age pension, wife pension, disability support
pension, carer payment, disability wage supplement, bereavement allowance
or widow B pension.
Item 8 inserts two new subsections at the end of section 1073AA.
New subsection 1073AA(7) is inserted to avoid confusion about how
section 1073AA interacts with the rate calculators and, in particular, the
modules relating to a couples' ordinary income, for example, Module E of
Rate Calculator A.
New subsection 1073AA(8) is inserted to clarify that, where one member of a
couple has the benefit of an income concession amount under the Veterans'
Entitlements Act, then that income concession amount is to be taken into
consideration when determining that couple's ordinary income under
point 1064-E2 or 1066-E2.
Amendments to the Veterans' Entitlements Act
Item 9 repeals subsection 46AA(5) and substitutes a new subsection 46AA(5)
to clarify that the income concession amount is to be applied to the
employment income earned, derived or received by each member of the couple
before the ordinary/adjusted income test in point SCH6-E3 of the rate
calculator is applied.
Item 10 amends the first example at the end of subsection 46AA(5) by adding
the words 'and subsection (1) applies to David and Amy' after the word
'couple'. This amendment confirms that, for the work bonus to apply to
both members of a couple, they both need to have reached qualifying age and
be in receipt of either a service pension or an income support supplement.
Item 11 amends the second example at the end of subsection 46AA(5) by
adding the words 'and subsection (1) applies to Ian and Simone' after the
word 'couple'. This amendment confirms that, for the work bonus to apply
to both members of a couple, they both need to have reached qualifying age
and be in receipt of either a service pension or an income support
supplement.
Item 12 inserts a new subsection at the end of section 46AA. New
subsection 46AA(5A) is inserted to avoid confusion about how section 46AA
interacts with the rate calculator and. in particular, the module relating
to a couples' ordinary/adjusted income, Module E of the Rate Calculator.
New subsection 46AA(5A) provides that, where one member of a couple has the
benefit of an income concession amount under the Social Security Act, then
that income concession amount is to be taken into consideration when
determining that couple's ordinary income under point SCH6-E3.
Items 13 to 16 amend section 46AB. Section 46AB provides for a definition
of the term 'employment income' for the purposes of the work bonus income
concession applied under section 46AA.
Item 13 repeals and substitutes paragraph 46AB(1)(b) to provide that the
'ordinary income' of a person will include 'employment income' that is
earned, derived or received, or that is taken to have been earned, derived
or received, by the person for work undertaken as an employee in an
employer/employee relationship, and that income is to include but is not to
be limited to:
. salary, wages, commissions and employment-related fringe benefits that
have been earned, derived or received or have been taken to have been
earned, derived or received; and
. leave payments to the person that have been received in relation to a
continuing employer/employee relationship.
Item 14 repeals and substitutes paragraph 46AB(1)(e), which provides that
employment income will not include a leave payment made to a person who was
not employed on a continuing basis.
Item 15 is a consequential amendment to subsection 46AB(2) to replace a
reference to the repealed paragraph 46AB(1)(e) with a reference to
subsection (1), reflecting the changes to the definition of employment
income made by items 13 and 14.
Item 16 is a technical amendment to paragraph 46AB(2)(a) to replace a
reference to 'sick leave' with the more contemporary term 'personal/carer's
leave'.
This item does not mean that a payment of sick leave is not to be counted
as a leave payment for the purposes of the Veterans' Entitlements Act.
Payments in respect of sick leave would fall within the definition of
personal/carer's leave for the purposes of this provision.
Schedule 7 - Minor corrections
Summary
Minor amendments are made to reinsert an unintentionally omitted reference
in the social security confidentiality provisions, and to make two
technical corrections.
Background
This Schedule reinserts a reference, unintentionally omitted from the
confidentiality provisions in the Social Security (Administration) Act 1999
(Social Security Administration Act), by the Social Security and Other
Legislation Amendment (Income Support for Students) Act 2010 (the Students
Act).
The reference in question (to the Digital Switch-over Household Assistance
Program (the Switch-over Program)) was inserted into subsection 202(1) of
the Social Security Administration Act by the Social Security Legislation
Amendment (Digital Television Switch-over) Act 2009 (the Switch-over Act),
with effect from 27 June 2009. This was to allow protected information to
be obtained for the purposes of the Switch-over Program.
However, the Students Act substituted subsection 202(1) for its own
purposes, with effect from 1 April 2010, unintentionally omitting the
recently inserted reference to the Switch-over Program.
The reference is reinserted so the Switch-over Program continues to operate
as intended.
The Schedule also makes two technical amendments to the Social Security Act
and the Social Security Administration Act.
The amendments made by this Schedule commence on Royal Assent.
Explanation of the changes
Item 1 makes a technical amendment by inserting 'to' after 'not' in
subsection 1218(3) of the Social Security Act.
Item 2 reinstates the reference to the Switch-over Program, as described
above, in subsection 202(1) of the Social Security Administration Act.
Item 3 makes a technical amendment by re-lettering as paragraph (dc) the
second occurring paragraph 202(2)(db) of the Social Security Administration
Act, which was inserted by item 2 of Schedule 1 to the Switch-over Act.
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