Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2010-2011
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS AND OTHER
LEGISLATION AMENDMENT (ELECTION COMMITMENTS AND OTHER MEASURES) BILL 2011
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 (ELECTION COMMITMENTS AND OTHER MEASURES) BILL 2011
OUTLINE
The Bill contains three election commitments and two non-Budget measures,
as described below.
Work bonus
As one of its election commitments, the Government committed to expanding
the existing seniors' work bonus, which was introduced in September 2009 as
part of its Secure and Sustainable Pension Reform package, to increase
incentives for age pension recipients, and veterans' affairs income support
pensioners of qualifying age, who work. The Bill extends the existing work
bonus to enable people of age pension age, or qualifying age, who take up
paid work, including occasional or variable work, to keep more of their
pension when they are working.
Increasing FTB child rates for certain teenagers in secondary study
In a further election commitment, the Government announced significant
improvements in family assistance for families with teenagers at school.
From 1 January 2012, the maximum rate of family tax benefit (FTB) Part A
paid to families with a child aged 16 to 19 in full-time secondary school
or vocational education equivalent, or who are exempt from this
requirement, will be aligned with the rate paid to families with a child
aged 13 to 15. This means that, if the child remains in school, the family
will not experience a drop in assistance when their child turns 16. The
system of government assistance for families with children aged under 18 is
also simplified by making FTB Part A the primary payment for children aged
under 18 who are in full-time secondary school study or vocational
education equivalent and under the primary care of their family.
Eligibility for FTB Part B and multiple birth allowance will be limited to
FTB children who are undertaking full-time secondary study, or are exempt
from this requirement. Changes to the youth allowance parental income test
will protect the entitlement of youth allowance recipients with a sibling
aged 16 to 19 who remains in, or transfers to, the FTB system as a result
of these new measures.
Baby bonus
The Bill provides for eligible baby bonus claimants to have a larger
portion of their baby bonus paid to them upfront, from 1 July 2011, to
assist them in meeting the initial costs of welcoming a child into the
family. This is one of the measures in the Government's Better Access to
Family Payments election commitment.
Thalidomide payments
The Bill ensures that payments made from the Thalidomide Australia Fixed
Trust to beneficiaries of the Trust, or in respect of a beneficiary of the
Trust, are exempt from income tax and from social security and veterans'
affairs income tests. The Bill also ensures that Commonwealth ex gratia
payments, made to beneficiaries of the Trust in respect of social security
and veterans' affairs payments, forgone due to the income test exemption
currently not being in effect, are also exempt from income tax.
Income management
The Bill makes some minor improvements to the income management provisions,
including the matched savings scheme payment, debt recovery and nominee
arrangements.
Financial impact statement
Work bonus
Total resourcing (all portfolios)
|2010-11 |2011-12 |2012-13 |2013-14 |
|$3.7 m |$28.1 m |$30.9 m |$31.0 m |
Increasing FTB child rates for certain teenagers in secondary study
Total resourcing (all portfolios)
|2010-11 |2011-12 |2012-13 |2013-14 |
|$1.0 m *# |$84.0 m # |$199.4 m |$237.6 m |
* Estimate only.
# Does not include Centrelink capital costs of $0.4 m in 2010-11 and $5.5 m
in 2011-12.
Baby bonus
Nil impact.
Thalidomide payments
Total resourcing (all portfolios)
|2010-11 |2011-12 |2012-13 |2013-14 |
|$0.2 m |$0.3 m |$0.3 m |$0.3 m |
This includes impacts for the Department of Families, Housing, Community
Services, and Indigenous Affairs in relation to the payment of ex gratia
payments prior to the commencement of the legislation.
Income management
Nil impact.
FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS AND OTHER
LEGISLATION AMENDMENT (ELECTION COMMITMENTS AND OTHER MEASURES) BILL 2011
NOTES ON CLAUSES
Clause 1 sets out how the Act is to be cited, that is, as the Families,
Housing, Community Services and Indigenous Affairs and Other Legislation
Amendment (Election Commitments and Other Measures) Act 2011.
Clause 2 provides a table that sets out the commencement dates of the
various sections in, and Schedules to, the Act.
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:
. 'Family Assistance Administration Act' means the A New Tax System
(Family Assistance) (Administration) Act 1999.
. 'Social Security Act' means the Social Security Act 1991.
. 'Veterans' Entitlements Act' means the Veterans' Entitlements
Act 1986.
Schedule 1 - Work bonus
Summary
As one of its election commitments, the Government committed to expanding
the existing seniors' work bonus, which was introduced in September 2009 as
part of its Secure and Sustainable Pension Reform package, to increase
incentives for age pension recipients, and veterans' affairs income support
pensioners of qualifying age, who work. This Schedule extends the existing
work bonus to enable older pensioners who take up paid work, including
occasional or variable work, to keep more of their pension when they are
working.
Background
The current work bonus was introduced as part of the Secure and Sustainable
Pension Reform package. It provides an incentive for pensioners of age
pension age, and veterans' affairs income support pensioners of qualifying
age, who wish to continue in employment, including occasional employment.
The new measure will further increase the incentives for older pensioners
to undertake paid work.
Section 1073AA in Division 1AAA of Part 3.10 of the Social Security Act,
and Division 1A of Part IIIB of the Veterans' Entitlements Act, set out the
current work bonus provisions. These provisions allow for a certain amount
of employment income that is earned, derived or received in an instalment
period by a person, who is of age pension age or qualifying age, and is in
receipt of a rate of social security pension determined under Pension Rate
Calculator A or Pension Rate Calculator C or an income support pension
under the Veterans' Entitlements Act, to be disregarded for the purposes of
the ordinary income test.
Currently, for an instalment period of 14 days, if a person earns $500 or
more, the disregarded amount is $250. Where a person earns less than $500
in a 14-day instalment period, the amount of disregarded income is half of
the employment income earned. A proportional rule applies to instalment
periods of less than 14 days.
The new, expanded, seniors' work bonus enables pensioners over age pension
age or qualifying age to keep more of their pension when they are working.
This mechanism supports those pensioners of age pension age or qualifying
age who wish to undertake some paid work to supplement their pension.
The amendments contained in this Schedule have two main components:
i) the first $250 of employment income a fortnight (rather than
50 per cent of the first $500, as it is currently) is excluded from
assessment under the income test for pensioners of age pension age
or qualifying age; and
ii) an employment income concession bank is introduced, to enable
pensioners to accrue any unused amounts of the $250 fortnightly
exemption, to a maximum of $6,500; any credit in this 'bank' could
then offset employment income that would otherwise be assessable in
the future.
The proposed employment income concession bank would operate at an
individual level. For couples, the amount of one partner's assessable
income reduced by the work bonus will be combined with the other partner's
income (if any) for pension assessment purposes in the same way that the
work bonus currently operates, and thereby benefits both partners.
The amendments contained in this Schedule, other than items 3 and 8,
commence on 1 July 2011 and apply in relation to an instalment period that
includes 1 July 2011 and later instalment periods. Items 3 and 8 of this
Schedule commence on the later of 1 July 2011 or immediately after the
commencement of Schedule 6 to the Families, Housing, Community Services and
Indigenous Affairs and Other Legislation Amendment (Budget and Other
Measures) Act 2011.
Explanation of the changes
Amendments to the Social Security Act
Item 1 repeals subsections 1073AA(2) and (3) of the Social Security Act,
which currently provide rules for working out how much employment income
can be disregarded by the ordinary income tests in Pension Rate
Calculators A and C. This item also inserts new subsections 1073AA(2)
to (4C).
New subsection 1073AA(2) applies where a person's employment income for an
instalment period is greater than or equal to the income concession amount,
as defined in new subsection 1073AA(4C). In these circumstances, the
person's employment income for that period is reduced by the income
concession amount for the purposes of the ordinary income test in the
relevant rate calculator.
The following two examples are provided at the end of subsection 1073AA(2):
Example 1: David earns $2,250 of employment income in an instalment
period of 14 days. David's rate of social security pension
for that period is greater than nil.
David's employment income for that period is reduced by $250, leaving
David $2,000 of employment income for that period.
Example 2: Amy earns $1,000 of employment income in an instalment
period of 14 days. Amy's rate of social security pension
for that period is greater than nil.
Amy's employment income for that period is reduced by $250, leaving
Amy $750 of employment income for that period.
New subsection 1073AA(3) applies where a person's unused concession
balance, as defined in new section 1073AB (inserted by item 4), is greater
than or equal to the amount of the person's employment income remaining
after applying subsection (2) (the current amount) for the instalment
period. In these circumstances, the person's employment income for that
period is reduced to nil and, provided that the person's social security
pension is payable to them for that instalment period, the person's unused
concession balance is reduced by an amount equal to the current amount.
The following two examples are provided at the end of subsection 1073AA(3):
Example 1: To continue example 1 in subsection (2), assume David's
unused concession balance is $2,000. The current amount is
$2,000.
David's employment income for that period is further reduced to nil.
David's unused concession balance is now nil.
Example 2: To continue example 2 in subsection (2), assume Amy's
unused concession balance is $1,600. The current amount is
$750.
Amy's employment income for that period is further reduced to nil.
Amy's unused concession balance is now $850.
New subsection 1073AA(4) applies where the person's unused concession
balance is greater than nil but less than the current amount of the
person's employment income after applying subsection (2). In these
circumstances, the person's employment income is further reduced by an
amount equal to the unused concession balance and, provided that the
person's social security pension is payable to them for that instalment
period, the person's unused concession balance is reduced to nil.
The following example is provided at the end of subsection 1073AA(4):
Example: Bill earns $1,250 of employment income in an instalment
period of 14 days. Bill's rate of social security pension
for that period is greater than nil.
Under subsection (2), Bill's employment income for that period is
reduced by $250, leaving Bill $1,000 of employment income
for that period.
Assume Bill's unused concession balance is $800.
Under subsection (4), Bill's employment income for that period is
further reduced by $800 leaving Bill $200 of employment
income for that period.
Bill's unused concession balance is now nil.
New subsection 1073AA(4A) applies where the person's employment income for
a period is less than the income concession amount. In these
circumstances, the person's employment income is reduced to nil and,
provided that the person's social security pension is payable to them for
that instalment period, the person's unused concession balance will be
increased by an amount equal to the difference between the income
concession amount and the amount of the employment income.
The following example is provided at the end of subsection 1073AA(4A):
Example: Emma earns $100 of employment income in an instalment
period of 14 days. Emma's rate of social security pension
for that period is greater than nil.
Emma's employment income for that period is reduced to nil.
Emma's unused concession balance is increased by $150.
New subsection 1073AA(4B) provides that, where a person has zero employment
income for an instalment period and the person's social security pension is
payable to them, the person's employment income bank balance is increased
by the income concession amount.
New subsection 1073AA(4C) defines the income concession amount as $250
where the instalment period is 14 days. Where the instalment period is
less than 14 days, the income concession amount is calculated on a pro-rata
basis using the formula provided.
Item 2 repeals the examples at the end of subsection 1073AA(6).
Item 3 repeals subsection 1073AA(8), which is to be inserted by the
Families, Housing, Community Services and Indigenous Affairs and Other
Legislation Amendment (Budget and Other Measures) Act 2011, and substitutes
new subsection 1073AA(8), which deals with how the rate calculators, in
particular, the modules relating to a couple's ordinary income, interact
with section 1073AA, where one member of the couple is in receipt of a
payment from the Department of Veterans' Affairs.
New subsection 1073AA(8) is inserted to clarify that, where one member of a
couple has the benefit of any income reduction under the Veterans'
Entitlements Act, then that reduction is to be taken into consideration
when determining that person's partner's ordinary income under point 1064-
E2 of the rate calculator at the end of section 1064 of the Social Security
Act (Pension Rate Calculator A) or under point 1066-E2 of the rate
calculator at the end of section 1066 of that Act (Pension Rate Calculator
C).
This item commences either on 1 July 2011 or immediately after Schedule 6
to the Families, Housing, Community Services and Indigenous Affairs and
Other Legislation Amendment (Budget and Other Measures) Act 2011, whichever
occurs later. However, the provision will not commence if Schedule 6 to
the Families, Housing, Community Services and Indigenous Affairs and Other
Legislation Amendment (Budget and Other Measures) Act 2011 does not
commence.
Item 4 inserts new section 1073AB at the end of Division 1AAA of Part 3.10
to define the term 'unused concession balance'.
New subsection 1073AB(1) provides that, on the first day the work bonus
provisions apply to a person, the person is taken to have an unused
concession balance of zero on that day.
Subsection 1073AB(2) provides that the maximum unused concession balance
for a person is $6,500. At the end of this subsection, the following
example is used to illustrate how the balance is capped at $6,500:
Example: John has an unused concession balance of $6,400. John
earns $50 of employment income in an instalment period of 14
days.
Instead of John's unused concession balance increasing to
$6,600 under subsection 1073AA(4A), John's unused concession
balance increases to $6,500.
New subsection 1073AB(3) provides that, if a person stops receiving one of
the social security pensions referred to in paragraph 1073AA(1)(a), the
person's unused concession balance will be retained.
The note at the end of new subsection 1073AB(3) confirms for the reader
that, if the work bonus provisions apply to the person again, the person's
unused concession balance will be that retained balance.
Item 5 is an application provision. The amendments in this Schedule, other
than item 3, apply in relation to an instalment period that includes 1 July
2011 and later instalments periods. The commencement date for item 3 is
set out above.
Amendments to the Veterans' Entitlements Act
Item 6 repeals subsections 46AA(2) to (4) of the Veterans' Entitlements
Act, which currently provide rules for working out how much employment
income can be disregarded by the ordinary/adjusted income test in the
Pension Rate Calculator. It inserts new subsections (2) to (4C).
New subsection 46AA(2) applies where a person's employment income for a
pension period is greater than or equal to the income concession amount, as
defined in subsection 46AA(4C). In those circumstances, the person's
employment income for that period is reduced by the income concession
amount for the purposes of the ordinary/adjusted income test in the Rate
Calculator.
The following two examples are provided at the end of subsection 46AA(2):
Example 1: David earns $2,250 of employment income in a pension
period. David's rate of service pension or income support
supplement for that period is greater than nil.
David's employment income for that period is reduced by
$250, leaving David $2,000 of employment income for that
period.
Example 2: Amy earns $1,000 of employment income in a pension period.
Amy's rate of service pension or income support supplement
for that period is greater than nil.
Amy's employment income for that period is reduced by $250,
leaving Amy $750 of employment income for that period.
New subsection 46AA(3) applies where a person's unused concession balance
as defined in new section 46AC (inserted by item 10 below) is greater than
or equal to the amount of the person's employment income that remains after
applying subsection (2) (the current amount) for the pension period. In
these circumstances, the person's employment income for that period is
reduced to nil and, provided service pension or income support supplement
is payable for the pension period, the person's unused concession balance
is reduced by an amount equal to the current amount.
The following two examples are provided at the end of this subsection:
Example 1: To continue example 1 in subsection (2), assume David's
unused concession balance is $2,000. The current amount is
$2,000.
David's employment income for that period is further
reduced to nil.
David's unused concession balance is now nil.
Example 2: To continue example 2 in subsection (2), assume Amy's
unused concession balance is $1,600. The current amount is
$750.
Amy's employment income for that period is further
reduced to nil.
Amy's unused concession balance is now $850.
New subsection 46AA(4) applies where the person's unused concession balance
is greater than nil but less than the current amount of the person's
employment income after applying subsection (2) in relation to the relevant
pension period. In these circumstances, the person's employment income is
further reduced by an amount equal to that balance and, provided service
pension or income support supplement is payable for the pension period, the
person's unused concession balance is reduced to nil.
The following example is provided at the end of the subsection:
Example: Bill earns $1,250 of employment income in a pension period.
Bill's rate of service pension or income support supplement
for that period is greater than nil.
Under subsection (2), Bill's employment income for that
period is reduced by $250, leaving Bill $1,000 of employment
income for that period.
Assume Bill's unused concession balance is $800.
Under subsection (4), Bill's employment income for that
period is further reduced by $800 leaving Bill $200 of
employment income for that period.
Bill's unused concession balance is now nil.
New subsection 46AA(4A) applies where the person's employment income for a
pension period is less than the income concession amount. In these
circumstances, the person's employment income is reduced to nil and,
provided service pension or income support supplement is payable for the
pension period, the person's unused concession balance will be increased by
an amount equal to the difference between the income concession amount and
the amount of the employment income.
The following example is provided at the end of the subsection:
Example: Emma earns $100 of employment income in a pension period.
Emma's rate of service pension or income support supplement
for that period is greater than nil.
Emma's employment income for that period is reduced to nil.
Emma's unused concession balance is increased by $150.
New subsection 46AA(4B) provides that, where a person has zero employment
income for a pension period and service pension or income support
supplement is payable for the pension period, the person's employment
income bank balance is increased by the income concession amount.
New subsection 46AA(4C) defines the income concession amount for a pension
period as $250.
Item 7 repeals the examples at the end of subsection 46AA(5).
Item 8 repeals subsection 46AA(5A), which is to be inserted by the
Families, Housing, Community Services and Indigenous Affairs and Other
Legislation Amendment (Budget and Other Measures) Act 2011, and substitutes
a new provision which deals with how the Rate Calculator interacts with
section 46AA, where one member of the couple is in receipt of a payment
under the Social Security Act.
New subsection 46AA(5A) is inserted to clarify that, where the employment
income of the partner of a member of a couple is reduced under
section 1073AA of the Social Security Act, the person's partner's
ordinary/adjusted income is reduced by the amount of that reduction for the
purposes of point SCH6-E3 of Schedule 6.
This item commences either on 1 July 2011 or immediately after Schedule 6
to the Families, Housing, Community Services and Indigenous Affairs and
Other Legislation Amendment (Budget and Other Measures) Act 2011, whichever
occurs later. However, the provision will not commence if Schedule 6 to
the Families, Housing, Community Services and Indigenous Affairs and Other
Legislation Amendment (Budget and Other Measures) Act 2011 does not
commence.
Item 9 repeals and substitutes subsection 46AA(6). Subsection 46AA(6) was
applicable in the circumstances where an amount of employment income was
earned by an invalidity service pensioner who, under section 115G, is a
participant in the Veterans' Vocational Rehabilitation Scheme (VVRS).
The new provision provides that section 46AA will be subject to new
section 46AD (inserted by item 10 below), which ensures that income
reductions will not be duplicated under both section 46AA and section 115G.
Item 10 inserts new sections 46AC and 46AD at the end of Division 1A of
Part IIIB to determine the amount of the 'unused concession balance' and
provide that income reductions will not be duplicated under the operation
of both section 46AA and section 115G.
New subsection 46AC(1) provides that, from the first day on which the work
bonus provisions apply to a person on a day that is after the commencement
of the Schedule, then the person is taken to have an unused concession
balance of zero on that day.
Subsection 46AC(2) provides that the maximum unused concession balance for
a person is $6,500. At the end of this subsection, the following example
is used to illustrate how the balance is capped at $6,500:
Example: John has an unused concession balance of $6,400. John earns
$50 of employment income in a pension period.
Instead of John's unused concession balance increasing to
$6,600 under subsection 46AA(4A), John's unused concession
balance increases to $6,500.
New subsection 46AC(3) provides that, if a person stops receiving service
pension or income support supplement, the person's unused concession
balance will be retained indefinitely.
The note at the end of new subsection 46AC(3) confirms for the reader that,
if the work bonus provisions apply to the person again, the person's unused
concession balance will be that retained balance.
New subsection 46AD(1) provides that new section 46AD will be applicable in
the circumstances where it is determined that an invalidity service
pensioner will be eligible for both the ordinary income concession
(referred to as the 'initial amount') available under section 115G (to
participants in the Veterans' Vocational Rehabilitation Scheme) and the
employment income concession (referred to as the 'reduction amount')
available under section 46AA.
New subsection 46AD(2) provides that the employment income concession under
section 46AA will be applicable in the circumstances where the total of the
'reduction amounts' under subsections 46AA(2) to (4A) are greater than the
'initial amounts' determined under subsections 115G(1) and 2).
New subsection 46AD(3) provides that the ordinary income concession under
section 115G will be applicable in the circumstances where the total of the
'reduction amounts' under subsections 46AA(2) to (4A) is less than the
'initial amounts' determined under subsections 115G(1) and 2).
A note to subsection 46AD(3) refers the reader to the effect of
subsections 115G(1) and (2) on excluding income amounts for certain
veterans.
The following example is provided at the end of this subsection:
Example: Jim earns $100 of employment income in a pension period.
Jim's rate of service pension or income support supplement
for that period is greater than nil. Assume Jim also has an
amount of $100 worked out under subsection 115G(1) in
relation to that period.
There is no reduction in Jim's employment income under
section 46AA for that period, but $100 is excluded under
subsection 115G(1).
Under subsection 46AA(4A), Jim's unused concession balance
is increased by $150.
Item 11 repeals and substitutes subsection 115G(4). Repealed
subsection 115G(4) had referred to the interaction of the provisions of
section 115G and section 46AA.
New subsection 115G(4) provides that section 115G is subject to the
provisions of new section 46AD concerning the interaction of sections 46AA
and 115.
Item 12 is an application provision. The amendments made by items 6, 7, 9,
10 and 11 of this Schedule apply in relation to the pension period that
includes 1 July 2011 and later periods.
Schedule 2 - Increasing FTB child rates for certain teenagers in secondary
study
Summary
As part of its election commitments, the Government announced significant
improvements in family assistance for teenagers in school. The maximum
rate of family tax benefit (FTB) Part A paid to families with a child aged
16 to 19 in full-time secondary school or vocational education equivalent
will be aligned with the rate paid to families with a child aged 13 to 15.
This means that, if the child remains in school, the family will not
experience a drop in assistance when their child turns 16. The system of
government assistance for families with children aged under 18 is also
simplified by making FTB Part A the primary payment for children aged under
18 who are in full-time secondary school study or vocational education
equivalent and under the primary care of their family; that is, they are
both financially dependent and reliant on their family for day-to-day
needs. The FTB Part B and multiple birth allowance eligibility rules for
FTB children aged 16 or more will limit eligibility for these payments to
FTB children who are undertaking full-time secondary study, or who are
exempt from this requirement. The entitlement of youth allowance
recipients whose sibling aged 16 to 19 remains in, or transfers to, the FTB
system as a result of these changes will be protected by changes to the
youth allowance parental income test. These measures commence on 1 January
2012.
Background
Currently, most low and middle-income families experience significant
reductions in government assistance when their child turns 16. This is
despite the fact that most 16 to 17 year olds, and a significant number of
18 and 19 year olds, remain in full-time secondary study and are under the
primary care of their parents.
To address this issue, this Schedule makes the following amendments to the
relevant FTB rates and eligibility rules:
. the FTB child rate for a full-time secondary student aged 16 to
19 years (potentially up to the end of the calendar year they turn 19)
will be increased so as to align with the FTB child rate for a child
aged 13 to 15 years;
. the higher base FTB child rate will only be available to an FTB child
aged 18 or more who has completed their secondary schooling or
equivalent, or, for an FTB child still in full-time secondary study,
will not be available until after the end of the calendar year in
which they turn 19;
. an FTB child aged 16 to 18 years would need to be in full-time
secondary study, or be exempt from the FTB activity test, to not be
disregarded in working out an individual's FTB Part B rate while
tertiary students would be disregarded;
. older teenage children aged 16 to 18 years in a multiple birth would
need to be in full-time secondary study, or be exempt from the FTB
activity test, to attract multiple birth allowance for their parent or
carer, while tertiary students would be excluded; and
. the child income test will no longer apply to an FTB child who is aged
16 to 19 years (potentially up to the end of the calendar year they
turn 19) and in full-time secondary study. The child income limit
will apply to an FTB child who is aged 16 to 19 (end of calendar year
they turn 19) if they are exempt from the full-time secondary study
requirement. The child income limit would apply to a 19 year old in
the calendar year they turn 20, even if they were in full-time
secondary study.
Changes to family assistance and youth allowance will simplify government
assistance for families with teenagers and mean that many families no
longer need to make complex decisions about which payment is better suited
to their individual circumstances.
Family assistance will be the primary form of government support for
children until they finish secondary education. This closely aligns with
the Australia's Future Tax System Review recommendation that 'family
payments should be the main form of assistance for families up to the end
of the secondary school or the school year in which they turn 18 (the
earlier of the two)'.
Complementary amendments to youth allowance will ensure this assistance
continues to be available to teenagers aged under 18 who meet independence
criteria, who need to live away from home in order to attend full-time
secondary study, who are not in full-time secondary study, or who meet
other eligibility criteria.
Teenagers aged 18 and 19 in full-time secondary study will continue to have
the option to apply for youth allowance, in recognition that the youth
allowance at home rate increases at age 18 and can be paid directly to the
young person. Youth allowance will provide ongoing support to young people
as they finish secondary study and progress to further education and
training.
Further, amendments to the youth allowance parental income test protect the
entitlement of youth allowance recipients whose sibling aged 16 to 19
remains in, or transfers to, the FTB system as a result of these changes.
This will assist the Government's long-term goal to increase the number of
students from lower socio-economic backgrounds in university study.
These changes build on the Government's earlier reform to youth allowance,
which increased assistance for students aged 16 and over, from low to
middle-income families, and the FTB Part A participation requirement, which
requires young people aged 16 to 20 to have a Year 12 qualification, or be
undertaking full-time secondary study, to be eligible for FTB Part A.
Explanation of the changes
Part 1 - Amendments to the A New Tax System (Family Assistance) Act 1999
Meaning of senior secondary school child
Item 1 inserts a new definition of senior secondary school child into
subsection 3(1) of the A New Tax System (Family Assistance) Act 1999
(Family Assistance Act). 'Senior secondary school child' has the meaning
given by new section 22B.
Item 3 inserts new section 22B into the Family Assistance Act. New
section 22B outlines when an individual is a senior secondary school child
in the various contexts in which the term will appear.
Subsection 22B(1) provides when an individual is a senior secondary school
child. The requirements that must be satisfied differ depending upon the
purpose for which the term is used. For the purposes of subclause 29(3)
or 36(2) of Schedule 1 to the Family Assistance Act (relating to
identifying a relevant FTB child for FTB Part B rate and multiple birth
allowance respectively), the individual must be aged 16 or 17, or be aged
18 and the calendar year in which the individual turned 18 must not have
ended. Substantive amendments are made at items 8 and 9 below to insert
references to a senior secondary school child for these purposes.
For the purposes of any other provision of the Family Assistance Act, the
individual is a senior secondary school child if the individual is aged 16,
17 or 18, or is aged 19 and the calendar year in which the individual
turned 19 has not ended.
Additionally, one of the following must apply before the individual will be
a senior secondary school child:
. the individual is undertaking full-time study in an approved course of
education or study that would, in the Secretary's opinion, assist or
allow the individual to complete the final year of secondary school or
an equivalent level of education; or
. except for the purposes of subsection 22A(1) or 35(1) of the Family
Assistance Act or paragraph 32L(1)(aa) of the Family Assistance
Administration Act (which relate to the income of the individual), the
individual is exempt from the FTB activity test.
These provisions are excluded so that the income of an individual aged
16 to 19 will only be disregarded where the individual is undertaking full-
time study, either domestically or overseas. If the child is exempt from
the FTB activity test, then the child income test would continue to apply.
The description in the first dot point above is consistent with the wording
used in the FTB activity test (paragraph 17B(1)(b)).
The concept of 'undertaking full-time study' is defined in subsection 3(1)
of the Family Assistance Act by reference to its meaning in the Social
Security Act. The definition in subsection 23(1) of the Social Security
Act then references section 541B of that Act, which uses the concept of a
'normal amount of full-time study' in defining full-time study.
Subsection 17(3) of the Family Assistance Act expands the definition by
enabling the Secretary to determine a different normal amount of full-time
study for a particular FTB child. In practice, this discretion is applied
where, for example, an FTB child's circumstances are such that a reduced
study load is appropriate and, therefore, enough for the child to satisfy
the FTB activity test.
Subsection 22B(2) provides that subsection 17B(3) applies in relation to
subsection 22B(1) in the same way as it applies in relation to
subsection 17B(1). The reference to undertaking full-time study in the
first dot point above would also include circumstances where the Secretary
has determined a child's normal amount of full-time study under
subsection 17(3) and the child is undertaking the required amount of study.
Subsection 22B(3) extends the period for which the individual is a senior
secondary school child, despite the individual completing the final year of
secondary school or an equivalent level of education. If the individual
completes the final year in December of a calendar year, the period is
extended to the end of 31 December of that year. Alternatively, if the
individual completes the final year of secondary school before December,
the period is extended to the end of the period of 28 days beginning on the
day after that day.
Subsection 22B(4) sets out how to work out the day when an individual
completes the final year of secondary school or equivalent level of
education. The day differs depending upon whether the individual was
required to sit an examination in relation to that final year of secondary
study (or equivalent level of education). If an examination was required,
the day the individual completes the final year is the later of the last
day of the examination period, or the last day of classes, as determined by
the secondary school or provider of that education. If no examination was
required, the day the individual completes the final year is the last day
of classes for that year, as determined by the secondary school or provider
of that education.
Subsection 22B(5) is an avoidance of doubt provision. It makes it clear
that, if an individual ceases to be a senior secondary school child,
nothing in the section prevents the individual again becoming a senior
secondary school child.
Item 4 inserts a further subparagraph into new paragraph 22B(1)(b),
providing an additional criterion which may result in an individual being a
senior secondary school child through overseas study. The amendment
provides that, if the individual is studying overseas full-time in a way
that would, in the Secretary's opinion, assist or allow the individual to
complete the final year of secondary school or an equivalent level of
education, then paragraph 22B(1)(b) is satisfied.
The description in item 4 picks up the wording of proposed new
paragraph 17B(1)(c), which is to be inserted into the Family Assistance Act
by Schedule 5 to the Families, Housing, Community Services and Indigenous
Affairs and Other Legislation Amendment (Budget and Other Measures)
Act 2011. The relevant changes are to commence on Royal Assent. Item 4
will commence on 1 January 2012 or at the start of the day on which
Schedule 5 to the 2011 Act commences, whichever is later. However, item 4
will not commence at all if Schedule 5 to the 2011 Act is not enacted.
Child income test
Section 22A of the Family Assistance Act sets out the circumstances in
which an individual cannot be an FTB child. One of these circumstances is
where the individual is aged 16 or more and has adjusted taxable income in
a particular income year that equals or exceeds the cut-out amount (item
2(a) of the table at the end of subsection 22A(1) refers). This is the FTB
child income test. The cut-out amount is specified in subsection 22A(2).
Item 2 amends section 22A to provide that the FTB child income test will no
longer apply to an individual while that individual is a senior secondary
school child under new section 22B. However, if the child is exempt from
the FTB activity test, then the child income test would continue to apply.
There will be situations where the child income test applies to an
individual for part of an income year only. If the individual's adjusted
taxable income for the relevant income year equals or exceeds the cut-off
amount, then the individual would not be an FTB child for that part of the
income year when the child income test applied to the individual.
Conversely, the individual's adjusted taxable income would not affect their
FTB child status for that part of the income year when the child income
test did not apply to the individual.
The relevant reconciliation time under the Family Assistance Administration
Act in relation to an individual who has provided an estimate of income for
an individual who would be an FTB child aged 16 or more is consequentially
amended at item 13 below.
A child who is in the care of an approved care organisation can also
attract FTB for the organisation. Section 20 of the Family Assistance Act
provides a definition of an approved care organisation. The circumstances
in which an approved care organisation is, and is not, eligible for FTB are
set out in sections 34 and 35 of the Family Assistance Act.
Section 35 has the same child income test for an individual in the care of
an approved care organisation as section 22A has for an FTB child. Item 5
amends section 35, to provide an exception to the general requirement that,
for an individual to be an individual in respect of whom an approved care
organisation may be eligible, the individual must have an adjusted taxable
income of less than the cut-out amount. This requirement will only apply
if the individual is not a senior secondary school child (defined at new
section 22B). However, if the child is exempt from the FTB activity test,
then the child income test would continue to apply.
FTB child rate for 16 to 19 year olds in full-time secondary study or
equivalent
The FTB Rate calculator in Schedule 1 to the Family Assistance Act sets out
the process for calculating an individual's rate of FTB. FTB comprises a
Part A rate (which includes an amount for each FTB child of the individual)
and a Part B rate (calculated by reference to the individual's youngest FTB
child). There are a number of different methods of calculating an
individual's Part A rate, depending on the individual's circumstances and
adjusted taxable income. These different methods are set out in subclause
1(2) of Schedule 1.
Method 1 applies where the individual's adjusted taxable income does not
exceed the higher income free area (currently $94,316 a year, plus $3,796
for each FTB child after the first) or where the individual or their
partner is receiving prescribed social security or veterans' payments.
Clause 7 of Schedule 1 provides a table of FTB child rates for the
different age groups (under 13, 13 to under 16, 16 to under 18, and 18 to
under 25). The relevant FTB child rate under clause 7 for each FTB child
of the individual is included in calculating an individual's Part A rate
under method 1.
Item 6 repeals the table in clause 7 and substitutes a new table. In
short, the new table ensures that an FTB child who has reached 16 years of
age and is a senior secondary school child attracts the same higher FTB
child rate applicable for an FTB child aged 13 to 15.
Items 1 and 2 of the new table are unchanged from the old table (although
the actual FTB child rates have been updated). Item 3 sets the FTB child
rate for a child who has reached 16 years and who is a senior secondary
school child (as defined in new section 22B). The FTB child rate for this
group is the same higher FTB child rate applicable for an FTB child who is
aged 13 to 15. Items 4 and 5 of the new table are similar to old items 3
and 4 except that these items do not apply to a senior secondary school
child (who is covered by new item 3).
Method 2 applies where the individual's adjusted taxable income exceeds the
higher income free area and where neither the individual nor their partner
is receiving prescribed social security or veterans' payments.
Clause 26 of Schedule 1 provides an FTB child rate for a child aged under
18 and another for a child who has turned 18. The relevant FTB child rate
under clause 26 for each FTB child of the individual is included in
calculating an individual's Part A rate under method 2, generally known as
the base child rate.
Item 7 repeals subclause 26(2) and substitutes rates for either an FTB
child who has not turned 18, or who has turned 18 and who is a senior
secondary school child (paragraph 26(2)(a)), or for an FTB child who has
turned 18 and who is not a senior secondary school child (paragraph
26(2)(b)). This results in the standard FTB child rate of a child who has
turned 18 but is a senior secondary school child becoming the same lower
standard FTB child rate for a child who has not yet turned 18 for the
purposes of method 2. This is consistent with the current treatment of an
FTB child under age 18. The actual rates are essentially unchanged, having
been updated only by indexation.
Method 3 applies where the individual has no FTB children and does not
incorporate an FTB child rate.
FTB Part B for students aged 16 to end of calendar year turned 18
Clause 29 of Schedule 1 to the Family Assistance Act provides some general
rules for calculating an individual's Part B rate. According to subclause
29(3), an FTB child who has turned 16 is to be disregarded in the rate
calculation process for Part B unless the child is undertaking full-time
study and the calendar year in which the child turned 18 has not ended.
The standard rate of Part B is worked out under the table in clause 30 of
Schedule 1. The rate is different, depending upon whether the individual's
youngest FTB child is under 5 years of age (covered by table item 1), or 5
years of age or older (covered by table item 2).
Item 8 amends subclause 29(3) to provide that an FTB child who has turned
16 years of age is to be disregarded unless the FTB child is a senior
secondary school child. As a result of new subparagraph 22B(1)(a)(i), the
individual may be aged 16 or 17, or aged 18 and the calendar year in which
the individual turned 18 has not ended. The provision then clarifies that,
if disregarding the FTB child means that neither item 1 nor item 2 of the
table in clause 30 applies to the individual, the individual's Part B rate
is nil.
The effect of this measure is that FTB Part B would no longer be available
for tertiary students who have turned 16.
Multiple birth allowance for students aged 16 to end of calendar year
turned 18
An individual's maximum rate under methods 1 and 2 include the relevant FTB
child rate, large family supplement (if applicable), multiple birth
allowance (if applicable), FTB Part A supplement (which is not included in
the rate calculation process until reconciliation by virtue of section 32A
of the Family Assistance Administration Act) and rent assistance (only
under method 1).
Clause 36 of Schedule 1 sets out the eligibility conditions for multiple
birth allowance. An amount of multiple birth allowance is to be added in
working out an individual's maximum rate if the individual has three or
more children and at least three of those children were born in the same
multiple birth and are either under 16, or over 16 and undertaking full-
time study and the calendar year has not ended in which the first born of
the children in the multiple birth who are undertaking full-time study
turns 18.
Item 9 modifies these multiple birth allowance eligibility requirements
insofar as they relate to a child who has turned 16 by substituting the
requirement that the child who has turned 16 be a senior secondary school
child as defined in new section 22B. As a result of subparagraph
22B(1)(a)(i), the individual may be aged 16 or 17, or aged 18 and the
calendar year in which the individual turned 18 has not ended.
The effect of this measure is that multiple birth allowance would no longer
be available for tertiary students who have turned 16 and who are in a
multiple birth.
Rent assistance
Rent assistance is a component of an individual's FTB Part A rate where the
method 1 or method 3 calculation process applies.
Method 1 applies where an individual's adjusted taxable income does not
exceed the higher income free area or where the individual or their partner
is receiving a prescribed social security or veterans' payment (clause 1 of
Schedule 1 to the Family Assistance Act refers). Clause 3 of Schedule 1
then sets out the overall rate calculation process for Part A where method
1 applies. Rent assistance is a possible component of an individual's
maximum rate (step 1 of the method statement in clause 3 refers).
Method 3 applies where the individual has no FTB children (but has one or
more regular care children). In these circumstances, an individual's Part
A rate is essentially an income-tested rent assistance payment.
The rules for payment of rent assistance are set out in clauses 38B to 38K
of Schedule 1 to the Family Assistance Act. Clause 38C outlines the
eligibility conditions for rent assistance. One of these conditions is
that the individual has at least one rent assistance child. The concept of
a rent assistance child is then defined in clause 38B.
An FTB child is a rent assistance child if the FTB child rate in clause 7
(amended as the result of the amendments above at item 6) for the child
exceeds the base FTB child rate, putting aside any care percentage in
relation to the child. The base FTB child rate is defined in clause 8, by
reference to the FTB child rate in clause 26 (amended as the result of the
amendments above to clause 26).
This will have a flow-on effect for the concept of rent assistance child
and will mean that the FTB child rate for a 16 to 19 (end of calendar year
they turn 19) year old in full-time secondary study (which will be
equivalent to the higher 13 to 15 year FTB child rate) will exceed the base
FTB child rate for the child and the child will therefore also be a rent
assistance child.
A regular care child (defined in subsection 3(1) of the Family Assistance
Act as a child who would be an FTB child of the individual except that the
individual has 14 per cent or more and less than 35 per cent care) is a
rent assistance child if the child is under 16 and is not an absent
overseas regular care child (as defined in section 63AA of the Family
Assistance Act).
Item 10 amends paragraph 38B(3)(a) of Schedule 1 to the Family Assistance
Act so that the concept of rent assistance child also includes a regular
care child who is a senior secondary school child as set out in new section
22B.
However, a regular care child aged 16 to 19 who is a senior secondary
school child would not be a rent assistance child if the child is an absent
overseas regular care child (in the same way as a regular care child under
16 who is an absent overseas regular care child is not a rent assistance
child under the current rules).
Indexation
The new FTB child rates would be subject to indexation on 1 July of each
year in accordance with movements in the Consumer Price Index, on the same
basis as the indexation arrangements for other FTB child rates. Indexation
is provided for in Schedule 4 to the Family Assistance Act. This would
ensure continued parity between the new FTB child rates and the relevant
existing FTB child rates.
Item 11 repeals items 1, 2 and 3 of the table at clause 2 of Schedule 4 and
substitutes an item which covers all items in the table at clause 7 as
amounts which are to be indexed. The items are given the abbreviation FTB
child rate (A1).
Item 12 then repeals items 1, 2 and 3 of the table at subclause 3(1) and
inserts indexation of the FTB child rate (A1) as described above, having
regard to the same reference and base quarter as currently occurs.
Amendments to the Family Assistance Administration Act
Where an individual has a rate of FTB calculated by reference to an
estimate of their adjusted taxable income, their entitlement may be
reconciled at a time set out in Subdivision D of Division 1, Part 3 of the
Family Assistance Administration Act. The relevant reconciliation time for
an individual who has provided an estimate of another individual's adjusted
taxable income, where the other individual has turned 16 and would be an
FTB child of the first individual if their adjusted taxable income were
less than the cut-out amount in subsection 22A(2) of the Family Assistance
Act, is the earlier of the following times after the end of the relevant
income year:
. when the first individual notifies the amount of the other
individual's adjusted taxable income; or
. when the Secretary becomes satisfied that the amount of the other
individual's adjusted taxable income can be worked out without
receiving a notification from the first individual.
The amendment made by item 13 provides that section 32L only applies if the
other individual is not a senior secondary school child. If the individual
is a senior secondary school child, then the child income test does not
apply (see amendments to section 22A of the Family Assistance Act at item 2
above). For the purpose of the child income test, an individual exempted
from the FTB activity test is not a senior secondary school child (as the
result of new subparagraph 22B(1)(b)(iii)).
Amendments to the Social Security Act
Item 14 is a technical amendment, consequential to item 15.
Item 15 inserts new subsections 543A(2AA) and (2AB).
The measure contained in this item will preclude full-time secondary school
or vocational education and training (VET equivalent) students, aged 16 to
17, from receiving youth allowance unless they are independent, are
required to live away from home or were receiving youth allowance
immediately before starting that course. The amendments in this item
preclude these students from receiving youth allowance by amending the
provisions relating to the minimum age requirement for youth allowance.
Section 543A prescribes the minimum age requirement for youth allowance.
Paragraph 543A(2)(b) provides that, subject to subsections 543A(2A)
and (2B), a person is taken to have attained the minimum age for youth
allowance where they are undertaking full-time study and are either at
least 16 years old, or are 15 years old and independent.
New subsection 543A(2AA) provides that paragraph 543A(2)(b) does not apply
to a person who is aged 16 or 17 and who is undertaking full-time study in
respect of a secondary course* at a secondary school* or a VET institution*
(*within the meaning of the Student Assistance Act 1973) unless:
. the person is independent;
. the person is taken by section 1067D to be required to live away from
home; or
. the person was receiving youth allowance immediately before starting
that course.
New subsection 543A(2AB) provides that, for the purposes of
subsection (2AA), a secondary course is a course that is determined, under
section 5D of the Student Assistance Act 1973, to be a secondary course for
the purposes of that Act.
Item 16 inserts new points 1067G-F31 and 1067G-F32 into Submodule 6 of
Module F of the Youth Allowance Rate Calculator.
A youth allowance recipient who is not independent may have their rate of
youth allowance decreased under the parental income test (PIT) contained in
Module F of section 1067G. Broadly, the PIT works by reducing a youth
allowance recipient's rate of payment by 20 per cent of the recipient's
parental income above a certain threshold amount for the appropriate tax
year.
The 20 per cent reduction is spread across people who share the same
combined parental income (the family pool) and who receive youth allowance
or other income support payments under the ABSTUDY Living Allowance or
Group 2 School Fees Allowance (means-tested component) and Assistance for
Isolated Children (AIC) (Additional Boarding Allowance students) schemes.
That is, if more than one person in a family pool receives youth allowance,
or the abovementioned ABSTUDY or AIC payments, the 20 per cent reduction is
split amongst those people in the family pool in proportion to their
respective maximum basic rates of income support.
Where a person in the family pool becomes excluded from receiving youth
allowance, the 20 per cent reduction will be spread amongst the remaining
members of the family pool. This may occur where a person is precluded
from receiving youth allowance as a result of the amendments at item 15
which preclude full-time secondary students aged 16 to 17 from receiving
youth allowance in certain circumstances.
The amendments in this item will address this issue, allowing people who
meet the new definition of a senior secondary school child and are
precluded from receiving youth allowance as a result of the amendments in
item 15 to be included in the family pool.
New section 1067G-F31 provides that submodule 6 of Module F applies in
relation to an FTB child aged 16 or more who is a senior secondary school
child as if the PIT under Module F applied to the person, and prescribes
the maximum payment rates to be used for the purposes of submodule 6.
New section 1067G-F32 provides that, for the purposes of submodule 6,
senior secondary school child has the same meaning as given by section 22B
of the Family Assistance Act (disregarding subparagraph 22B(1)(a)(i) of
that Act).
Part 2 - Application and transitional provisions
Item 17 provides application and transitional provisions for the Schedule.
Subitem 17(1) provides that the amendment made by item 2 (relating to the
child income test) applies in relation to working out if an individual is
an FTB child for days on or after 1 January 2012.
Subitem 17(2) provides that the amendment made by item 5 (relating to the
child income test for an approved care organisation) applies in relation to
working out whether an approved care organisation is eligible for FTB for
days on or after 1 January 2012.
Subitem 17(3) provides that the amendments made by items 6 to 10 (relating
to the FTB child rate for 16 to 19 year olds in full-time secondary study
or equivalent, and consequential changes to calculations for FTB Part B,
multiple birth allowance and rent assistance) apply in relation to working
out the rate of FTB for days on or after 1 January 2012.
Subitem 17(4) provides a transitional approach to the application of the
new child standard rate (base child rate) for method 2 resulting from the
amendments to paragraphs 26(2)(a) and (b) by item 7. If, on or after
1 January 2012, it is necessary to work out an individual's standard rate
under Division 2 of Part 3 of Schedule 1 to the Family Assistance Act in
relation to an FTB child who turned 18 before 1 January 2012 and who is a
senior secondary school child, then the higher base child rate in
paragraph 26(2)(b) continues to apply to the FTB child, in substitution for
the lower base child rate in paragraph 26(2)(a).
Subitem 17(5) provides that the amendment made by item 13 (relating to the
relevant reconciliation time if the child income test applies for a child
who has turned 16) applies in relation to same-rate benefit periods
beginning on or after 1 January 2012.
Subitem 17(6) contains a transitional provision which will 'grandfather'
existing youth allowance recipients and those people who would have been
receiving youth allowance except for the application of a compliance
penalty period. This provision ensures that youth allowance recipients
have the choice, at the time of implementation, to continue to receive
student income support or to transfer to FTB.
The subitem provides that the amendments made by items 14 and 15 do not
apply in relation to:
. a person who was receiving youth allowance immediately before the
commencement of those items; or
. a person who would have been receiving youth allowance immediately
before the commencement of those items except for the application of a
compliance penalty period.
Schedule 3 - Baby bonus
Summary
This Schedule provides for eligible baby bonus claimants to have a larger
portion of their baby bonus paid to them upfront, from 1 July 2011, to
assist them in meeting the initial costs of welcoming a child into the
family. This is one of the measures in the Government's Better Access to
Family Payments election commitment.
Background
This measure is intended to assist with the upfront costs associated with a
birth or adoption, such as buying a pram, baby clothes or setting up a
bedroom.
Baby bonus is paid in 13 fortnightly instalments (or, in limited
circumstances, 26 weekly payments). As a result of the changes made by
this measure, from 1 July 2011, claimants will receive more ($500 more in
2011-12) in the first fortnightly instalment than in the 12 subsequent
fortnightly instalments. The 12 subsequent payments will help parents meet
ongoing costs during the baby's first six months.
The total amount of baby bonus will not change under this measure
(currently $5,294), and the amount of baby bonus will continue to be
indexed on 1 July each year in accordance with existing arrangements.
The amendments made by this Schedule commence on 1 July 2011.
Explanation of the changes
Item 1 repeals subsections 47(1) and (2) of the Family Assistance
Administration Act and substitutes new subsections 47(1), (2) and (2A).
New subsection 47(1) sets out how baby bonus will be paid to claimants who
are entitled to receive baby bonus as 13 fortnightly instalment payments.
New paragraph 47(1)(a) provides that the Secretary must pay the claimant
the upfront part of the amount of baby bonus that the claimant is entitled
to at the end of the claimant's first instalment period. The upfront part
is the amount set out in new subsection 47(2A).
New paragraph 47(1)(b) provides that, following the payment of the upfront
part amount, the remainder of the baby bonus entitlement is paid over
12 fortnightly instalment periods. The amount for each of the remaining
fortnightly periods is worked out by subtracting the upfront part from the
total baby bonus entitlement and dividing the remaining amount by 12.
The note following new subsection 47(1) notes that section 47AB provides
for rounding of the amounts of baby bonus payments.
New subsection 47(2) sets out how baby bonus will be paid to claimants who
are entitled to be paid baby bonus as 26 weekly instalment payments. For
claimants who are entitled to receive weekly payments, the payment for the
first two weekly instalment periods is half of the upfront part of the
amount of baby bonus the claimant is entitled to.
Paragraph 47(2)(d) provides that, for the remaining 24-week period the
amount for each of the weekly periods is worked out by subtracting the
upfront part from the total baby bonus entitlement and dividing the
remaining amount by 24.
The note following new subsection 47(2) notes that section 47AB provides
for rounding of the amounts of baby bonus payments.
New subsection 47(2A) sets out the amount that is the upfront part. For
the 2011-2012 financial year the upfront part is $879.77. For the 2012-13
financial year and later financial years, the upfront part will be 16.18
per cent of the total amount of baby bonus that the claimant is entitled
to.
Item 2 is an application provision providing that item 1 only applies to
individuals who become eligible for baby bonus on or after 1 July 2011.
Schedule 4 - Thalidomide payments
Summary
This Schedule ensures that payments made from the Thalidomide Australia
Fixed Trust to beneficiaries of the Trust, or in respect of a beneficiary
of the Trust, are exempt from income tax and from social security and
veterans' affairs income tests. This Schedule also ensures that
Commonwealth ex gratia payments, made to beneficiaries of the Trust in
respect of social security and veterans' affairs payments, forgone due to
the income test exemption currently not being in effect, are also exempt
from income tax.
Background
The morning sickness drug, thalidomide, which has been associated with a
range of birth defects, was distributed by the Distillers Company (Bio-
chemicals) Australia Pty Ltd to Australians from 1958 to 1962.
The majority of thalidomide survivors received common law settlements
around 1974. However, as a result of negotiations initiated in
September 2008 with Diageo plc (the British company which acquired the
companies that initially distributed the drug), Diageo plc has agreed to
make payments of varying amounts to the 36 Australian thalidomide survivors
by way of an annuity.
Under the social security law and the Veterans' Entitlements Act, a
person's rate of income support payment is subject to an income and assets
test. Currently, payments such as these annuity payments are assessable as
income for social security and veterans' affairs purposes, which has
resulted in any thalidomide survivors who receive income support payments
either having their rate reduced or their payment suspended or cancelled.
Payments such as the annuity payments are also assessable for income tax
purposes.
Subsection 8(8) of the Social Security Act and subsection 5H(8) of the
Veterans' Entitlements Act specify certain amounts that are not income for
the purposes of the social security law and the Veterans' Entitlements Act.
This Schedule amends both subsection 8(8) and subsection 5H(8) and provides
for these annuity payments to be excluded from the income test under the
social security law and the Veterans' Entitlements Act. The Schedule also
amends section 51-30 of the Income Tax Assessment Act 1997 (the Income Tax
Assessment Act) to ensure the annuity payments are included in a list of
income that is exempt from income tax.
As a result of being paid these thalidomide payments, survivors who were in
receipt of a social security payment or income support under the Veterans'
Entitlements Act may have had their social security or veterans' affairs
payment suspended due to the effect of the social security or veterans'
affairs income test.
Because legislative amendments to exempt the payments from the income tests
could not be enacted immediately, Commonwealth ex gratia payments were made
to survivors whose income support had been affected. These payments are
assessable income in the hands of survivors due to the operation of the
income tax law. This Schedule amends section 51-30 of the Income Tax
Assessment Act to include the ex gratia payments made to survivors in the
list of exempt income.
Under the pension reform measures that occurred in 2009, a person who was
receiving certain social security or veterans' affairs payments on
19 September 2009 can continue to have their payment calculated under
transitional rules if those rules provide a higher payment rate than new
rules introduced under the pension reforms, provided the person remains
continuously on the payment. As a result, a number of social security and
veterans' affairs recipients continue to have their payment calculated
under the transitional rules as this gives them a higher rate of payment
than under the new rules.
However, where the person's social security or veterans' affairs payment is
no longer payable - for example, when their assessable income exceeds the
disqualifying limit - access to the transitional rules is lost and cannot
be regained. As a consequence, if the person's social security or
veterans' affairs payment subsequently becomes payable again, the person's
rate would be calculated according to the new rules which could be at a
lower rate. Most of the thalidomide survivors who were receiving a social
security or veterans' affairs payment are no longer receiving their
payment. As a result, those who were paid under the transitional rules
have lost access to those rules.
This Schedule provides for thalidomide survivors to regain access to the
transitional rules as soon as their social security or veterans' affairs
payment becomes payable on commencement of the amendments to subsection
8(8) of the Social Security Act or subsection 5H(8) of the Veterans'
Entitlements Act.
The amendments made by this Schedule commence the day this Act receives
Royal Assent.
Explanation of the changes
Part 1 - Main amendments
Amendments to the Income Tax Assessment Act
Item 1 includes payments from the Thalidomide Australia Fixed Trust and the
Commonwealth ex gratia thalidomide payments in the list of exempt income in
section 11-15.
Item 2 amends section 51-30, which lists tax-exempt 'Welfare' payments, to
include payments from the Thalidomide Australia Fixed Trust and the
Commonwealth ex gratia thalidomide payments.
The exemption will apply provided the payments are made to a beneficiary of
the Trust or to another individual in respect of a beneficiary of the
Trust. Payments applied for the benefit of a beneficiary of the Trust to
cover specific expenses will also be tax exempt to the beneficiary of the
Trust. However, the amendment does not exempt these payments in the hands
of any third party recipient.
Item 3 is an application provision and provides that the amendments made to
exempt the Commonwealth ex gratia thalidomide payments will apply for the
2010-11 and 2011-12 income years only. As the payments will only be made
until such time as payments from the Thalidomide Australia Fixed Trust are
made exempt from social security income tests, it is not necessary for this
exemption to be ongoing.
Item 3 also provides that the amendments made to exempt payments from the
Thalidomide Australia Fixed Trust from income tax commence in the 2010-11
income year and apply thereafter.
Amendments to the Social Security Act
Item 4 inserts new paragraph 8(8)(vc) into subsection 8(8).
New paragraph 8(8)(vc) provides that a payment by the Thalidomide Australia
Fixed Trust that is made to, or applied for the benefit of, a beneficiary
of the Trust or is made to a person in respect of a beneficiary of the
Trust is not income for the purposes of the Social Security Act.
Item 5 repeals paragraph 146(1)(b) of Schedule 1A to the Social Security
Act and substitutes a new paragraph 146(1)(b). New paragraph 146(1)(b)
provides that the transitional rules under clause 146 continue to apply to
a person as long as they continuously receive one of the pensions listed in
paragraph 146(1)(a) (even if the person transfers between a number of those
pensions or otherwise stops receiving one and starts receiving another
without a gap of a day or more between the receipt of either pension) or
subclause 146(1A) applies.
Item 6 inserts new subclause 146(1A) into clause 146 of Schedule 1A of the
Social Security Act. New subclause 146(1A) applies to a person if:
a) a payment by the Thalidomide Australia Fixed Trust:
. is made to, or applied for the benefit of, the person or the
person's partner as a beneficiary of the Trust; or
. is made to the person or the person's partner in respect of a
beneficiary of the Trust; and
b) subparagraph 146(1)(b)(i) applies to the person immediately before
the payment is made; and
c) at the commencement of item 4 of Schedule 4 to this Act, the person
receives a social security payment mentioned in
paragraph 146(1)(a); and
d) after the commencement of item 4, the person continues, without a
break, to receive that social security payment or any of the other
payments listed in paragraph 146(1)(a).
The purpose of this subclause is to ensure that any thalidomide survivors,
who have received an annuity payment which has resulted in their social
security payment being cancelled or suspended, will regain access to the
transitional rules, provided they receive one of the listed payments and
the other requirements of clause 146 apply.
Amendments to the Veterans' Entitlements Act
Item 7 inserts new paragraph 5H(8)(xb) into subsection 5H(8).
New paragraph 5H(8)(xb) provides that a payment by the Thalidomide
Australia Fixed Trust that is made to, or applied for the benefit of, a
beneficiary of the Trust or is made to a person in respect of a beneficiary
of the Trust is not income for the purposes of the Veterans' Entitlements
Act.
Item 8 repeals paragraph 30(1)(b) of Schedule 5 to the Veterans'
Entitlements Act and substitutes a new paragraph 30(1)(b). New paragraph
30(1)(b) provides that the transitional rules under clause 30 continue to
apply to a person as long as they continuously receive one of the pensions
listed in paragraph 30(1)(a) (even if the person transfers between a number
of those pensions or otherwise stops receiving one and starts receiving
another without a gap of a day or more between the receipt of either
pension) or subclause 30(1A) applies.
Item 9 inserts new subclause 30(1A) into clause 30 of Schedule 5 to the
Veterans' Entitlements Act. New subclause 30(1A) applies to a person if:
a) a payment by the Thalidomide Australia Fixed Trust:
. is made to, or applied for the benefit of, the person or the
person's partner as a beneficiary of the Trust; or
. is made to the person or the person's partner in respect of a
beneficiary of the Trust; and
b) subparagraph 30(1)(b)(i) applies to the person immediately before
the payment is made; and
c) at the commencement of item 7 of Schedule 4 to this Act, the person
receives a payment mentioned in paragraph 30(1)(a); and
d) after the commencement of item 7, the person continues, without a
break, to receive that payment or any of the other payments listed
in paragraph 30(1)(a).
The purpose of this subclause is to ensure that any thalidomide survivors,
who have received an annuity payment which has resulted in their social
security or Veterans' Entitlements Act payment being cancelled or
suspended, will regain access to the transitional rules, provided they
receive one of the listed payments and the other requirements of clause 30
apply.
Part 2 - Amendments commencing on 1 July 2014
Amendments to the Income Tax Assessment Act
Item 10 repeals, with effect from 1 July 2014, the Commonwealth ex gratia
thalidomide payment from the list of exempt income in section 11-15. It is
not anticipated that ex gratia payments will be made from 1 July 2014, as
they will only be made while the payments from the Trust are assessed as
income for social security means test purposes.
Item 11 repeals, with effect from 1 July 2014, the exemption for the
Commonwealth ex gratia thalidomide payments in section 51-30. The
ex gratia payments are not anticipated to be made from 1 July 2014.
Schedule 5 - Income management
Summary
This Schedule makes some minor improvements to the income management
provisions, including the matched savings scheme payment, debt recovery and
nominee arrangements.
Background
Matched savings scheme payment
The matched savings scheme payment is designed to assist those on
compulsory income management to improve their financial literacy and to
encourage saving. The payment is payable to people who are subject to
compulsory income management, who undertake an approved financial
management or money management course and accumulate savings.
To qualify for the matched savings payment, a person must be subject to
income management, in the qualifying savings period, under the child
protection, vulnerable welfare payment recipients, school enrolment, school
attendance, disengaged youth or long-term welfare payment recipient
measures under Subdivision A of Division 2 of Part 3B of the Social
Security (Administration) Act 1999 (Social Security Administration Act).
The person must also maintain a pattern of regular savings throughout the
qualifying savings period of at least 13 consecutive weeks. Currently, the
qualifying savings period begins at any time after the person has commenced
an approved course.
This Schedule makes changes to subparagraph 1061WG(1)(b)(i) of the Social
Security Act to clarify that a person's qualifying savings period starts
from the date of registration for, not commencement of, a course.
This change seeks to clarify the starting date for the commencement of the
qualifying savings period for the matched savings scheme payment.
Nominees
This Schedule also makes changes to the income management measure with
respect to nominees, including the concept of who is a nominee, the
requirement for consent in certain circumstances, the giving of stored
value cards to the principal or nominee, and the nominee's status if the
nominee becomes subject to the income management measure under the child
protection measure.
Currently, Part 3B of the Social Security Administration Act provides for
two types of nominee, a 'designated nominee' and a 'payment nominee'. This
has resulted in some inconsistency in the treatment of nominees in relation
to 16 to 17 year old dependent youth allowance recipients. This Schedule
simplifies the concept of nominee and resolves the inconsistency in the
treatment of welfare recipients by combining designated and payment
nominees into one entity.
Under subsection 123E(1A) of the Social Security Administration Act, if a
payment nominee becomes subject to income management under the child
protection measure, the Secretary must cancel the appointment of the
nominee. This requirement could have some unintended consequences for
youth allowance recipients, as cancellation of the youth allowance
recipient's parent's nominee status would result in the youth allowance
recipient's payment no longer being subject to income management. This was
not the intention of the income management measure. This Schedule
addresses this problem, although the Secretary will continue to have a
general revocation power under subsection 33(3) of the Acts Interpretation
Act 1901.
Currently, a person who is a payment nominee must obtain the principal's
permission to enter into a written agreement with the Secretary to be
subject voluntarily to income management. This may result in parents
having to obtain that permission from their child. While this may have
been appropriate when voluntary income management was originally introduced
as an alternative to the child protection measure, with the expansion of
voluntary income management, and those people on voluntary income
management no longer being considered inappropriate to act as nominees,
this is no longer the case. This Schedule removes the requirement for the
principal's consent.
Under Part 3B of the Social Security Administration Act, a person who is
subject to income management (or the person's nominee) may, with the
person's consent (or the nominee's consent), give a third person a stored
value card that enables the third person to acquire goods or services.
This Schedule makes amendments so that a nominee may consent to the
principal, rather than the third person, being given a stored value card.
Debt recovery
Section 123ZF of the Social Security Administration Act currently provides
that, if a person obtains the value of a cheque, which was issued to
another person who is subject to income management, without the endorsement
of the payee, this will result in a debt being due by that unauthorised
person to the Commonwealth. Under section 123ZF, if the Commonwealth
receives an amount, by way of reimbursement, from the unauthorised person,
the customer's income management account is credited by the amount
received, but only after the actual recovery of the funds. This can leave
the customer out-of-pocket until the funds are actually recovered.
This Schedule seeks to remedy this situation by allowing the Secretary to
credit the customer's income management account by the amount of any debt
raised under section 123ZF prior to the debt actually being recovered.
This will mean that the person will not have to wait for the funds to be
actually recovered.
This Schedule also makes a minor technical amendment to the legislative
instrument making power in paragraph 123YL(2)(b) of the Social Security
Administration Act.
The amendments made by this Schedule commence on the day after Royal
Assent.
Explanation of the changes
Part 1 - General amendments
Amendments to the Family Assistance Administration Act
Item 1 repeals subsection 219TE(1A). This subsection was originally
inserted by the Social Security and Other Legislation Amendment (Welfare
Payment Reform) Act 2007. The requirement to cancel the appointment of a
nominee under subsection 219TE(1A) has unintended consequences if a person,
who is a payment nominee of a family assistant recipient, becomes subject
to income management under the child protection measure. In these
circumstances, the person's nominee status must be cancelled, with the
result that the family assistance recipient's payment is no longer subject
to income management. This was not the intention of subsection 219TE(1A).
The Secretary does, however, under section 219TO, have the general power to
revoke, vary or amend under subsection 33(3) of the Acts Interpretation
Act 1901 (due to the reference to 'writing' in section 219TB) the
instrument appointing a nominee.
Amendments to the Social Security Act
Item 2 removes the word 'commenced' in subparagraph 1061WG(1)(b)(i) and
replaces it with 'is registered for'. This makes it clear that the
relevant date that a person's qualifying savings period starts from is the
day the course operator registers the person, not the day the person takes
action to become registered for the course. For example, where the course
provider sends out a confirmation letter in response to a customer's
application to undertake an approved course, the date of the letter would
be taken to be the date of acceptance for the course. The start date
would, therefore, be the date of the letter.
Amendments to the Social Security Administration Act
Item 3 repeals subsection 123E(1A). As with item 1, this subsection was
inserted by the Social Security and Other Legislation Amendment (Welfare
Payment Reform) Act 2007. The requirement to cancel the appointment of a
nominee under subsection 123E(1A) has unintended consequences if a parent,
who is a payment nominee of a youth allowance recipient, becomes subject to
income management under the child protection measure. In these
circumstances, the parent's nominee status must be cancelled, with the
result that the youth allowance recipient's payment is no longer subject to
income management. This was not the intention of subsection 123E(1A). The
Secretary does, however, under section 123P have the general power to
revoke, vary or amend under subsection 33(3) of the Acts Interpretation Act
1901 (due to the reference to 'writing' in section 123B) the instrument
appointing a nominee.
Item 4 repeals the definition of designated nominee in section 123TC
because the amendment made by item 7 below makes the definition redundant.
Item 5 inserts into section 123TC a definition of excluded Part 3B payment
nominee, which means the Public Trustee of a State or Territory or a Part
3B payment nominee who is not subject to the income management measure.
Item 6 repeals the definition of excluded payment nominee in section 123TC
because the amendment made by item 5 above makes the definition redundant.
Item 7 inserts into section 123TC a definition of Part 3B payment nominee,
which means:
. a person who, by virtue of an appointment in force under section 123B
of the Social Security Administration Act or under section 219TB of
the Family Assistance Administration Act, is a payment nominee; or
. a person to whom payment of another person's service pension is made
by virtue of an approval under section 58 of the Veterans'
Entitlements Act or an appointment under section 202 of the Veterans'
Entitlements Act; or
. a person to whom another person's instalments of youth allowance are
to be paid in accordance with subsection 45(1) of the Social Security
Administration Act.
Item 8 repeals the definition of payment nominee in section 123TC because
the amendment made by item 7 above makes the definition redundant.
Item 9 makes a minor technical amendment to section 123UC.
Item 10 adds new subsection 123UC(2). New subsection 123UC(2) provides a
further rule for when a person is subject to income management under the
child protection measure. It provides that a person is subject to income
management under this measure at a particular time if the person is not
otherwise subject to income management under any other provision of
Subdivision A of Division 2 of Part 3B of the Social Security
Administration Act, and the person has a payment nominee who is subject to
income management under subsection 123UC(1).
Item 11 repeals paragraph 123UM(3)(c) and replaces it with a new
paragraph 123UM(3)(c) due to the amendment made by item 5.
Items 12, 13 and 14 repeal paragraph 123UM(3)(d) and
subparagraphs 123UN(1)(a)(iv) and 123UO(3)(b)(iv) respectively. These
provisions relate to the requirement that a person, who is a payment
nominee, must obtain the principal's permission under section 123UP (which
is being repealed by item 15) to enter into a written agreement with the
Secretary to be subject voluntarily to income management.
Item 15 repeals section 123UP.
Item 16 repeals paragraph 123YE(2)(b).
Item 17 makes a minor technical amendment to subparagraph 123YE(2)(c)(ii)
due to the amendment made by item 18.
Item 18 repeals paragraph 123YE(2)(d).
Item 19 makes a minor technical amendment to paragraph 123YE(2)(e) due to
the amendment made by item 16 above.
Item 20 makes a minor technical amendment to paragraph 123YE(2)(f) due to
the amendment made by item 18 above.
Items 21, 22, 23 and 25 remove the words 'or a third person' from the
provisions identified in these items.
Items 24, 26, 43 and 54 remove the words 'or the third person, as the case
may be' from the provisions identified in these items.
Item 27, 44 and 55 remove the words 'a third person a stored value card
that enables the third person' from the provisions identified in these
items and replaces them with 'the first person a stored value card that
enables the first person'.
Items 28 to 32, 34, 45, 48 and 56 remove the words 'a third person' from
the provisions identified in these items and replaces them with 'the first
person'.
Items 33, 35, 47, 49 and 57 remove the words 'the first person or the third
person' from the provisions identified in these items and replaces them
with 'or the first person'.
Item 36 removes the word 'Minister' from subparagraph 123YL(2)(b)(ii) and
replaces it with 'Secretary'. This gives the power to make a legislative
instrument for the purposes of this subparagraph to the Secretary, which is
consistent with other provisions in section 123YL.
Item 37 makes a minor technical amendment to paragraph 123YM(2)(h) due to
the amendment made by item 38.
Item 38 repeals paragraph 123YM(2)(i).
Item 39 makes a minor technical amendment to paragraph 123YM(2)(k) due to
the amendment made by item 38 above.
Items 40 and 42 remove the words 'or (i), the Secretary gives the first
person or a third person' from the provisions identified in these items and
replaces them with ', the Secretary gives the first person'.
Item 41 removes the words 'or a third person a stored value card under
paragraph (2)(h) or (i)' from subsections 123YM(4) and (6) and replaces
them with 'a stored value card under paragraph (2)(h)'.
Item 46 removes the words 'the designated nominee' from subsection 123YN(8)
and replaces them with 'the Part 3B payment nominee or the first person'.
Item 50 makes a minor technical amendment to paragraph 123YO(2)(g) due to
the amendment made by item 51.
Item 51 repeals paragraph 123YO(2)(h).
Item 52 makes a minor technical amendment to paragraph 123YO(2)(j) due to
the amendment made by item 51 above.
Item 53 removes the words 'or (h), the Secretary gives the first person or
a third person' from the provisions identified in this item and replaces
them with the phrase ', the Secretary gives the first person'.
Item 58 makes a minor technical amendment to section 123ZC due to the
amendment made by item 9 above.
Item 59 makes a minor technical amendment to section 123ZE due to the
amendment made by item 9 above.
Item 60 repeals subsections 123ZF(3) and (4) and replaces them with new
subsections 123ZF(3) and (4). These provisions relate to the misuse of
cheques.
New subsection 123ZF(3) provides that, where a customer has been issued
with a cheque and, without the person's consent, the cheque has been used
by a third party, then the Secretary may re-credit the person's income
management account by an amount equal to the value of the cheque.
New subsection 123ZF(4) provides that, where the Secretary decides to re-
credit a person's income management account under subsection (3), then the
value of the cheque in question is credited to both the Income Management
Record and the person's income management account.
Item 61 is an application provision for item 60. It provides that item 60
applies to the use of a cheque after the commencement of that item, or to
its use prior to the commencement of that item where no amount has yet been
recovered by the Secretary from the unauthorised person.
Part 2 - Part 3B payment nominee amendments
Items 62 to 96 remove the words 'payment nominee' and 'designated nominee'
(wherever they occur) from the provisions identified in these items and
replace them with 'Part 3B payment nominee'.
A note after each of items 73, 76, 81, 84, 89, 92 and 95 signposts that the
heading to the provision identified in each note is altered by removing the
reference to 'designated nominee' and replacing it with 'Part 3B payment
nominee'.