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2008-2009
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
FAMILY ASSISTANCE AMENDMENT (FURTHER 2008 BUDGET MEASURES) BILL 2009
EXPLANATORY MEMORANDUM
(Circulated by the authority of the
Minister for Families, Housing, Community Services and Indigenous Affairs,
the Hon Jenny Macklin MP)
FAMILY ASSISTANCE AMENDMENT (FURTHER 2008 BUDGET MEASURES) BILL 2009
OUTLINE
This bill will amend the family assistance law to implement certain 2008
Budget measures and make associated amendments.
Continuous adjustment of rate of family tax benefit by instalment
The first measure introduces mandatory continuous adjustment to allow for
the reduction of a claimant's rate of family tax benefit where there is a
revised estimate (by the person or the Secretary) to assist in preventing
overpayments following reconciliation.
Non-payment of family tax benefit for non-lodgment of tax returns
The second measure will cease fortnightly family tax benefit payments, and
payment for a past period in the same income year in which a claim is made,
for claimants and/or partners who fail to lodge income tax returns.
Information sharing
The third measure will include amendments to the tax file number provisions
in the family assistance law to ensure accurate information sharing between
the Australian Taxation Office and Centrelink for the purpose of
reconciliation and debt offsetting.
Financial impact statement
|Total |2007-08 |2008-09 |2009-10 |2010-11 |2011-12 |
|Resourcing | | | | | |
|Continuous |nil |$1.7 m |-$14.3 m |-$2.6 m |-$1.6 m |
|adjustment of| | | | | |
|rate of | | | | | |
|family tax | | | | | |
|benefit by | | | | | |
|instalment | | | | | |
|Non-payment |$41.6 m |$13.3 m |-$20.8 m |-$162.5 m |-$189.7 m |
|of family tax| | | | | |
|benefit for | | | | | |
|non-lodgment | | | | | |
|of tax | | | | | |
|returns | | | | | |
|Information |nil |nil |nil |nil |nil |
|sharing | | | | | |
FAMILY ASSISTANCE AMENDMENT (FURTHER 2008 BUDGET MEASURES) BILL 2009
NOTES ON CLAUSES
Clause 1 sets out how the Act is to be cited, that is, as the Family
Assistance Amendment (Further 2008 Budget Measures) Act 2009.
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or repealed as set out in that Schedule.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 Act' means the A New Tax System (Family Assistance)
Act 1999; and
. 'Family Assistance Administration Act' means the A New Tax System
(Family Assistance) (Administration) Act 1999.
Schedule 1 - Continuous adjustment of rate of family tax benefit by
instalment
Summary
This Schedule introduces mandatory continuous adjustment to allow for the
reduction of a claimant's rate of family tax benefit where there is a
revised estimate (by the person or the Secretary) to assist in preventing
overpayments following reconciliation.
Background
Part 4 of the Family Assistance Act sets out how to determine a claimant's
rate of family tax benefit. The rate is calculated in accordance with the
rate calculator in Schedule 1 to the Family Assistance Act.
Subsection 20(1) of the Family Assistance Administration Act provides that
a claimant's rate of family tax benefit can be determined on the basis of
an estimate of income that the claimant provides. The estimate can only be
used if the Secretary considers that it is reasonable.
The estimate that is provided by the claimant can be revised during the
income year and, if the revised estimate is reasonable, the Secretary must
vary the rate of family tax benefit based on this estimate. This variation
occurs under section 31A of the Family Assistance Administration Act. The
variation can only apply prospectively and may result in an increase or
decrease in a claimant's rate for their ongoing family tax benefit
instalment payments.
Similarly, subsection 20(2A) provides authority for the use of an indexed
estimate or indexed actual income to determine the rate of family tax
benefit where the customer has been given a notice of the indexed amount
and has not provided a reasonable estimate that can be used instead of the
indexed estimate or indexed actual income. This variation occurs under
either section 31C or 31D of the Family Assistance Administration Act.
If an indexed estimate or an indexed actual income is being used to
determine the rate of family tax benefit and the claimant provides a
reasonable estimate, then under subsection 20(1) the claimant's estimate
can be used by the Secretary to determine the claimant's rate of family tax
benefit.
Subsection 20(3) of the Family Assistance Administration Act provides
authority for the Secretary to determine the individual's rate of family
tax benefit on the basis of an estimate of maintenance income. This
variation occurs under section 31B of the Family Assistance Administration
Act.
This Schedule inserts a new section 31E into Subdivision C of Division 1 of
Part 3 of the Family Assistance Administration Act. This new section will
require the Secretary to calculate whether a claimant has a notional
overpayment of family tax benefit for the earlier period in an income year
because of a revised estimate of income or maintenance income. If there is
a notional overpayment, the claimant's daily rate of family tax benefit for
the remainder of the income year will be reduced by a daily amount that
equals the notional overpayment for the earlier period divided by the
number of days in the remaining period in the year.
The amendments made by this Schedule commence on 1 July 2009.
Explanation of the changes
Item 1 inserts a new section 31E into Subdivision C of Division 1 of
Part 3 of the Family Assistance Administration Act.
New subsection 31E(1) sets out when new section 31E will apply. New
paragraph 31E(1)(a) provides that a claimant must have a determination in
force that they are entitled to be paid family tax benefit by instalment in
an income year.
New subparagraphs 31E(1)(b)(i) to (iv) provide that new section 31E applies
where there is a variation in a claimant's rate of family tax benefit
because of the application of subsection 31A(1), 31B(1), 31C(1) or 31D(1).
These provisions cover variations where the claimant provides a revised
estimate of income, where the Secretary makes a revised estimate of
maintenance income, or where there is an indexed estimate or indexed actual
income.
New subparagraph 31E(1)(b)(v) provides that new section 31E will also apply
to a claimant if they provide a revised estimate, but this does not affect
their ongoing rate and, therefore, there is no variation under subsection
31A(1). However, if the claimant has a notional overpayment for the
earlier period of the year because of the revised estimate, the application
of new section 31E will allow a reduction in their ongoing rate.
For example, Nicole and Robert have two children aged 15 and 19,
Nicole is receiving fortnightly payment of family tax benefit, and her
rate includes both Part A and Part B. On 7 January, Nicole's youngest
child turns 16 and, as the child is no longer in school, Nicole ceases
to be entitled to family tax benefit Part B. Nicole continues to be
entitled to family tax benefit Part A at the base rate. On 2
February, Nicole increases her income estimate as she has increased
her hours at work. The increased estimate does not affect Nicole's
ongoing Part A rate, which continues to be the base rate. However,
based on the new income estimate, Nicole's Part B rate would have been
lower in the earlier period of 1 July to 6 January. Therefore, when
Nicole provides the revised estimate, it is calculated that she has a
notional overpayment of family tax benefit for the period 1 July to 6
January, which results in her ongoing rate of family tax benefit being
reduced to cover this notional overpayment.
New subparagraph 31E(1)(b)(vi) is similar in application to
subparagraph 31E(1)(b)(v) except that it applies when the Secretary makes a
revised estimate of the claimant's maintenance income that does not result
in a variation of the claimant's ongoing entitlement determination under
subsection 31B(1). However, if the revised maintenance income results in
the claimant having a notional overpayment for the earlier period in the
income year, their ongoing rate of family tax benefit by instalment will be
reduced.
New subparagraphs 31E(1)(b)(i) to (iv) apply to variations that have effect
after 1 July in a year and new subparagraph 31E(1)(b)(vi) applies to a
Secretary's revised maintenance income estimate that is made after 1 July
in a year. The exclusion of a revised income amount that has effect from 1
July, or a revised maintenance income estimate that is made on 1 July,
reflects the fact that there can only be a notional overpayment if there is
an earlier period in the income year where the previous estimate had
effect. New subparagraph 31E(1)(b)(v) includes a revised income estimate
provided on 1 July as it is possible for there to be a period where the
previous estimate continues to have effect before the revised estimate is
taken into account.
New subsection 31E(2) provides a method statement. This method statement
is to be applied to determine if the claimant has a notional overpayment
and, if so, provides a method of working out the claimant's daily
overpayment rate based on the notional overpayment.
Under step 1 of the method statement, the amount that the claimant is or
was entitled to be paid in the income year before the applicable day is
determined (applicable day is defined in new subsection 31E(5)).
For example, Carol and David have two children aged two and six. They
provide an income estimate at the beginning of the year of $40,000.
This income estimate is used to determine their rate of family tax
benefit for the period before the applicable day.
Step 2 of the method statement requires working out the amount that the
claimant would have been entitled to if the revised income estimate,
revised estimate of maintenance income, indexed estimate or indexed actual
income had been used to determine the claimant's rate of family tax benefit
for the period prior to the revised amount being applicable. The revised
amount is applied to the claimant's circumstances as they were for each day
in the period before the applicable day.
For example, Carol and David are entitled to instalments of family tax
benefit for two children based on an income estimate of $40,000. They
notify that they have a new child, born on 1 February. Their rate of
family tax benefit is varied due to the change in circumstances. On
6 April, they revise their income estimate to $48,000. The variation
under subsection 31A(1) has effect from 6 April, so this is the
applicable day. Step 2 requires that the $48,000 is used to determine
what would have been the family tax benefit entitlement for the period
from 1 July to 31 January, when there were two children in the family,
and from 1 February to 5 April, when there were three children. The
sum of these amounts is the amount of family tax benefit that Carol
and David would have been entitled to if their rate of family tax
benefit had been calculated using the revised estimate of $48,000,
taking into account their circumstances on each day in the period
before the applicable day.
Step 3 of the method statement requires taking the amount determined in
step 2 away from the amount in step 1. If this amount is greater than
zero, there is a notional overpayment. If the amount is zero or less,
there is no notional overpayment and the claimant's rate of family tax
benefit will not be affected by a variation under new section 31E.
Step 4 of the method statement only applies if the amount in step 3 is
greater than zero. If the amount in step 3 is greater than zero, then
step 4 requires working out how many days are left in the income year
starting on the applicable day and ending on the last day of the income
year.
For example, Carol and David provide a revised estimate and the
applicable day is 6 April. Therefore, there are 86 days remaining in
the income year.
Step 5 of the method statement requires dividing the notional overpayment
(step 3) by the remaining days in the year (step 4). This will produce the
daily overpayment rate.
New subsection 31E(3) provides that, if step 5 of the method statement
results in a daily overpayment rate, the Secretary must reduce the
claimant's daily rate of family tax benefit by the daily overpayment rate.
This reduction will occur for the remainder of the income year, unless a
new application of section 31E occurs due to a subsequent revised estimate.
It is intended that the reduction will assist in preventing the claimant
having a family tax benefit debt on reconciliation.
For example, Mary provides an income estimate on 1 July of $40,000.
She revises the estimate on 6 April to $48,000. The revision of the
income estimate results in a notional overpayment for the period 1
July to 5 April. This is the first relevant variation for the year,
and new subparagraph 31E(1)(b)(i) applies. On 11 May, Mary notifies
of a revised income estimate of $46,000. This is a decrease in her
estimate from 6 April and will result in an increase in her rate of
family tax benefit. This is a subsequent variation and new
subparagraph 31E(1)(b)(i) applies. If there is a remaining notional
overpayment, Mary's daily rate of family tax benefit will be reduced
under new subsection 31E(3), although by a lower daily overpayment
rate due to the lower revised estimate. Where there is no remaining
notional overpayment, the determination of Mary's ongoing rate of
family tax benefit will be varied under section 31A, resulting in an
increase, and there will be no reduction of her daily rate under new
subsection 31E(3).
A claimant's daily rate of family tax benefit can be reduced to nil under
new subsection 31E(3). If the daily rate is reduced to nil, the claimant's
instalment entitlement determination continues in force and the claimant
remains entitled to instalments of family tax benefit at a nil rate.
A claimant's daily rate of family tax benefit cannot be reduced below nil.
If a revised estimate results in an increase in the rate of family tax
benefit, the new ongoing rate will be increased according to the relevant
rules in section 31A or 31B. New section 31E cannot operate to increase a
claimant's rate of family tax benefit. For example, if a claimant provides
a reduced income estimate and there is no notional overpayment, their rate
of family tax benefit may be increased prospectively under section 31A,
based on the new estimate. Any top-up amount for the earlier period in the
income year is determined at reconciliation after the end of the income
year, when the claimant's actual income is known.
New subsection 31E(4) provides that section 31E may have more than one
application for a claimant in an income year. New section 31E will be
applied each time one of subparagraphs 31E(1)(b)(i) to (vi) applies.
New subsection 31E(5) defines applicable day for the purpose of new
section 31E. For new subparagraphs 31E(1)(b)(i), (ii), (iii) and (iv), the
applicable day is the day on which the variation under the relevant section
referred to in each of those subparagraphs has effect. For new
subparagraphs 31E(1)(b)(v) and (vi), the applicable day is the first day in
the instalment period in which the relevant application of the method
statement in subsection 31E(2) is applied.
Application
New subparagraphs 31E(1)(b)(i) to (iv) will apply to variations under
subsections 31A(1), 31B(1), 31C(1) and 31D(1) that are made on or after the
commencement of item 2 (1 July 2009). This is regardless of whether the
instalment entitlement determination in force was made before, on or after
that commencement (subitem 2(1) refers).
Similarly, if the claimant provides a revised estimate of income or the
Secretary makes a revised estimate of maintenance income, new subparagraphs
31E(1)(b)(v) and (vi) will apply to revised estimates provided or made on
or after the commencement of item 2. This is regardless of whether the
instalment entitlement determination in force was made before, on or after
that commencement (subitem 2(2) refers).
Schedule 2 - Non-payment of family tax benefit for non-lodgment of tax
returns
Summary
This Schedule will cease fortnightly family tax benefit payments, and
payment for a past period in the same income year in which a claim is made,
for claimants and/or partners who fail to lodge income tax returns.
Background
Family tax benefit can be paid based on an estimate of an individual's
adjusted taxable income. To ensure that claimants are paid their correct
entitlement, the amount of family tax benefit paid based on the estimate is
compared with the family tax benefit entitlement based on actual adjusted
taxable income when this is known. This process is known as
reconciliation. Where a claimant or partner (if any) is required to lodge
an income tax return, the Commissioner of Taxation can provide details
about their adjusted taxable income (Schedule 3 to the Family Assistance
Act refers) after making an assessment of taxable income.
A non-lodger debt can occur where a claimant or their partner has not
lodged an income tax return within the prescribed time.
Subsection 28(2) of the Family Assistance Administration Act provides for a
variation of a claimant's entitlement determination under section 16 or 17
where relevant income tax returns are required to be lodged and this has
not occurred within a specific timeframe. Where these conditions are met,
the Secretary must vary the claimant's entitlement determination such that
the claimant is not, and never was, entitled to family tax benefit for the
entitlement year.
A variation under subsection 28(2) may result in a debt being owed to the
Commonwealth, which arises under section 71 of the Family Assistance
Administration Act. The debt raised, known as a non-lodger debt, is for
the entire amount of family tax benefit that the claimant received for the
entitlement year in respect of which they or their partner have not lodged
a tax return.
Currently, a claimant can continue to receive payment of family tax benefit
for the current income year (instalments or payment for a past period)
based on an estimate, even if a subsection 28(2) or 28(6) variation has
been made for a previous income year, resulting in a non-lodger debt for
that previous year. There are further provisions in section 28 that enable
subsequent variations of the determination in prescribed circumstances,
with the result that a non-lodger debt can cease to exist (for example, due
to a couple separating), or a non-lodger debt can be reinstated (for
example, due to the couple reconciling). Such subsequent variations do not
alter the fact that an initial variation of the determination was made
under subsection 28(2).
This Schedule inserts a new Subdivision CA into Division 1 of Part 3 of the
Family Assistance Administration Act to prohibit payment of family tax
benefit by instalments, or payment for a past period in the same income
year in which a claim is made, if the payment would be based on an
estimate. The prohibition will be applied where there has been a variation
of an entitlement determination under subsection 28(2) because the claimant
for the income year the variation relates to (the non-lodger debt year), or
the claimant's partner (who was a partner in that year) has not lodged a
relevant tax return for that year. The prohibition will apply to the
claimant and the partner. The prohibition will not apply to the claimant
or the partner due to the partner not lodging a tax return if the couple
separate, but the prohibition would resume if they become a couple again
and the partner has still not lodged the outstanding tax return. The
prohibition will also be applied to a new partner of the claimant, if the
claimant remains prohibited because the claimant has not lodged a relevant
tax return, while they remain a couple.
While a prohibition applies, this does not prevent payment in respect of a
period in a previous income year if the person's family tax benefit for
that period is not determined on the basis of an estimate. Payment can
still be made at reconciliation for a particular income year, as payment
would not be based on an estimate for that year.
In similar circumstances to those outlined above for prohibition of
payment, if there have been three variations under subsection 28(2), and
all outstanding tax returns have not been lodged for each relevant year,
the claimant and partner will not be entitled to payment of family tax
benefit if the payment would be based on an estimate. However, payment can
still be made at reconciliation for a particular income year, as payment
would not be based on an estimate for that year.
Items 1, 2, 3 and 7 of this Schedule will commence on 1 July 2009. Items
4, 5, 6 and 8 will commence on 1 July 2010.
Explanation of the changes
Item 1 makes a consequential amendment to subsection 23(6) as a result of
the insertion of new Subdivision CA.
Item 2 makes a consequential amendment to subsection 24(4) as a result of
the insertion of new Subdivision CA.
Item 3 inserts new Subdivision CA into Division 1 of Part 3 of the Family
Assistance Administration Act.
New section 32AA provides that, if a claimant's entitlement determination
is varied under subsection 28(2) of the Family Assistance Administration
Act, then the claimant and their partner, within the meaning of
subparagraph 28(1)(b)(iii) (relevant partner), may be subject to a
prohibition of their family tax benefit payments that are made based on an
estimate of adjusted taxable income, an indexed estimate, an indexed actual
income or an estimate of maintenance income. Section 32AA also applies
where a claimant has a variation of their determination under subsection
28(2) and a subsequent variation under subsection 28(6).
There can be more than one subsection 28(2) variation for a claimant at any
one time. Therefore, the prohibited period for a claimant and/or their
partner can be in place as a result of more than one subsection 28(2)
variation. As a consequence, before an individual can again receive
payment of family tax benefit based on an estimate, the requirements for
ending the prohibited period must be met in respect of each subsection
28(2) variation that had occurred. This means that, if the claimant and/or
their partner were required to lodge tax returns for more than one
cancellation income year, all outstanding tax returns must be lodged before
the prohibited period can end.
The prohibition also applies to the relevant partner to prevent the partner
from claiming and being paid family tax benefit by instalments when the
claimant still has a prohibition in place. If the partner were able to
claim, then the application of Subdivision CA to the claimant would not
have any consequence for the claimant.
The prohibition only applies to past periods occurring in the income year
in which the claim is made. The prohibition does not prevent a claimant
from being paid for a past period in a previous income year.
For example, Terry was paid family tax benefit by instalments in the
2007-08 income year. By November 2009, Terry had not lodged his tax
return for 2007-08 and a subsection 28(2) variation was made. In
January 2010, a prohibition was applied to Terry and he ceased to be
paid family tax benefit by instalments. Terry notified that he no
longer wanted to receive his family tax benefit by instalment and his
entitlement determination ceased to be in force (section 21 of the
Family Assistance Administration Act refers). In June 2010, Terry
makes a new claim for family tax benefit by instalments and this claim
is accompanied by a past period claim for the period January to June.
Both of these claims are effective and section 16 and 17 entitlement
determinations are made. However, because of the prohibited period,
it is determined that Terry's rate of family tax benefit is nil. As a
consequence, he cannot be paid for the past period or ongoing
instalments of family tax benefit for the prohibited period in the
2009-10 income year because his family tax benefit rate in both of
these situations is determined on the basis of an estimate. He may be
entitled to an amount of family tax benefit at the end of the 2009-10
income year following reconciliation.
The prohibited periods are set out in new sections 32AB (for the claimant)
and 32AC (for the relevant partner). There is also a prohibited period for
a new partner of the claimant, which is set out in new section 32AD.
New section 32AB provides when the claimant has a prohibited period.
First kind of prohibited period
New subsection 32AB(1) provides that, if the claimant or the relevant
partner is required to lodge income tax returns for the cancellation income
year and either has not lodged, then, following the grace period, there
must be a prohibited period for the claimant. For new section 32AB, the
grace period is defined in new subsection 32AB(8).
New subsection 32AB(2) provides the circumstances when the prohibited
period begins and ends for the claimant if the first kind of prohibited
period applies.
New subsections 32AB(3) and (4) provide two circumstances in which the
first kind of prohibited period ends (new subsection 32AB(2) refers). New
subsection 32AB(3) provides that the prohibited period ends if the claimant
and/or the relevant partner lodges an income tax return for the
cancellation income year. New subsection 32AB(4) provides that the
prohibited period will end if the claimant and the relevant partner
separate after the end of the grace period, provided that the claimant has
lodged a tax return for the cancellation income year. The first kind of
prohibited period can also end if new subsection 32AB(7) applies.
Second kind of prohibited period
New subsection 32AB(5) applies if the claimant and the relevant partner
separate on or after the day of the subsection 28(2) variation, they are
still separated at the end of the grace period but become members of the
same couple again on an applicable day after the end of the grace period,
and the partner was required to lodge an income tax return and has not done
so.
New subsection 32AB(6) provides the circumstances when the second kind of
prohibited period as set out in subsection 32AB(5) begins and ends for the
claimant.
New paragraph 32AB(6)(a) provides that the second kind of prohibited period
begins on a day determined by the Secretary which must be after the day on
which the couple re-partner.
New paragraph 32AB(6)(b) provides that the second kind of prohibited period
ends when the relevant partner lodges an income tax return, the claimant
and the relevant partner cease to be members of the same couple or
subsection 32AB(7) applies.
Prohibited period may end in special circumstances
New subsection 32AB(7) provides that the Secretary can end the prohibited
period if there are special circumstances that justify this occurring.
Examples of special circumstances could include domestic violence, severe
illness or severe financial hardship.
Grace period
New subsection 32AB(8) defines grace period for the purpose of new
section 32AB. New paragraph 32AB(8)(a) provides that the grace period is
to be a minimum of 75 days from the day that the subsection 28(2) variation
occurs. The Secretary could determine a longer period under
subsection 32AB(9).
New paragraph 32AB(8)(b) defines the grace period where subsection 32AB(7)
applies. This grace period is a period of 14 days or a longer period as
determined by the Secretary under new subsection 32AB(9), beginning on the
day on which the variation in subsection 32AB(7) is made. The note to
subsection 32AB(8) explains that the effect of paragraph (b) is that
another prohibited period can be applied to the claimant under
subsection (1). It is intended that, once the grace period ends and
subsection (7) no longer applies, there can be another prohibited period
for the claimant.
New subsection 32AB(9) provides that, if there are special circumstances,
the Secretary may, in writing, vary the grace period.
New subsection 32AB(10) provides that a determination made under new
paragraph 32AB(6)(a), subsection 32AB(7) or 32AB(9) is not a legislative
instrument within the meaning of the Legislative Instruments Act 2003.
This subsection is declaratory of the law because a determination under
paragraph 32AB(6)(a), subsection 32AB(7) or subsection 32AB(9) is applied
to individuals on a case-by-case basis. Therefore, this is not an
exemption from the Legislative Instruments Act 2003.
New section 32AC provides when the relevant partner has a prohibited
period.
First kind of prohibited period
New subsection 32AC(1) provides that, if the claimant or the relevant
partner are still members of the same couple at the end of the grace period
and either or both are required to lodge income tax returns for the
cancellation income year and have not done so, then, following the grace
period there must be a prohibited period for the relevant partner. For
new section 32AC, the grace period is defined in new subsection 32AC(10).
New subsection 32AC(2) provides the circumstances when the prohibited
period begins and ends for the relevant partner if the first kind of
prohibited period applies.
New subsections 32AC(3) and (4) provide two circumstances when the first
kind of prohibited period under new section 31AC ends. New
subsection 32AC(3) provides that, if the claimant and/or the relevant
partner are required to lodge income returns for the cancellation income
year and relevant income tax returns are lodged, the prohibited period
ends. New subsection 32AC(4) provides that the prohibited period for the
relevant partner will end if the claimant and the relevant partner separate
after the end of the grace period. The first kind of prohibited period can
also end if new subsection 32AC(9) applies.
Second kind of prohibited period
The second kind of prohibited period applies in circumstances where the
claimant and relevant partner separate and become members of the same
couple again. New subsection 32AC(5) applies if the claimant meets the
following: the claimant and the relevant partner separate on or after the
day of the subsection 28(2) variation; they are still separated at the end
of the grace period; they are members of the same couple again on an
applicable day after the end of the grace period, as defined in paragraph
32AC(10)(a); the partner and/or the claimant was required to lodge an
income tax return for the cancellation income year; and either or both has
not done so by the day on which they become members of the same couple
again.
New subsection 32AC(6) provides the circumstances when the second kind of
prohibited period as set out in subsection 32AC(5) begins and ends for the
claimant.
New paragraph 32AC(6)(a) provides that the second kind of prohibited period
begins on a day determined by the Secretary, which must be after the day
that the couple re-partner.
New paragraph 32AC(6)(b) provides that the second kind of prohibited period
ends when either new subsection 32A7(7), (8) or (9) applies.
New subsection 32AC(7) provides that new section 32AC ends for the relevant
partner if the partner or the claimant was required to lodge an income tax
return for the cancellation income year and does so.
New subsection 32A7(8) provides that section 32AC ends for the relevant
partner if the claimant and the relevant partner cease to be members of the
same couple again.
Prohibited period may end in special circumstances
New subsection 32AC(9) provides that the Secretary can end the prohibited
period if there are special circumstances that justify this occurring.
Examples of special circumstances could include domestic violence, severe
illness or severe financial hardship.
Grace period
New subsection 32AC(10) defines grace period for the purpose of new
section 32AC. New paragraph 32AC(10)(a) provides that the grace period is
to be a minimum of 75 days from the day on which the subsection 28(2)
variation occurs. The Secretary could determine a longer period under
subsection 32AC(11).
New paragraph 32AC(10)(b) defines the grace period where subsection 32AC(9)
applies. This grace period is a period of 14 days or a longer period as
determined by the Secretary under new subsection 32AC(11), beginning on the
day the variation in subsection 32AC(9) is made.
New subsection 32AC(11) provides that, if there are special circumstances,
the Secretary may, in writing, vary the grace period.
New subsection 32AC(12) provides that a determination made under new
paragraph 32AC(6)(a), subsection 32AC(9) or subsection 32AC(11) is not a
legislative instrument within the meaning of the Legislative Instruments
Act 2003. This subsection is declaratory of the law because a
determination under paragraph 32AC(6)(a), subsection 32AB(9) or
subsection 32AB(11) is applied to individuals on a case-by-case basis.
Therefore, this is not an exemption from the Legislative Instruments Act
2003.
New subsection 32AD deals with the situation where the claimant partners
with a new partner who was not the claimant's partner during the
cancellation income year. A prohibited period only applies to the new
partner if the claimant is subject to a prohibited period and, during that
period, the claimant and the partner are members of the same couple. If
new section 32AD applies to the new partner, they will be subject to a
prohibition of their family tax benefit payments that are made based on an
estimate of adjusted taxable income, an indexed estimate, an indexed actual
income or an estimate of maintenance income. New section 32AD will end for
the new partner if they separate from the claimant or the claimant lodges
an income tax return for the cancellation income year.
Application of the prohibited period to the claimant's new partner while
they remain a couple prevents avoidance of the prohibition on instalments,
which could occur if the new partner were to claim family tax benefit by
instalments.
Item 4 makes a consequential amendment to new section 32AA.
Item 5 inserts a new subsection 32AA(2) that makes new section 32AA subject
to new section 32AE. This amendment will commence on 1 July 2010 and
ensures that, where new section 32AE applies to an individual, this will
take precedence over any application of new section 32AA.
Item 5 inserts a new section 32AE into the Family Assistance Administration
Act.
New subsection 32AE(1) provides that new section 32AE applies if there have
been three subsection 28(2) variations in relation to a claimant.
New subsection 32AE(2) provides that, if new section 32AE applies, then the
claimant will cease to be entitled to family tax benefit payments that are
made based on an estimate of adjusted taxable income, an indexed estimate,
an indexed actual income or an estimate of maintenance income.
New subsection 32AE(2) will apply if the claimant is required to lodge an
income tax return for one or more of the cancellation income years and has
not so lodged; and, if the claimant is a member of a couple and the partner
is also the relevant partner for one or more of the cancellation income
years concerned, the partner has not lodged for each of the cancellation
income years.
New subsection 32AE(3) provides similar rules to new subsection 32AE(2) for
the claimant's current partner.
Application
Item 7 provides the application provisions for amendments that are starting
on 1 July 2009. The amendment made under item 3 applies in relation to a
subsection 28(2) variation that is made before, on or after 1 July 2009.
This is regardless of whether the determination being varied was made
before, on or after 1 July 2009 (subitem 7(1) refers).
Subitem 7(2) provides that, if there has been a subsection 28(2) variation
before 1 July 2009 but all relevant tax returns have been lodged for the
cancellation income year, then subitem (7)1 will not apply.
Subitem 7(3) provides that, if the subsection 28(2) variation mentioned in
new section 32AA occurs before the commencement of item 3, being 1 July
2009, the grace period in new subsection 32AB(8) or 32AC(10) is taken to
begin on 1 July 2009.
Subitem 8(1) provides that new section 32AE will apply to variations
occurring before, on or after commencement of item 6, which is 1 July 2010.
Subitem 8(2) provides that any entitlement to be paid family tax benefit
before the commencement of item 6 (1 July 2010) will not be affected by the
amendments made by item 6.
Subitem 8(3) provides that, if there have been more than three variations
made before the commencement of this item in 1 July 2010, then new
section 32AE will apply in relation to all of those variations.
Subitem 8(4) provides that, if there have been three or more
subsection 28(2) variations before 1 July 2010, but relevant tax returns
have been lodged for one or more of the cancellation income years, then
subitems 8(1) and (2) will not apply in relation to those variations.
The application of the amendments to variations which have occurred before
commencement is intended to address existing non-lodger debt relating to
earlier income years, and to ensure that claimants receive their correct
family tax benefit entitlement, which is determined after reconciliation
conditions are met.
Schedule 3 - Information sharing
Summary
This Schedule will include amendments to the tax file number provisions in
the family assistance law to ensure accurate information sharing between
the Australian Taxation Office and Centrelink for the purpose of
reconciliation and debt offsetting.
Background
Section 154A of the Family Assistance Administration Act relates to the use
of tax file numbers that have been provided to the Secretary under a
provision of the family assistance law. Under section 154A, the Secretary
may provide an individual's tax file number to the Commissioner of Taxation
for the purpose of being informed of the individual's taxable income for a
particular income year. In return, the Commissioner may provide the
Secretary with particulars of the individual's taxable income, which is a
component of adjusted taxable income under Schedule 3 to the Family
Assistance Act. The Commissioner can only keep the record of the tax file
number for a period of three years after the end of the particular income
year, at which time the Commissioner must destroy the record of the tax
file number provided for that income year.
The rate of payment of family tax benefit by instalments is worked out
using an estimate of adjusted taxable income. Past period claims may also
be worked out on the basis of an estimate where the past period is in the
same year in which the claim is made.
Under section 154A, the Commissioner of Taxation may provide the Secretary
with the individual's particulars of income for the income year. When the
individual's particulars of income are known, reconciliation can occur.
The process of reconciliation involves reviewing the individual's rate of
family tax benefit for the relevant income year based on an estimate and
comparing it with the rate recalculated on the basis of actual income.
This is a Secretary-initiated review under section 105 of the Family
Assistance Administration Act.
The amended section 154A will extend the period of time for which the
Commissioner of Taxation may use an individual's tax file number record,
provided by the Secretary for a specified income year, to provide the
Secretary with the individual's income details for that year. The
Commissioner will keep the record for a minimum period of three years after
the end of that income year, or such longer period that the Commissioner
needs to be able to provide the individual's income details to the
Secretary. Amendments will also specify that the Commissioner may provide
the Secretary with other components of the individual's adjusted taxable
income for the year (which are relevant for reconciliation purposes), in
addition to taxable income. Amendments will further specify that a record
of an individual's tax file number can be provided to the Commissioner for
the purpose of debt offsetting, along with information about an
individual's family assistance entitlement or debt.
The amendments made by this Schedule commence on 1 July 2009.
Explanation of the changes
Item 1 repeals subsection 154A(2), (3) and (4) and substitutes new
subsections 154A(2), (3), (4), (5), (6) and (7).
Under new subsection 154A(2), the Secretary may provide to the Commissioner
of Taxation a record of an individual's tax file number. This record is
provided for the purpose of the Secretary being informed of the amounts
included in the individual's adjusted taxable income that the Commissioner
has determined for the specified income year. The specified income year is
the year for which the tax file number record is provided.
New subsection 154A(3) provides for the Secretary to give notice to the
Commissioner of Taxation if the Secretary understands that an individual is
not required to lodge an income tax return for that year. For example,
this may occur if the individual has notified the Secretary that the
individual is not required to lodge a tax return for that year.
New subsection 154A(4) provides that a notice given under
subsection 154A(3) may include a record of the individual's tax file number
to assist the Commissioner to identify the claimant. This record must be
destroyed by the Commissioner when it is no longer needed. This record is
no longer needed when the Commissioner has matched the notice given under
subsection 154A(3) with the tax file number record provided under
subsection 154A(2).
Under new subsection 154A(5), the Commissioner of Taxation may provide to
the Secretary amounts included in an individual's adjusted taxable income,
together with the individual's tax file number. The components of adjusted
taxable income are set out in Schedule 3 to the Family Assistance Act. The
amounts that the Commissioner determines and can provide are taxable
income, reportable fringe benefits total, tax exempt foreign employment
income (for 2008-09 and later income years), net rental property loss (for
2008-09 and earlier income years), and total net investment loss and
reportable superannuation contributions (for 2009-10 and later income
years). The individual's tax file number assists in the identification of
the claimant to whom the income amounts for the specified year apply.
New subsection 154A(6) provides, as a general rule, that the Commissioner
of Taxation must destroy the record of the tax file number three years
after the end of the income year for which it was provided. The exception
to this general rule is where the Commissioner has not disclosed to the
Secretary the particulars of the individual's adjusted taxable income, and
the Commissioner has not received a notice from the Secretary under new
subsection 154A(3). The tax file number record should only be destroyed if
the exception to the destruction of the record does not apply.
New subsection 154A(7) provides that the Commissioner of Taxation must
destroy the record of the tax file number once the Commissioner provides to
the Secretary particulars of the individual's adjusted taxable income for
the specified income year or the Commissioner receives notice under
subsection 154A(3) that the Secretary understands that the individual is
not required to lodge a tax return for the income year.
Item 3 inserts a new section 154B. New section 154B will allow for the
Secretary to provide the Commissioner of Taxation with an individual's tax
file number to assist in debt recovery.
Under new subsection 154B(1), the Secretary may provide the Commissioner of
Taxation with the tax file number of an individual or their partner, along
with details of their entitlement or non-entitlement to family assistance,
for a debt offsetting purpose stated in new subsection 154B(2).
New subsection 154B(2) sets out the relevant debt offsetting purposes for
the Secretary providing the Commissioner with information about an
individual's entitlement or non-entitlement to family assistance. This
information is provided for the purpose of enabling the Commissioner either
to apply a tax refund to a family assistance debt under section 87 or 93 of
the Family Assistance Administration Act, or to assist the payment of
deductions from family assistance (other than child care benefit) to the
Commissioner under section 225 of the Family Assistance Administration Act,
or to set off an entitlement to family assistance (other than child care
benefit) against a tax liability under section 226 of the Family Assistance
Administration Act.
New subsection 154B(3) provides that the Commissioner must destroy the tax
file number record when the tax file number is no longer required for the
purpose of assisting in debt recovery.
Application
Section 154A of the Family Assistance Administration Act, as amended by
item 1, applies in relation to tax file number records that have been
provided by the Secretary to the Commissioner of Taxation in the period
beginning on 1 July 2006 and ending immediately before the commencement of
this Schedule (pre-commencement period). If a tax file number record is
provided during the pre-commencement period, the record provided is the
designated TFN record, for the purpose of the application of the amended
section 154A to that record. The amended section 154A also applies to tax
file number records provided on or after the commencement of this Schedule
(the application provision in item 3 refers).
Transitional
Item 4 provides the transitional arrangements for the provision of tax file
number records if an individual's tax file number record had previously
been provided by the Secretary to the Commissioner and was destroyed by the
Commissioner because of the application of section 154A prior to the
amendments in this Schedule.
Subitem 4(1) provides the criteria that must be met in order for the
transitional arrangements to be applied. The transitional arrangements
will apply if the Secretary has previously provided an individual's tax
file number record to the Commissioner of Taxation for an income year and
this has been destroyed by the Commissioner because of the application of
section 154A prior to the amendments in this Schedule. If the record has
been destroyed and the Commissioner did not provide the Secretary with the
particulars of the individual's taxable income for that income year before
the commencement of this Schedule, item 4 applies.
Subitem 4(2) provides that the Secretary may provide to the Commissioner a
record of the individual's tax file number for the purpose of determining
the particulars of the actual adjusted taxable income for the individual
for the specified year. This provision of the tax file number record under
subitem 4(2) only occurs where the Commissioner destroyed the individual's
original tax file number record as required under section 154A prior to the
amendments in this Schedule.
Subitem 4(3) provides that the Commissioner must destroy the record
provided in subitem 4(2) when the Commissioner has disclosed particular's
of the individual's adjusted taxable income to the Secretary or when the
Commissioner receives a notice under subsection 154A(3) that the Secretary
understands that the individual is not required to lodge a tax return for
the income year.