Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2002-2003-2004
THE
PARLIAMENT OF THE COMMONWEALTH OF
AUSTRALIA
HOUSE OF
REPRESENTATIVES
EXPLANATORY
MEMORANDUM
(Circulated
by the authority of the Minister for Family
and Community Services,
Senator the Hon Kay
Patterson)
This Bill is the second of two bills giving effect to
the More Help for Families package of measures announced in the 2004 Budget
to provide extra assistance to families.
The
Bill contains five elements:
• An ongoing
increase in the maximum and base rates of family tax benefit Part A of $600
annually for each FTB child. The new FTB Part A supplement would be paid
as a lump sum on income reconciliation for the 2003-04 income year and later
years.
• A reduction in the rate at which
family tax benefit Part A reduces from the maximum rate to the base rate, from
30 cents in the dollar to 20 cents in the
dollar.
The financial cost of these measures is
$1.9b in 2003-04, $2.5b in 2004-05, $2.5b in 2005-06, $2.6b in 2006-07 and $2.7b
in 2007-08.
• A new maternity payment of
$3000, which will be payable as a lump sum to all mothers, regardless of income,
from 1 July 2004. The maternity payment will increase to $4000 in July 2006 and
$5000 in July 2008. The new maternity payment will replace the current
(means tested) maternity allowance and the Baby Bonus. As the new
maternity payment will be universal, the maternity immunisation allowance is
also to be free of the means test and will be payable for all children who meet
current immunisation requirements.
The Baby
Bonus will be phased out, and a deadline imposed for lodging a valid Baby Bonus
claim, by amendments to the Income Tax Assessment Act 1997. The changes
relating to the phasing out of the Baby Bonus will take effect from 1 July 2004,
with parents of children born on or after this time being able to claim a
maternity payment instead of a Baby Bonus. The changes relating to the deadline
for lodging valid Baby Bonus claims will take effect from 1 July 2001,
the date of effect of the Baby Bonus.
The net
additional financial cost of introducing the new maternity payment for the
Family and Community Services portfolio is $559m in 2004-05, $567m in 2005-06,
$797m in 2006-07 and $818m in 2007-08.
The Baby
Bonus amendments will reduce expenses across the forward estimates period by
$50m in 2005-06, $100m in 2006-07 and $140m in 2007-08.
• A reduction in the rate at which
family tax benefit Part B is withdrawn, from 30 cents in the dollar to 20 cents
in the dollar.
• An increase in the
amount of income a secondary earner in a partnered relationship can earn before
entitlement to family tax benefit Part B is affected, from $1825 to $4000
annually.
The financial cost of these measures
is $414m in 2004-05, $438m in 2005-06, $459m in 2006-07 and $479m in
2007-08.
Clause 1 sets out how the Act is to be cited,
that is, the Family Assistance Legislation Amendment (More Help for Families
- Increased Payments)
Act 2004.
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;
• ‘Family Assistance
Administration Act’ means the A New Tax System (Family Assistance)
(Administration) Act 1999;
• ‘Tax
Assessment Act 1936’ means the Income Tax Assessment Act
1936;
• ‘Tax Assessment 1997’
means the Income Tax Assessment Act
1997;
• ‘FTB’ means family
tax benefit.
Schedule 1 – Amendments relating
to FTB Part A supplement
This Schedule provides for an ongoing increase in the
maximum and base rates of FTB Part A of $600 annually for each FTB child. The
new FTB Part A supplement would be paid as a lump sum on income reconciliation
for the 2003-04 income year and later years.
An individual can claim payment of FTB by instalments, as
a lump sum for a past period or as a single payment/in substitution because of
the death of an FTB child or individual. These options are set out in section 7
of the Family Assistance Administration Act.
If an individual makes an effective claim and
meets all the relevant eligibility criteria, then the Secretary must make an
entitlement determination. Where the claim is for payment of FTB by instalment,
the entitlement determination is made under section 16 of the Family
Assistance Administration Act and provides that an individual is entitled to be
paid FTB on each day that the determination is in force at an appropriate daily
rate. For past period claims, the entitlement determination is made under
section 17 of the Family Assistance Administration Act to the effect that the
individual is entitled to be paid FTB for the relevant past period. Section 18
covers the determination of claims for FTB because of the death of an FTB child
or individual.
An individual’s annual
rate of FTB is calculated in accordance with the relevant method statements in
Schedule 1 to the Family Assistance Act (subsection 58(1) refers). Schedule 1
applies irrespective of the payment method claimed by an individual. In defined
circumstances (for example, where the care of an FTB child is shared between
separated parents or a couple has a blended family), certain amounts for the
child or the rate of FTB can be “shared” in accordance with
percentages determined by the Secretary (sections 59 to 61 of the Family
Assistance Act refer). The annual rate is converted to a daily rate under
subsection 58(3) of the Family Assistance Act (to support payment of FTB by
instalments and payment for a past period that is less than a whole
year).
An individual’s annual rate of FTB
is made up of the individual’s Part A rate and a Part B rate. An
individual can be entitled to one or both of these amounts, depending on the
individual’s circumstances.
Instalment payments are provided for in
section 23 of the Family Assistance Administration Act. Instalments are paid on
a fortnightly basis (the “instalment period”). The amount of an
instalment payment is “the amount accruing for the days in the instalment
period for which an entitlement to be paid FTB arose under the
determination” (definition of “instalment amount” in
subsection 23(2)). Other types of FTB payments are paid at such time and in
such manner as the Secretary determines (section 24 of the Family Assistance
Administration Act refers).
The rate
calculation process in Schedule 1 to the Family Assistance Act incorporates an
income test that relies on the concept of “adjusted taxable income”
(ATI) as defined in Schedule 3. It is actual ATI for the current income
year that is ultimately relevant in determining an individual’s annual and
daily rate of FTB, although an estimate of income can be used to calculate a
“provisional” rate (section 20 of the Family Assistance
Administration Act refers). ATI for members of a couple for FTB Part A includes
the ATI of both partners (clause 3 of Schedule 3 refers).
The general rules around ATI and the rate
calculation process for FTB are specifically modified to take account of the
situation where an individual dies part way through the year and where an
individual was partnered for part of the relevant income year but separated at
the end of that year (see subclause 2(2) and clause 3A of Schedule 3 to the
Family Assistance Act).
The process of income
reconciliation is a process of comparing an individual’s rate calculated
and paid on the basis of an estimate of ATI and actual ATI. Income
reconciliation is a Secretary initiated review under section 105 of the Family
Assistance Administration Act when details of actual ATI become known (the
Australian Taxation Office has sent the relevant income information to
Centrelink). Income reconciliation generally happens after the end of the
income year to which the payment relates. There may be occasions where an
individual dies part way through an income year where reconciliation can happen
before that time.
Maintenance income can also
affect an individual’s rate of FTB Part A. As the maintenance income test
is based on maintenance income received in the current income year, an estimate
of maintenance income can be used to determine rate. The relevant provisions
relating to the maintenance income test are set out in Division 5 of
Schedule 1 to the Family Assistance Act. After the end of the income year when
actual maintenance income is known, reconciliation (Secretary initiated review
under section 105 of the Family Assistance Administration Act) occurs.
FTB Part A
supplement
The new FTB Part A supplement
will be included in an individual’s maximum rate of FTB Part A. The
supplement will also be included in the base rate of FTB by virtue of existing
cross-references in the FTB rate calculator in Schedule 1 to the Family
Assistance Act (amendments are not required to achieve this outcome). However,
the supplement will not be paid in respect of a particular income year until
reconciliation occurs (which will generally be after the end of that income
year). Schedule 1 includes specific provisions that set out when reconciliation
occurs in particular circumstances (for example, when the individual is and
remains a member of a couple). These provisions establish a relevant
reconciliation time that is then the trigger for review (and payment of the
supplement).
The amount of the FTB Part A
supplement is $600 for each FTB child. There would be capacity to
“split” the payment in certain situations where the care of an FTB
child is shared.
The supplement would be
added into an individual’s rate of FTB on reconciliation in respect of the
2003-04 income year. The supplement would be indexed on 1 July 2004 (to set a
new amount for the 2004-05 income year) and then would be paid for 2004-05 when
reconciliation occurs in relation to that income year and so on.
Explanation of
changes
The rate calculation process for FTB Part A is set out
in Schedule 1 to the Family Assistance Act. There are two ways in which that
rate can be calculated. Method 1 is used where the individual’s income
does not exceed the “higher income free area” as defined in clause 2
of Schedule 1 or the individual or his/her partner is receiving a social
security pension or benefit or a service pension. Method 2 is used where the
individual’s income does exceed the higher income free area and neither
the individual nor his/her partner is receiving a social security pension or
benefit or a service pension.
The “Method
1” calculation process is outlined in the method statement at the end of
clause 3 of Schedule 1.
The first step is to
calculate an individual’s maximum rate based on the number and ages of the
individual’s FTB children and the individual’s eligibility for large
family supplement, multiple birth allowance and rent assistance.
Step 2 is to apply an income test to ascertain
the individual’s income tested rate. An individual’s income tested
rate will be their maximum rate if the individual’s income is less than
the income free area (as set out in clause 19 of Schedule 1). For every
dollar over the income free area, the individual’s maximum rate is reduced
by 30 cents in the dollar until the “base rate” (defined in clause 4
of Schedule 1) is reached. This is known as the first taper. An
individual’s FTB Part A rate, calculated using method 1, cannot fall below
the base rate.
The next step is to apply the
maintenance income test if relevant to ascertain the individual’s income
and maintenance tested rate. This test has the effect of further reducing an
individual’s maximum rate (assuming it is more than the base rate) by 50
cents for every dollar of maintenance income in excess of the individual’s
maintenance income free area (as defined in clauses 22 and 23 of Schedule 1).
As with the income test, an individual’s FTB Part A rate cannot fall below
the base rate.
The “Method 2”
calculation process is outlined in the method statement at the end of clause 25
of Schedule 1.
Step 1 is to work out an
individual’s maximum rate having regard to the number and ages of the
individual’s FTB children (unlike method 1, there is no additional amount
available as rent assistance). The maximum rate for the purposes of method 2 is
the same as the base rate for method 1.
The
next step is to apply the income test in clause 28 of Schedule 1 to the Family
Assistance Act to ascertain the individual’s provisional Part A rate.
An individual’s maximum rate is then reduced by 30 cents for each dollar
of income above the individual’s higher income free area. This is known
as the second taper.
Items 1 and 2 increase an
individual’s maximum rate for both methods 1 and 2 by the new FTB Part A
supplement. This is achieved
by:
• adding a new paragraph (ca) into
step 1 of the method statement in clause 3 of Schedule 1 to the Family
Assistance Act which refers to the new FTB Part A supplement;
and
• adding a new paragraph (d) into
step 1 of the method statement in clause 25 of Schedule 1 to the Family
Assistance Act which refers to the new FTB Part A supplement.
The FTB Part A supplement would also be incorporated into the base rate as defined in clause 4 of Schedule 1 by virtue of the reference in clause 4 to the maximum rate worked out under clause 25. Separate amendments are not required to achieve this result.
However, as there is capacity to split FTB between two or
more individuals who are not members of the same couple where the care of an FTB
child is shared, this capacity is carried over into new section 38A, in
subsection 2. If the Secretary has determined under subsection 59(1) of
the Family Assistance Act the percentage that is to be the individual’s
percentage of FTB for an FTB child, then the FTB Part A supplement in respect of
that child is also dealt with in accordance with that determination. Therefore
a 70:30 split under subsection 59(1) would mean that the FTB Part A supplement
is split on the same terms.
New subsection
38A(4) makes it clear that indexation of the FTB Part A supplement on 1 July
2004 applies prospectively in relation to the 2004-05 income year and not to the
2003-04 income year
Items 4 and 5 amend
the relevant indexation provisions in Schedule 4 to the Family Assistance Act to
ensure that the new FTB Part A supplement is indexed in accordance with the
Consumer Price Index on 1 July of each year (starting on 1 July 2004) on the
same terms as the other components of the maximum rate of FTB Part A.
Clause 7 of Schedule 4 to the Family
Assistance Act provides for the adjustment of the FTB under 13 child rate and
the FTB 13-15 child rate to ensure that proportional parity is maintained
between those rates and the combined pensioner couple maximum basic rate.
Items 6, 7 and 8 make some consequential amendments to the adjustment
provisions in clause 7 to take account of the new FTB Part A supplement.
A New Tax System (Family Assistance)
(Administration) Act 1999
Item 9
inserts a new Subdivision D at the end of Division 1 of Part 3 to the Family
Assistance Administration Act.
In broad terms,
the new Subdivision provides that the new FTB Part A supplement cannot be added
into an individual’s rate of FTB unless and until the relevant FTB
reconciliation conditions are satisfied and sets out the “FTB
reconciliation conditions”.
There are a
number of amounts that may be unknown at the time that eligibility for, or rate
of, FTB is being considered. Section 20 of the Family Assistance Administration
Act enables an estimate of an unknown amount relevant to eligibility or rate to
be used in these circumstances. The unknown amount could be of taxable income,
adjusted fringe benefits total, target foreign income, net rental property loss,
tax free pension or benefit, deductible child maintenance expenditure (these are
components of the definition of “adjusted taxable income” as defined
in clause 2 of Schedule 3 to the Family Assistance Act), maintenance income and
adjusted taxable income of an FTB child (a child whose income is above a
specified income cut-out amount in a particular income year cannot be an FTB
child in that year according to section 22A of the Family Assistance
Act).
The FTB Part A supplement should not be
taken into account in determining an individual’s annual rate of FTB
until, broadly speaking, the process of reconciliation occurs. The FTB
reconciliation conditions outlined in new Subdivision D are essentially the
triggers for reconciliation.
Under new
section 32A, the Secretary is required to disregard the FTB Part A supplement
provisions in making or varying an instalment or past period entitlement
determination under which an individual is entitled to FTB in respect of a
“same-rate benefit period” in a particular income year unless and
until the individual has satisfied the relevant FTB reconciliation conditions
for that period.
The concept of a same-rate
benefit period within an income year acknowledges that an individual’s
circumstances may change during the course of an income year such that different
reconciliation conditions may need to be satisfied in relation to different
periods in an income year. However, the reconciliation conditions for all the
same rate benefit periods in the relevant income year would need to be satisfied
before the new FTB
Part A supplement is included
in an individual’s rate calculation on reconciliation.
Note 1 indicates that those FTB Part A
supplement provisions will be taken into account when the relevant determination
or variation is reviewed under section 105 when the Secretary is required to do
so by new section 105A.
Note 2 refers the
reader to new section 32B which sets out when the FTB reconciliation conditions
are satisfied.
New section 32B sets out when the FTB reconciliation
conditions (outlined in new sections 32C to 32Q) are satisfied in relation to a
same rate benefit period. If only one of these conditions applies to an
individual, then the individual satisfies the FTB reconciliation conditions at
the “relevant reconciliation time”. Where more than one condition
applies, then the individual satisfies the FTB reconciliation conditions at
whichever relevant reconciliation time is the latest. The relevant
reconciliation time for each condition is then set out in the provision relating
to the condition.
New sections 32C to 32H set
out the relevant reconciliation time in situations where an individual, or a
partner of the individual, is or was required to lodge an income tax return for
the relevant income year. In the situations covered by these sections, the
relevant reconciliation time is generally when an assessment is made of the
individual’s taxable income, or the partner’s taxable income (if
both have an assessment, it is the later of the two). However, this is
conditional on the individual’s income tax return, and the partner’s
income tax return, having been lodged before the end of the second income year
following the relevant income year. If the individual, or partner, lodges his
or her income tax return after that time, the result is that the FTB Part A
supplement cannot be paid. The situations covered by new sections 32C to 32H,
and any exceptions to the relevant reconciliation time being when an assessment
of taxable income is made, are noted below.
New
section 32C covers the situation where the individual was a member of a couple
throughout the same-rate benefit period, and continues to be partnered to the
other member until the end of the second income year following the relevant
income year.
New section 32D covers the
situation where the individual was not a member of a couple at any time during
the same-rate benefit period.
New section 32E
covers the situation where the individual was a member of a couple throughout
the same-rate benefit period, but was no longer partnered to the other member at
the end of the relevant income year.
New
section 32F covers the situation where the individual was a member of a couple
throughout the same-rate benefit period, but separated after the end of the
relevant income year and before the end of the designated date (defined in new
section 32R) in the next income year, and at least one person in the
couple lodged an income tax return for the relevant income year before the
end of the designated date in the next income
year.
• In new section 32F, there is one
exception to the relevant reconciliation time being when an assessment of
taxable income is made. This is set out in new subsection 32F(4), and covers
the situation where the person entitled to FTB has lodged an income tax return
for the relevant income year before the end of the designated date in the next
income year, but the person’s former partner has not. In this situation,
the relevant reconciliation time is the end of the designated date in the next
income year. The reason for this exception is to prevent a delay beyond that
time by the person’s former partner in lodging his or her income tax
return from also delaying payment of the FTB Part A
supplement.
New section 32G covers the
situation where the individual was a member of a couple throughout the same-rate
benefit period, but separated after the end of the relevant income year and
before the end of the designated date in the next income year, and neither
person in the couple lodged an income tax return for the relevant income
year before the end of the designated date in the next income
year.
New section 32H covers the situation
where the individual was a member of a couple throughout the same-rate benefit
period, but separated after the designated date in the next income year and
before the end of the second income year after the relevant income
year.
• In new section 32H, the relevant
reconciliation time is the later of when an assessment is made of the
individual’s taxable income (if the income tax return was lodged before
the end of the second income year following the relevant income year), and when
the individual separated.
New section 32J sets
out the relevant reconciliation time for an individual who is not required to
lodge a tax return. It applies where that individual (the first individual) or
anyone else whose adjusted taxable income is relevant in working out the first
individual’s entitlement to, or rate, of FTB (except an FTB child of the
first individual), is not required to lodge a tax return for the relevant income
year.
The relevant reconciliation time is the
earlier of:
• the time after the end of
the income year when the first individual notifies the Secretary of his or her
adjusted taxable income for the relevant income year; or
• the time after the end of the income year when the
Secretary becomes satisfied that the adjusted taxable income of the first
individual can be worked out without such notification.
New section 32K sets out the relevant
reconciliation time for an individual who has a child aged between 5 and 16 who
is not undertaking full-time study or primary eduction where the individual has
provided an estimate of the child’s adjusted taxable income and, assuming
the child’s income is less than the “cut out amount”, the
child would be an FTB child of the individual.
In this situation, the relevant reconciliation time is the earlier
of:
• the time after the end of the
income year when the first individual notifies the Secretary of the
child’s adjusted taxable income for the relevant income year;
or
• the time after the end of the income year when the
Secretary becomes satisfied that the adjusted taxable income of the child can be
worked out without such notification.
The
“cut out amount” for a child’s income is defined in subsection
22A(2) of the Family Assistance Act.
The
question of whether a child is undertaking primary education is to be determined
in the same way as it is determined under section 22A of the Family Assistance
Act.
New section 32L sets out the relevant
reconciliation time for an individual who has a child aged 16 or more where the
individual has provided an estimate of the child adjusted taxable income and,
assuming the child’s income is less than the “cut out amount”,
the child would be an FTB child of the
individual.
In this situation also, the
relevant reconciliation time is the earlier
of:
• the time after the end of the
income year when the first individual notifies the Secretary of the
child’s adjusted taxable income for the relevant income year;
or
• the time after the end of the income year when the
Secretary becomes satisfied that the adjusted taxable income of the child can be
worked out without such notification.
The
“cut out amount” for a child’s income is defined in subsection
22A(2) of the Family Assistance Act.
New
section 32M sets out the relevant reconciliation time for an individual whose
adjusted taxable income for the relevant income year is affected by an amount of
target foreign income, tax free pension or benefit or deductible child
maintenance expenditure of the individual or another
individual.
Where this happens, the
individual’s relevant reconciliation time is the earlier
of:
• the time after the end of the
income year when the first individual notifies the Secretary of his or her
adjusted taxable income for the relevant income year; or
• the time after the end of the income year when the
Secretary becomes satisfied that the adjusted taxable income of the first
individual can be worked out without such notification.
“Target foreign income”,
“tax free pension or benefit” and “child maintenance
expenditure” are concepts defined in clauses 5, 7 and 8 of Schedule 3 to
the Family Assistance Act.
New section 32N sets
out the relevant reconciliation time for an individual who has “annualised
maintenance income” (as defined in Division 5 of Part 2 of Schedule 1 to
the Family Assistance Act) and who is not exempt from the maintenance income
test.
In this situation, the relevant
reconciliation time is the earlier
of:
• the time after the end of the
income year when the individual notifies the Secretary of information sufficient
to work out the individual’s annualised amount of maintenance income for
the relevant income year; or
• the time after the end of the income year that the
Secretary becomes satisfied that the individual’s annualised amount of
maintenance income can be worked out without such notification.
New section 32P sets out the relevant
reconciliation time for an individual who is not a member of a couple, is exempt
from the Part A income test, either didn’t have annualised maintenance
income or was exempt from the maintenance income test and who has an FTB child
whose adjusted taxable income is not relevant in determining the
individual’s entitlement to, or rate of
FTB.
In this situation, the relevant
reconciliation time is the end of the relevant income
year.
New section 32Q allows the Secretary to
determine the relevant reconciliation time for classes of individuals in
specified circumstances. The determination would be in writing and would be a
disallowable instrument.
New section 32R
defines “designated date” (as used in some of the conditions
described above) as the specified date determined by the Secretary in a
disallowable instrument.
Item 10
inserts a new section 105A into the Family Assistance Administration Act. Under
this new provision, the Secretary is required to review a determination which,
when made or varied, disregarded the new FTB Part A supplement if the individual
subsequently satisfies the FTB reconciliation conditions for each same rate
benefit period in the relevant income year. This assumes that if the FTB Part A
supplement were not disregarded, it would have been relevant in working out the
individual’s rate of FTB.
The resulting
review under section 105 of the Family Assistance Administration Act must take
account of the relevant FTB Part A supplement provisions (but other matters can
also be considered in the context of the review).
Item 11 sets out the various amendments in
Part 1 apply.
The amendments relating to the indexation of the
“FTB gross supplement amount” apply in relation to FTB for the
2004-05 income year and later income years.
All
other amendments made in Part 1 apply in relation to FTB for the 2003-04 income
year and later income years.
Schedule 2 – Amendments relating
to maternity payment and maternity immunisation allowance
This Schedule provides for a new maternity payment of
$3000, which will be payable as a lump sum to all new mothers, regardless of
income, from 1 July 2004. The maternity payment will increase to
$4000 in July 2006 and $5000 in July 2008. The new maternity payment will
replace the current (means tested) maternity allowance and the Baby Bonus.
As the new maternity payment will be universal, the maternity immunisation
allowance is also to be free of the means test and will be payable for all
children who meet current immunisation
requirements.
The Baby Bonus will be phased
out, and a deadline imposed for lodging a valid Baby Bonus claim, by amendments
to the Tax Assessment Act 1997. The changes relating to the phasing out of
the Baby Bonus will take effect from 1 July 2004, with parents of children born
on or after this time being able to claim a maternity payment instead of a Baby
Bonus. The changes relating to the deadline for lodging valid Baby Bonus claims
will take effect from 1 July 2001, the date of effect of the Baby
Bonus.
To give effect to the new maternity payment, this Schedule
repeals the existing maternity allowance eligibility and rate provisions in the
Family Assistance Act and substitutes new provisions for maternity payment. It
also makes various consequential amendments, to provisions in the Family
Assistance Act, the Family Assistance Administration Act, the Tax Assessment Act
1936 and the Tax Assessment Act 1997, to reflect the name change while
preserving the same general effect for the new payment (as part of the family
assistance law) as for the old allowance.
The
initial amount of the new maternity payment is to be $3000 from
1 July 2004. This Schedule also provides for future increases in the
amount of maternity payment – to $4000 from 1 July 2006 and to $5000 from
1 July 2008.
In relation to maternity
immunisation allowance, amendments are made to the maternity immunisation
allowance eligibility and rate provisions in the Family Assistance
Act.
Certain amendments (other than the name
change) consequential to the main changes are also made to the Family Assistance
Act and the Family Assistance Administration
Act.
Amendments are made to the Tax Assessment
Act 1997 to limit claims for the Baby Bonus to children born between 1 July
2001 and 30 June 2004, or for children aged under five years for whom claimants
otherwise gain legal responsibility during that period. There will also be a
requirement for claims for the Baby Bonus to be lodged by 30 June
2014.
The Schedule also includes a range of
application and saving provisions.
Explanation of
changes
Item 1 repeals the current Division 2 of Part 3 of
the Family Assistance Act (the maternity allowance eligibility provisions) and
substitutes a new version of the Division, containing the eligibility provisions
for maternity payment.
The main changes are in
the name and in the removal of current references to the individual having to
have actually or (in the case of a stillborn child) hypothetically an FTB
Part A rate greater than nil. That rate requirement is how the means test
has been applied to maternity allowance – FTB Part A under the FTB rate
calculator in Schedule 1 to the Family Assistance Act may be reduced to nil
under the income test and/or the maintenance income
test.
Those tests are no longer required for
the new maternity payment, although it is still basically required that the
individual be actually or hypothetically (as applicable) eligible for FTB. This
is to apply the usual FTB criteria such as having at least one FTB child (who
must meet the usual residence requirements) and the individual meeting the
residence requirements personally. However, there is one FTB eligibility
criterion that needs to be overcome for this purpose, ie, that the
individual’s overall rate of FTB (not just the Part A rate) be greater
than nil (see paragraph 21(1)(c) of the Family Assistance Act). Accordingly, an
individual will generally be eligible for maternity payment for a child either
if he or she is (or would hypothetically be) eligible for FTB for the child, or
would be if not for having an overall rate of
nil.
The new section 37 of the Family
Assistance Act inserted by this item includes a further substantive change. The
current maternity allowance is payable only to one eligible individual, with the
Secretary deciding which of two or more individuals who may be eligible for one
child should be the eligible one. This will remain the default rule under the
new maternity payment. However, if the Secretary considers it reasonable in any
given case, the Secretary will be able to share the increased amount of the new
payment between two or more eligible individuals, by determining a percentage
for each of them (so that the total amount for one child is not exceeded). This
discretion is not available in relation to two members of the same couple. The
new arrangement is similar to the arrangements for sharing FTB between eligible
individuals.
Item 2 repeals the current
Division 2 of Part 4 of the Family Assistance Act (dealing with the amount of
maternity allowance) and substitutes a new version of the Division, dealing with
the amount of maternity payment.
The main
change in the substituted Division is to give effect to the substantial increase
in the payment to $3000 (later amendments give effect to the further increases
in this amount to $4000 and $5000, as discussed below). The new sharing rule
mentioned above is also reflected here, so that an individual is eligible only
for his or her determined percentage of the total amount.
The item also reflects a technical change to the
indexation arrangements for the new payment. This is necessary because
indexation of the amount in question is currently achieved by reference to
increases in the rate of parenting payment, a means tested payment under the
Social Security Act 1991. That indexation mechanism is no longer
appropriate for maternity payment, given that the amount of the payment is now
being set without any reference to the rate of parenting payment. Accordingly,
specific indexation provisions are being set up in the family assistance law (by
items 9, 10 and 11) and the existing parenting payment link is
being removed by this item. The new indexation arrangements will basically
retain the parenting payment indexation structure – with reference to CPI
on 20 March and 20 September each year.
The change of name to maternity payment is being
incorporated in the main amendments discussed here. However, the following
items are also necessary, to reflect the name change in various provisions of
the Family Assistance Act, the Family Assistance Administration Act, the Tax
Assessment Act 1936 and the Tax Assessment Act 1997: items 4, 5, 6, 7, 12,
13, 15, 16, 18, 20, 21, 22, 24, 26, 28, 32, 34, 35, 36, 37 and 38. The
amendments to section 52-150 of the Tax Assessment Act 1997, in particular, are
to retain the tax exempt status of the new payment on the same basis as the old
allowance.
The following items make amendments
to reflect in relevant Family Assistance Administration Act provisions the new
rules for sharing maternity payment: items 17 and
19.
New section 47 (relating to payment of
maternity payment and maternity immunisation allowance), substituted by item
23, gives effect to a further substantive change in relation to the new
maternity payment. This is to give the Secretary a discretion to allow
maternity payment to be paid in instalments, rather than as one lump sum as at
present. If this were considered appropriate, the total amount would be paid in
six equal instalments, and generally to a bank account in the same manner as for
FTB. For consistency, it is being clarified that lump sum payments of maternity
payment and maternity immunisation allowance should also generally be paid to a
bank account. There is capacity, however, to pay any of the amounts in a
different way. Rules are included to round to the nearest cent any amount paid
under the section – this will be relevant mostly to maternity payment
shared between eligible individuals and/or paid as
instalments.
The new arrangement to allow
payment by instalments is also reflected in the new version of section 38 of the
Family Assistance Act, substituted by item 1, so that amounts of
maternity payment to be paid to an individual on the death of another individual
are limited to those not already paid to the deceased individual – again,
this is similar to the FTB
arrangements.
Items 43 and 45 make
amendments to the Family Assistance Act eligibility provisions for maternity
immunisation allowance to remove the means test requirement in the same way as
for the new maternity payment.
Similarly,
item 47 amends section 67 of the Family Assistance Act, dealing with the
amount of maternity immunisation allowance, to remove the indexation link to
parenting payment. The new indexation arrangements for maternity immunisation
allowance are covered by the amendments made by items 9, 10 and
11.
Item 30 repeals section 72 of
the Family Assistance Administration Act. That section currently prevents debts
arising under section 71 in certain cases where the individual’s FTB Part
A rate being nil has precluded the individual’s entitlement to maternity
allowance or maternity immunisation allowance. Those circumstances will no
longer arise.
There are several application and
saving provisions included in these amendments. The amendments discussed above
relating to the new maternity payment generally apply in relation to children
born or delivered on or after 1 July 2004. However, they also apply to
children born before that date who are placed with families on or after that
date as part of an adoption process, as long as that placement takes place
within the relevant child’s first
26 weeks.
The amendments relating to
maternity immunisation allowance generally apply in relation to children who
would attract the allowance on or after 1 July 2004, whether it is a
living child who reaches the 18 month minimum eligibility age for the allowance
on or after that date, a stillborn child delivered on or after that date, or a
child who is born alive but who dies on or after that
date.
Other application and saving amendments
are made – these are basically to preserve current maternity allowance and
maternity immunisation allowance rights and obligations in relation to
eligibility, claims, payments, debts, etc.
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Current law
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New law
|
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Baby Bonus claims are currently allowed in relation to
children born on or after 1 July 2001, or children aged under 5 for whom
the claimant gains legal responsibility on or after this time.
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Baby Bonus claims will be allowed in relation to
children born between 1 July 2001 and 30 June 2004 inclusive, or
children aged under 5 for whom the claimant gains legal responsibility during
this time.
Claims for the Baby Bonus can be lodged up to and
including 30 June 2014.
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Child event – current
law
A person is entitled to the Baby Bonus
if they meet a number of criteria, including that they have a ‘child
event’.
A person has a child event at a
particular time (event time) if:
• the
person becomes legally responsible for a child at the event
time;
• the event time is on or after 1 July
2001;
• the person is an Australian resident
at the event time;
• the person has not
previously been legally responsible for the child before 1 July 2001;
and
• there is no other person who is also
legally responsible for the child at the event time and who was also legally
responsible for the child at a time before 1 July
2001.
Child event – new
law
The amendment made by item 39
provides that only persons who become legally responsible for a child aged under
five years between 1 July 2001 and 30 June 2004 inclusive will be able to
make a claim for the Baby Bonus.
The item sets
out that a person will have a child event at a particular time (event time)
if:
• the person becomes legally
responsible for a child at the event
time;
• the event time is between 1 July 2001
and 30 June 2004 inclusive;
• the person is
an Australian resident at the event
time;
• the person has not previously been
legally responsible for the child before 1 July 2001;
and
• there is no other person who is also
legally responsible for the child at the event time and who was also
legally responsible for the child at a time before 1 July
2001.
Example 1 Sue is an Australian
resident who has her first child, Kerrie, on 30 June
2004.
Sue has a child event and may claim the
Baby Bonus in respect of Kerrie as:
• Sue
became legally responsible for Kerrie when she was
born;
• the event time was between 1 July
2001 and 30 June 2004;
• Sue was an
Australian resident at the event
time;
• neither Sue nor another person was
legally responsible for the child before 1 July
2001.
Provided that she continues to meet the
eligibility requirements, Sue could claim the Baby Bonus for income years up to
and including 2008-09.
Example 2
Lauren and Craig are Australian residents who have two children, Lionel, born 11
August 2000, and Tony, born 5 October 2002. Lauren has claimed the Baby
Bonus in respect of Tony for the 2002-03 and 2003-04 income
years.
Provided that she continues to meet the
eligibility requirements, Lauren could continue to claim the Baby Bonus in
respect of Tony for income years up to and including
2007-08.
Items 40 and 41 impose a
deadline of 30 June 2014 for lodging valid Baby Bonus claims. This will allow
taxpayers who are eligible to claim the Baby Bonus sufficient time to lodge
claims for their full five year entitlement to the Baby Bonus, as well as
allowing a further four years to align with the period for which tax returns may
be reviewed and/or amended.
The commencement clause of the bill provides for the
changes to the child event provisions of the Baby Bonus made by item 39
to apply from 1 July 2004.
The
commencement clause also provides for the imposition of a deadline by which a
valid Baby Bonus claim must be lodged to apply from 1 July 2001, the
date of effect of the Baby Bonus.
The last Parts of the Schedule provide for the later
increases in the new maternity payment. The amount will rise to $4000 in
relation to children born or delivered on or after 1 July 2006. However, the
amendment giving effect to this increase will not operate in the (unlikely)
event that normal indexation increases in the meantime overtake that $4000
figure by that date. Similarly, the amount will rise to $5000 in relation to
children born on or after 1 July 2008, but not so as to override any
interim indexation increases to higher than that amount at that
point.
Schedule 3 – Amendments relating
to income taper
This Schedule provides for a reduction in the rate at
which FTB Part A reduces from the maximum rate to the base rate, from 30 cents
in the dollar to 20 cents in the dollar. It also provides for a reduction in
the rate at which FTB Part B is withdrawn, from 30 cents in the dollar to
20 cents in the dollar.
The income test for FTB Part A is set out in Division 5 of
Part 2 of Schedule 1 to the Family Assistance Act. The method statement in
clause 18 provides a mechanism for working out an individual’s
“reduction for adjusted taxable income” (that is, the amount that
the individual’s maximum rate of FTB Part A is to be reduced because of
income). Step 5 of the method statement incorporates a 30% taper. This means
that an individual maximum rate is reduced by 30 cents for each dollar of income
over the individual’s income free
area.
FTB Part B also has a 30% taper that
applies under the income test. The income test for FTB Part B is set out in
Division 3 of Part 4 of Schedule 1 to the Family Assistance Act. The relevant
provision is step 5 in the method statement in clause 32.
This Schedule reduces the tapers in clauses 18
and 32 from 30% to 20%.
The income test taper
applicable to FTB Part A (method 2) would remain at 30% - the method statement
in clause 28 of schedule 1 refers. Method 2 applies where the individuals
adjusted taxable exceeds the income higher income free area.
Item 1 reduces the taper that applies under the
income test for FTB Part A (method 1) from 30% to 20% by amending step 5 in the
method statement in clause 18 of Schedule 1 to the Family Assistance
Act.
Item 2 reduces the taper that
applies under the income test for FTB Part B from 30% to 20% by amending step 5
in the method statement in clause 32 of Schedule 1 to the Family Assistance
Act.
Item 3 provides that the new tapers
apply in relation to FTB for the 2004-05 income year and subsequent income
years.
Schedule 4 – Amendments relating
to income free area
This Schedule provides for an increase in the amount of
income a secondary earner in a partnered relationship can earn before
entitlement to FTB Part B is affected, from $1825 to $4000
annually.
The income test for FTB Part B is set out in the method
statement in clause 32 of Schedule 1 to the Family Assistance Act. If the
income of a secondary earner in a partnered relationship exceeds the income free
area, then the individual’s standard rate of FTB Part B is subject to
reduction.
This Schedule increases the income
free area for FTB Part B to $4,000.
Item 1 repeals clause 33 of Schedule 1 to the
Family Assistance Act and inserts a new clause 33. New clause 33 sets an
individual’s income free area at $4,000. The new $4,000 income free area
will apply in relation to FTB for the 2004-05 income year.
The income free area will then be indexed on 1
July 2005 and the new indexed amount will apply for 2005-06 and so on.
The relevant application provision is in
item 3(1). Item 4 ensures that the new income free amount of
$4,000 is not indexed on 1 July 2004.
Item
2 makes a technical amendment to the relevant indexation provision. This
amendment applies to FTB for the 2005-06 income year or a subsequent income
year.