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ISSN 1328-8091
BILLS DIGEST NO. 88, 2012-13 12 March 2013
Family Assistance and Other Legislation Amendment Bill 2013
Michael Klapdor Social Policy Section
Contents
Purpose of the Bill ................................................................................................................................... 3
Structure of the Bill ................................................................................................................................. 3
Baby bonus .............................................................................................................................................. 4
Background .......................................................................................................................................... 4
Brief history of the Baby Bonus ....................................................................................................... 5
Birth rates and spending issues ....................................................................................................... 6
Amounts, recipients and expenditure on Baby Bonus .................................................................... 6
Introduction of Paid Parental Leave .................................................................................................... 8
Paid Parental Leave Pay ................................................................................................................... 8
Dad and Partner Pay ............................................................................................................................ 9
Choosing between Baby Bonus and Paid Parental Leave pay ........................................................... 10
Recipients and expenditure on Paid Parental Leave payments .................................................... 10
Committee consideration ..................................................................................................................... 11
Senate Community Affairs Legislation Committee ........................................................................... 11
Senate Economics Legislation Committee ........................................................................................ 11
Senate Standing Committee for the Scrutiny of Bills ........................................................................ 12
Policy position of non-government parties/independents................................................................... 12
Position of major interest groups ......................................................................................................... 13
Financial implications ............................................................................................................................ 13
Statement of Compatibility with Human Rights ................................................................................... 13
Key issues and provisions ...................................................................................................................... 13
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Schedule 1—Baby Bonus ................................................................................................................... 13
Multiple births ............................................................................................................................... 14
Instalments .................................................................................................................................... 15
Are costs lower for second and subsequent children? ................................................................. 15
How many people will be affected by the changes ....................................................................... 16
Will the changes affect birth rates ................................................................................................ 17
Risk of early births ......................................................................................................................... 18
Why is Paid Parental Leave treated differently ............................................................................. 20
Comments ...................................................................................................................................... 20
Schedule 2—Family tax benefit and double orphan pension ........................................................... 21
Family tax benefit eligibility ........................................................................................................... 21
Double Orphan Pension ................................................................................................................. 22
Other provisions .................................................................................................................................... 23
Family Assistance and Other Legislation Amendment Bill 2013 3
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Family Assistance and Other Legislation Amendment Bill 2013
Date introduced: 13 February 2013
House: House of Representatives
Portfolio: Families, Housing, Community Services and Indigenous Affairs
Commencement: Various dates as set out in the table in clause 2 of the Bill
Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill's home page, or through http://www.aph.gov.au/Parliamentary_Business/Bills_Legislation. When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the ComLaw website at http://www.comlaw.gov.au/.
Purpose of the Bill
The purpose of the Family Assistance and Other Legislation Amendment Bill 2013 (the Bill) is to amend the A New Tax System (Family Assistance) Act 1999 (the FA Act)1, the A New Tax System (Family Assistance) (Administration) Act 1999 (the FA Admin Act)2, the Paid Parental Leave Act 2010 (the PPL Act)3, the Social Security Act 1991 (the SS Act)4, and the Social Security (Administration) Act 1999 (the SS Admin Act)5 to:
ï· reduce the amount of Baby Bonus paid for second and subsequent children from $5000 to $3000
ï· align the age of eligibility for double orphan pension with that for family tax benefit
ï· allow certain families to continue to receive family tax benefit in respect of a child who has finished secondary school or its equivalent until the end of that calendar year
ï· make technical amendments to the eligibility rules for Schoolkids Bonus and
ï· clarify the meaning of the term ‘entrusted to care’ to reflect the policy intent of the Baby Bonus.
Structure of the Bill
The Bill is divided into three schedules as follows:
1. The text of the A New Tax System (Family Assistance) Act 1999 can be viewed at: http://www.comlaw.gov.au/Details/C2013C00028/Download 2. The text of the A New Tax System (Family Assistance) (Administration) Act 1999 can be viewed at: http://www.comlaw.gov.au/Details/C2013C00030/Download 3. The text of the Paid Parental Leave Act 2010 can be viewed at:
http://www.comlaw.gov.au/Details/C2013C00010/Download 4. The text of the Social Security Act 1991 can be viewed at: http://www.comlaw.gov.au/Details/C2013C00081/Download 5. The text of the Social Security (Administration) Act 1999 can be viewed at:
http://www.comlaw.gov.au/Details/C2013C00051/Download
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ï· Schedule 1 of the Bill amends the FA Act, FA Admin Act and the Family Assistance and Other Legislation Amendment Act 20126 in relation to the Baby Bonus
ï· Schedule 2 of the Bill amends the FA Act and the SS Act in relation to Family Tax Benefit and Double Orphan Pension and
ï· Schedule 3 of the Bill amends a number of statutes in relation to the Schoolkids Bonus, the clarification of the term ‘entrusted to care’, Family Assistance Clean Energy Payments, Social Security and Veterans’ Entitlements Supplements and to Dad and Partner Pay.
This Bills Digest contains significant information and analysis in relation to the changes to the Baby Bonus as this is the primary measure proposed by the Bill.
The other amendments are dealt with in less detail.
Baby bonus
Background
The main measure proposed by the Bill, reducing the Baby Bonus for second and subsequent children, was announced in the Mid-Year Economic and Fiscal Outlook (MYEFO) on 22 October 2012. The Minister for Families, Community Services and Indigenous Affairs, Jenny Macklin, stated that the purpose of the change was to ‘ensure the family payments system is sustainable into the future’7:
The change recognises that families buy the big ticket nursery items when their first child is born.
Most families don’t face the same upfront costs for a second or third child as they do for their first. Expensive items such as the cot, pram, change table and baby capsule are generally reused for younger siblings.
It’s important that the family payment system is sustainable into the future. 8
The Baby Bonus is a payment intended to help families with the costs of a newborn baby or adopted child (under the age of 16). It is payable to families who have not received Paid Parental Leave and whose estimated combined adjusted taxable income is $75 000 or less in the six months after the child is born or adopted. It is payable to parents whose baby is stillborn.9 The current payment of
6. The text of the Family Assistance and Other Legislation Amendment Act 2012 can be viewed at: http://www.comlaw.gov.au/Details/C2012A00049/Download. Information about the content of that Act, including the Bills Digest is on the relevant Bill homepage which can be viewed at: http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22legislation%2Fbillhome%2Fr4751%2 2
7. J Macklin (Minister for Families, Community Services and Indigenous Affairs and Minister for Disability Reform), A sustainable family payment system, media release, 22 October 2012, viewed 19 February 2013, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressrel%2F1994781%22
8. Ibid.
9. A New Tax System (Family Assistance) Act 1999, section 36.
Family Assistance and Other Legislation Amendment Bill 2013 5
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$5000 per eligible child is made in 13 fortnightly instalments.10 The first instalment is paid at a higher rate of $846.20 and the other 12 fortnights are paid at a rate of $346.15.11
Reducing the Baby Bonus from $5000 to $3000 for second and subsequent children is estimated to save the Budget $505.9 million over four years from the 2012-13 financial year.12
Brief history of the Baby Bonus
At the time of its introduction, the payment now known as the Baby Bonus was called Maternity Payment. The lump sum Maternity Payment introduced by the Howard Government in July 2004 replaced the First Child Tax Rebate and the Maternity Allowance.13 The First Child Tax Rebate, an income-tested tax offset available to families that had given birth or adopted a child after 1 July 2001, was also referred to as the ‘baby bonus’.14 The First Child Tax Rebate was criticised as offering a greater level of assistance to those on higher incomes (who had greater tax liabilities to claim the rebate against).15 The combination of the two existing payments into one non-means tested lump sum maternity payment was seen as an alternative to the introduction of government-funded paid parental leave and one that would provide the same level of assistance to all parents.
The Maternity Allowance that the Maternity Payment also replaced was an income-tested lump sum introduced in 1996. From January 1998, a portion of the Maternity Allowance was turned into a separate payment, the Maternity Immunisation Allowance, paid to those whose children had received age-appropriate immunisation (unless exempt from the requirement). The Maternity Immunisation Allowance remained as a payment after the introduction of the Maternity Payment/Baby Bonus in 2004 but was closed to new recipients from July 2012. Immunisation requirements are now part of the eligibility requirements for the Family Tax Benefit Part A supplement.16
10. A New Tax System (Family Assistance) Act 1999, section 66. 11. Department of Human Services website, ‘Payment rates for baby bonus’, viewed 8 March 2013, http://www.humanservices.gov.au/customer/enablers/centrelink/baby-bonus/payment-rates 12. J Collins (Minister for Community Services, Minster for the Status of Women and Minister for Indigenous Employment
and Economic Development), ‘Second reading speech: Family Assistance and Other Legislation Amendment Bill 2013’, House of Representatives, Debates, 13 February 2013, p. 4, viewed 8 March 2013, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22chamber%2Fhansardr%2Fe1b9741b -6117-42e6-bb54-219d93714fe7%2F0017%22 13. K Patterson (Minister for Family and Community Services), Howard Government helps Australian women balance work
and family, media release, 19 August 2004, viewed 8 March 2013, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressrel%2F11JD6%22 14. D Gray, ‘Bonus for babies to taper: Vanstone’, The Age, 30 October 2001, viewed 8 March 2013, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressclp%2FBGA56%22 15. A Wilson, ‘Baby bonus “for the lucky few”’, The Australian, 31 October 2001, viewed 8 March 2013,
http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressclp%2FSMA56%22 16. N Roxon (Minister for Health and Ageing) and J Macklin (Minister for Families, Housing, Community Services and Indigenous Affairs), Stronger immunisation incentives, media release, 25 November 2011, viewed 8 March 2013,
http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressrel%2F1251175%22
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Following the 2004-05 Budget, the term Baby Bonus was used interchangeably for both the First Child Tax Rebate and new Maternity Payment. From 1 July 2007, Maternity Payment was formally renamed the Baby Bonus.17
From 1 January 2009, an income test was applied to the Baby Bonus limiting eligibility for the payment to families whose combined adjusted taxable income was expected to be $75 000 in the six months following the birth (including stillbirth) or adoption. Also, on the same date, the payment switched from being paid as a lump sum to most families to being paid in mandatory fortnightly instalments.18
Birth rates and spending issues
There was significant discussion around the time of the introduction of the Maternity Payment and in subsequent years as to whether the payment provided an incentive for women to have children and whether the payment had any effect on the birth rates.19 Issues were also raised about the lump-sum payment being used ‘irresponsibly’ by some mothers to make purchases unrelated to their newborn children. The payment has been dubbed the ‘plasma bonus’ by some in reference to the payment reportedly being used to buy high-end televisions and other luxuries.20 However, there is little evidence to support this view.21 The issue of birth rates is discussed below in the ‘Key issues and provisions’ section of this Bills Digest.
Amounts, recipients and expenditure on Baby Bonus
The amount of Maternity Payment/Baby Bonus was paid as a lump sum amount of $3000 per child when first introduced in 2004.22 This amount has increased over time due to indexation to movements in the Consumer Price Index (CPI) as well as ad-hoc increases. From 1 January 2009, the
17. See: D Daniels and K Magarey, Families, Community Services and Indigenous Affairs Legislation Amendment (Child Support Reform Consolidation and Other Measures) Bill 2007, Bills Digest, no. 141, 2006-07, Parliamentary Library, Canberra, 2007, viewed 8 March 2012, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22legislation%2Fbillsdgs%2FZBZM6%2 2
18. Families, Housing, Community Services and Indigenous Affairs and Other Legislation Amendment (2008 Budget and Other Measures) Bill 2008, viewed 8 March 2013, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22legislation%2Fbillhome%2Fr2988%2 2
19. C Pirani, ‘Boom in birthrate has three fathers’, The Australian, 22 September 2006, p. 3, viewed 8 March 2013, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressclp%2FZPXK6%22 20. R Haynes, ‘Blowing the baby bonus: reform would lead to fall in plasma tv sales’, The Daily Telegraph, 3 April 2008, p. 9, viewed 8 March 2013,
http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressclp%2FN22Q6%22 21. See: L Buckmaster, ‘The plasma myth: how parents of newborns spend their money’, FlagPost weblog, Parliamentary Library, Canberra, 24 October 2012, viewed 7 March 2013, http://parliamentflagpost.blogspot.com.au/2012/10/the-
plasma-myth-how-parents-of-newborns.html 22. K Patterson (Minister for Family and Community Services), Howard Government helps Australian women balance work and family, op. cit.
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total amount has been paid in instalments over 13 fortnights. The following table sets out changes to the total amount of Baby Bonus paid:
Table 1: Maternity Payment/Baby Bonus historical payment rates
Date Amount of Maternity
Payment
Date Amount of Baby
Bonus
1 July 2004 $3000 1 July 20072 $4133
20 September 2004 $3042 20 September 2007 $4100
20 March 2005 $3079 20 March 2008 $4258
20 September 2005 $3119 1 July 20083 $5000
20 March 2006 $3166 1 July 2009 $5185
1 July 20061 $4000 1 July 2010 $5294
20 September 2006 $4100 1 July 2011 $5437
20 March 2007 $4133 1 July 20124 $5437
1 September 20125 $5000
1. Ad-hoc increase.
2. Maternity Payment renamed Baby Bonus from 1 July 2007.
3. Ad-hoc increase and change to indexation so that it only occurs once a year.
4. Indexation frozen until 1 July 2015.
5. Baby Bonus reduced to $5000.
Source: Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA), ‘3.6.4 Maternity payments - historical rates’, Family Assistance Guide, FaHCSIA website, viewed 21 February 2013, http://guidesacts.fahcsia.gov.au/guides_acts/fag/faguide-3/faguide-3.6/faguide-3.6.4.html
The introduction of Paid Parental Leave in 2011 has significantly reduced the number of recipients of the Baby Bonus and government expenditure on the payment.23 The following table outlines
23. J Gillard (Prime Minister) and J Macklin (Minister for Families), In the business of delivering paid parental leave, joint media release, 1 July 2011, viewed 8 March 2013, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressrel%2F904291%22
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recipients and expenditure on the Baby Bonus since 2004 as reported in departmental annual reports and the latest estimates from the FaHCSIA Additional Estimates Statements 2012-13:
Table 2: Maternity Payment/Baby Bonus expenditure and recipients
Year Expenditure ($ million) No. of recipients
2004-05 727 235 371 families in respect of 239 431 children
2005-06 855 268 751 families in respect of 273 562 children
2006-07 1161 286 770 families in respect of 291 876 children
2007-08 1213 285 000 families in respect of 290 000 children
2008-09 1399 278 000 families in respect of 283 000 children
2009-10 1398 268 000 families in respect of 273 000 children
2010-11 1176 219 000 families in respect of 223 000 children
2011-12 1011 157 581 families in respect of 160 496 children
2012-13* 853 Not available
2013-14* 655 Not available
* Estimates based on the implementation of the measures proposed in the Bill.
Sources: FaHCSIA and Department of Family and Community Services, Annual reports 2004-05 to 2011-12, FaHCSIA website, viewed 21 February 2013, http://www.fahcsia.gov.au/about-fahcsia/publications-articles/corporate-publications/annual-reports; Australian Government, Portfolio additional estimates statements 2012-13: Families, Housing, Community Services and Indigenous Affairs Portfolio, Commonwealth of Australia, Canberra, 2012, p. 31, viewed 1 March 2013, http://resources.fahcsia.gov.au/budget/2012-13/FaHCSIA_PAES_2012-13.pdf
Introduction of Paid Parental Leave
The introduction of Paid Parental Leave in January 2011 provided a much more generous support to parents with newborn or newly adopted children and around half of new parents are now receiving support through this scheme.24 Under the Paid Parental Leave statutory scheme, two payments are available to families of newborn, adopted or stillborn children: Paid Parental Leave Pay and Dad and Partner Pay.
Paid Parental Leave Pay
Eligible working parents who are the primary carers of newborn or newly adopted children may receive Paid Parental Leave Pay for up to 18 weeks at the rate of the national minimum wage ($606.50) funded by the Government. For long-term employees (12 months of continuous service at the one employer) the parental leave payment is to be paid via the employer. For others, the
24. For detailed information on the introduction of the Paid Parental Leave Scheme see: S O’Neill and others, Paid Parental Leave Bill 2010, Bills Digest, no. 175, 2009-10, Parliamentary Library, Canberra, 2010, viewed 4 March 2013, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22legislation%2Fbillsdgs%2FX60X6%22
Family Assistance and Other Legislation Amendment Bill 2013 9
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payment is made via the Department of Human Services. The Paid Parental Leave scheme is a payment only, it does not entitle a parent to a leave period or an additional leave period on top of existing leave entitlements offered by their employers. The payment can be made on top of any employer provided leave/payments that a new parent is entitled to.
Unlike the Baby Bonus, qualification for Paid Parental Leave Pay is based on a work test and an income test. To be eligible under the work test, a new parent must:
ï· have worked for at least ten of the 13 months prior to the birth or adoption of their child
ï· have worked for at least 330 hours in that 10 month period (just over one day a week) and
ï· not have had more than an eight week gap between two-consecutive working days (where a working day is a day on which a person has worked for at least one hour).25
To be eligible under the income test, a person must have an individual adjusted taxable income of $150 000 or less in the financial year prior to the date of claim or the date of birth or adoption (whichever is earlier).26
The payment can be transferred to a person’s partner or the other parent of the eligible child if that person also meets the eligibility criteria.
Dad and Partner Pay
Dad and Partner Pay commenced on 1 January 2013.27 The scheme essentially provides fathers and partners access to two-weeks of Paid Parental Leave pay if they have taken unpaid leave or are not working for the two weeks for which they claim the payment for. Those eligible for Dad and Partner Pay are:
ï· the biological father of the child
ï· a partner of the birth mother
ï· an adoptive parent
ï· a parent in a surrogacy arrangement and
ï· a legal parent or a partner of the legal parent.28
25. Paid Parental Leave Act 2010, section 32, 26. The income test for paid parental leave is set out in Division 4 of Part 2-3 of the Paid Parental Leave Act 2010. 27. For detailed information on Dad and Partner Pay see L Buckmaster and S O’Neill, Paid Parental Leave and Other Legislation (Dad and Partner Pay and Other Measures) Bill 2012, Bills Digest, no. 131, 2011-12, Parliamentary Library,
Canberra, 2012, viewed 4 March 2013, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22legislation%2Fbillsdgs%2F1624889% 22
28. Details about when, and whether a person is eligible for Dad and Partner Pay are contained in chapter 3A of the Paid Parental Leave Act 2010.
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Dads and partners must meet the same work and income tests as apply to Paid Parental Leave Pay. Eligible dads and partners can receive Dad and Partner Pay if the primary carer is in receipt of Baby Bonus.
A person can only receive payments under the Paid Parental Scheme for a maximum of 18 weeks in respect of a particular child. That means that an individual who receives Dad and Partner Pay for two weeks could only have a maximum of 16 weeks of Paid Parental Leave Pay transferred to them from their partner (that is, they cannot combine the two types of payment for more than an 18 week entitlement).
Choosing between Baby Bonus and Paid Parental Leave pay
Unlike the Baby Bonus, parental leave payments are taxable. The total maximum payment for Paid Parental Leave paid over 18 weeks is currently $10 917 compared to a total maximum payment of $5000 for Baby Bonus. Due to the taxable nature of paid parental leave and the fact that it is treated as income under the income tests for Family Tax Benefits Parts A and B (and other family assistance payments), there may be cases where a person is better off receiving Baby Bonus rather than paid parental leave if they are eligible for both. This would only arise in situations where an individual loses more through increased tax liabilities and lower family assistance payments than they would otherwise gain through the higher rate of parental leave pay.
Recipients and expenditure on Paid Parental Leave payments
In 2011-12, there were 125 177 recipients of Paid Parental Leave Pay (not including those whose payments started prior to July 2011).29 Of these recipients, 124 397 were mothers representing 45.5 per cent of all mothers in 2011-12. Almost all (98.6 per cent) families who received Paid Parental Leave in 2011-12 did so for the entire18 weeks of the entitlement period.30
Around 6000 dads or partners are reported to have applied for Dad and Partner Pay since its commencement on 1 January 2013.31 It is not clear how many of those applicants were qualified for, and received, the payment.
29. Senate Community Affairs Committee, Answers to Questions on notice, Families, Housing, Community Services and Indigenous Affairs Portfolio, Supplementary Estimates 2012-13, 18 October 2012, Question no. 20, viewed 4 March 2013, http://www.aph.gov.au/Parliamentary_Business/Committees/Senate_Committees?url=clac_ctte/estimates/sup_1213 /FaHCSIA/index.htm
30. FaHCSIA, Annual report 2011-12, FaHCSIA, Canberra, 2012, p. 50, viewed 4 March 2013, http://www.fahcsia.gov.au/sites/default/files/documents/10_2012/fahcsia-2011-12-annual-report_0.pdf 31. J Macklin (Minister for Families, Community Services and Indigenous Affairs and Minister for Disability Reform), ‘Answer to Question without notice: Families’, [Questioner: G Perrett], House of Representatives, Debates,
11 February 2013, p. 50, viewed 4 March 2013, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22chamber%2Fhansardr%2F31814f37-6bd0-44dd-a2e7-40d55027d5cf%2F0149%22
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The estimated expenditure on the Paid Parental Leave Scheme is as follows (Paid Parental Leave Pay and Dad and Partner Pay have not being disaggregated in the budget papers):
Table 3: Budgeted expenditure on Paid Parental Leave payments
2011-12
Revised Budget $’000
2012-13 Budget $’000 2013-14 $’000
2014-15 $’000
2015-16 $’000
Paid Parental Leave payments
1 373 565 1 440 072 1 548 543 1 616 178 1 678 880
Source: Australian Government, Portfolio budget statements 2012-13: budget related paper no. 1.7: Families, Housing, Community Services and Indigenous Affairs Portfolio, Commonwealth of Australia, 2012, p. 49, viewed 4 March 2013, http://resources.fahcsia.gov.au/budget/2012-13/FaHCSIA_PBS_2012-13.pdf
On its own, Dad and Partner Pay was estimated to cost $185.5 million over five years from 2012-13.
The Baby Bonus and the Paid Parental Leave scheme are discussed further below under the ‘Key issues and provisions’ section of this Bills Digest.
Committee consideration
At the time of writing, the House of Representatives Selection Committee has not referred the Bill for inquiry.
Senate Community Affairs Legislation Committee
The Senate Selection of Bills Committee met on 27 February 2013 and referred the provisions of the Bill for inquiry by the Senate Community Affairs Legislation Committee (Community Affairs Committee). The Community Affairs Committee is due to report on 18 March 2013.32
Senate Economics Legislation Committee
In addition the Bill has been referred to the Senate Economics Legislation Committee (Economics Committee) for inquiry and report by 18 March 2013.33 It is likely that the Economics Committee will defer to the inquiry of the Community Affairs Committee.
32. The details of the inquiry can be viewed at: http://www.aph.gov.au/Parliamentary_Business/Committees/Senate_Committees?url=clac_ctte/family_assistance/in fo.htm
33. Selection of Bills Committee, Report No. 2 of 2013, Senate, Canberra, 28 February 2013, viewed 8 March 2013, http://www.aph.gov.au/Parliamentary_Business/Committees/Senate_Committees?url=selectionbills_ctte/reports/20 13.htm
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Senate Standing Committee for the Scrutiny of Bills
The Senate Standing Committee for the Scrutiny of Bills (Scrutiny of Bills Committee) has considered this Bill and had no comment to make in relation to it.34
Policy position of non-government parties/independents
Members on the Opposition front bench have criticised the cuts to Baby Bonus rates for second and subsequent children but the Coalition has not yet announced whether it will move amendments or vote against the Bill. Shadow Minister for Families, Housing and Human Services, Kevin Andrews said that ‘the changes to the Baby Bonus will mean having more than one baby in Australia will become more expensive, at a time when Australian families need all the assistance they can get with the rising cost of living’.35 Shadow Treasurer, Joe Hockey, also criticised the cuts, likening the proposed measures to China’s one child policy: ‘the government seems to want to penalise anyone that has a second or third child … I think that worked quite well in China, didn’t it’.36
At the time of writing, the Australian Greens (the Greens) had not announced their position on the provisions contained in the Bill.
Independent MP, Tony Windsor has stated his support for a reduction in the Baby Bonus rate for second and subsequent children. Mr Windsor has long called for the scrapping of the Baby Bonus arguing that it provides a short term incentive for a long term commitment: ‘it concerns me that some people who aren’t in a position financially or in maturity see the bonus as a short term gain but in reality it’s a lifetime responsibility that requires much more’.37
Fellow Independent Bob Katter has stated, however, that he is ‘tenaciously opposed’ to the proposed cuts to the Baby Bonus. He was quoted as saying, ‘those poor struggling little mothers, they can’t get men to shoulder their responsibilities … the struggle for them to try and survive when they’re bringing up the nation’s future is appalling’.38
34. Standing Committee for the Scrutiny of Bills, Alert Digest No. 2 of 2013, Senate, Canberra, 27 February 2013, viewed 6 March 2013, http://www.aph.gov.au/Parliamentary_Business/Committees/Senate_Committees?url=scrutiny/alerts/2013/index.ht m
35. K Andrews (Shadow Minister for Families, Housing and Human Services), More than one too many, Wayne Swan’s MYEFO baby limit, media release, 23 October 2012, viewed 5 March 2013, http://www.liberal.org.au/latest-news/2012/10/23/more-one-too-many-wayne-swan%E2%80%99s-myefo-baby-limit
36. J Hockey (Shadow Treasurer) quoted in ‘Baby bonus cuts penalise families: Hockey’, The Herald Sun, 22 October 2012, viewed 7 March 2013, http://www.heraldsun.com.au/news/breaking-news/baby-bonus-cut-penalises-families-hockey/story-e6frf7kf-1226501079428
37. T Windsor, Windsor agrees—Baby bonus should be scrapped, media release, 28 April 2011, viewed 5 March 2013, http://www.tonywindsor.com.au/releases/110428.pdf 38. B Katter, quoted in A Henderson, ‘Government faces fight to pass budget measures’, Australian Broadcasting Corporation (ABC) News website, viewed 5 March 2013, http://www.abc.net.au/news/2012-10-23/government-faces-
fight-to-pass-budget-measures/4328066 and quoted in J Ireland, ‘Labor does not understand cost of raising children:
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Position of major interest groups
In its response to the MYEFO announcement of the cuts to Baby Bonus, the Australian Council of Social Service (ACOSS) stated that it ‘accepts the need to reduce the cost of the poorly designed Baby Bonus but would prefer to see the savings invested in better family payments for parents struggling on low incomes’.39 ACOSS has long held the view that the Baby Bonus is a poorly targeted payment due to the fact that the same amount is paid to families on high incomes as is paid to families on very low incomes.
Financial implications
The Explanatory Memorandum to the Bill states that the proposed changes to Baby Bonus rates for second and subsequent children will provide savings of $505.9 million over four years from 2012-13 to 2015-16.40 The other amendments proposed by the Bill are estimated to have a negligible financial impact.
Statement of Compatibility with Human Rights
As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act.41 The Government considers that the Bill is compatible.
At the time of writing this Bills Digest, the Parliamentary Joint Committee on Human Rights has not published any comments about the Bill.
Key issues and provisions
Schedule 1—Baby Bonus
Schedule 1 of the Bill amends the FA Act A New Tax System (Family Assistance) Act 1999 (the FA Act), the FA Admin Act and the Family Assistance and Other Legislation Amendment Act 2012 to reduce the amount of Baby Bonus that is to be paid in respect of a child that is not the firstborn, first adopted or first entrusted into care child of an eligible individual.
Abbott’, The Border Mail, 23 October 2012, viewed 5 March 2013, http://www.bordermail.com.au/story/414843/labor-does-not-understand-cost-of-raising-children-abbott/ 39. Australian Council of Social Service, Budget cuts needed to clear the decks for NDIS, dental care and other priorities, media release, 22 October 2012, viewed 5 March 2013,
http://acoss.org.au/media/release/budget_cuts_needed_to_clear_the_decks_for_ndis_dental_care_and_other_prior i
40. Explanatory Memorandum, Family Assistance and Other Legislation Amendment Bill 2013, p. 2. 41. The Statement of Compatibility with Human Rights can be found after page 25 of the Explanatory Memorandum to the Bill.
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Item 1 of Schedule 1 repeals existing section 66 of the FA Act and substitutes new section 66 setting out the amounts payable for Baby Bonus. The proposed section would provide for a total amount of $5000 to be paid in respect of the firstborn child of an individual eligible for the Baby Bonus, the first child that becomes entrusted to the care of (through a foster care or surrogacy arrangement) or adopted by an eligible individual (or their partner), or the first stillborn child of an eligible individual who has not given birth to any other children previously. For all other children Baby Bonus is to be paid in respect of, except in cases of multiple births, the total amount payable is $3000. The reduced rate will be payable in respect of:
ï· any children born after the firstborn (except in cases of multiple births)
ï· any children adopted or entrusted into the care of the individual after the first child adopted or entrusted into care and
ï· any stillborn children where the mother already has previously given birth to other children or has previously suffered a stillbirth.
The proposed provisions will pay the $5000 amount to the first child born alive to a mother who has previously suffered a stillbirth42 and will also pay the higher amount to mothers who have previously given birth to a child and later adopt or have a child entrusted into their care.43
Subsection 36(3) of the FA Act sets out that for an individual to be eligible for Baby Bonus in respect of a child entrusted into their care, through a foster care or surrogacy arrangement for example, then:
ï· the child must be entrusted into their or their partner’s care within 26 weeks of the child’s birth and
ï· the individual or their partner must continue to be or likely to continue to be the primary carer of the child for no less than 26 weeks.
In cases where both the birth mother and the child’s new primary carer wish to claim baby bonus, the relevant amount ($5000 or $3000) will be paid at a pro-rated amount according to the portion of the first 26 weeks of the child’s birth that each party had care of the child for.
Multiple births
Proposed subsections 66(2), (3) and (4) set out the payment rates in multiple children cases. They provide for the higher rate of $5000 to be paid in respect of each child in the following circumstances:
ï· for a child born as part of a multiple birth (including any stillborn children)
ï· for two or more children who are part of the same ‘entrustment to care’ process and
42. Proposed paragraph 66(1)(a) of Schedule 1 of the Bill. 43. Proposed paragraph 66(1)(b) of Schedule 1 of the Bill.
Family Assistance and Other Legislation Amendment Bill 2013 15
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ï· for two or more children who are entrusted to care as part of the same adoption process.
Instalments
Item 7 of Schedule 1 of the Bill repeals paragraphs 47(2A)(b) and (c) of the FA Admin Act and inserts new paragraphs 47(2A)(b), (c), (d), (e) and (f) setting out how the proposed new rates of Baby Bonus are to be paid as instalments. As noted above, the total amount of Baby Bonus has been paid in 13 fortnightly instalments since 1 January 2009 with the first fortnight paid at a higher rate. The proposed paragraphs set out the instalment amounts for the $5000 Baby Bonus and the proposed lower rate of $3000 for second and subsequent children.
Under the proposed changes, those eligible for the higher rate of Baby Bonus between 1 July 2013 and 1 July 2015 will continue to receive $846.20 for their first fortnightly instalment of Baby Bonus and $346.15 for the remaining 12 fortnights. Those eligible for the lower rate will receive $692.40 as the upfront amount in the first fortnight and 1/12 of the remaining total ($192.30) over the remaining 12 fortnights.
As a result of amendments to the FA Admin Act by the Family Assistance and Other Legislation Amendment Act 2012, indexation of the Baby Bonus will not occur until 1 July 2015.44 Proposed paragraphs 47(2A)(e) and (f) provide that from 1 July 2015 (following the indexation of the total payment rates to movements in the Consumer Price Index (CPI)), the amount payable as the upfront amount for those receiving the higher amount will be 16.92 per cent of the total payment. Those receiving the lower amount after 1 July 2015 will receive 23.08 per cent of the total payment as the upfront amount. The following 12 fortnights will be paid at a rate of 1/12 of the total payment remaining after the upfront amount has been deducted.
Are costs lower for second and subsequent children?
The basic answer is yes. The consensus of a large body of research into the costs of children is that a family will tend to have significantly reduced costs for second and subsequent children.45 A report published by FaHCSIA which examined research into the costs of children in Australia explains:
The costs of the first child are often greater than the costs for each subsequent child. This is due to economies of scale resulting from hand-me-downs and shared infrastructure (such as bedrooms and furniture). 46
44. See L Buckmaster, Family Assistance and Other Legislation Amendment Bill 2012, Bills Digest, no. 126, 2011-12, Parliamentary Library, Canberra, 2012, viewed 6 March 2012, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22legislation%2Fbillsdgs%2F1515486% 22
45. See for example, M Gray and D Stanton, ‘Costs of children and equivalence scales: a review of methodological issues and Australian estimates’, Australian Journal of Labour Economics, vol. 13, no. 1, 2010, pp. 99-115, viewed 7 March 2013, http://business.curtin.edu.au/files/261gray.pdf; Australian Institute of Family Studies (AIFS), A guide to calculating the costs of children, AIFS, Melbourne, 2000, viewed 7 March 2013, http://www.aifs.gov.au/institute/pubs/costs.pdf
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The authors noted however, that large numbers of children in a household can produce diseconomies of scale due to the extra costs of upgrading to larger houses and cars (or second cars).
The 2009 Review of Australia’s Future Tax System, led by Ken Henry, noted that the research undertaken by FaHCSIA into the costs of children had found that the actual direct costs for low-income families are around $2000 for a first child and $1000 for a second child.47 This suggests that not only are the rate reductions proposed in the Bill supported by evidence, but also that the Baby Bonus remains a very generous payment providing assistance far beyond that required to meet the stated policy intent. The Review recommended that the Baby Bonus be abolished and replaced with a small supplementary payment that reflected the direct costs of a new born baby, to be paid over the first three months.48
How many people will be affected by the changes
No information has been provided by the Government as to how many people are expected to be affected by the changes to the Baby Bonus rates. The Explanatory Memorandum, Minister’s second reading speech and the original budget announcement fail to mention the number of families who will receive a lower rate of payment due to the proposed amendments.
Very rough estimates can be made by dividing the total expected savings by the amount to be reduced—$2000—giving a figure of 85 000 children. Birth statistics offer another way of guessing at the numbers affected: according to the Australian Bureau of Statistics, around 56 per cent of the 301 617 births in 2011 were to mothers with previous children.49 The FaHCSIA Annual Report 2011-12 states that the Baby Bonus was paid in regards to 55 per cent of all births in that year.50 Applying this proportion to the number of second and subsequent births in 2011 would give a rough figure of 83 000. These figures do not include the number of stillbirths, adoptions and children entering the care of others. The fact that multiple births will continue to receive the higher rate (there were 4560 multiple births in 2011) also complicates attempts to try and estimate the number affected.51 In the absence of any official figures the only realistic estimate that can be given is that tens of thousands of families will receive lower rates of Baby Bonus over the next four years in order for the expected budget savings to be realised.
46. P Henman and others, Costs of children: research commissioned by the Ministerial Taskforce on Child Support, Occasional paper, no. 18, FaHCSIA, Canberra, 2007, p. 7, viewed 7 March 2013, http://www.fahcsia.gov.au/sites/default/files/documents/05_2012/oip18.pdf
47. Review of Australia’s Future Tax System (K Henry, chair), Australia’s future tax system—final report: part 2: detailed analysis, Commonwealth of Australia, 2009, chapter F3-2, viewed 7 May 2013, http://www.taxreview.treasury.gov.au/content/FinalReport.aspx?doc=html/publications/Papers/Final_Report_Part_2 /chapter_f3-2.htm
48. Ibid., recommendation 91. 49. Australian Bureau of Statistics (ABS), Births, Australia, 2011, cat. no. 3301.0, ABS, Canberra, 25 October 2012, viewed 6 March 2013, http://www.abs.gov.au/AUSSTATS/abs@.nsf/Lookup/3301.0Main+Features12011?OpenDocument 50. FaHCSIA, Annual report 2011-12, FaHCSIA, Canberra, 2012, p. 50. 51. ABS, op. cit.
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Will the changes affect birth rates
At the time of its introduction and in subsequent years, the Baby Bonus has been held as a pro-natalist policy intended to boost Australia’s birth rate. Boosting birth rates was, in reality, only a small part of the policy intent behind the various Howard Government maternity-related benefits. The immense pressure for a paid maternity leave scheme is more likely to have been the main reason for the introduction of benefits such as the Baby Bonus. One commentator described it as a ‘badly designed sop to women when Howard refused to introduce paid maternity leave’.52
The question as to whether the Baby Bonus did affect a rise in the birth-rate is in dispute. A 2009 working paper published by the Melbourne Institute of Economic Policy and Research examined birth intentions (as reported in the Household Income and Labour Dynamics in Australia survey) and birth rates before and after the introduction of the Maternity Payment/Baby Bonus. The paper concluded that the Baby Bonus ‘exerted a small though positive and significant effect on fertility. Further, the effect seemed to be stronger for second and possibly higher-order children’.53 An earlier working paper published by the Productivity Commission found that while fertility levels rose in the relevant period following the introduction of the Maternity Payment/Baby Bonus, the Baby Bonus itself would have played only a partial role as it was only ‘one element of a package of other measures’ whose generosity has also increased substantially’.54
A study by Ross Guest and Nick Parr put forward a different micro-econometric model from that used by the authors of the Productivity Commission working paper to look at how family benefits might impact on a couple’s decisions regarding childbirth, particularly the timing of childbirth.55 Their study found that benefits such as the Baby Bonus would need to be of much greater magnitude to effect a couple’s decisions regarding having children and that a combination of demographic and other economic factors played a much more influential role in the increase in fertility rates through the 2000s. Guest and Parr hold that past decreases in fertility and the increases during the 2000s are partly the result of decisions by women to postpone childbirth to later in life.56 They also hold that policy measures which reduce the amount of time women spend
52. E Cox, ‘Slashing middle class welfare will hurt women’, Crikey website, 2 April 2009, viewed 8 March 2012, http://www.crikey.com.au/2009/04/02/slashing-middle-class-welfare-will-hurt-women/ 53. R Drago, K Sawyer, K Sheffler, D Warren and M Wooden, Did Australia’s baby bonus increase the fertility rate, Working paper, no. 1/09, Melbourne Institute of Applied Economic and Social Research, 2009, p. 24, viewed 6 March 2013,
http://www.melbourneinstitute.com/downloads/working_paper_series/wp2009n01.pdf 54. R Lattimore and C Pobke, Recent trends in Australian fertility, Staff working paper, Productivity Commission, Canberra, 2008, p. 35, viewed 6 March 2013, http://www.pc.gov.au/research/staff-working/fertility-trends 55. R Guest and N Parr, ‘The effects of family benefits on childbearing decisions: a household optimising approach applied
to Australia’, Economic Record, vol. 86, no. 275, December, 2010, pp. 609-619, viewed 6 March 2013, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22library%2Fjrnart%2F483451%22 56. N Parr, ‘The baby bonus failed to increase fertility—but we should still keep it’, The Conversation website, 5 December 2011, viewed 6 March 2013, http://theconversation.edu.au/the-baby-bonus-failed-to-increase-fertility-but-we-
should-still-keep-it-4528
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out the workforce following childbirth, such as childcare fee assistance, have much more influence on decisions to have children than other forms of assistance.57
These studies suggest that the financial assistance offered by the Baby Bonus could have a small impact on decisions about childbirth, particularly for second and subsequent children. However, the effect would only be small and other forms of assistance to families such as Paid Parental Leave, the supplementary payments provided under the Clean Energy Household Assistance package and small increases in Family Tax Benefit Part A rates announced in the 2012-13 Budget will go some way to offsetting any disincentive effect arising from a reduction in Baby Bonus rates.58
Risk of early births
The introduction of the Maternity Payment/Baby Bonus on 1 July 2004 had a noticeable effect on the number of births occurring just before and just after the commencement date. In fact, 1 July 2004 saw more Australian children born than on any other single date in the thirty years prior.59 Economists Joshua Gans and Andrew Leigh (now Member for Fraser) estimated that over 1000 births were ‘moved’ so as to ensure that the parents would be eligible for the Baby Bonus, with around one quarter moved by more than a week. They found that most of this effect was produced due to changes in the timing of induction and caesarean section procedures.60 Increases in the Baby Bonus rates in subsequent years are also believed to have led to women seeking to delay births in order to take advantage of the higher rates.61
There is some concern that an opposite trend could occur as a result of the amendments proposed in Schedule 1 of the Bill, with mothers having their second or subsequent child pushing for earlier births to ensure they receive a higher Baby Bonus payment. Minister Macklin has reportedly written to the Royal College of Obstetricians and Gynaecologists ‘urging doctors to counsel women on the risks of premature births’. The Sunday Telegraph quoted from a copy of the letter in which the Minister purportedly wrote:
57. R Guest and N Parr, ‘The effects of family benefits on childbearing decisions: a household optimising approach applied to Australia’, op. cit., p. 617. 58. For information on the Household Assistance Package see the Department of Human Services website: http://www.humanservices.gov.au/customer/subjects/clean-energy-future. The 2012-13 Budget included a measure
to increase the maximum rate of Family Tax Benefit Part A by $300 a year for families with one child and by $600 a year for families with two or more children. The base rate would also increase by $100 a year for families with one child and by $200 a year for families with two or more children. These increases were to take effect from 1 July 2013 but no legislation has been tabled to date. See Australian Government, Portfolio budget statements 2012-13: budget related paper no. 1.7: Families, Housing, Community Services and Indigenous Affairs Portfolio, Commonwealth of Australia, 2012, p. 18, viewed 4 March 2013, http://resources.fahcsia.gov.au/budget/2012-13/FaHCSIA_PBS_2012-13.pdf 59. J Gans and A Leigh, ‘Born on the first of July: an (un)natural experiment in birth timing’, Journal of Public Economics,
vol. 93, 2009, p. 246, viewed 6 March 2013, http://andrewleigh.org/pdf/BabyBonus.pdf 60. Ibid. 61. S Maiden, ‘Mums pushing for caesareans in rush for big baby bonuses’, The Sunday Telegraph, 28 October 2012,
viewed 6 March 2013, http://www.news.com.au/lifestyle/parenting/mums-pushing-for-caesareans-in-rush-for-big-baby-bonuses/story-fnet085v-1226504552138
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I am conscious of the pressure that may be placed on obstetricians and other medical staff to reschedule elective procedures in the lead-up to the start date for the reduced rate of baby bonus …
I know that the government and your members share the concern that the health of mothers and babies remain the paramount consideration in scheduling such procedures.
I have included a fact sheet about those payments that your members may find useful when counselling mothers about the risks they may face in attempting to qualify for the higher rate of baby bonus. 62
The rate reduction proposed in the Bill will affect a much smaller number of women than did the Baby Bonus introduction and subsequent rate increases. The fact that the measure affects only those having second or higher order children, the impact of Paid Parental Leave on the numbers of Baby Bonus recipients, the introduction of means testing on the payment and a number of other policy changes will see a much smaller group of mothers in a position to even consider the impact of the policy change on the timing of their giving birth. Those who are able to access private obstetric services, thereby having greater control over the timing of their birth, are much more likely to be from higher income households and therefore are much less likely than in 2004 to be eligible for the Baby Bonus. Also, the introduction in 2010 of a cap on the amount of benefits paid for obstetric services under the Extended Medicare Safety Net has made the use of such private services less affordable and less attractive to mothers compared to 2004.63
Despite the small numbers, an incentive to avoid, if possible, giving birth after 30 June 2013 is built into the proposed changes and the health risks to children from an induced early birth or early caesarean are of concern no matter how small the number.64 These risks underscore Gans’ and Leigh’s conclusion to their 2009 paper and call into question whether any lessons have been learned from previous announcements of Baby Bonus changes:
… when policymakers are announcing a new policy, they should think not only about the behavioural distortions of the policy over the long-run, but also of the possibility that the introduction of the policy may itself cause distortions in the short-run. Such effects are likely to be largest when a sharp policy discontinuity is announced in advance.
65
While it is not suggested that anyone, mother or doctor, will place a baby in danger for such a relatively small financial gain, the fact that the design of this policy change offers such an incentive for a birth to occur earlier than otherwise needed is a significant flaw. The same policy intent could have been achieved without this perverse incentive effect with either a gradual reduction in the rate of Baby Bonus for second and subsequent children or by shortening the time between the announcement and implementation of the measure.
62. Ibid. 63. See Department of Health and Ageing (DOHA), ‘Changes to the Extended Medicare Safety Net in the 2009-10 Budget’, factsheet, DOHA website, viewed 7 March 2013, http://www.health.gov.au/internet/mbsonline/publishing.nsf/Content/Factsheet-EMSN; S Dunlevy, ‘Safety net
delivers a different baby bonus’, The Telegraph, 17 August 2007, viewed 7 March 2013, http://www.dailytelegraph.com.au/news/a-very-different-baby-bonus/story-e6frezz9-1111114199784 64. See Australian Institute of Health and Welfare (AIHW), ‘National core maternity indicators’, AIHW, Canberra, 2013, p. 16, 18, viewed 7 March 2013, http://www.aihw.gov.au/publication-detail/?id=60129542685 65. J Gans and A Leigh, op. cit., p. 262.
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Why is Paid Parental Leave treated differently
Previously, cuts to the Baby Bonus not accompanied by any cuts to Paid Parental Leave have been criticised as favouring working mothers over women who choose to stay at home to care for their children.66 The two forms of assistance are similar in that they are both payments paid in instalments to primary carers that can function as compensation for time out of the workforce. However, the policy intents behind the Baby Bonus and Paid Parental Leave are very different and changes to one scheme should not be seen as necessitating a change in the other.
As noted in the Bills Digest discussion of the 2012 cut to the Baby Bonus, the creation of Paid Parental Leave as a separate scheme, rather than simply boosting the amount of support offered through the Baby Bonus, was intended as recognition that such leave is a workplace entitlement:
The entitlement to Paid Parental Leave is also connected with objectives such as encouraging women to remain in the workforce and to take leave at a crucial stage of childhood development.
This is also the basis of the much more generous scheme proposed by the Coalition which proposes to provide new mothers with 26 weeks paid leave at their full wage or salary capped at an income level of $150 000. These approaches can be contrasted with Baby Bonus which is intended as a form of short term income support to assist with the costs of newborn or adopted children.
67
The cuts proposed by the Bill are in recognition that parents will usually have lower costs associated with second or subsequent children and therefore do not require the same amount of Baby Bonus as is paid in regards to their first child. Paid Parental Leave is intended as a form of income replacement while a parent takes time away from work to care for their newborn and is therefore not directly connected with the changing costs of children.
Comments
The Baby Bonus is a poorly targeted form of support for families with newborn children providing the same level of financial assistance to all eligible households regardless of the needs of a particular family. The proposed amendments recognise that the costs of second and subsequent children tend to be lower than for firstborns but it remains the case that households with relatively high incomes will receive exactly the same amount of Baby Bonus as households in very dire situations. If the Government’s primary intent is to find savings from family assistance programs, improved targeting of assistance could provide significant savings without reducing the support provided to those most in need.
The impact of the policy change on birth rates, if any, is likely to be minimal. Of more concern in the policy design is the perverse incentive offered to mothers to give birth prior to the application of the measures.
66. For example: S Lunn and S Dunlevy, ‘Stay-at-home mums cry foul on baby bonus’, The Australian, 30 November 2011, viewed 7 March 2013, http://www.theaustralian.com.au/national-affairs/stay-at-home-mums-cry-foul-on-baby-bonus/story-fn59niix-1226209677912
67. L Buckmaster, Family Assistance and Other Legislation Amendment Bill 2012, op. cit., p. 12.
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Schedule 2—Family tax benefit and double orphan pension
Schedule 2 of the Bill amends the FA Act and the SS Act to allow secondary school children to remain eligible family tax benefit children until the end of the calendar year in which they finish school and to align the qualification period for the Double Orphan Pension with family tax benefit eligibility rules.
Family tax benefit eligibility
One of the requirements for an individual to be eligible for family tax benefit is that they have a ‘family tax benefit child’ (an FTB child) in their care.68 A FTB child can be one for the following:
ï· a child aged up to 15 years
ï· a child aged 16 to 19 years in full-time secondary study (defined as a ‘senior secondary school child’) or
ï· a child aged 16 or 17 years who has completed their Year 12 or equivalent qualification, or is considered exempt from this requirement.
Paragraphs 22B(3)(a) and (b) of the FA Act provides that a senior secondary school child is still considered to be an eligible FTB child for a short period after they finish their secondary school education. The period depends on when the child finishes their secondary school year:
ï· if the day they complete the final year of secondary school or equivalent is in December then they continue to be considered a ‘senior secondary school child’ until the end of the calendar year and
ï· if the day they complete the final year of secondary school or equivalent is before December, then they continue to be considered a ‘senior secondary school child’ for a period of 28 days after the day they finish.
Items 1 and 2 of Schedule 2 of the Bill propose to add ‘November or’ to paragraph 22(3)(a) of the FA Act and replace the word ‘December’ with the word ‘November’ in paragraph 22(3)(b) so that those who finish secondary school in November or December can continue to be eligible family tax benefit children until the end of that calendar year, and those who finish before November continue to be eligible for a period of 28 days. The proposed changes ensure that parents and carers of children who happen to finish their secondary schooling in November will not have their family tax benefit payments reduced or cut off just before the end of the year.
68. The term FTB child is defined in section 3 of the A New Tax System (Family Assistance) Act 1999.
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Retrospective application
Item 3 is an application provision which operates so that the amendments in items 1 and 2 will be applied retrospectively from 1 January 2012. This means that the proposed provisions extending eligibility for family tax benefit for children who finish school in November until the end of the year will be applied to the 2012 calendar year. Family tax benefit entitlements are reconciled at the end of each financial year so the retrospective application of these proposed measures could result in adjustments upward for some families’ family tax benefit entitlements.
Double Orphan Pension
Double Orphan Pension is a supplement payment designed to help with the costs of caring for children who are orphans or who are unable to be cared for by their parents in exceptional circumstances. To be eligible, an individual must:
ï· care for a child where both parents are deceased or
ï· care for a child where one parent is deceased and the other parent is in prison, a psychiatric or nursing home, or is of unknown whereabouts or
ï· care for a child who is a refugee and their parents are outside Australia or of unknown whereabouts.69
There is no income or assets test, however, the individual must receive family tax benefit for the child, or would receive it except the family’s income is over the family tax benefit income test limits or the child is receiving another education payment that precludes the family from receiving family tax benefit on their behalf (such as ABSTUDY).70 These eligibility criteria require the child to meet certain age criteria to be considered a family tax benefit child (described in the section above). Double Orphan Pension is currently paid at a rate of $57.90 per fortnight.
The qualification criteria for Double Orphan Pension set out at Part 2.20 of the SS Act make use of the definition of young person at subsection 5(1) of that Act. This definition states that a young person is someone under 16 years of age or is a ‘student child’. A student child is someone aged 16 or over but under the age of 22 who is receiving full-time education at a school college or university (whose personal financial year income will be less than $6404). This is slightly different from the definition used for a senior secondary school child in regards to family tax benefit, as discussed above. The main issue is that it does not allow someone to remain eligible for Double Orphan Pension beyond the date upon which they finish their schooling. That is, unlike the definition used for family tax benefit, payment of the Double Orphan Pension would cease immediately for
69. See: ‘Double Orphan Pension’, Department of Human Services (DHS) website, viewed 7 March 2013, http://www.humanservices.gov.au/customer/services/centrelink/double-orphan-pension 70. ABSTUDY is a payment that helps with the costs for Aboriginal and Torres Strait Islander Australians who are studying or undertaking an apprenticeship. See the ‘ABSTUDY’, Department of Human Services website, viewed 12 March
2013, http://www.humanservices.gov.au/customer/services/centrelink/abstudy
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someone whose eligible child is over 16 and finishes their schooling without immediately moving into full-time education at another school, college or university.
Item 4 of Schedule 2 of the Bill repeals and replaces the definition of young person in subsection 5(1) of the SS Act. The effect of the amendment is that the current definition of young person in subsection 5(1B) will apply except in relation to Part 2.20 of the SS Act (the section setting out qualification for Double Orphan Pension). The proposed definition of young person applicable to Double Orphan Pension will include those aged under 22 receiving full-time education at a school, college or university and those who meet the definition of secondary school child as described above. Item 5 sets out that this particular definition is applicable for working out qualification for Double Orphan Pension for days after 1 January 2012, applying retrospectively in the same way as item 3. It means that the rules relating to a child finishing school in November or December and remaining eligible for family tax benefit until the end of the calendar year will also apply for Double Orphan Pension retrospectively.
Items 6 and 7 propose to amend this new definition for the purposes of working out qualification for Double Orphan Pension for days after 1 January 2013. From this date forward, the applicable definition of young person relevant for Double Orphan Pension will be those aged under-20 years. This is the same as the current family tax benefit age limit (which was reduced on 1 January 2013 to no longer pay those aged 18 or over unless they were aged 18-19 and in full-time education). The proposed new definition applicable from 1 January 2013 will essentially mean that there are no anomalies between the age and study qualification criteria for Family Tax Benefit and Double Orphan Pension.
Other provisions
Schedule 3 makes a number of technical and clarifying amendments.
Items in Part 2 of Schedule 3 of the Bill clarify the meaning of ‘becomes entrusted’ in reference to a child entrusted to the care of an individual, primarily in regards to eligibility for Baby Bonus. Various amendments are made to the FA Act, the FA Admin Act, the Families, Housing, Community Services and Indigenous Affairs and Other Legislation Amendment (2008 Budget and Other Measures) Act 2008, the PPL Act, and the Paid Parental Leave (Consequential Amendments) Act 2010 to clarify when a child is considered to have been entrusted to the care of a certain individual and that Baby Bonus is to be paid around the time a child first enters a person’s care, rather than at some time after a formal process of adoption commences.
Other items in this schedule relate to the Schoolkids Bonus and when the Department of Human Services should be notified that eligible study is being undertaken by potential recipients and their children. Also, amendments are made to allow people who switch from quarterly to fortnightly payments of the Clean Energy Supplement, Pension Supplement or Seniors Supplement to receive any arrears immediately.
24 Family Assistance and Other Legislation Amendment Bill 2013
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