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Tuesday, 22 June 1999
Page: 7021

Mr LAWLER (5:19 PM) —In opening, I recognise the work the previous speaker, the member for Calare, has done on other social policy. As he mentioned, many of his research results have actually been used in government policy, however I am not quite sure how he intends the government to estimate how much of a payment is due to people if it cannot use an estimate of what they are likely to earn. It seems the only other way would be to do it on a week by week basis, and to me that seems like an administrative nightmare and totally impractical. I do also acknowledge, however, his point that many of the so-called overpayments that the government uncovers are in fact accidental overpayments, and I think the government has recognised this by putting on some 140 new people in Centrelink to assist people in preventing this from happening.

Having said that, as usual, the Labor Party continue to focus on small aspects of the tax package. They are incapable perhaps of looking at the whole picture. They complain time after time about how much more one group will get compared to another. How can a party that offers nothing to anyone complain about one group getting more than another group? That defies belief in my view.

The current system of assistance for families, particularly the overlap between the various income tests for benefits, results in disincentives for low and moderate income families to work. Many families face an effective marginal tax rate of 85.5 per cent or more if they increase their income. To remove these overlaps and disincentives, the government intends to ease substantially the income test for family allowance by increasing the level of income at which it begins to be income tested from $24,350 a year for one child to $28,200 a year and reducing the income test taper rate from 50 per cent to 30 per cent.

These measures represent a major social reform that provides substantial extra income to help lower income families raise their children and improves work incentives. They ensure that unemployed families will not incur a sudden drop in family allowance when they leave the income support system, improving incentives for them to obtain a full-time job. Isn't that what we all should be doing?

At the same time, these measures combined with tax cuts will ensure that low income working families will have much better incentives to improve their circumstances. For example, their effective marginal tax rate will drop from the aforesaid 85.5 per cent to 61 per cent over a substantial range of incomes. I believe this marginal tax rate is still way too high, yet Labor is voting to support this effective tax rate of 85.5 per cent. Let us make this very clear: Labor wants low income people to pay an effective tax rate on an increased part of their income of 85.5 per cent. Where is the incentive to work? Who would work harder when the tax rate for that extra income is going to be effectively more than 85 per cent? Would a Labor politician work under this regime? No. It is about time to put low income workers back on some form of equal footing.

Combine our changes with the decrease in the tax rate for all Australians and all of a sudden the mist starts to clear, and there lies the incentive to work. Here we are not trying to overcome people with an allergy to work, like some people who are perhaps in some work programs; the people we are talking about are willing to work but are being penalised for doing so. These are the easiest people to get back into the work force, and Labor want to deter them from doing this by charging them an effective tax rate of 85.5 per cent.

At present, when families are applying for family allowance, those families must, as we discussed, estimate their annual income. Under the current system, which Labor supports, if a family overestimates their income and therefore gets a reduction in their family allowance, at the end of the year they will not receive a top-up payment. What I am saying is that if they overestimate their income and claim less than they are entitled to they have no redress. On the other hand, if a family underestimates their income and receives payments greater than those to which they are entitled, the government grabs it back with the glee of Ricky Ponting taking that catch the other night.

Let us make it clear: Labor supports the system that grabs back accidental overpayments but does not make restitution for accidental underpayments. This new system eliminates this longstanding problem by providing for payments to be reconciled against actual taxable income at the end of the year. If a family is entitled to more money, then they will be repaid. Likewise, if they are entitled to less, then that will need to be paid back. What could be fairer?

In addition to this change which makes the family payment system much fairer for low income families, family tax benefit part A customers who claim their benefit on a fortnightly instalment will be automatically issued with a health care card at six-monthly intervals. Before now they would have had to apply for the health care card every six months and provide documentation of their previous eight weeks income to get that. In some cases, perhaps that paperwork might not have been available or perhaps they might not have bothered if they did not have any particular reason for wanting a health card at the time. But a problem might arise if, for example, the kids, who are normally healthy, are suddenly taken ill. They may be in the predicament where they have to pay full price for some of their medication. This could represent a substantial cost to someone if they suddenly have to hand over $50 for an antibiotic and a couple of boxes of ventolin. By having an automatic delivery of their health care card at six-monthly intervals, this will not happen.

Another improvement of the new family tax benefit is the level at which income testing begins, which will increase from $24,350 for a one-child family to $28,200 per family. Further, the income test taper rate, as I said, will reduce from 50 per cent to 30 per cent. Again, lower income families will be substantially better off. As well as making the system much easier to implement by reducing 12 existing benefits down to three, people are financially better off and it is much easier for them to understand the system. Enhancing the family tax initiative also allows family to keep more of the income they earn. The greatest beneficiaries will be single income families with very young children who will have a tax-free threshold of $13,000. But every family will be better off under this system by not paying the 85.5 per cent effective tax rate on part of their income. I commend this bill to the House. I congratulate the government for its initiatives.