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Tuesday, 16 September 2003
Page: 20185


Mr SWAN (6:23 PM) —This government's family payments system puts many Australian families under unprecedented financial pressure. One in three families are hit with debts that they cannot avoid and are placed in an unrelenting financial squeeze which, for many, results in their tax returns being stripped without their knowledge. While the government is content to pay family payments to some millionaires who do not deserve them, it is financially squeezing at least 700,000 Australian families with debts that they did not ask for. If they do not have a tax return to strip, the government tells them to put this debt on their credit card. This is financially irresponsible and socially irresponsible and just proves that families under financial pressure cannot afford this government.

The government's only solution to this debt trap which is built into the family payments system is to tell families that the only way to avoid the debt is not to take their family payments in the first place. The only people who can afford not to take those family payments are those who are very comfortable. When this government is challenged on this question, it puts its hand over its heart and it says, `We'll fix the system'—yet it has not fixed the system. The system has completed its third year of operation and it is still delivering debts to over 600,000 families who are also being slugged with very high effective marginal tax rates.

This is a government and a Prime Minister who pretend that they are family friendly. They express great pride in their family credentials, but they preside over a system that punishes families financially. If anything, it just demonstrates how the coalition favour the better off in their family payments system and tax regimes generally to the expense of low and middle income earning Australians. The government punish those who work hard to make the economy strong and do not deliver to them their fair share. At the same time, the government are quite comfortable making payments to millionaires. It is for this reason that I move:

That all words after “That” be omitted with a view to substituting the following words:

“whilst not declining to give the Bill a second reading, the House:

(1) condemns the Government's failure to compreh-ensively reform its flawed system of family assistance, which has so far resulted in one in three families receiving FTB and CCB accumulating debts in excess of $1.2 billion;

(2) urges the Government to immediately close loopholes such as share market margin lending losses and foreign income reporting which have allowed wealthy families to pocket benefits;

(3) recognises the importance of annual tax returns for family budgeting and opposes the automatic stripping of family tax returns without warning to recoup family assistance debts;

(4) notes the proposed two year time limit for past period claims of family assistance is still at odds with tax law which allows adjust-ments and subsequent claims to be made for up to four years; and

(5) calls on the Government to reform family assistance to improve incentives to work and ensure benefits may properly account for changes in family income without the risk of families accruing an unavoidable debt”.

I welcome the opportunity to speak on the Family Assistance Legislation Amendment (Extension of Time Limits) Bill 2003, because it allows us a broader scope to once again place on the record the complete failure of the government and the incompetence of Minister Vanstone, the Minister for Family and Community Services, in not fixing this ramshackle family payments system.

What we have in this bill today is yet another attempt by the government to stick a bandaid on a system that, really, should be on life support. Only a government hopelessly in denial and completely out of touch with families would persist with and defend this flawed family payments system. Minister Vanstone's continued defence of the system serves only to remind us of her inability to assimilate even a basic understanding of the problems and the way to fix them.

From when the very first bills were introduced to implement this new payments system as part of the GST, Labor warned it would be a nightmare for families. The minister of the day derided Labor and asserted that our concerns were nothing but scaremongering. With two years of figures in, we know that around 700,000 families a year are hit with FTB and CCB debts. The total accumulated debt now stands at over $1.2 billion and will certainly, by the time the third year is in, go well over $1.5 billion—an enormous financial clawback in the family payments system, which is putting an unprecedented financial squeeze on Australian families.

Each year, families who wish to obtain their benefits fortnightly must guess their annual income one year in advance. This is the core of the problem, because benefits are paid not on the basis of current income but on the basis of future income. Families find it tough enough planning and budgeting even a month ahead, let alone a year ahead. They do not know if they are going to get extra overtime or a pay rise or even whether one parent might have to go back to work. The problem with the system is that these future events will affect the benefits they are eligible for now. It sounds pretty crazy, but that is the way the system works. Even if families tell Centrelink as soon as they know that their income is going to change, it in many cases is simply too late. At the end of the year, income is averaged and the government retrospectively claws back benefits that families were told they were entitled to. This is a massive problem that is only growing.

In the Senate estimates the government finally came clean and admitted that an extra 60,000 families accrued family tax benefit debts in 2000-01, thanks to its flawed family payments system. Information provided to Labor in Senate estimates has revealed that 728,458 families accrued debts totalling $644.8 million in 2000-01. That is 58,176 additional families and $60.86 million extra debt than in previous final figures provided in the 2001-02 Centrelink annual report.

Everyone will recall that the government avoided the little problem of these debts during the 2001 election by announcing a one-off $1,000 waiver per family. But since then the government has ruthlessly recouped benefits, and one of the ways that it has done this is by thieving the money from the tax returns of honest Australian families. All of this occurs without warning these hapless families, who were counting on the money to pay their bills, school fees, for the repair of the car or whatever. Most do not even know they have a debt, let alone the knowledge that it may run to the thousands and that it may be taken from their tax return without the courtesy of a phone call.

The Prime Minister has previously in this place committed to finding other ways for families to repay, apart from thieving from their tax returns, but he has reneged on that undertaking. The government relies on the fine print in the TaxPack that says refunds may be used to offset family assistance debts. But the truth is that there is not so much as a phone call or a letter when the money is stripped. Consider the distress of people when this happens. I was with a gentleman on Saturday night who told me his horror story about how the money had already been spent—he had gone out and purchased household items on the anticipation of his tax return, only to find that it was not there. The Ombudsman has called for a change to this practice. He has called for an end to the stripping—or thieving—of money from tax returns, but this has of course fallen on the deaf ears of this government. Labor will today again call on the government to halt this practice.

I wonder how many coalition backbenchers who have sympathised with their constituents who have had their tax returns stripped will support our second reading amendment today. Perhaps the member for Riverina over there will. I think she has honourably raised this matter with the government in the past. When she raised it they pretended they were going to do something, and then they did not do anything. I wonder whether she was one of the members in the government party room today who jacked up on what the government was doing on the pensioner education supplement, where it is going out there to steal $350 a year from pensioners who are getting an education.

I congratulated those backbenchers who stood up on that issue in the government party room today. I said, `Good on you.' But what we need you to do now is to stand up on the bigger issues—to stand up in the party room on this debacle of family debt which is affecting and squeezing so many family budgets; to do something about that; to do something for the 30,000 families who are having their carer allowance taken away because these parents care for profoundly disabled or chronically ill children. We need you to do something. Do something for the pensioners who are currently being slugged with huge debts without any knowledge of how they have occurred, and do something about this vile minister, Minister Vanstone, who goes on national television and says that she will sell their homes. Do something about that. Those eight or nine who stood up in the party room today on the pensioner education supplement ought to do the same on these issues, because they are issues which are squeezing low- and middle-income Australian families and causing them distress. Do something about the fact that the government are paying family payments to millionaires. Do something about the fact that they are paying family payments to people who are earning hundreds of thousands of dollars. Do something about the 18,000 families who earn over $100,000 a year, yet who are getting family payments. Do something in the name of fairness.

What all these things show is that this is a government which favours the better off at the expense of everybody else. No matter where you go in the social security regime at the moment, that is the truth of the outcome. Evidence has emerged which does indicate that hundreds, if not thousands, of high-wealth families are still, as we speak here tonight, accessing family tax benefits. Right under the minister's nose, families earning hundreds of thousands, if not millions, a year are getting family payments of up to $4,300 per child. This extraordinary discovery demonstrates that the minister has lost control of the day-to-day running of her portfolio or that she simply approves of the fact that this is happening. The minister, or the public, would be none the wiser about this if these matters had not been raised by Labor and put on the public agenda. The matters would have been hidden—swept under the carpet—as is the usual practice of this minister. The minister has not addressed these problems since we raised them.

There are three big loopholes in there where wealthy individuals are accessing family payments: when a claim for the family tax benefit is lodged, no verification is made of current family income; margin lending losses from playing the share market may be used by families to artificially reduce assessable income; and the government relies on the self-reporting of foreign income with no verification mechanisms in place. I will speak on each of these points. Regarding the verification of income, the fact is that high-wealth individuals may access family tax benefit A payments, because at the time of claim no verification of family income occurs and payments commence on the basis of a customer estimate only. Indeed, the current family tax benefit rules mean that families may obtain these payments for up to two years before they must provide details of their actual income. While they may have to eventually repay the benefits, it allows high-wealth individuals to pocket payments for up to two years, interest free.

Regarding margin lending losses, unlike the negative gearing of property, families who negatively gear shares may reduce their assessable income for the family tax benefit. This is illogical and a clear loophole. It is also a practice that has exploded in recent years. Information from the Reserve Bank indicates the net value of margin lending loans has exploded from $2 billion in 1996 to $10.5 billion today. One hundred and thirty thousand individuals have margin loans in Australia. Even if just one uses the mechanism to claim more family tax benefit than they would otherwise receive, it is one too many. This loophole ought to be closed immediately.

That brings me to foreign income. The other loophole pointed out by Labor is that, while foreign income impacts on family tax benefit payments, no verification is made by Centrelink. Essentially, it is an honour system. Foreign income is of course a major problem for taxation as well. Currently, only foreign cash transactions of more than $5,000 are tracked by financial institutions. Only a small proportion of these may be investigated by the ATO. As a bare minimum, Centrelink ought to seek bank statements and obtain data from financial institutions to obtain concrete information on those who derive a foreign income, not just rely on a person's word. The government response to these loopholes has been inadequate to say the least. These inadequacies are also highlighted in the bill before us today.

As I noted earlier, families wishing to receive fortnightly benefits must provide a forward estimate of income. Given the financial squeeze on many families when they are bringing up children, this is a popular option. People want their income currently; they need their income on a fortnightly basis; they need it to feed, clothe and educate their children on a daily basis. Kids do not stop growing just because the federal government does not have a system which pays them on a fortnightly basis. School shoes have to be bought and re-bought. New school uniforms have to be bought. As kids get older, they eat more. That is why families need their family payments on a fortnightly basis.

Of the 2.1 million families who receive payments each financial year, approximately 95 per cent receive their payments fortnightly. The remainder obtain a lump sum through Centrelink or the ATO once their income is known. The system allows families who overestimate their annual income to receive a so-called `top-up' payment when they lodge their tax return. But I prefer to call it a `catch-up' payment—not, Minister, a top-up payment—since these families have received less than their full fortnightly entitlement throughout the year and the government is only paying them an amount that should have been paid to them earlier. So, it is a catch-up payment; it is not a top-up payment.

In both of these cases, where there is a lump sum—or a catch-up payment—owed there is a 12-month time limit from the end of the financial year when these claims must be lodged. Should a family miss the deadline, they can kiss goodbye to the money that the government owes them. This is yet another example of the fine print in the Howard government GST legislation—all the fine print that was in there dudding the pensioners. It is another example of the fine print in the family payment system that was dudding the families of Australia. Unsurprisingly, many families have missed this deadline. This fix is in response to Labor's discovery in February this year that 25,072 family tax benefit customers who lodged 2001 tax returns after 30 June 2002, and/or whose partners lodged 2001 tax returns after 30 June 2002, were denied $37 million, which is an average of $1,477 in top-ups—or catch-ups—of their 2000-01 FTB entitlements.

These figures do not include information on those who were owed lump sum amounts. In these cases the ATO conveniently failed to process them, saying they were not effective claims. Now, through this bill, the government has decided to extend by a further 12 months the deadline for catch-up payments—that is, top-up payments—and lump sum claims to 24 months. It is a good measure and well overdue but, in the sea of problems that comprise the family payment system we currently have, it is a minor though important beneficial measure. This little patch-up hits the budget bottom line to the tune of $180 million over the forward estimates. I just wish the government would come to grips with the fundamental problem. So, while it is welcome and while it will ensure families do not miss out on their entitlement, it does nothing to address the core problems with family tax benefit.

The simple fact is this: few families can afford to defer payments until the end of the year to claim a lump sum or a catch-up payment. So the announcement is of no benefit to most of the people being slugged by Senator Vanstone's system. In light of the other bandaid changes the government have made to this system, it is obvious they have a great deal of difficulty in grasping the need for reform. Or perhaps the answer is that they simply do not want to fix it because they are reliant upon the $1.5 billion claw-back they are going to get over a three-year period. The truth is that families cannot afford to forgo their fortnightly benefits, although Minister Vanstone continues to advise them to do precisely that—that is: let the government off the hook because it is too lazy or incompetent or mean to fix the system. Let the families of Australia bear the burden of that because the government itself will not take on the burden of reforming a system for the benefit of the families of Australia.

So families are in this position: either they forgo fortnightly payments and really struggle financially or they seek to obtain their entitlements and run the risk that they will get a nasty debt at the end of the year. That continues to be the case despite all the assurances that have been given in this parliament. Despite all of the good work by the member for Riverina and one or two others, this government has not fixed the system and this bill does not fix the problem. Essentially it is only of benefit to a few, and generally to those who are better off. I do not begrudge them that, but what about the great mass of low- and middle-income earning Australian families who continue to be slugged, continue to have their tax returns stripped and continue to be advised by Senator Vanstone if they cannot get these debts stripped from their tax return to put them on their credit card? How financially irresponsible is that? Either way most families continue to lose.

What families desperately need is a family payment system that can properly adjust for changes in family income through the year and pay the correct entitlement without the risk of a nasty end-of-year debt. The extension of time limits that this bill provides for simply does not scratch the surface of the problems within this system. Labor has been critical of the one-year limitation on the payment of top-ups, however it is one of the smaller anomalies within a system that has resulted in 728,458 families getting debts totalling $644.8 million in 2000-01. A further 643,000 families are expected to receive debts from underestimates of income for the 2001-02 financial year.

On top of that—this is just a stunning figure and, if they have any guts on the back bench of the governing parties, they will listen very closely—250,000 families have been hit with a debt from the second year before they have been able to pay off their first-year debt. Think about that. A quarter of a million Australian families struggling to bring up their kids and get by and improve have debts from the first two years which still have not been paid off. If that does not send a message to the government, I do not know what will. These double debtors may soon be hit with triple debts, and how many of those will there be? We have a quarter of a million with double debts; it is quite likely we will have a couple of hundred thousand with triple debts. This is just so financially irresponsible, let alone socially irresponsible, because it causes enormous distress. It causes havoc with family budgets. It disrupts family plans.

This is a very harsh and mean system. It is a heartless system from a heartless minister—a habitually heartless minister, if you have seen what has been going on with the carer allowance, with pensioners and so on. It is incredibly disturbing. The disturbing thing about the debt figures is that, whilst there has been no decline in families getting debts, there has been an increase in the number that are getting catch-up payments. What does that mean? It means that, to escape the system, families are taking less than they are entitled to; but they are being put under more financial stress. They are being squeezed even further by this government because it is the only way they can avoid the debt trap that Senator Vanstone and her colleagues have constructed.

This is simply an indictment of this government. It shows how completely out of touch it is with the lifestyles and the financial pressures that the average family in this country experiences. If you want an example of how completely out of touch this minister is, read the feature article in the Age from 30 August, which is entitled `The moderate who wasn't'. Senator Vanstone went out to lunch on many occasions with the author of the article, Frank Robson. Robson examined her approach to politics, her approach to her portfolio and her approach to eating. He looked at her very closely, and he was stunned. He talked, for example, about the day that the minister had lunch with the chief executive of McDonald's. You might recall that Minister Vanstone blew the whistle on the government's tax cuts of $4 a week. She said, `Hell, that wouldn't buy a milkshake and a sandwich.' McDonald's were ecstatic. They said, `You can get one down here.' So she actually went to lunch with the chief executive of McDonald's, and this is how Mr Robson describes it. The article says:

At first, to her guest's discomfort, Vanstone ignores him while ordering wine and absorbedly studying the menu. Only after ordering (guineafowl with a side serve of buttery mash) does she turn her attention to other things—

namely, her guest. Of course, this comes on top of the five-hour lunch that she had with the author and one member of her staff—where, conservatively calculated, she would have spent $400 on the wine alone. No wonder she described the tax cut as getting a sandwich and a milkshake.


Mr Cadman —Mr Deputy Speaker, I raise a point of order. This bill deals with family payments, not the minister's dining habits. I think we are a long way from the subject of the legislation. Could I suggest you listen carefully and bring the member back to the bill.


The DEPUTY SPEAKER (Mr Wilkie)—I believe the member for Lilley has been relevant to the substance of the bill to this stage. I will listen carefully.


Mr SWAN —It deals with the double standards of the government. There is one standard for low- and middle-income earners in this community, for families who are struggling to bring up their kids. They get a family payment system where, when they get an extra dollar of debt, she strips it from their tax return. But she is quite happy to go to lunch and spend more on the wine than she will pay a pensioner in two weeks. That is the point. She will spend on wine what the family will spend on groceries for a fortnight. That is the point. The point is that this bill demonstrates how out of touch this minister is with the lifestyles of average Australian families who are bringing up children. She has not got a clue what life is like at the kitchen tables or in the lounge rooms of most Australian homes.

There is an alternative. Labor has consistently said that a new approach needs to be adopted in order to pay family assistance. A new method of assessment needs to be introduced so that benefits are responsive to changes in earnings. That is obvious to anyone who has examined this system; and it should be obvious to backbenchers in the coalition party room. Next time there is a party meeting, they ought to be getting up and talking about this. They ought to be flexing their muscles and standing up for Australian families. It does mean doing away with prospective annual income estimates and moving closer to actual current income. Such a system would not punish families for something that could happen in the future, and it should also help to restore incentives to earn extra income. Piled on top of the current system is a taxation system and a social security payments system under which many families, when they work overtime, are paying 60c in the dollar after the withdrawal of social security benefits and family payments.

There are a lot of people out there on high incomes who are whingeing about the top marginal tax rate. It is already paid by 860,000 households in this country—three-quarters of whom are families earning between $30,000 and $60,000 a year. That is why they are a priority for us. Fixing the family payments system so that it gives people what they are entitled to must be a priority—and so too must these high effective marginal tax rates that come from the interaction between the social security system and the tax system. That is why we need action. Every time a hardworking family on a modest income in this community does a bit of overtime, John Howard and Peter Costello have got their hand in their pocket taking out 60c. And they claim to be the party of incentive. It is just obscene. There is an alternative.

To sum up, I will return to where I started. We have in this bill yet another attempt by the government to stick a bandaid on a system that is on life support. Only a government and a minister hopelessly in denial and completely out of touch with families would persist with and defend this flawed family payments system. Hundreds of thousands of families across the nation have been hit with debts two years running. As they lodge their 2002-03 tax return, many will get a third debt. Some will have debts for three years, not just one—the triple whammy. The system is drowning families in this country in debt. It is both socially and fiscally irresponsible, and it needs to be fixed. That is why we on this side of the House have moved a second reading amendment to this bill. We do that in a vain hope that someone in this government—the minister, the Prime Minister or someone on the back bench—will show some guts and fix this system for the benefit of hardworking Australian families who just want to get ahead.


The DEPUTY SPEAKER (Mr Wilkie)—Is the amendment seconded?


Mrs Crosio —I second the amendment and reserve my right to speak.