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Wednesday, 6 February 2013
Page: 289

Mr RANDALL (Canning) (19:08): In making representations on behalf of a constituent, Paul Maeder, I have become aware of an issue with family assistance that exists in the special case of a claimant receiving income protection payments after permanent disability, rather than ordinary income from an employer. As is the case for many recipients of income protection payments, my constituent's insurance provider does not remit any tax or superannuation from the monthly payments they make to him. He therefore pays tax on this income directly to the ATO and pays 9 per cent of what he earns each month into a superannuation fund.

Mr Maeder has stated that he is eager to make a contribution to his superannuation so that when his income protection payments cease at age 65, he will not have to rely on the age pension as his main source of income and he will not be a burden to the taxpayer. In order to pay only the 15 per cent concessional rate of tax on his super contributions, Mr Maeder claims them back as a 'personal superannuation contribution' at item D12 on his tax return.

Were he ordinarily employed, the basic 9 per cent minimum superannuation payments made by an employer would not be factored into Mr Maeder's income when putting in his tax return. In his more unusual circumstances as a recipient of income protection payments, the amount he pays to superannuation is included initially, and he then claims this deduction. The problem arises when it comes to how the information from my constituent's tax return is used to determine his family assistance entitlements. Mr Maeder is a single parent and is the main carer for his four children. The amount he receives in family assistance is calculated using the information about his income provided in his tax return.

As has been confirmed by the Minister for Human Services, Senator Kim Carr, in correspondence between his office and my own:

Family assistance law requires that Family Tax Benefit and Child Care Benefit are calculated using an individual's adjusted taxable income which includes, among other amounts, reportable superannuation contributions.

Because Mr Maeder claims an income tax deduction for his superannuation, the 9 per cent he has paid is added back onto his total income and the family assistance that he is entitled to is subsequently reduced. Were my constituent's superannuation payments made by an employer in the form of the minimum 9 per cent superannuation guarantee, they would not be included in his assessment of income.

Mr Maeder receives around $1,000 less in assistance each year because his superannuation is included as part of his income. It is worthwhile to note that another government organisation, the Child Support Agency, has made a private ruling on Mr Maeder's case because of his unique circumstances. While they would usually include personal superannuation contributions when assessing a person's income for child support purposes, they have recognised that Mr Maeder's contributions are only the equivalent of what most other income earners would receive from an employer and have agreed not to include them in his assessable earnings.

It is therefore clear that CSA agrees this is a special case and that there are regulations in place that allow them to accommodate these cases. When administering family assistance payments, the Department of Human Services does not have the power to make rulings that reflect unusual circumstances and are therefore bound by legislation, which states 'all personal contributions must be counted towards income'.

I have written to a number of government ministers on this matter. The Minister for Human Services has informed me only that Mr Maeder's assessment is in keeping with the requirements of the legislation, without acknowledging that this legislation fails to properly cater for his unusual case. I have not received any response from the Treasurer.

The problem would be rectified if there were some other way that the likes of Mr Maeder could report their superannuation contributions to the ATO so that they are not assessed in the same way as personal contributions above and beyond the minimum 9 per cent. Another way this issue might be tackled is a change to family assistance legislation allowing for case-by-case assessments, like those that are conducted by the CSA or to make special legislative provisions for recipients of income protection payments.

I seek leave to table a simple case study that has been presented to me by Mr Maeder that compares the family assistance received by two individuals who receive the same income after the minimum 9 per cent superannuation is paid, one of whom receives this income as an employee and another who is the recipient of income protection payments. This highlights the discrepancy of around $1,000 each year.

Leave granted.