Senator CHERRY (2:18 PM) —My question is to the Minister for Family and Community Services. Is the minister aware that, if a person receiving family tax benefit returned to work in January 2002, their income would be attributed right back to 1 July 2001 and that the person might lose their entitlement for family tax benefit for the time that they were not in work and most needed it? Isn't it the case that the attribution of higher income back across a period of lower or no income is the root cause of the overpayments of family tax benefit bedevilling your department and thousands of Australian families? Why is the minister only now proposing, two years after this new backdating rule commenced, that families can have the additional option of asking for a reduced rate for the remainder of the year to avoid potential overpayments?

Senator VANSTONE (Minister for Family and Community Services and Minister Assisting the Prime Minister for the Status of Women) —With respect, Senator Cherry, I do not know that your question was phrased in the plainest English that it could have been, but I believe I understand the point that you are getting to. You would be familiar with how the system was designed, Senator Cherry, because you were an adviser to one of the senators, at least— Senator Lees, I think—when all of this package was negotiated. So you will understand that this was a shift to a tax system where people would either get a top-up at the end of the year or else repay—just the same as people do in their tax, where some people get a tax refund cheque and other people get another assessment notice and have to put in some more money. It was envisaged that people would notify their changes of income during the year and of course, if they got a higher income during the year, that would mean we would reduce the payments. But it may mean, as I think is the point that you are making, that for a large period of the year—maybe six months; maybe nine months—they have been paid at a higher rate, because at that point they had a lower income.

You cannot possibly suggest that we should, by some measure of force, pay people a lower amount than their entitlement during the earlier part of the year. That is not fair. Some people have opted in the latter part of the year to put in a higher estimate of income to ensure that any overpayment is taken into account. That has been happening, but it perhaps has not been happening as often as it could. So what we have done is to directly put that choice to families as to whether they would like to have their future payments adjusted to take account of any overpayment in the past.

But that is not the only choice that is offered. I outlined the other choices that are offered in the earlier question that I answered—for example, to allow families to take a base rate and get a top-up at the end of the year. The only families on FTB part A that could get an overpayment under that situation would be families that were earning more than $80,000 a year. So I think this extra choice is a good thing. I am pleased that we have done it. As with all things, Senator Cherry, with hindsight you can say: why didn't it happen sooner? You could always ask that question. It is a pretty pointless question; it is a navel-gazing question. I like to look forward to the future. The key point, I think you must agree, is that we have made a good change.

Senator CHERRY —Mr President, I ask a supplementary question. I thank the minister for her answer—of sorts. Isn't it the case that the core problem with the new payment system is that, when the family payments system, which was a social security payment, was rolled into the family tax benefit, the government abolished the `notional date of event' concept which allowed income to be taken into account only from the date on which it was earned? Why doesn't the government stop asking families to apply for less than they are entitled to under the new rules, which is essentially what you are asking, and apply the old rules, which did not lead to hundreds of thousands of systemic debt recoveries of overpaid family payments?

Senator VANSTONE (Minister for Family and Community Services and Minister Assisting the Prime Minister for the Status of Women) —Senator, with respect, I think you still misunderstand. I know you do not think you misunderstand—that is actually a function of misunderstanding. People do not misunderstand and believe they misunderstand. The concept of misunderstanding is that you do not understand and you do not realise that you do not understand. That is actually what misunderstanding means. It is what the prefix `mis' before the word `understand' actually means, so it is no surprise to me that you shake your head and say, `No, no, I don't misunderstand,' because anyone who misunderstands does not understand that they misunderstand. That is the whole point. I cannot use any plainer English than that.

Senator Cherry —Mr President, I raise a point of order. I ask that the minister answer the question.

The PRESIDENT —Senator Vanstone, I ask that you answer the question.

Senator VANSTONE —We have shifted to a tax payment system where people have a reconciliation at the end of the year. You seek to highlight that some people have had an overpayment. The government has acknowledged that some people had difficulties in the first year, and that is why we had those tremendously generous waivers in the first year. (Time expired)