Mr COSTELLO (Treasurer) (10:16 AM) —I move:

That the bill be now read a second time.

This bill gives effect to a number of important measures which are part of the government's new tax system.

First, extra assistance will be provided to families in recognition of the additional costs in bringing up children and the sacrifices that families make.

The tax-free thresholds of the Family Tax Initiative introduced by this Government in 1997 are to be doubled. This increase will benefit eligible families with dependent children by at least $140 a year per child, with extra benefits of at least $350 a year flowing to eligible single income families with one child or more under the age of five.

In addition, the family allowance income test will be eased by increasing the level of income that a family can earn before the maximum rate payments are affected. The income test free area will be increased to $28,200.

When the income test free area is exceeded, the new taper which applies to reduce a family's rate of payment will be 30c in the dollar, a significant decrease on the current taper rate of 50c in the dollar.

The changes to the family income test, combined with the personal income tax cuts, will increase greatly the rewards for low to middle income working families from working harder. It also ensures that families are substantially better off when moving to full-time employment.

Secondly, this bill provides for the maximum rate of all income support payments provided to social security and veterans' pensioners, other social security recipients and students in receipt of income support to be increased by four per cent on 1 July 2000.

The four per cent increase will raise the level of these payments by significantly more than the expected impact of tax reform on prices, as measured by the CPI. The increase incorporates a component that represents an advance on future consumer price increases that result from the impact of tax reform on the CPI. That is, this arrangement is considerably more beneficial to income support recipients because indexed payments are being provided `up-front' rather than later, as occurs under current indexation arrangements.

The overall effect is that not only are indexation increases being provided up-front, but income support payments will be 1.5 per cent higher than they would have, had normal indexation arrangements applied.

In addition, the income and assets test free areas that apply to social security, veterans' and student income support payments will be increased by 2.5 per cent.

The income test for pensions will also be eased by reducing the current 50 per cent taper rate to 40 per cent. This measure will enable pensioners to keep an extra 10c of pension for every dollar of income they receive over the income free area. It will be of particular benefit to age and service pensioners and to self-funded retirees with modest incomes who will, as a result, be eligible for part rate pension and associated benefits.

This bill is an important plank in the new tax system. Taken together with the other elements of the new tax system, it ensures that all Australians share in the benefits of tax reform.

Full details of the measures in the bill are contained in the explanatory memorandum circulated to honourable members.

I commend the bill to the House and present the explanatory memorandum.

Debate (on motion by Mr Crean) adjourned.