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Tuesday, 7 October 2003
Page: 20665


Mr BRENDAN O'CONNOR (5:32 PM) —This is one of the most important debates we could be having in this parliamentary term. From the fact that you have participated in this debate, Mr Deputy Speaker Lindsay, I think you would be well aware of how important it is. I certainly would not agree with your sentiments in some of the areas that you raised, but the fact that you were one of the very few members of the government willing to enter into this debate illustrates how important you believe it is. It is a very important debate because it is about the way in which government takes care of people in need. It is about the way in which the government derives a system that is fair and balanced and effective, both in terms of—as you have said—the responsibilities the government has to the taxpayers of this country and the responsibility that all governments have towards those people in need of care and assistance.

Getting that balance right is not necessarily easy; however, I think the government has fundamentally got it wrong in many areas, and I would like to draw the House's attention to those deficiencies within government policy and implementation. The Family and Community Services and Veterans' Affairs Legislation Amendment (2003 Budget and Other Measures) Bill 2003 is an omnibus bill and it goes to many areas. I have no problem with some of the areas to which it refers, and neither does the opposition in general. There are some issues which are non-controversial and are supported by the opposition. Amongst those—and it was referred to by the member for Shortland—is the issue of payments made under the laws of Germany or Austria for those persecuted under what is now referred to as National Socialist persecution from income. Another non-controversial issue is the assurances of support provision—that is, where the bill seeks to make amendments to improve the operation of the assurance of support scheme and simplify arrangements for people who provide an assurance of support. Again, I do not think that is an area of great controversy and I think it can be supported.

There is also of course the stopping of payment to people absent from Australia without notice, and comparable foreign payment debt recovery. This bill seeks to make amendments to strengthen the arrangements for ceasing payments to people travelling overseas who do not notify of their departure. Under the new rules, as I understand it, there would be the capacity to suspend payment where a person leaves Australia without notifying of their departure and where the secretary of FaCS finds out about the departure before the end of the person's portability period. Again, this is an area which should actually reap some savings and it is not something that I would rise to oppose.

Another area which is not controversial but which is very important is where the bill seeks to restore access by the Child Support Agency to financial transaction information held by the AUSTRAC database. It bewilders me that the agency could have lost this access, as it did in 1998 when it ceased to be part of the Australian Taxation Office and therefore ceased to be part of the administrative arrangements of the Taxation Office. That has meant that the Child Support Agency has been doing without information that is absolutely vital to it undertaking its responsibilities. It is a deficiency that has resulted from decisions by this government. The government is now seeking to make amends belatedly. I support those late amendments to the system with respect to Child Support Agency information access, and I think all members on this side would.

The issue of where the Child Support Agency links up with the family tax benefit is a very important one. There have certainly been concerns in my electorate about the way in which people are asked to repay debts that they have accumulated based on calculations of their income where it has been assumed that child support payments have been made to them when they have made it very clear to the department that no payments have been made. I draw the attention of the House to an example from my electorate: a constituent of mine who at the moment is a single mother and custodian of her child. The father of the child is no longer residing with them; he is no longer a custodial parent. He is obliged under the law to pay child support, as he should, and to help with the care of the child. For over two years he has not paid child support, and the agencies have not been able to have him comply. However, what is most concerning to me in relation to this debate and the broader debate about the way in which the family tax benefit operates is that the mother has made it very clear to the department that, whilst the father owes that amount, she has not been in receipt of it, but the department determines her income on the assumption that she has been in receipt of that payment.

I find that an absolutely unconscionable approach by a department to seek arrears from a woman who is doing it tough as a single parent, looking after her child and not being provided with moneys that are legally owed to her. The department is well aware that the moneys have not been paid to her, but it still calculates the family tax benefit payment as though it were part of her income. I cannot believe that any government would support the outcome that I have outlined, so I am hoping it is a glitch or a deficiency in the implementation of the process. The government and the department should seek to rectify that anomaly if it is occurring throughout the country—and, from discussions with other members, I believe it is. It is certainly something that I am seeking to resolve for my constituent who is now loaded up with a debt based on a figure of income that she is not in receipt of because the childcare payments are not being paid to her.

The fact that the Child Support Agency is gaining access to information is good. It rectifies what has been a deficiency of this government for five years in allowing it to break in the first place. I commend that provision of this omnibus bill. However, there has to be a further correction in relation to the relationship between the Child Support Agency and the department whereby income is being calculated including a child support amount when it is not being paid to the recipient—the custodial parent. That is something that should be addressed by this government and the department. I draw this House's attention to that and I hope the government listens to my concerns in relation to that.

Apart from the major problem I have with the way in which this woman—this single parent—has been treated, in the issues I have raised there are some things that we can support, but there are some critical problems about the way in which this government would like to set about recovering payment. This is a very difficult issue too. I do not for a moment think that it is easy to resolve these issues, but the assumption should not be that you seek to remove or go after people's assets in the first instance, particularly when there has been no intent by the recipient of a benefit to in any way defraud the department—and therefore the public—nor should there be an immediate attack upon or threat to sequester the assets of people who have been overpaid if indeed the errors or overpayments have been due to miscalculations by the department or the fact that there are some deficiencies in the information that the department has.

It appears to me that it is almost assumed that when there has been an overpayment it is the result of an intention of the recipient to defraud the Commonwealth. Therefore not only does the money have to be sought and recovered but there has to be some almost punitive dimension to the recovery. There has to be a greater effort made by this government to work out ways that can mitigate the adverse social impacts of having to pay back or return moneys where there has been a genuine overpayment by the Commonwealth.

I take the point you made when speaking on this matter, Mr Deputy Speaker Lindsay, about trying to find a balance between the responsibilities to the taxpayer and to the recipients of family tax benefit payments, but we should not be trying to insert a punitive dimension to recovering money from people who are innocent of any bad faith or motive in terms of an overpayment. This is a system that has some serious deficiencies. I do not think blaming the recipients of family tax benefit overpayments is the way to rectify any problems in the system. There has to be a greater balance. There has to be a capacity to mitigate the problems that will arise from repaying moneys, particularly for people on very low incomes or people who have very small asset bases—which, of course, would include many of the people that are in receipt of family tax benefit.

This government has not demonstrated any sense of fairness or any concern for those people. I think it really is a shame because it could do a lot better. The concern I have is with the way this bill would go about correcting social security overpayments and failures to disclose incomes. The way the Centrelink debt recovery teams have been seeking to recover new large debts aggressively by threatening people with the remortgage of their homes, I think it was, and with the use of their credit cards to offset the debt are examples of people being forced into further debt. In other words, the debt that people may have with the government is being shifted to a credit card or to a bank, and that is not something that it is going to be very easy for them to recover from. It could in fact create further poverty traps within our community, and I think it has to be avoided wherever possible.

They are some of the concerns I have with this legislation. I have already commented upon those matters in this compendium of bills which I agree with. However, I think there is a more comprehensive matter in the whole area of the family tax benefit that really has not been properly addressed by this government, although it has been touched on by a number of people. I do not think that Senator Patterson has really been given any favours. She was sacked as the Minister for Health because she was not able to sell what was clearly a very bad health policy, and now she has been given the hospital pass of the day, or of the week, to try and fix up the problems in the family tax benefit area. In being given this area, she certainly will not think she is the favoured colleague of the Prime Minister's office, because clearly there are major problems with the system.

In effect, this government supports a family tax benefit system, as it stands, where parents on middle incomes pay an effective marginal tax rate of between 60 per cent and 77 per cent, and where, because of the allowances income test, an individual claiming Newstart who earns more than $62 in a fortnight pays an effective marginal tax rate of 67 per cent. In no way is this going to encourage people to re-enter the work force or provide any proper incentive for people to work. This government supports a system—again, due to the same allowances income test—whereby an individual claiming Newstart who earns more than $150 in a fortnight would be paying a marginal tax rate of 87 per cent. These figures are absolutely startling to anyone who was not aware of them. Effectively, people who are on the lowest rungs of our society, who are trying to get back into the work force, are paying more income tax than people on a quarter of a million dollars a year. That is a ludicrous situation if we are trying to assist people back into work.

I do recall the then Minister for Employment and Workplace Relations, now the Minister for Health, about a year ago actually commenting on the problems with providing any incentives in the system and with the unfairness that arises as a result of these sorts of marginal tax rates. But he was effectively gagged by the Prime Minister and the Treasurer, and we have not heard any further comment from him nor from any of the frontbench members of the government in relation to this area. There are major problems in this area, and there are major inequities. The government is slugging the people who can least afford it and preventing them from having any incentive to get off parts of welfare where they can. It is something that has to be fundamentally tackled by this government, but to date we have seen very little energy or thought go into finding a system that is fair.

In effect, week after week in this House we get family tax benefit legislation that tinkers around the edges. We had some a number of weeks ago which effectively improved the lot of people who had overcalculated their income, so that they can now take two years rather than one year to actually seek a return of their income. It was a minor improvement and it is certainly better than it was, but it still stands as very unfair when you compare it with the opposite situation—that is, the person who actually has to repay moneys and who has no two-year limit if the government wants to recover moneys from them. As we can see, there are things that the government is doing, but it is tinkering around the edges and looking to make tiny improvements. I have acknowledged in this debate, as I did in the debate on that bill, the extent of the doubling of the time. I did say that, while it is a small step in the right direction, the problem is that that is not the fundamental problem with the family tax benefit system. The problem with the family tax benefit system, fundamentally, if the government were to look at it seriously, is that it is inequitable in terms of who it hits the most. It provides no capacity and no genuine incentive for people to try to find a way out of poverty traps for themselves. This is a real problem that has to be addressed.

I have mentioned those quite extraordinarily high marginal tax rates, and I can mention a number of others. For example, due to the Youth Allowance with a combination of other tests, there are about 40,000 families that face effective marginal tax rates of over 100 per cent.


Mr Sidebottom —It is 102 per cent.


Mr BRENDAN O'CONNOR —I think that is about right. So you have the situation where, if you go out to work, you had better bring 2c for each dollar you are looking to make. That is quite extraordinary. If you are making $5, you had better bring 10c because that is how much you will have to pay for the privilege of notionally earning $5. That is an extraordinary anomaly that has to be fixed, you would think, but it has not been fixed. It is something that really boggles the mind. I do not know how people can actually stand up and defend the family tax benefit system without laughing because it is so ludicrous. I suppose the one thing that should stop them from laughing is the effect of it—


Mr Sidebottom —It is cruel.


Mr BRENDAN O'CONNOR —It is not funny, because it is a cruel system, as the member for Braddon suggests. It is a cruel system to expect people to actually go out and lose money because they are actually working. They are the fundamental issues that this government has to focus its mind on. I have acknowledged that there are some benefits in this bill, but there are some real deficiencies in the system as a whole. I have some real concerns. One thing about this area of policy is that all members in this House know about the problems, because we hear all the time at the electorate office about concerns about payment and recovery and the way in which they are implemented. So there are fundamental problems. At the heart of it there is the problem with the inequitable marginal tax rates and the inability of the government to find a policy that provides incentives for people to work, to get out of the poverty trap and get out of the system. That is something that the government should turn its mind to now to deliver a decent, fair and effective system. (Time expired)