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Families, Housing, Community Services and Indigenous Affairs and Other Legislation Amendment (Budget and Other Measures) Bill 2011

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2010

 

 

 

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

 

 

 

 

 

 

 

 

FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS AND OTHER LEGISLATION AMENDMENT (BUDGET AND OTHER MEASURES) BILL 2010

 

 

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Circulated by the authority of the

Minister for Families, Housing, Community Services and Indigenous Affairs, the Hon Jenny Macklin MP)



FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS AND OTHER LEGISLATION AMENDMENT (BUDGET AND OTHER MEASURES) BILL 2010

 

 

OUTLINE

 

The Bill contains one 2010 Budget measure and several non-Budget measures, as described below.

 

Special disability trusts

 

The Bill introduces a 2010 Budget measure that amends the special disability trust provisions in the social security and veterans’ entitlements legislation to widen the appeal of the provisions.  The amendments relax the purpose and work capacity tests in relation to these trusts , and give trustees greater flexibility to meet costs relating to the beneficiary’s health, wellbeing, recreation, independence and social inclusion. 

 

Residence required to qualify for disability support pension

 

An ongoing requirement for residence in Australia will be introduced for disability support pension, bringing the pension into line with other workforce age payments.

 

Scheduling of land

 

The Bill will add further parcels of land to Schedule 1 to the Aboriginal Land Rights (Northern Territory) Amendment Act 1976 to enable the land to be granted to relevant Aboriginal Land Trusts.

 

Indigenous Land Corporation

 

The Bill includes amendments to the Aboriginal and Torres Strait Islander Act 2005 to include a power for the Minister to make guidelines that would apply to the Indigenous Land Corporation when it performs its functions to support native title settlement.

 

Family tax benefit

 

Amendments are made to ensure that students studying overseas full-time are treated for family tax benefit purposes in the same way as full-time students undertaking Australian study.

 

Pension reform measures

 

The Bill makes amendments to address two minor anomalies arising from the pension reform legislation enacted in 2009.

 

Minor corrections

 

Minor amendments are made to reinsert an unintentionally omitted reference in the social security confidentiality provisions, and to make two technical corrections.

 

Financial impact statement

 

Special disability trusts

 

Total resourcing

2010-11

2011-12

2012-13

2013-14

$0.4 m

$0.1 m

$0.2 m

$0.3 m

 

Residence required to qualify for disability support pension

 

Total change in resourcing (FaHCSIA and Centrelink)

2010-11

2011-12

2012-13

2013-14

$0.4 m

- $2.6 m

- $2.9 m

- $3.3 m

 

The remaining measures in this Bill have no financial impact.

 

 



FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS AND OTHER LEGISLATION AMENDMENT (BUDGET AND OTHER MEASURES) BILL 2010

 

 

NOTES ON CLAUSES

 

Abbreviations used in this explanatory memorandum

 

  • ‘Social Security Act’ means the Social Security Act 1991 ; and

 

  • ‘Veterans’ Entitlements Act’ means the Veterans’ Entitlements Act 1986 .

 

 

Clause 1 sets out how the new Act is to be cited, that is, as the Families, Housing, Community Services and Indigenous Affairs and Other Legislation Amendment (Budget and Other Measures) Act 2010.

 

Clause 2 provides a table that sets out the commencement dates of the various sections in, and Schedules to, the new Act.

 

Clause 3 provides that each Act that is specified in a Schedule is amended or repealed as set out in that Schedule.

 



Schedule 1 - Special disability trusts

 

 

Summary

 

This Schedule introduces a 2010 Budget measure that amends the special disability trust provisions in the social security and veterans’ entitlements legislation to widen the appeal of the provisions.  The amendments relax the purpose and work capacity tests in relation to these trusts , and give trustees greater flexibility to meet costs relating to the beneficiary’s health, wellbeing, recreation, independence and social inclusion.

 

Background

 

Special disability trusts were established in 2006 to assist family members, who have the financial means to do so, to make private financial provision for the current and future care and accommodation needs of their family member with a severe disability.

 

The Senate Standing Committee on Community Affairs inquired into why more families were not making use of the special disability trust provisions and made various recommendations to make special disability trusts more attractive to families of people with severe disabilities.

 

This measure helps address a number of the recommendations contained in the Standing Committee’s report - in particular, the relaxation of the work capacity and trust purpose requirements.

 

This Schedule makes amendments to both Division 1 of Part 3.18A of Chapter 3 of the Social Security Act and Division 11B of Part IIIB of the Veterans’ Entitlements Act in relation to special disability trusts.

 

The amendments made by this Schedule commence on 1 January 2011.

 

Explanation of the changes

 

Amendments to the Social Security Act

 

Item 1 inserts a new paragraph 1209L(ea) after paragraph 1209L(e) to include a requirement that special disability trusts meet the expenditure requirements to be inserted by item 5 below.

 

Item 2 repeals paragraph 1209M(2)(c) and substitutes a new paragraph 1209M(2)(c).

 

Subsection 1209M(2) provides the impairment or disability conditions that a principal beneficiary, who has reached 16 years of age, must have in order to be the principal beneficiary for the purposes of this Part.

 

New paragraph 1209M(2)(c) changes the work capacity tests in the beneficiary requirements to provide a greater scope for beneficiaries to work and still meet the criteria for special disability trusts.  New subparagraph 1209M(2)(c)(i) provides that a person can be working for up to seven hours a week at or above the relevant minimum wage and still meet the beneficiary requirements.  New subparagraph 1209M(2)(c)(ii) provides that a person can be working for wages determined in accordance with the supported wage system and still meet the beneficiary requirements.

 

Item 3 omits the word ‘sole’ in subsection 1209N(1) and substitutes the word ‘primary’.  Subsection 1209N(1) provides that the primary purpose, during the beneficiary’s lifetime, must be to meet the beneficiary’s reasonable care and accommodation needs. 

 

The amendment is a relaxation of the purpose test and provides that a trust can still meet the criteria for a special disability trust, even if it has purposes other than meeting the reasonable care and accommodation needs of the beneficiary, provided that remains the primary purpose of the trust.

 

As reflected in the note to item 3 , the heading to subsection 1209N(1) is also amended by omitting the word ‘sole’ and substituting the word ‘primary’.

 

Item 4 repeals subsections 1209N(2), (3) and (4) and substitutes new subsections 1209N(2), (3) and (4).

 

New paragraph 1209N(2)(a) provides that a trust can have purposes that are both ancillary to the primary purpose and necessary or desirable to facilitate the primary purpose.  This new paragraph effectively replicates the old subsection 1209N(2).

 

New paragraph 1209N(2)(b) provides that a trust can also have purposes that are primarily for the benefit of the principal beneficiary.

 

Note 1 at the end of new subsection 1209N(2) confirms for the reader that a particular purpose of a trust may fulfil the matters set out in both of paragraphs 1209N(2)(a) and (b).

 

Note 2 at the end of new subsection 1209N(2) alerts the reader to the new trust expenditure requirements inserted by item 5 below.

 

New paragraph 1209N(3)(a) provides that the reasonable care and accommodation needs of a beneficiary of a special disability trust must be decided in accordance with any guidelines made under new subsection 1209N(4).  New paragraph 1209N(3)(b) provides that purposes that are for the primary benefit of the principal beneficiary of a special disability trust must be decided in accordance with any guidelines made under new subsection 1209N(4). 

 

New subsection 1209N(4) gives the Secretary a discretionary power to make guidelines, by legislative instrument, for deciding what are, or are not, reasonable care and accommodation needs, and what are, or are not, purposes that are primarily for the benefit of the principal beneficiary.

 

Item 5 inserts a new section 1209RA into Division 1 of Part 3.18A of Chapter 3, immediately after section 1209R.

 

New section 1209RA sets out the trust expenditure requirements that a trust must meet to be considered a special disability trust.  Subsection 1209RA(1) provides that, if there is a determination made under subsection 1209RA(3), and a trust has one or more purposes (other than the primary purpose) that are primarily for the benefit of the principal beneficiary, the trust must comply with the determination made in accordance with subsection 1209RA(3).

 

New subsection 1209RA(2) provides that a decision about whether a trust’s purposes are primarily for the benefit of the principal beneficiary must be made in accordance with any guidelines made by the Secretary in accordance with subsection 1209N(4).

 

New subsection 1209RA(3) gives the Secretary discretionary power to determine the value of income and assets that may be applied by a trust, in each financial year, for purposes that primarily benefit the principal beneficiary.

 

Amendments to the Veterans’ Entitlements Act

 

Item 6 inserts new paragraph 52ZZZW(ea).

 

Section 52ZZZW sets out the provisions which detail the requirements that must be complied with in order for a special disability trust to be regarded as such for the purposes of the Veterans’ Entitlements Act.

 

New paragraph 52ZZZW(ea) includes the ‘trust expenditure requirements’ that are referred to in new section 52ZZZWEA (inserted by item 10 ).

 

Item 7 repeals and substitutes paragraph 52ZZZWA(2)(c).

 

Section 52ZZZWA sets out the conditions of impairment and disability that the beneficiary of the special disability trust must meet in order to satisfy the requirements of the provision.

 

New paragraph 52ZZZWA(2)(c) provides that the beneficiary of the special disability trust must have a disability as a result of which:

 

·          the beneficiary is not working and is not likely to work for more than seven hours a week for a wage that is equal to or higher than the ‘relevant minimum wage’ within the meaning of subsection 23(1) of the Social Security Act; or

  • the beneficiary works for wages that have been set in accordance with the Commonwealth program known as the ‘supported wage system’.

Items 8 and 9 amend section 52ZZZWB.  Section 52ZZZWB provides that the sole purpose of a trust that is to be regarded as a special disability trust is to provide for the ‘care and accommodation’ of the principal beneficiary of the trust.

 

The amendments provide for a relaxation of the purpose test.  They provide that a trust can still meet the criteria for a special disability trust, even if it has purposes other than meeting the reasonable care and accommodation needs of the beneficiary, provided that those needs remain the primary purpose of the trust.

 

Subsection 52ZZZWB(1) is amended by replacing the reference to the ‘sole’ purpose of the special disability trust with a reference to the ‘primary’ purpose of the special disability trust, as provided by the trust deed, being to meet the reasonable care and accommodation needs of the principal beneficiary.

 

As a consequence, the heading to subsection 52ZZZWB(1) is also amended to describe the provision as referring to the ‘primary purpose - care and accommodation for (the) principal beneficiary’.

 

Subsections 52ZZZWB(2), (3) and (4) are repealed and substituted by item 9 .

 

New subsection 52ZZZWB(2) provides that the trust may have other purposes if those other purposes:

 

·          have the function of being both ancillary to the primary purpose and necessary or desirable in facilitating the achievement of the primary purpose; or

·          are primarily for the benefit of the principal beneficiary.

There is a distinction to be made between ‘ancillary’ purposes and ‘other’ purposes.

 

In referring to the ‘ancillary purposes’ of the trust, subsection 52ZZZWB(2) is referring to those provisions of the trust that are necessary or desirable in facilitating the primary purpose.

 

The relevant provisions would generally concern the maintenance and the practical administration of the trust, and are not matters which would need to be addressed in the guidelines determined under subsection 52ZZZWB(4).

 

The ‘other purposes’ that the trust may refer to and which are subject to the guidelines determined under subsection 52ZZZWB(4) are those purposes, other than the primary purpose, that will benefit the principal beneficiary.

 

Note 1 to subsection 52ZZZWB(2) refers to the possibility of a particular purpose being both ancillary and primarily for the benefit of the principal beneficiary.

 

Note 2 to subsection 52ZZZWB(2) refers to the guidelines made under section 52ZZZWEA (inserted by item 10 ) that provide for the limits on the values of income and assets that may be applied for purposes other than the primary purpose, for the benefit of the principal beneficiary.

 

New subsection 52ZZZWB(3) refers to the guidelines made under the provisions of new subsection 52ZZZWB(4) and provides that:

 

·          the reasonable care and accommodation needs of the principal beneficiary of a special disability trust must be decided in accordance with the guidelines in the circumstances where the guidelines refer to those needs; and

  • purposes which are other than the primary purpose that are primarily for the benefit of the principal beneficiary must be decided in accordance with the guidelines in the circumstances where the guidelines refer to those purposes.

New subsection 52ZZZWB(4) provides the Repatriation Commission with a discretionary power to make (by legislative instrument) guidelines that are to be used for deciding either or both of the following:

 

·          what are, and what are not, to be regarded as being the reasonable care and accommodation needs for the beneficiaries of a special disability trust;

·          what are, and what are not, to be regarded as purposes of the trusts, other than the primary purpose, that are primarily for the benefit of the beneficiaries of the trusts.

Item 10 inserts new section 52ZZZWEA.

 

New section 52ZZZWEA sets out the expenditure requirements for trusts that are to be regarded as special disability trusts.

 

New subsection 52ZZZWEA(1) is applicable in the circumstances where the Repatriation Commission has made a determination under subsection 52ZZZWEA(3) that specifies the total value of income and assets of the special disability trust that can be applied for purposes other than the primary purpose for each tax year.

 

New subsection 52ZZZWEA(1) provides that, where a special disability trust has one or more purposes that are primarily for the benefit of the principal beneficiary, other than the primary purpose referred to in subsection 52ZZZWB(1), the total value of the income and assets of the special disability trust that are applied for other purposes, other than the primary purpose, are not to exceed the value that is specified in the determination for that tax year.

 

New subsection 52ZZZWEA(2) is applicable where special disability trust guidelines have been made under paragraph 52ZZZWB(4)(b).  In those circumstances, the question as to whether a purpose for which the income and assets of a special disability trust have been applied is one of the other purposes referred to in subsection 52ZZZWEA(1), is to be decided in accordance with those guidelines.

 

The note to subsection 52ZZZWEA(2) refers to paragraph 52ZZZWB(4)(b) providing for the determination of guidelines that decide what are, and what are not, the other purposes (other than the primary purpose) that are primarily for the benefit of the beneficiaries of the special disability trusts.

 

New subsection 52ZZZWEA(3) provides the Repatriation Commission with the discretionary power to make a determination as to the total value of income and assets of a special disability trust that may be applied in each tax year for purposes, other than the primary purpose referred to in subsection 52ZZZWB(1), where those other purposes are primarily for the benefit of the principal beneficiary of the special disability trust.

 

Item 11 is an application provision and provides that the amendments made by this Schedule will apply to all trusts, irrespective of whether they were created before, on or after commencement of this Schedule and whether or not they met the criteria for being a special disability trust before commencement of this Schedule.

 

It is intended that, by applying the new provisions to existing, as well as new, trusts, more families will be able to benefit from the concessions

 

Accordingly, an existing trust, that may not have previously met the criteria for a special disability trust, will not be prevented from being considered a special disability trust under the new criteria simply as a result of when it was created.  In fact, it is intended that the relaxation of the purpose and the work capacity rules will result in more existing trusts meeting the criteria and the concessions provided being taken up by families.

 

While the effect of these provisions means that the trust expenditure requirements will be imposed on trusts midway through a trust’s reporting period, there will be no undue burden placed on trusts (or trustees) as all these changes are beneficial.



Schedule 2 - Residence required to qualify for d isability support pension

 

 

Summary

 

This Schedule will introduce an ongoing requirement for residence in Australia for disability support pension, bringing the pension into line with other workforce age payments.

 

Background

 

These amendments will close a loophole that has allowed continued payment of disability support pension to people who live permanently overseas but return to Australia every 13 weeks in order to retain their pension.

 

It is not the intention of the 13-week portability period to allow people to live overseas and return to Australia for only short periods every 13 weeks to maintain payment.  The 13-week portability period is designed to allow disability support pensioners who reside permanently in Australia sufficient time to deal with personal matters that may arise from time to time overseas.  This is consistent with the purpose of disability support pension, which is to assist people with the cost of living in Australia, and is designed to engage people of workforce age in activities in Australia that will lead to greater levels of economic and social participation.

 

Section 7 of the Social Security Act lists the factors to which regard must be had in deciding whether or not a person is an Australian resident .  Part 2.3 of the Social Security Act provides the qualification rules for disability support pension.  Subdivision A of Division 1 of that Part provides how a person is qualified for disability support pension.  Those provisions are to be amended to provide that a person must be an Australian resident to qualify for disability support pension.

 

The new qualification requirement for disability support pension will not apply to a pensioner whose disability support pension is portable under an international social security agreement.  The new requirement will also not apply to a pensioner who is grandfathered from certain portability changes made in 2000 and 2004.  Lastly, the new requirement will not apply to a pensioner who is severely disabled and terminally ill, and who is overseas to be with a family member or to return to the person’s country of origin.

 

The amendments made by this Schedule commence on 1 January 2011.

 

Explanation of the changes

 

Item 1 provides for the amendment of section 94 (Qualification for disability support pension) of the Social Security Act by the insertion of new paragraph 94(1)(ea), which requires that a disability support pensioner either be an Australian resident or be absent from Australia and remain eligible for disability support pension under section 1218AA.

 

Item 2 provides for the amendment of section 94A (Qualification for disability support pension - person transferring to that pension) of the Social Security Act by the insertion of paragraph 94A(1)(ja), which requires that a disability support pensioner either be an Australian resident or be absent from Australia and remain eligible for disability support pension under section 1218AA.

 

Item 3 adds a note to subsection 94A(1), referring to section 7 as the source of the definition of Australian resident.

 

Item 4 provides for the amendment of section 95 (Qualification for disability support pension - permanent blindness) of the Social Security Act by the insertion of paragraph 95(1)(d), which requires that a disability support pensioner either be an Australian resident or be absent from Australia and remain eligible for disability support pension under section 1218AA.

 

Item 5 provides for the amendment of section 1212 of the Social Security Act by the addition of a new definition of Australian resident disability support pensioner .

 

Item 6 provides for the amendment of section 1212 of the Social Security Act by the addition of a new definition of terminally ill overseas disability support pensioner .

 

Item 7 provides for the amendment of the table in section 1217, relating to portability of social security payments, by repealing item 3 of that table and substituting two new items to provide for portability of an Australian resident disability support pensioner (item 2) and of a terminally ill overseas disability support pensioner (item 3).

 

Item 8 adds new clause 150 to Schedule 1A to the Social Security Act.  This provides an exemption from the requirement to be an Australian resident to qualify for disability support pension for certain pensioners whose entitlement to disability support pension is otherwise maintained.

 



Schedule 3 - Scheduling of land

 

 

Summary

 

This Schedule will add further parcels of land to Schedule 1 to the Aboriginal Land Rights (Northern Territory) Act 1976 (the Land Rights Act) to enable the land to be granted to relevant Aboriginal Land Trusts.

 

Background

 

This Schedule will add further parcels of Northern Territory land near Borroloola and also land comprising the Port Patterson Islands to Schedule 1 to the Land Rights Act.  This will allow the land in question to be granted to relevant Aboriginal Land Trusts pursuant to sections 10 and 12 of the Land Rights Act.

 

Government policy is that land should be added to Schedule 1 to the Land Rights Act where agreement to do so has been reached between the Northern Territory Government and the relevant Land Council.  Agreement has been reached between the Commonwealth, the Northern Territory Government and the Northern Land Council that these parcels of land should be granted to relevant Aboriginal Land Trusts as Aboriginal land under the Land Rights Act.

 

The parcels of land near Borroloola are associated with the Borroloola Land Claim, which was the first land claim made under the Land Rights Act.  The parcels of land include Batten Point, North Island and some small islands off the coast of Vanderlin Island.  North Island has been held as Barranyi National Park and previously did not qualify to be granted as part of the land claim.  The small islands, called Rarranggilawunyara, Niwawunala, Wanadjurara and Alolo, were part of the land claim, but were inadvertently omitted from the Aboriginal Land Commissioner’s recommendations.  Two related grants of land have previously been made to the claimants, and, once these particular parcels of land are granted, this land claim will be resolved.

 

The Port Patterson Islands also relate to a long-running land claim, the Kenbi land claim over the Cox Peninsula near Darwin.  After a long and complex process, this land claim is also approaching resolution.  The addition of the Port Patterson Islands to Schedule 1 to the Land Rights Act will enable this land to be included in a grant associated with the Kenbi Land Claim in the near future.

 

The amendments made by this Schedule commence on the day after Royal Assent.

 

Explanation of the changes

 

Item 1 amends Part 4 of Schedule 1 to the Land Rights Act by inserting various portions of land near Borroloola in the Northern Territory as land to be granted as Aboriginal land.

 

Item 2 also amends Part 4 of Schedule 1 to the Land Rights Act by inserting a portion of land in the Northern Territory known as the Port Patterson Islands to be granted as Aboriginal land.

 



Schedule 4 - Indigenous Land Corporation

 

 

Summary

 

This Schedule makes amendments to the Aboriginal and Torres Strait Islander Act 2005 (the ATSI Act) to include a power for the Minister to make guidelines that would apply to the Indigenous Land Corporation when it performs its functions to support native title settlement.

 

Background

 

The purpose of the Indigenous Land Corporation is to assist Aboriginal people and Torres Strait Islanders to acquire and manage Indigenous-held land so as to provide economic, environmental, social and cultural benefits. 

 

The Indigenous Land Corporation’s functions are set out in sections 191C, 191D and 191E of the ATSI Act.  Its main functions are land acquisition and land management.  These functions can be exercised in support of native title settlements, whether or not the settlement includes a determination of native title.

 

The Government promotes flexible native title settlements that can be sustained over the long term, instead of litigation, wherever possible.  Settlements may provide for a range of practical benefits. 

 

In introducing these amendments, the Government recognises that the Indigenous Land Corporation can assist with the resolution of native title settlements, particularly where connection to the land in question is at issue and native title may not be established.

 

The amendments provide a power for the Minister to make guidelines that would apply to the extent that the Indigenous Land Corporation performs its functions in supporting native title settlements.  In these instances, the Indigenous Land Corporation will be required to have regard to any guidelines made in the exercise of the Minister’s power.

 

The amendments made by this Schedule commence on the day after Royal Assent.

 

Explanation of the changes

 

Item 1 inserts new subsection 191F(2A), which will require the Indigenous Land Corporation to have regard to guidelines made under new section 191HA to the extent that it is performing its functions in supporting native title settlements.

 

The Indigenous Land Corporation may perform its functions for any reason covered in its enabling legislation.   The Indigenous Land Corporation must have regard to the guidelines only to the extent that it is performing its functions in supporting native title settlements.  It will not be required to have regard to the guidelines when performing its functions in other contexts.

 

Item 2 inserts new section 191HA, which provides that the Minister may make guidelines in the circumstances provided for in new subsection 191F(2A).  Any guidelines made under this provision will be a disallowable legislative instrument.

 

Subsection 191I(1) applies if the Indigenous Land Corporation makes its own guidelines about the performance of a function referred to in paragraph 191D(1)(a), (c) or (d) or paragraph 191E(1)(d), (e) or (f) of the ATSI Act. 

 

New subsection 191I(1A), inserted by item 3 , makes it clear that any guidelines made by the Indigenous Land Corporation will have no effect, to the extent of any inconsistency, if they are inconsistent with any guidelines made by the Minister under new  section 191HA.

 

The heading to section 191I is altered by omitting the word ‘Guidelines’ and substituting ‘Indigenous Land Corporation guidelines’ to describe more accurately the content of the section .

 

Item 4 makes an amendment to subsection 191I(2) required as a consequence of item 3 .

 



Schedule 5 - Family tax benefit

 

 

Summary

 

The amendments made by this Schedule ensure that students studying overseas full-time are treated for family tax benefit (FTB) purposes in the same way as full-time students undertaking Australian study.

 

Background

 

An FTB child , in relation to FTB, has the meaning given in Subdivision A of Division 1 of Part 3 of the A New Tax System (Family Assistance) Act 1999 (Family Assistance Act) - see section 3.  An FTB child may be aged up to 24 - see section 22. 

 

The Family Assistance Legislation Amendment (Participation Requirement) Act 2009 introduced an activity test for the first time for children aged 16 to 20, commencing for most claimants on 1 July 2010, although the measure came into effect for new claimants from 1 January 2010.  However, the measure unintentionally excluded from the definition of FTB child those children or young people who were studying overseas full-time.

 

The amendments made by this Schedule extend entitlement for these claimants in respect of such children or young people. 

 

Under subsection 22(3) of the Family Assistance Act, an individual aged 16 to 17 is an FTB child of an adult who has care of the individual, provided the individual meets certain residence requirements and satisfies or is exempt from the FTB activity test.  Equally, under subsection 22(4) of the Family Assistance Act, an individual aged 18 to 20 is an FTB child of an adult who has care of the individual, provided the individual meets certain residence requirements and satisfies or is exempt from the FTB activity test.  The concept ‘satisfies the FTB activity test’ is defined in section 17B of the Family Assistance Act.  Amendments will ensure that the FTB activity test may be met by a student studying overseas full-time.

 

Under subsection 22(6) of the Family Assistance Act, an individual aged 21 to 24 is an FTB child of an adult who has care of the individual, provided the individual meets certain residence requirements and is undertaking full-time study.  Amendments will provide that studying overseas full-time will also result in a young person in this age-group being an FTB child.

 

An individual who is aged five or more and less than 16 cannot be an FTB child of an adult if the individual is not undertaking full-time study or primary education and has adjusted taxable income that equals or exceeds the cut-out amount (see item 1 of the table in subsection 22A(1) of the Family Assistance Act and supporting definitions in section 22A).  The amendments will ensure that income over the cut-out amount is not a disqualifying factor if the student is studying overseas full-time.

 

There are similar rules that define the concept of an eligible child where an approved care organisation claims payment of FTB in respect of a child.  These rules are set out in sections 34 and 35 of the Family Assistance Act.  Amendments will provide for studying overseas full-time to substitute for the existing rules relating to undertaking Australian study. 

 

If an FTB child dies and, immediately prior to the child’s death, an individual was eligible for FTB in respect of the child, then the individual remains eligible for FTB for a bereavement period of 14 weeks after the child’s death.  However, the bereavement period does not include any day on or after the day upon which the young person would have turned 25, and the requirement is repeated that the young person must have been undertaking full-time study (see paragraph 31(3)(a)).  The amendments similarly extend the bereavement period for those young people studying overseas full-time.

 

Where an FTB child has died, section 32 provides that a lump sum of FTB may be payable in substitution for the continuing 14 weeks of eligibility under section 31.  The calculation of the bereavement lump sum is dealt with by section 65, and repeats the requirement that the FTB child be aged under 25 and undertaking full-time study (see paragraph 65(2)(a)).  The amendments also extend the calculation of the bereavement lump sum to include those young people studying overseas full-time.

 

The rate calculation for FTB is dealt with in Schedule 1 to the Family Assistance Act.  The rate calculation process for FTB Part B disregards an FTB child who has turned 16 years of age unless the child is undertaking full-time study and the calendar year in which the child turned 18 has not ended.  The relevant rule is in subclause 29(3) of Schedule 1 to the Family Assistance Act.  Similarly, in calculating the amount of multiple-birth allowance as part of FTB rate, a child aged 16 or more is disregarded unless they are undertaking full-time study (paragraph 36(2)(b) of Schedule 1).  For the purposes of the rate calculation process for FTB Part B and for multiple birth allowance, amendments will include an FTB child where the child is studying overseas full-time and meets all the other criteria. 

 

Additionally, the term ‘undertaking full-time study’ is used in paragraph 32K(1)(b) of the A New Tax System (Family Assistance) (Administration) Act 1999 (Family Assistance Administration Act) in relation to the relevant reconciliation time for FTB eligibility in respect of a child or young person who is not undertaking full-time study but who has an income (that is, the situation mentioned in table item 1 of subsection 22A(1) of the Family Assistance Act).  The amendments will provide for the relevant reconciliation time under section 32K in respect of a child or young person who is not studying overseas full-time and whose income is then relevant to FTB eligibility.

 

The amendments made by this Schedule commence on the day of Royal Assent.

 

Explanation of the changes

 

Amendments to the Family Assistance Act

 

Item 1 inserts a definition of the new term studying overseas full-time into subsection 3(1) of the Family Assistance Act, the meaning of which is set out in new section 3C (inserted by item 2 ). 

 

Studying overseas full-time in new section 3C of the Family Assistance Act has the meaning given by a legislative instrument made by the Minister for the purposes of this section. 

 

Item 3 inserts new paragraph 17B(1)(c) as an alternative way to satisfy the FTB activity test in subsection 17B(1) of the Family Assistance Act. 

 

New paragraph 17B(1)(c) provides that an individual may satisfy the FTB activity test by studying overseas full-time in a way that would, in the Secretary’s opinion, assist or allow the individual to complete his or her final year of secondary school or an equivalent level of education.

 

Item 4 is a consequential amendment to item 3

 

Item 5 amends paragraph 17B(4)(a) of the Family Assistance Act to provide authority for the Secretary to set guidelines, by legislative instrument, for the exercise of the Secretary’s discretion under new paragraph 17B(1)(c).

 

Item 6 amends subsection 17B(5) of the Family Assistance Act to require the Secretary to have regard to any such guidelines.

 

Item 7 inserts the words ‘or is studying overseas full-time’ into paragraph 22(6)(d) of the Family Assistance Act.  This has the effect of extending the definition of FTB child to include 21 to 24 year-olds who are studying overseas full-time.

 

A note provides for the heading to subsection 22(6) to be amended to include reference to studying overseas full-time.

 

Item 8 repeals and substitutes paragraph (a) of a particular cell of table item 1 of subsection 22A(1) of the Family Assistance Act.  The effect of this is to include within the definition of FTB child individuals who are aged five or more and less than 16 if they have adjusted taxable income that equals or exceeds the cut-out amount but are studying overseas full-time. 

 

Item 9 inserts the words ‘or was studying overseas full-time’ after the words ‘undertaking full-time study’ as they appear in paragraph 31(3)(a) of the Family Assistance Act, relating to the bereavement period.  Paragraph 31(3)(a) of the Family Assistance Act currently excludes from continued eligibility for FTB those individuals, among others, whose FTB child would have been aged 25 or over if he or she had not died and was undertaking full-time study.  This amendment will extend eligibility in respect of young people studying overseas full-time, and is consistent with the above amendments to the definition of FTB child for 21 to 24 year olds.

 

Item 10 inserts the words ‘or is studying overseas full-time’ after the words ‘undertaking full-time study’ as they appear in subparagraph 34(1)(a)(iii).  This insertion will result in an approved care organisation being eligible for FTB in respect of an individual aged 21 to 24 who is studying overseas full-time and meets the other prescribed requirements.

 

Item 11 repeals and substitutes paragraph (a) of a particular cell of table item 1 of subsection 35(1) of the Family Assistance Act to include reference to studying overseas full-time.  The effect of this is that an approved care organisation may be eligible for FTB for an individual aged five or more and less than 16 despite the fact the individual has adjusted taxable income that equals or exceeds the cut-out amount if the individual is studying overseas full-time. 

 

Item 12 inserts the words ‘or was studying overseas full-time’ after the words ‘undertaking full-time study’ as they appear in paragraph 65(2)(a) of the Family Assistance Act. 

 

The calculation of the lump sum payable where an FTB child has died is dealt with by section 65.  This insertion prevents the exclusion of days from the lump sum period where an FTB child aged under 25 was studying overseas full-time.

 

Item 13 inserts the words ‘or is studying overseas full-time’ after the words ‘undertaking full-time study’ as they appear in paragraph 29(3)(a) of Schedule 1 to the Family Assistance Act. 

 

The rate calculation process for FTB Part B currently disregards an FTB child who has turned 16 unless the child is undertaking full-time study and the calendar year in which the child turned 18 has not ended (subclause 29(3) of Schedule 1 to the Family Assistance Act refers).  This amendment will allow the inclusion of an FTB child who is studying overseas full-time.

 

Items 14 and 15 insert the words ‘or is studying overseas full-time’ after the words ‘undertaking full-time study’ as they appear in subparagraphs 36(2)(b)(i) and 36(2)(b)(ii) of Schedule 1 to the Family Assistance Act. 

 

In calculating the amount of multiple-birth allowance as part of an individual’s rate of FTB, a child aged 16 or more is disregarded unless he or she is undertaking full-time study and the calendar year in which the first born of the children in the multiple birth who are undertaking full-time study turned 18 has not ended (paragraph 36(2)(b) of Schedule 1 of the Family Assistance Act refers).  This amendment will allow the inclusion of an FTB child who is studying overseas full-time.

 

Amendments to the Family Assistance Administration Act

 

Item 16 repeals and substitutes paragraph 32K(1)(b) of the Family Assistance Administration Act.  Section 32K currently sets out the relevant reconciliation time for FTB eligibility in respect of an FTB child who is not undertaking full-time study or primary education.  This amendment will extend the provision to provide for the reconciliation time for FTB eligibility in respect of FTB children who are not studying overseas full-time. 

 

Application

 

Item 17 sets out the application rules for the amendments made by Schedule 5. 

 

Subitem 17(1) provides that the amendments made by items 3 to 8, 10, 11 and 13 to 16 , apply in relation to working out an individual’s or approved care organisation’s entitlement (if any) to FTB in respect of days occurring on or after the commencement of those items (that is, on Royal Assent).

 

Subitem 17(2) provides that the amendments made by items 9 and 12 (relating to the bereavement period and the bereavement lump sum) apply in relation to deaths occurring on or after the commencement of those items (that is, on Royal Assent).

 



Schedule 6 - Pension reform measures

 

 

Summary

 

This Schedule makes amendments to address two minor anomalies arising from the pension reform legislation enacted in 2009.

 

The amendments ensure that leave payments taken as part of an ongoing employment relationship will be treated in the same way as the income that would have been earned if the employee had not taken leave.

 

The amendments also ensure that members of a couple who receive separate income support payments from Centrelink and the Department of Veterans’ Affairs will be able to benefit from the work bonus rules in the same way as a couple benefits from the work bonus rules where they receive their income support payment from the same agency.

 

Background

 

These amendments are to clarify, and provide certainty around the application of, certain provisions inserted by the Social Security and Other Legislation Amendment (Pension Reform and Other 2009 Budget Measures) Act 2009 (the Pension Reform Act) and the Veterans’ Affairs and Other Legislation Amendment (Pension Reform) Act 2009 .

 

The current definitions of employment income in subsection 8(1C) of the Social Security Act and subsection 46AB(1) of the Veterans’ Entitlements Act specifically exclude leave payments received by an individual.  Employment income and leave payments are treated differently under the various rate calculators in the Social Security Act and the Veterans’ Entitlements Act. 

 

Since the commencement of clause 146 in Schedule 1A to the Social Security Act (inserted by the Pension Reform Act), there has been uncertainty in the treatment of leave payments.  This has resulted in possible unintended consequences for people whose rates of pension are calculated in accordance with clause 146.

 

A similar problem does not arise under the Veterans’ Entitlements Act as that Act does not include the same daily employment income attribution rules as those located in Division 1AA of Part 3.10 of Chapter 3 of the Social Security Act.

 

Under the social security law, it is possible that a person, during a period of leave such as annual leave, will, because of the different income attribution rules applying to employment income as opposed to leave payments, no longer satisfy the requirements of the transitional arrangements.  This may happen, for example, where leave income is attributed to a single day in an instalment period and not spread out over the entire instalment period under section 1073B.

 

Because the beneficial transitional arrangements operate such that, once a person loses access to them, they cannot ever have access to them again, it is possible for the person, once they return from leave, to receive a lower rate of payment than they were receiving before they went on leave.  This may be the case even if, during their leave period, the amount that was paid to them as leave payments was equivalent to the amount that they would otherwise have received as employment income. 

 

It is also not clear that leave payments can be counted towards the income concession amount calculated under section 1073AA of the Social Security Act or section 46AA of the Veterans’ Entitlements Act.  The income concession amount under section 1073AA or section 46AA is only worked out with respect to employment income.  Because the current definition specifically excludes leave payments (as defined), a person can have their payment rate reduced during a period of leave even if their leave payments are equivalent to the employment income they would have otherwise received because the income concession provisions in section 1073AA or section 46AA do not apply to leave payments.

 

Currently, section 1073AA of the Social Security Act provides for people over age pension age to benefit from an income concession amount, which is an amount of employment income that is disregarded for the purposes of the ordinary income test used in determining their rate of pension.  There is an equivalent provision (section 46AA) in the Veterans’ Entitlements Act to provide that recipients of payments under that Act also benefit from an income concession amount if they have employment income.

 

The amendments in this Schedule correct these anomalies in relation to leave payments so that people get the beneficial effect of the provisions that they were intended to have.

 

Similarly, the work bonus amendments will clarify that an eligible couple, where one member is in receipt of a social security pension or veterans’ entitlements income support pension and the other is in receipt of a payment under the Veterans’ Entitlements Act or a social security pension, will be treated the same as a couple where both members receive a social security pension or a veterans’ entitlements income support pension.

 

Currently, a member of a couple receiving a relevant social security payment whose partner is receiving a veterans’ payment will not receive the full benefit of the social security pension reform work bonus amendments.

 

The amendments made by this Schedule commence on the day of Royal Assent.

 

Explanation of the changes

 

Amendments to the Social Security Act

 

Item 1 repeals paragraph 8(1A)(b) and substitutes a new paragraph 8(1A)(b) that will ensure leave payments made to employees who have an ongoing employment arrangement with their employer are included in the definition of employment income.

 

Item 2 repeals paragraph 8(1A)(e) and substitutes a new paragraph 8(1A)(e) that confirms leave payments made to a person when their employment ends are not included in the definition of employment income.

 

Item 3 omits the reference to paragraph (1A)(e) in subsection 8(1C) and inserts a reference to subsection (1A) to reflect the changes to the definition of employment income made by items 1 and 2 .

 

Item 4 omits the words ‘sick leave’ and substitutes the words ‘personal/carer’s leave’ into the definition of leave payment in subsection 8(1C).  This item is intended to reflect current terminology and does not mean that a payment of sick leave is not to be counted as a leave payment for the purposes of the social security law.  Sick leave would fall within the definition of personal/carer’s leave for the purposes of this provision.

 

Item 5 repeals subsection 1073AA(6) and substitutes a new subsection 1073AA(6) to clarify that the income concession amount is to be applied to the employment income earned, derived or received by each member of the couple before the ordinary income test in the rate calculators is applied.

 

Item 6 amends the first example at the end of subsection 1073AA(6) by adding the words ‘and subsection (1) applies to David and Amy’ after the word ‘couple’.  This amendment confirms that, for the work bonus to apply to both members of a couple, they both need to have reached age pension age and be in receipt of either age pension, wife pension, disability support pension, carer payment, disability wage supplement, bereavement allowance or widow B pension.

 

Item 7 amends the second example at the end of subsection 1073AA(6) by adding the words ‘and subsection (1) applies to Ian and Simone’ after the word ‘couple’.  This amendment confirms that, for the work bonus to apply to both members of a couple, they both need to have reached age pension age and be in receipt of either age pension, wife pension, disability support pension, carer payment, disability wage supplement, bereavement allowance or widow B pension.

 

Item 8 inserts two new subsections at the end of section 1073AA.

 

New subsection 1073AA(7) is inserted to avoid confusion about how section 1073AA interacts with the rate calculators and, in particular, the modules relating to a couples’ ordinary income, for example, Module E of Rate Calculator A.

 

New subsection 1073AA(8) is inserted to clarify that, where one member of a couple has the benefit of an income concession amount under the Veterans’ Entitlements Act, then that income concession amount is to be taken into consideration when determining that couple’s ordinary income under point 1064-E2 or 1066-E2.

 

Amendments to the Veterans’ Entitlements Act

 

Item 9 repeals subsection 46AA(5) and substitutes a new subsection 46AA(5) to clarify that the income concession amount is to be applied to the employment income earned, derived or received by each member of the couple before the ordinary/adjusted income test in point SCH6-E3 of the rate calculator is applied.

 

Item 10 amends the first example at the end of subsection 46AA(5) by adding the words ‘and subsection (1) applies to David and Amy’ after the word ‘couple’.  This amendment confirms that, for the work bonus to apply to both members of a couple, they both need to have reached qualifying age and be in receipt of either a service pension or an income support supplement.

 

Item 11 amends the second example at the end of subsection 46AA(5) by adding the words ‘and subsection (1) applies to Ian and Simone’ after the word ‘couple’.  This amendment confirms that, for the work bonus to apply to both members of a couple, they both need to have reached qualifying age and be in receipt of either a service pension or an income support supplement.

 

Item 12 inserts a new subsection at the end of section 46AA.  New subsection 46AA(5A) is inserted to avoid confusion about how section 46AA interacts with the rate calculator and. in particular, the module relating to a couples’ ordinary/adjusted income, Module E of the Rate Calculator.

 

New subsection 46AA(5A) provides that, where one member of a couple has the benefit of an income concession amount under the Social Security Act, then that income concession amount is to be taken into consideration when determining that couple’s ordinary income under point SCH6-E3.

 

Items 13 to 16 amend section 46AB.  Section 46AB provides for a definition of the term ‘employment income’ for the purposes of the work bonus income concession applied under section 46AA.

 

Item 13 repeals and substitutes paragraph 46AB(1)(b) to provide that the ‘ordinary income’ of a person will include ‘employment income’ that is earned, derived or received, or that is taken to have been earned, derived or received, by the person for work undertaken as an employee in an employer/employee relationship, and that income is to include but is not to be limited to:

 

·          salary, wages, commissions and employment-related fringe benefits that have been earned, derived or received or have been taken to have been earned, derived or received; and

·          leave payments to the person that have been received in relation to a continuing employer/employee relationship.

Item 14 repeals and substitutes paragraph 46AB(1)(e), which provides that employment income will not include a leave payment made to a person who was not employed on a continuing basis.

 

Item 15 is a consequential amendment to subsection 46AB(2) to replace a reference to the repealed paragraph 46AB(1)(e) with a reference to subsection (1), reflecting the changes to the definition of employment income made by items 13 and 14 .

 

Item 16 is a technical amendment to paragraph 46AB(2)(a) to replace a reference to ‘sick leave’ with the more contemporary term ‘personal/carer’s leave’.

 

This item does not mean that a payment of sick leave is not to be counted as a leave payment for the purposes of the Veterans’ Entitlements Act.  Payments in respect of sick leave would fall within the definition of personal/carer’s leave for the purposes of this provision.

 



Schedule 7 - Minor corrections

 

 

Summary

 

Minor amendments are made to reinsert an unintentionally omitted reference in the social security confidentiality provisions, and to make two technical corrections.

 

Background

 

This Schedule reinserts a reference, unintentionally omitted from the confidentiality provisions in the Social Security (Administration) Act 1999 (Social Security Administration Act), by the Social Security and Other Legislation Amendment (Income Support for Students) Act 2010 (the Students Act).

 

The reference in question (to the Digital Switch-over Household Assistance Program (the Switch-over Program)) was inserted into subsection 202(1) of the Social Security Administration Act by the Social Security Legislation Amendment (Digital Television Switch-over) Act 2009 (the Switch-over Act), with effect from 27 June 2009.  This was to allow protected information to be obtained for the purposes of the Switch-over Program.

 

However, the Students Act substituted subsection 202(1) for its own purposes, with effect from 1 April 2010, unintentionally omitting the recently inserted reference to the Switch-over Program.

 

The reference is reinserted so the Switch-over Program continues to operate as intended.

 

The Schedule also makes two technical amendments to the Social Security Act and the Social Security Administration Act.

 

The amendments made by this Schedule commence on Royal Assent.

 

Explanation of the changes

 

Item 1 makes a technical amendment by inserting ‘to’ after ‘not’ in subsection 1218(3) of the Social Security Act.

 

Item 2 reinstates the reference to the Switch-over Program, as described above, in subsection 202(1) of the Social Security Administration Act .

 

Item 3 makes a technical amendment by re-lettering as paragraph (dc) the second occurring paragraph 202(2)(db) of the Social Security Administration Act, which was inserted by item 2 of Schedule 1 to the Switch-over Act.