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Wednesday, 9 March 2005
Page: 101

Senator GREIG (4:27 PM) —I too rise to speak on the Family and Community Services and Veterans’ Affairs Legislation Amendment (Further 2004 Election Commitments and Other Measures) Bill 2005. The Democrats welcome the bill, which amongst other things makes aged care accommodation bonds exempt assets under the social security and Veterans Affairs assets test. Many older Australians are faced with paying an accommodation bond for entry into an aged care hostel. Having paid the bond, they do not receive interest on it and have no control over the funds until they either leave the facility or pass away and the balance is returned to their estate. The family home is exempt from the assets test for social security benefits. This bill applies the same rules to the assessment of accommodation bonds, the size of which continue to grow. Removal of the treatment of the bond as an asset for the purpose of calculation of income support is a sensible change and represents a fair and reasonable outcome to what was becoming a considerable problem for many low-income pensioners and veteran residents.

We also accept the changes that this bill brings to the child income cut-out amount for family tax benefit. The child income cut-out amount formula provides that, firstly, the following amounts for a year per child must be added: taxable income, the value of any adjusted fringe benefits, target foreign income, net rental property loss and tax-free pension or benefit. Secondly, from this value the amount of deductible child maintenance expenditure is subtracted and then, finally, by dividing the part B standard rate that applies when the youngest child is five years old or over by 0.3 and then adding the part B income-free area, you get the cut-out amount. The complexity of this formula would challenge the best of us, and I seriously doubt that any parent could independently and readily satisfy themselves that it was being applied correctly. So it is with some relief that we note the formula is now to be replaced by a specified cut-out amount, if for no other reason than that it is less complex. We accept the department’s assertion that it preserves the true value of the cut-out amount.

I turn now to the third change brought about by this bill, which the minister explains as an increase to family tax benefit B, in this case delivered as an end-of-year bonus payment once family tax benefit B families lodge their annual tax returns—except that this is a misnomer. From reading it, families would reasonably expect a $150 bonus per child, which would come in very handy midway through the year, particularly for single parents who struggle to meet the costs of raising children alone. Many will not receive it, however. There will be no $150 bonus for them. There will be no bonus because it will be eaten up by a flawed payment system that causes families to repeatedly incur family tax payment debts at the end of the year through no fault of their own. This is a matter that we Democrats have consistently raised in the five years since the government introduced the family tax benefit system. Time and time again in this place we have outlined the difficulty that families incur in the requirement that they accurately estimate their income.

If the formula I outlined a moment ago seemed complex then consider what the general income estimate process is for every Australian family who wants to claim their entitlement to cover the cost of children. The process is this: they multiply the amount they receive before tax, the gross amount, by 26 or 52, depending on whether they are paid weekly or fortnightly; they have to take into account any pay rises or other changes in their regular earnings since 1 July; they have to add any bonuses, lump sum payments, gifts or extra money that they owe or their partner has received since 1 July or that they expect to receive during the year; they have to add the value of fringe benefits or any salary package for the financial year, and they may need to seek assistance in calculating this from the Family Assistance Office; they add any foreign income; they add any income from rental property, that is net income; they add any pension or benefit paid since 1 July; they then subtract any tax deductions that may be allowed, such as work-related expenses; and, finally, once they have added these together, they must subtract their own and/or their partner’s child support and maintenance payments made that year—and there is no margin for error allowed in that calculation.

This does not just happen once a year; families are encouraged to do these calculations monthly. Single parents raising children alone, struggling with work and family responsibilities, are faced with this in order to claim family tax benefit B. How they find the time in their busy schedules to do this concerns me. It goes without saying that families, even if they rigorously apply the previous nine steps that I have outlined, will inevitably be unable to estimate their income accurately. Many future changes simply cannot be accurately predicted. These families incur an overpayment, and it will need to be offset by this advance payment of $150 and likely the next one as well. It remains that the family tax benefit system creates poverty traps. It will be even worse at the end of this financial year because of the anomaly of 27 fortnightly paydays for that year for many workers.

Every family’s circumstances are different, but many who would normally expect to receive a small tax refund at the end of the year, as well as the $150 family tax bonus, are likely to find instead that they owe money to Centrelink. The $300 increase in family tax benefit B—whether it is paid this year, next year or even last year—will not fix the major problems in this flawed payment system. This is a case of the more things change, the more they stay the same. These families who incur family payment debts are neither Centrelink cheats nor welfare frauds, but the government insists on putting them in that category, and then attempts to mask the flaws in the system by paying bonuses, which many will not receive.

In September 2002, the Minister for Family and Community Services announced that changes to the family assistance scheme were aimed at improving the administration of the scheme and providing more choice and flexibility for families. The minister also indicated, ‘The changes will see the number of overpayments greatly reduced.’ Masking the true extent of overpayments by denying families bonuses is not providing low-income families with more choice and flexibility. Just two years ago, the Commonwealth Ombudsman’s inquiry into the family tax benefit reported in response to the changes. It said:

However, the analysis suggests that, even if my recommendations are adopted in full, the scheme is likely to continue to result in significant numbers of unavoidable debts for families.

Clearly, the Ombudsman’s predictions have been borne out. The Australian Democrats support this bill, because those low-income families who manage to avoid the estimate pitfalls and actually receive the bonus will be provided with some short-term relief. It may mean that for one week they will not have to line up at welfare agencies for assistance with the costs of daily living.

The government’s double standards in relation to families are further promulgated by this bill. It is not only low-income families who will receive this; wealthy families—millionaires even—where through wealth, opportunity or good fortune one parent can choose to stay at home, will also receive the bonus. The government pays family tax benefit B to wealthy families with a stay-at-home parent at the same time as it intends to compel single parents to leave children as young as six years of age to go out to work. So in addition to all its other flaws, family tax benefit B is mistargeted. The Australian Democrats support this bill and will continue to press the government to address the fundamental systemic problems of the income estimate system and change the fundamental basis on which FTB part B is paid.