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Wednesday, 2 December 2015
Page: 14425

Mr PORTER (PearceMinister for Social Services) (10:00): I move:

That this bill be now read a second time.

In conjunction with the original Social Services Legislation Amendment (Family Payments Structural Reform and Participation Measures) Bill 2015, this bill introduces a package of new reforms that help the government support families while encouraging parents' participation in the workforce.

The new package will supersede measures stalled in the Senate, including:

maintaining FTB payment thresholds, where savings were estimated at $525 million;

maintaining FTB payment rates, where savings were estimated at $1 billion;

limiting FTB Part B to families with children under six, where savings were estimated at $1.8 billion; and

revising the FTB end of year supplements to their original value of $600 and $300 per year, where savings were estimated at $1.3 billion.

The two bills anticipate withdrawal of the measures relating to FTB from the 2014-15 budget and instead propose changes which focus squarely on the principles of structural reform of the social welfare system by simplifying the payment structure of family tax benefits. At the same time, the bills provide more assistance to families when they need it most and is, therefore, fiscally responsible.

The new package has been introduced in order to pay for the Jobs for Families package. The package contains the required savings from family payments to offset the additional investment in childcare reforms which will help families and encourage workforce participation.

The government believes that workforce participation is fundamental for creating prosperity which allows families to create a better life for themselves and their children. That is why this government places an emphasis on the importance of child care, which 165,000 Australians say is of critical importance in order for them to return to work or increase their work hours and grow their household wealth.

The Jobs for Familiespackage makes child care simpler and less inflationary— in contrast to the Rudd-Gillard-Rudd government, which oversaw a 50 per cent increase in childcare fees during its tenure.

While the family payments structural reform in this bill will pay for the Jobs for Families package, it will also simplify the family tax benefit system and provide more money on a fortnightly basis to those families who need it the most.

The government is increasing the fortnightly payment rates of family tax benefit part A by $10.08 for each FTB child in a family aged up to 19 years. This is worth an extra $6,000 over the lifetime of a child. What this means is that around 1.2 million lower income families (including income support families) who receive family tax benefit part A for around 2.2 million children will now receive higher fortnightly payments from 1 July 2018. The increase in their fortnightly payments will help families better manage their day-to-day budgets by providing them with timely, regularised assistance when they need it the most.

We will also provide an additional $10.44 per fortnight for youth allowance recipients under the age of 18 who are living at home, bringing the payments to the same standard rate as a family tax benefit part A child aged between 13 and 19.

Aligning these two rates of payment is in itself a much needed part of the reform process to simplify payments where possible. These reforms will avoid confusion for families and make sure there are no perverse incentives for them to change payment systems. Just as workforce participation is key to growing wealth, educational attainment is key to getting a job. The government understands this, as it is increasing the fortnightly rate of these payments to encourage children to stay in school. This is fundamental to giving children a good start in life so that they become productive, contributing members of our society.

Importantly, this alignment reform will also flow on to people who are on disability support under the age of 18, special benefit and ABSTUDY. These changes will cost around $584.2 million over the forward estimates.

These changes are based squarely on the McClure reform recommendations; they simplify the system, making it easier for parents and their children to navigate the system in order to get the assistance that is appropriate to their circumstances.

This bill will also provide for the phase-out of both the family tax benefit part A supplement and the family tax benefit part B supplement.

The part A supplement will reduce to $602.25 a year from 1 July 2016 and to $302.95 a year from 1 July 2017. The part B supplement will reduce to $302.95 a year from 1 July 2016 and to $153.30 a year from 1 July 2017. Both supplements will then be withdrawn entirely from 1 July 2018.

This measure will save $4.06 billion over the forward estimates. This is again a sensible reform which saves the government money on family tax benefits in order to fund the Jobs for Familiespackage. This change will encourage workforce participation and assist in reducing deficits that we inherited from the previous government.

The family tax benefit part A and B supplements were introduced at a time when, under the Howard government, there was an anticipated surplus of $13.6 billion in 2004-05. The supplements were introduced to be used as an offset for potential family tax benefit overpayments arising from underestimation by FTB families of their annual income.

With the Australian Taxation Office introducing a single-touch payroll system, a system which will allow for accurate reporting of income by the 2018-19 financial year, the changes will significantly reduce the problem of family tax benefit debts.

In an era of responsible spending, it is also important to highlight how poorly targeted the FTB supplements actually were—much like the schoolkids bonus which Labor introduced and intended to pay for with the non-existent money collected from the mining tax. It is entirely feasible for a family on income support and a low income to receive exactly the same amount in their supplements as it would be for a family on a higher income. We have, thankfully, managed to cease the schoolkids bonus—an unfair payment and one that was not paid for fiscally. And now we want to phase out the family tax benefit A and B supplements—payments which are neither well targeted nor have a useful purpose in the foreseeable future.

While no family, whether they are higher or lower income, would be individually enthusiastic about payments ending, like the schoolkids bonus it is very difficult to justify borrowing money to pay for payments that we cannot afford. Further, the FTB supplements are meant to help pay for debt that 75 per cent of families already never accumulate.

Crucially these changes are consistent with the critical reform recommendations of the McClure review to reduce the number of ill-targeted and convoluted supplements in the system. McClure emphasised that there are far too many payments and supplements—in fact, he noted there are, remarkably, some 20 main payment types and 53 supplements (that second figure has been reduced from 55 because the government has already removed the seniors supplement and the low-income supplement). This measure will further reduce the amount of supplements in the system (as will the associated reform measures in child care).The third measure in this bill will introduce a new rate structure for family tax benefit part B and make other amendments to the rules for part B, from 1 July 2016.

Firstly, the maximum standard rate will increase by $1,000.10 per year for families with a youngest child aged under 12 months of age. This will provide more choice for families when their children are very young, because the government recognises the importance of families having choice on how they wish to spend their time when their children are very young.

A new family tax benefit part B rate of up to $1,000.10 per year will be made available for single parents under the age of 60 with a youngest child aged 13 to 16. Eligibility for single parent families under the age of 60 will cease when the youngest child turns 16. This measure will save $781.1 million over the forward estimates.

The combined effect of the two bills is to encourage greater workforce participation as children enter secondary schooling. At the same time the government recognises that sometimes it is difficult for single parents to transition into work even when their youngest children are in secondary school. This is why we are intending to apply different payment assistance for these categories once their children turn 13. We will provide them with some additional appropriate assistance as they prepare to re-enter the workforce.

The government also recognises that grandparent carers and single parents who are 60 and over have a different family structure and several different circumstances which may act in some instances in a way that presents more constraints than otherwise regarding their ability to gain further employment. That is why a decision has been made to exempt these two small groups from these changes in these reforms.

Additionally, it can be noted that the savings achieved by the changes contained in this bill have always been earmarked by the government as the savings necessary to pay for reforms to the childcare system under the stewardship of the Minister for Employment. As it is the case that the final structure of the childcare reforms can be achieved inside a revised funding envelope, the opportunity arose in this bill to forgo some savings inside the FTB system pertaining to grandparent carers and single parents aged over 60. The government acknowledges the unique role that these individuals play in society in raising children in circumstances that none of us would count as ideal.

These reforms are a critical part of efforts to enhance the long-term sustainability of the social security system. This is a government which places fairness and equity at the centre of our social security system. That is why we are taking proactive steps to ensure that the system is affordable now and for future generations. Without sensible, measured reform, cuts would have to be made later which may be more severe. That is something this government does not want to see happen.

As a share of GDP, government spending on family assistance in Australia tripled from 0.9 per cent in in 1980 to 2.7 per cent in 2012 and is higher than the average for OECD countries.

The number of families who receive family tax benefit has declined over time, down from 1.72 million in 2010-11 to 1.62 million in 2012-13. Yet despite this decline in the number of recipients, the cost continues to rise with expenditure increasing by almost a billion dollars over the last three financial years for which full data is available, up from $18.9 billion in 2010-11 to $19.8 billion in 2012-13.

A decade ago, the Social Services portfolio had $83 billion worth of expenditure. Today, collectively, on welfare repayments, it has $154 billion worth of expenditure. In 2026, that is estimated to increase to a remarkable $277 billion worth of expenditure. Therefore, we should take very close care and attention to these types of projections. One thing historically that people in public finances will find is that these projections of expenditure are usually fairly sound. These projections of expenditure are basically showing that the welfare bill is going to grow at around about 3.4 per cent a year above the inflation rate. The rate of growth above inflation is to be taken as a sign of concern. This year we will spend around $20 billion on FTB parts A and B. This represents, as I have noted previously, the second biggest item of expenditure in the Social Services portfolio and the fourth largest in the Commonwealth budget.

That is why this government is taking proactive steps to address the sustainability, viability and longevity of the system before it becomes too difficult. The 2015 Intergenerational report identified that the number of people of traditional working age (being 16 to 64 years of age) for every person aged 65 and over has fallen from 7.3 people in 1974-75 to an estimated 4.5 people today. By 2054-2055, this is projected to nearly halve again to only 2.7 people. This means that the number of taxpayers funding FTB parts A and B is also in decline. Without any change, the cost of our social security system will continue to rise whilst the number of working-age taxpayers continues in a relative sense to decline. This coupled with the ballooning government deficits that were left by the previous government meant that this government has had to take sensible steps to address this issue. This reinforces the government's commitment to pursuing rational policy objectives aimed at ensuring the sustainability of our social security system. Again, this will ensure that Australia, in the words of the Prime Minister, can continue to provide 'a generous social welfare safety net' into the future.

In the context of the current budget position these figures highlight the need for the targeted savings proposed in this bill.

In summary, the package of family tax benefit and dependent youth measures enhances support for families with their day-to-day living expenses and so helps them support their children from birth through education and the transition to independence. This increase in day-to-day support has been achieved through reforming the supplements and increasing fortnightly payments including aligning the rates of youth payments.

Together, the revised package demonstrates the government's commitment to assisting families:

providing additional assistance to families when they need it most;

supporting family choice to spend more time with their children when they are very young if they wish to do so;

recognising that grandparent and great-grandparent carers and single parents aged 60 years or over with children in secondary schooling may have limited capacity to increase workforce participation than average recipients of FTB.

At the same time, these reforms will improve the sustainability of family payments ensuring we can achieve three very important goals:

1. continue to assist families in raising their children over the long-term;

2. fund the childcare reforms designed to enable and encourage greater workforce participation; and

3. continue a deservedly needed process of simplifying FTB, consistent with the recommendations of the McClure review which highlights the unworkability of a system that maintains 20 main payment types with in excess of 50 supplement categories.

These measures are sensible, practical and aimed at ensuring the sustainability of our system, and guarantee that payments are targeted to those most in need. Sustainability and fairness are at the heart of these reforms, and I urge all members to support these measures to ensure that the government can continue to support those most in need now and into the future. I commend the bill to the House.

Debate adjourned.