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Thursday, 2 September 1993
Page: 894

Senator SHERRY (Parliamentary Secretary to the Minister for Primary Industries and Energy) (12.07 p.m.) —I move:

  That this bill be now read a second time.

I seek leave to have the second reading speech incorporated in Hansard.

  Leave granted.

  The speech read as follows

In `Building On Strength' the government announced as part of its advancement towards a fairer Australia that it would improve the position of low income retirees by easing the pensions assets test and by introducing a seniors health card.

Soon after, the government fulfilled the first part of this commitment by introducing legislation to ease the pensions assets test from 20 September 1993. This bill will meet the second part of that commitment by introducing a seniors health card from 1 July 1994 that will give certain older low income non-pensioner retirees access to concessional pharmaceutical benefits and to hearing aid concessions. It is estimated that this initiative will assist 200,000 people.

The payment of pharmaceutical allowance was introduced in November 1990 to offset the introduction of a charge for pharmaceutical benefits for persons who had previously received prescriptions free under the Pharmaceutical Benefits Scheme. At that time, the government decided that as an interim measure, certain persons were to be eligible for payment of advances of that allowance.

The government has now decided that the period in which advances of payment of pharmaceutical allowance will be payable should be further extended until 31 December 1994. This bill gives effect to that decision.

Since coming to office in 1983, much has been achieved in assisting Australian families. For example, the government introduced the Family Allowance Supplement and later integrated family payments for children so as to reduce poverty traps, improve work incentives for low income families, increase the take-up rate of the family payment for low income families with children and help families to budget better. The government remains committed to protecting and enhancing the interests of families. However, it is important that this be achieved equitably and targeted towards those people who are most in need.

The government is concerned that the use of taxable income alone might not be a reliable basis upon which to determine entitlement to certain social security payments.

For example, some people receive benefits from their employer such as a car or rent-free housing but do not pay any tax on them because the definition of `taxable income' in the Income Tax Assessment Act 1936 does not include the value of such benefits. Instead, the employer is subject to fringe benefits tax.

To qualify for a family payment under the Social Security Act 1991, a person must satisfy an income test. Similarly, a person aged under 18 who applies for a job search allowance or a sickness allowance is subject to a parental income test. At present, both of these income tests are based on `taxable income' that is defined to mean the same as in the Income Tax Assessment Act 1936. As a result, these income tests do not take account of employer provided fringe benefits. This means that some people who have a high income in real terms, can still pass the income tests. This gives an unfair advantage to those people who receive income in the form of fringe benefits rather than as wages.

Accordingly, the government has decided to amend the Social Security Act 1991 from 1 January 1994 to make sure that the income tests for family payment and the parental income test for job search allowance and sickness allowance claimants aged under 18 take account of certain employer fringe benefits. The benefits that will be assessable are employer provided motor vehicles, housing, loans, school fees and private health insurance. The value of the benefits of a person and the person's partner, or parent as the case may be, will be added together and anything in excess of $1,000 will be taken into account. If the combined total is less than that amount it will be ignored.

Another example of where inequity can arise is where despite having similar levels of income, one family can be advantaged over another merely because the source of some or all of their income is overseas. The foreign income might not form part of their `taxable income' upon which entitlement to family payment is based. This can occur, for instance, because one parent works overseas and is not resident in Australia for the purposes of Australian taxation legislation.

To that end, the Social Security Act 1991 is to be amended with effect from 1 January 1994 to allow certain foreign income to be taken into account when assessing a person's entitlement to family payment. This measure will not affect families receiving social security pensions or benefits or service pensions as they are exempt from the family payment income test.

Many social security pensioners receive foreign income. That income must be converted to Australian dollars to calculate the rate of Australian pension payable. Currently, unless exceptional circumstances prevail, the foreign currency provisions in the Social Security Act 1991 only enable the exchange rates used for this purpose to be changed four times a year. However, due to the needs-based nature of Australia's social security system, we must be more flexible.

The bill will amend the foreign currency conversion provisions in the act so that they will be more responsive to frequent or sudden movements in exchange rates. A new exchange rate for each nominated currency will be set every pension payday, based on the market exchange rate available at the Commonwealth Bank of Australia on the previous payday. If there is no such rate for that payday, for example, because of a national public holiday, the rate used will be the market exchange rate that applied on the last working day immediately before that payday.

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

  Debate (on motion by Senator Panizza) adjourned.