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Wednesday, 9 March 2005
Page: 44

Senator CHRIS EVANS (Leader of the Opposition in the Senate) (12:33 PM) —I rise to speak on the Family and Community Services and Veterans’ Affairs Legislation Amendment (Further 2004 Election Commitments and Other Measures) Bill 2005. Am I the only one who has noticed that the bill names seem to be getting longer and longer! At the outset, I indicate that Labor will be supporting the passage of this bill through the Senate today. I want to take the opportunity presented by this debate to highlight some examples of the Howard government’s continued neglect of our social welfare system and the implications for Australian families.

Labor support the bill not because the measures within it are strong or it is the best approach to dealing with the issues we face as a nation; we support this bill because these measures go some way to alleviating for some Australian families the hardships created by the Howard government over the last nine years. Many families are suffering under the government’s mismanagement of our social welfare system, and Labor have no intention of standing in the way of any financial relief that those families can get. Disappointingly, however, the bill makes no attempt to address any of the underlying structural problems in our social welfare system. This is evident from the government’s consistent failure to acknowledge the grave flaws in its family tax benefit system. We continue to see hundreds of thousands of families hit with large family tax benefit debts year after year, and now we have learnt that some of Australia’s richest families, with earnings of over $1 million each year, are still being paid obligation-free welfare of up to $3,000 a year in the form of family tax benefit part B.

This bill makes no attempt to address these obvious structural inconsistencies in the family tax benefit system. Instead, it introduces another quick fix, demonstrating, yet again, the government’s bandaid approach to social security. It just cannot get its head around the difficult issues that need to be confronted. I will take this opportunity to point out some of those failings and show how these are symptomatic of the government’s continued mishandling of our social welfare framework.

The bill itself proposes to amend the following legislation: the A New Tax System (Family Assistance) Act 1999 and the A New Tax System (Family Assistance) (Administration) Act 1999 to introduce a new family tax benefit part B supplement from 1 January 2005; the A New Tax System (Family Assistance) Act 1999 to replace the existing formula for the child income cut-out amount for the family tax benefit, with a specified indexed cut-out amount; and the Social Security Act 1991 and the Veterans’ Entitlements Act 1986 to exempt aged care accommodation bonds from the operations of the assets test. And some people think the tax act is complicated!

I will deal with each of these measures in turn. Schedule 1 seeks to create a family tax benefit B supplement. As part of its election commitment to provide extra assistance for families, the government promised to increase the maximum rate of family tax benefit part B by $300, starting from 1 July 2005. After the election the government subsequently announced that it would backdate the new payment to 1 January 2005, and it would now be paid as a lump sum or as income reconciliation after the end of the relevant income year. It is claimed that schedule 1 of the bill gives legislative effect to this commitment through the introduction of the new family tax benefit B supplement. The annual amount of the new supplement will initially be set at $302.95 for the 2004-05 financial year. This represents a daily amount of 83c. As the family tax benefit B supplement commences from 1 January 2005—and there are 181 days in the period from 1 January to 30 June 2005—eligible families will be paid up to $150.23 for this period. That money will be paid when the family tax return is lodged after 1 July this year.

The family tax benefit part B supplement will be subject to a one-off six-month indexation arrangement on 1 July 2005, reflecting its commencement date of 1 January 2005 and then will be indexed on 1 July 2006 and each following 1 July according to annual movements in the consumer price index. The creation of this family tax benefit supplement was not what the government promised during the election campaign. I will return to that later in my speech.

Schedule 2 of the bill proposes to change the formula for calculating the child income cut-out amount for family tax benefit. Under section 22A(1) of the A New Tax System (Family Assistance) Act 1999, certain children cannot be regarded as children for the purposes of FTB eligibility if the child’s adjusted taxable income exceeds a cut-out amount. Children aged five to 15 years who are not undertaking full-time study or primary school education and all those aged 16 years or more are covered by this provision. At present, the cut-out amount is determined with reference to the rate of family tax benefit part B for children aged five years or more and the income test free threshold and the family tax benefit part B income test. Both of these reference values have been changed or are likely to be changed in the future as family assistance policy evolves. This bill removes the present formula and sets out a specific dollar amount for the cut-out of $11,233 from 1 July 2005. This amount will then be subject to annual consumer price indexation to maintain its value in real terms. This will remove any chance of the cut-out amount being influenced by future changes to the structure of family tax benefit part B.

Schedule 3 of the bill exempts aged care accommodation bonds from the operation of the social security and veterans’ affairs assets test. Currently, where a customer pays an accommodation bond on an aged care facility the refundable balance of the bond is held as an asset of the customer for means testing purposes. This can result in a reduction in the pension the customer receives and may in some cases mean that a pension is no longer payable. These amendments, which are welcome and have Labor’s full support, mean that many older Australians will be able to receive a higher rate of payment or obtain a payment that they would otherwise not have been able to.

These amendments will also allow customers to pay their accommodation bonds by periodic payment and to rent out their former home without the rental payments affecting their rate of pension. Customers in this situation will also be able to retain the asset test exemption for their former home during any period in which they rent it out. This change mirrors existing concessions available to residents in higher level aged care who pay accommodation charges. There will also be provision for customers who will now be eligible for a social security or veterans’ affairs payment because of these changes to have their payment backdated to 1 July 2005. The backdating will be made available where customers apply to Centrelink or the Department of Veterans’ Affairs for payment prior to 30 September 2005 or, if they have special circumstances, to 30 June 2006.

I will concentrate my other remarks on the proposal to introduce the family tax benefit part B supplement. As I indicated earlier, it is quite clear that the proposed changes to family tax benefit B included in this bill are not what families were promised during the election campaign. As a result of this broken promise, eligible families will now receive only half of what they were promised during the next financial year. As part of its election policy ‘Extra assistance for families’ the government promised to increase the maximum rate of FTB part B by $300 starting from 1 July 2005. Families have every right to assume that the $300 annual increase would be made available to families through their regular fortnightly family payments and that this money would start to be paid after 1 July this year. But that has not occurred.

What has occurred under this bill is that families will not actually receive the promised $300, which will now be paid as a lump sum, until after 1 July 2006, when they get their tax returns for the 2005-06 financial year—and for those of us who are a bit slow on our tax returns, obviously a long time after 1 July. Instead, the Minister for Family and Community Services announced on 9 February 2005 that eligible families would be paid a $150 bonus at the time they lodge their tax returns for the current financial year—that is, after 1 July 2005. But the $150 that the government calls a bonus is really only half what the families were promised during the election. We have seen the government swing into the old mean and tricky mode by fudging the accounting and then having the audacity to dress up the revised measures as somehow being an additional benefit for struggling families. We know what it is really about, and that is about taking the pressure off next year’s budget.

In a breathtaking display of hypocrisy the Minister for Family and Community Services continues to claim that this consolation payment of up to $150 is somehow a bonus for families. Clearly, either Senator Patterson does not understand her own election promise, which was that families would get the full $300—not $150—starting on 1 July this year, or she is being deliberately deceptive. The delayed payment of the full $300 was confirmed by officials from the Department of Family and Community Services when they appeared at the Senate estimates hearings on 16 February this year.

What is also clear is that families no longer have the choice of receiving the additional money through their fortnightly payments. The minister says that this is because of the positive response of families who received lump sum payments last year. That is obviously true for some families but it is not true for those families who need the extra money on a fortnightly basis. Taking away the choice—and that is what the government is doing—of receiving the additional money fortnightly is also contrary to the government’s rhetoric that families should have the option of receiving regular fortnightly payments or a lump sum through the tax system. The Howard government is taking away the choice that it has advocated. It is taking away the choice that has been contained in all its rhetoric on this issue for the last few years.

It is also increasingly clear that the family payments system under the Howard government is inequitable, inconsistent and unfair. In the last week we have seen yet more damning evidence that the system is not working. Families that need the most help are left to watch while Australia’s richest families continue to receive family payments. Nearly 30,000 families with annual incomes of over $100,000 receive family tax benefit part B payments, worth up to $3,000 a year during the 2002-03 financial year. At the same time, poorer families continue to be confronted with a mounting family payment debt load year after year. Imagine how those families felt when they saw reports last week that rich families earning hundreds of thousands of dollars a year were still getting family payments. While rich families are pocketing thousands of dollars in welfare, other families—needy families—have been saddled with debts every year. Where is the fairness and equity in all that? The fact that rich families are being rewarded with up to $3,000 a year in obligation-free family payments highlights the failure of the Howard government to provide assistance to those families who need it most.

If the government were really serious about welfare reform then fixing this glaring inequity would be a good starting point. But there is nothing in this bill. The largess for Australia’s richest families contrasts with the government’s harsh plans to take payments away from people with disabilities, and sole parents. This inequity demonstrates why Labor remains committed to introducing a single family payment, with a consistent income test for all Australian families.

Debate interrupted.