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Social Services Legislation Amendment (Family Measures) Bill 2015



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ISSN 1328-8091

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BILLS DIGEST NO. 84, 2015-16 24 FEBRUARY 2016

Social Services Legislation Amendment (Family Measures) Bill 2015 Dale Daniels Social Policy Section

Contents

List of abbreviations ............................................................ 2

Purpose of the Bill ............................................................... 3

Background ......................................................................... 3

2014-15 Budget measures ...................................................... 3

2015-16 Budget measures ...................................................... 4

Stalled measures now dropped ............................................... 4

Portability of Family Tax Benefit Part A ................................... 5

Large Family Supplement ........................................................ 5

Committee consideration .................................................... 5

Senate Community Affairs Legislation Committee .................. 5

Policy position of non-government parties/independents ..... 6

Position of major interest groups ......................................... 6

Financial implications .......................................................... 6

Statement of Compatibility with Human Rights .................... 6

Key issues and provisions ..................................................... 6

Schedule 1—Portability of Family Tax Benefit ........................ 6

A New Tax System (Family Assistance) Act 1999 .................. 7

A New Tax System (Family Assistance) (Administration) Act 1999 ................................................................................ 7

Schedule 2—Large Family Supplement ................................... 7

A New Tax System (Family Assistance) Act 1999 .................. 7

Date introduced: 2 December 2015

House: House of Representatives

Portfolio: Social Services

Commencement: Sections 1 to 3 upon Royal Assent; Schedule 1 on 1 January 2016; and Schedule 2 on 1 July 2016.

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page, or through the Australian Parliament website.

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the ComLaw website.

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List of abbreviations Abbreviation Definition

ATI Adjusted taxable income

ATO Australian Taxation Office

CPI Consumer Price Index

FA Act A New Tax System (Family Assistance) Act 1999

FTB Family Tax Benefit

FTB-A Family Tax Benefit Part A

FTB-B Family Tax Benefit Part B

GDP Gross Domestic Product

No. 4 Bill Social Services and Other Legislation Amendment

(2014 Budget Measures No. 4) Bill 2014

No. 6 Bill Social Services and Other Legislation Amendment

(2014 Budget Measures No. 6) Bill 2014

SS Act Social Security Act 1991

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Purpose of the Bill The Social Services Legislation Amendment (Family Measures) Bill 2015 (the Bill) amends A New Tax System (Family Assistance) Act 19991 (FA Act) and A New Tax System (Family Assistance) (Administration) Act 19992 so:

• from 1 January 2016, the length of time for which Family Tax Benefit Part A (FTB-A) can be paid to recipients who are outside Australia will be reduced to six weeks and

• from 1 July 2016, the Large Family Supplement will be abolished.

Background FTB-A and Family Tax Benefit Part B (FTB-B) are the two main forms of direct financial assistance the Commonwealth provides to families with children. Both payments are means tested to target assistance at lower-income families. FTB-A is available to all families who meet the care, residence and income test requirements.3 Different income test requirements for FTB-B restrict the payment to single parent families and couple families where one parent has a low income or is not in paid employment.4

2014-15 Budget measures In its 2014-15 Budget, the Abbott Government proposed a range of savings measures targeting family payments. These included:

• lowering the income cut-off point for FTB-B for single parents and primary earners in a couple from $150,000 per annum down to $100,000 per annum

• limiting FTB-B to families with a child under six years

• introducing a new FTB allowance for single parents on maximum rate of FTB-A who have a child aged six to twelve years, worth $750 per child, to partially makeup for the loss of access to FTB-B

• limiting the FTB-A Large Family Supplement to families with four or more children

• maintaining FTB payments for two years, that is, they would not be indexed

• not indexing some of the FTB-A and FTB-B income test thresholds for three years

• removing the FTB-A ‘per child add-on’, a component of the FTB income test which reduced the payment withdrawal rate for those with more than one child and

• reducing the FTB-A and FTB-B supplements to their 2004 values ($600 per FTB-A child and $300 per FTB-B family).5

The Government stated that the intent of the measures was to ‘ensure the family payments system is sustainable in the long term’ and is ‘better targeted to support those who need it most’.6 Expenditure savings of $8.5 billion over five years to 2017-18 were anticipated.7

The Government attempted to legislate these measures, together with a range of other social security measures, in two omnibus Bills: the Social Services and Other Legislation Amendment (2014 Budget Measures No. 1) Bill 2014 (the No. 1 Bill) and the Social Services and Other Legislation Amendment (2014 Budget Measures No. 2) Bill 2014.8 The Government was unable to secure their passage in the Senate due to opposition to various measures

1. A New Tax System (Family Assistance) Act 1999, accessed 8 February 2016. 2. A New Tax System (Family Assistance) (Administration) Act 1999, accessed 8 February 2016. 3. Department of Human Services (DHS), ‘Family Tax Benefit’, DHS website, last updated 14 October 2015, accessed 10 November 2015. 4. Ibid.

5. P Yeend and M Klapdor, ‘Family payments’, Budget review 2014-15, Research paper series, 2013-14, Parliamentary Library, Canberra, 2015, accessed 22 October 2015. 6. K Andrews (Minister for Social Services), Supporting parents through a sustainable, better targeted family payments system, media release, 13 May 2014, accessed 22 October 2015. 7. Australian Government, Budget measures: budget paper no. 2: 2014-15, pp. 197-200, accessed 22 October 2015; Parliamentary Budget

Office (PBO), 2014-15 Budget and forward estimates— charts, PBO website, 10 June 2014, p. 10, accessed 18 November 2015. 8. Parliament of Australia, ‘Social Services and Other Legislation Amendment (2014 Budget Measures No. 1) Bill 2014 homepage’, Australian Parliament website; Parliament of Australia, ‘Social Services and Other Legislation Amendment (2014 Budget Measures No. 2) Bill 2014

homepage’, Australian Parliament website, both accessed 6 November 2015.

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from the Labor Opposition, the Australian Greens, minor parties and independent senators. Both Bills were discharged from the Notice Paper in the Senate on 28 October 2014.

On 2 October 2014, the Government reintroduced the measures in four new Bills. The family payment measures were contained in the Social Services and Other Legislation Amendment (2014 Budget Measures No. 4) Bill 2014 (the No. 4 Bill) and the Social Services and Other Legislation Amendment (2014 Budget Measures No. 6) Bill 2014 (the No. 6 Bill).9 The No. 6 Bill contained the measures that the Opposition had offered to support.10

This Bill passed both Houses on 17 November 2014. The family payment measures it included were:

• the limit on the Large Family Supplement to families with four or more children

• removal of the FTB-A per child add-on and

• lowering of the income cut-off point for FTB-B for single parents and primary earners in a couple from $150,000 per annum down to $100,000 per annum.

The remaining measures were included in the No. 4 Bill which has been before the Senate since 28 October 2014.

2015-16 Budget measures In its 2015-16 Budget, the Abbott Government included its stalled measures and announced that it would move to abolish the Large Family Supplement altogether.11 The Government also linked the savings from the 2014-15 family payment budget measures with funding for its families package—primarily the $3.5 billion in additional funding allocated to replace two existing child care fee assistance payments with a single payment, the Child Care Subsidy, and to overhaul the funding programs for non-mainstream services.12

Stalled measures now dropped In introducing the Social Services Legislation Amendment (Family Payments Structural Reform and Participation Measures) Bill 2015, the Minister for Social Services Christian Porter stated that it would ‘supersede measures’ that had stalled in the Senate.13 Treasurer Scott Morrison stated that, as Minister for Social Services, he had worked with ‘crossbench senators over many, many months to reengineer the measures that have been put forward in the 14-15 Budget.’14

The Social Services Legislation Amendment (Family Payments Structural Reform and Participation Measures) Bill 2015 was the first instalment of the 2015-16 Budget family assistance changes. It passed both houses on 30 November 2015. However after amendment only one measure remained. That measure was the removal of eligibility for FTB-B for couple families with a youngest child aged 13 years or more. Grandparents and great-grandparents were exempt from this change.

Further measures concerning FTB-A and FTB-B are contained in the Social Services Legislation Amendment (Family Payments Structural Reform and Participation Measures) (No. 2) Bill 2015 introduced into Parliament at the same time as this Bill on 2 December 2015.

9. Parliament of Australia, ‘Social Services and Other Legislation Amendment (2014 Budget Measures No. 4) Bill 2014 homepage’, Australian Parliament website; Parliament of Australia, ‘Social Services and Other Legislation Amendment (2014 Budget Measures No. 6) Bill 2014 homepage’, Australian Parliament website, both accessed 6 November 2015.

10. J Macklin (Shadow Minister for Families and Payments), ‘Second reading speech: Social Services and Other Legislation Amendment (2014 Budget Measures No. 6) Bill 2014’, House of Representatives, Debates, 2 October 2014, p. 9, accessed 24 February 2016. 11. Australian Government, Budget measures: budget paper no. 2: 2015-16, p. 151, accessed 22 October 2015. 12. T Abbott (Prime Minister) and S Morrison (Minister for Social Services), Jobs for Families child care package delivers choice for families, media

release, 10 May 2015; M Sheppard, ‘Early childhood education and care’, Budget review 2015-16, Research paper series, 2014-15, Parliamentary Library, Canberra, 2015, both accessed 18 February 2015. 13. C Porter (Minister for Social Services), ‘Second reading speech: Social Services Legislation Amendment (Family Payments Structural Reform and Participation Measures) Bill 2015’, House of Representatives, Debates, 21 October 2015, p. 11919, accessed 22 October 2015. 14. S Morrison (Treasurer), C Porter (Minister for Social Services), S Birmingham (Minister for Education and Training), Revised Family Tax Benefit

measures to fund $3.5 billion child care investment, media release, 21 October 2015, accessed 22 October 2015.

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Portability of Family Tax Benefit Part A Provision for families to receive family payments while temporarily overseas dates back to the Chifley Government in 1947.15 At present FTB-A can be paid at the full rate for an absence of up to six weeks and at the base rate for a further 50 weeks. The full rate is an age related rate (currently $179.76 to $233.94 per fortnight) that is available to lower and middle income families. The lower base rate (currently $57.68 per fortnight) is a rate available to families with higher incomes. This period can be extended in certain circumstances such as if hospitalisation prevents return or if an individual is deployed overseas with the Australian Defence Force or the Australian Federal Police. FTB-B can only be paid for six weeks to an individual who is overseas.16

Large Family Supplement Higher rates of family payments for large families have existed in Australia since 1964 when the Menzies Government increased Child Endowment for third and subsequent children to a higher rate than that for first and second children. When Family Allowance was introduced by the Fraser Government in 1976 a slightly different approach was taken. The rates of payment were lowest for the first child and each subsequent child received a higher rate than the one before (except for third and fourth children who received the same rate and fifth and subsequent children who also received the same rate).17

In 1989 the Hawke Government simplified this arrangement so that the same rate applied to the first three children in a family and a higher rate applied to subsequent children. In January 1996 when the Keating Government merged Basic Family Payment and Additional Family Payment to form Family Payment, the Large Family Supplement was introduced. The rates of Family Payment were age related and the principle of paying higher rates for larger families was preserved through the Large Family Supplement which provided an extra payment for each fourth or subsequent child in a family.18

The introduction of Family Tax Benefit in 2000 left the Large Family Supplement essentially unchanged. However, in 2006 the Howard Government extended eligibility to the third child in each family.19

The Abbott Government included a reversal of the 2006 change in its 2014 Budget. This measure was included in the Social Services and Other Legislation Amendment (2014 Budget Measures No. 6) Act 201420 which passed both houses on 17 November 2014. As a result, from July 2015 the Large Family Supplement was paid for the fourth and subsequent child in a family.

In June 2015 Large Family Supplement was paid for 121,000 children whose families received FTB-A fortnightly. Approximately six per cent of people receiving FTB-A receive it as a lump sum after the end of the year and cannot be included in the end of year statistics.21

Committee consideration Senate Community Affairs Legislation Committee The Bill has been referred to the Senate Community Affairs Legislation Committee for inquiry and report. Details of the inquiry are available on the Committee website.22

The Committee’s report, released on 22 February 2016, recommended that the Bill be passed.23 The Australian Greens issued a dissenting report, recommending that the Bill not be passed, stating:

15. D Daniels, Social security payments for people caring for children, Background note, Parliamentary Library, Canberra, 29 January 2009, accessed 18 February 2016. 16. Department of Social Services (DSS), ‘3.1.1.50 FTB payments during absence from Australia’, Family assistance guide, version 1.184, released 8 February 2016, DSS website, last updated 11 May 2015, accessed 9 February 2016. 17. D Daniels, Social security payments for people caring for children, op. cit. 18. Ibid.

19. Ibid.

20. Social Services and Other Legislation Amendment (2014 Budget Measures No. 6) Act 2014, accessed 10 February 2016. 21. DSS, ‘Answers to Questions on Notice’, [Questioner: C Moore], Question 6(b), Senate Community Affairs Legislation Committee, Inquiry into the Social Services Legislation Amendment (Family Payments Structural Reform and Participation Measures) Bill 2015, 19 November 2015. 22. Senate Community Affairs Legislation Committee, Inquiry into the Provisions of the Social Services Legislation Amendment (Family Measures)

Bill 2015, The Senate, Canberra, accessed 13 January 2016. 23. Senate Community Affairs Legislation Committee, Inquiry into the Provisions of the Social Services Legislation Amendment (Family Measures) Bill 2015, Report, The Senate, Canberra, 22 February 2016, accessed 24 February 2016.

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poorly targeted cuts to the FTB system in isolation, without any broader strategy for the necessary reform to the revenue base, inevitably hurt vulnerable people the most, without addressing underlying structural factors. 24

Policy position of non-government parties/independents The ALP has agreed to support the abolition of the Large Family Supplement. Shadow Treasurer Bowen made this commitment in his 20 May 2015 Press Club Speech.25 When the Bill came up for debate in the House of Representatives on 8 February 2016, the Labor Opposition confirmed that it would not oppose the measures contained in the Bill.26

As set out above, the Greens do not support the Bill. Adam Bandt, of the Australian Greens and Independent MP Andrew Wilkie both voted against the passage of the Bill in the House of Representatives.27

Position of major interest groups The Western Australian Commissioner for Children and Young People has raised concerns about the impact of the removal of the Large Family Supplement on low income large families and on large indigenous families in particular.28

The Society of St Vincent De Paul also raised concerns about the impact on low income families of the loss of the Large Family Supplement. They also raised concerns about the changes to portability of FTB-A where low income parents needed to travel overseas to care for close relatives such as aged parents.29

Financial implications According to the Explanatory Memorandum, the Bill will provide net savings of around $219.4 million over the forward estimates.30

Statement of Compatibility with Human Rights As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible.31

The Parliamentary Joint Committee on Human Rights has examined the Bill and has concluded that it does not raise human rights concerns.32

Key issues and provisions Schedule 1—Portability of Family Tax Benefit The Minister for Social Services Christian Porter has stated that the change to the portability period for FTB-A will align it with that for FTB-B and most other income support payments.33

The changes made by Schedule 1 commence from 1 January 2016.34

24. Ibid., p. 15. 25. C Bowen, ‘Labor and the Economy: Owning the Future’ National Press Club Speech, 20 May 2016. 26. J Macklin, ‘Second reading speech: Social Services Legislation Amendment (Family Measures) Bill 2015’, House of Representatives, Debates, (proof), 8 February 2016, p. 91, accessed 10 February 2016.

27. Australia, House of Representatives, ‘Social Services Legislation Amendment (Family Measures) Bill 2015’, Votes and Proceedings, 8 February 2016, p. 107, accessed 10 February 2016. 28. Commissioner for Children and Young People(Western Australia), Submission to Senate Community Affairs Legislation Committee, Inquiry into Social Services Legislation Amendment (Family Measures) Bill 2015, 4 January 2016, accessed 8 February 2016. 29. St. Vincent De Paul Society, Submission to Senate Community Affairs Legislation Committee, Inquiry into Social Services Legislation

Amendment (Family Measures) Bill 2015, 29 February 2016, accessed 8 February 2016. 30. Explanatory Memorandum, Social Services Legislation Amendment (Family Measures) Bill 2015, accessed 10 February 2016. 31. The Statement of Compatibility with Human Rights can be found at page 8 of the Explanatory Memorandum to the Bill. 32. Parliamentary Joint Committee on Human Rights, Thirty-third report of the 44th Parliament, 2 February 2016, p. 2, accessed 8 February 2016. 33. C Porter (Minister for Social Services), ‘Second reading speech: Social Services Legislation Amendment (Family Measures) Bill 2015’, House of

Representatives, Debates, 2 December 2015, p. 14422, accessed 13 January 2016. 34. See subitems 31(2) and (3) which provide exceptions to the general rule.

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A New Tax System (Family Assistance) Act 1999 Items 3, 4 and 6 amend subsections 24(1) and (4) of the FA Act to replace the 56 week maximum portability period with a six week maximum portability period.

Items 1, 5, 7, and 25 repeal redundant provisions.

Item 23 inserts new subsections 57G(4) and (5) of the FA Act to reflect the way eligibility for Single Income Family Supplement is affected by the change in portability period.

A New Tax System (Family Assistance) (Administration) Act 1999 Items 27 and 28 make consequential amendments to reduce the maximum portability period.

Items 29 and 30 insert new provisions concerning variations to entitlements for FTB and child care benefit to reflect the reduced portability period. The Explanatory Memorandum explains these amendments in greater detail.35

Schedule 2—Large Family Supplement The Minister stated that the abolition of the large family supplement was in line with recommendations of the Henry Tax Review 2010, the National Commission of Audit and the McClure Review. He also stated that recent research into the costs of children found that each additional child in a family costs less than a first child.36 This undermines the long standing approach of giving more per child to bigger families.

The changes made by Schedule 2 commence from 1 July 2016.

A New Tax System (Family Assistance) Act 1999 Items 1 to 7 repeal all provisions for Large Family Supplement.

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35. Explanatory Memorandum, op. cit., pp. 4-5. 36. C Porter (Minister for Social Services), ‘Second reading speech: Social Services Legislation Amendment (Family Measures) Bill 2015’, op. cit.