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Social Security Legislation Amendment (Family Measures) Bill 1995



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Warning:

This Digest was prepared for debate and reflects the legislation as introduced but

House: House of Representatives

Portfolio: Social Security

Commencement: The Act commences upon the Royal Assent with the exception of Schedules 1, 5 and 6 (which commence on 1 February 1996) and Schedules 2,3,4,7,8 and 9 (which commence on 1 January 1996).

Purpose

The Bill is an omnibus Bill which amends the following pieces of legislation:

Social Security Act 1991

Data- matching Program (Assistance and Tax) Act 1990

Income Tax Assessment Act 1936

Veterans' Entitlements Act 1986

Child Support (Assessment) Act 1989

Health Insurance Act 1973

Social Security (Non- Budget Measures) Legislation Amendment Act 1995

Background

Maternity Allowance

In 1990, Australia ratified the International Labour Organisation (ILO) Convention No. 156 titled `Convention Concerning Equal Opportunities and Equal Treatment for Men and Women Workers: Workers With family Responsibilities'. In the process of implementing the Convention, the government has legislated for certain minimum conditions for employees with family responsibilities, including that employment not be terminated on the basis of family responsibilities and that all employees be eligible for 51 weeks parental leave. Parental leave is also part of federal industrial awards.

In announcing agreement with the ACTU to implement Accord Mark 7, the Prime Minister in a Statement dated 1 June 1994 announced:

that for next year's Budget, the Government will have further negotiations with the ACTU about ways to assist families, and in that context give consideration to introducing a maternity allowance paid through the Social Security system, in the spirit of ILO Convention 103 (Maternity Protection).

ILO Convention 103 provides that a woman should be entitled to a minimum of 12 weeks maternity leave and that `while absent from work on maternity leave the woman shall be entitled to receive cash and medical benefits for herself and her child, either by means of compulsory social insurance or from public funds.' 1 Australia has not ratified this Convention as other parts of the Convention, such as that which prohibits employers from being liable for maternity benefits, are contrary to Government policy.

In light of the Prime Minister's comments and the content of Convention No. 103, the National Council for the International Year of the Family recommended that the Commonwealth proceed with its intention of introducing a maternity allowance through the social security system. The national Council further recommended that:

. the allowance cover a 12 week period;

. the allowance be paid where there is no other employment related maternity benefit available; and

. the allowance not be conditional on prior workforce participation, but cover all families. 2

The maternity allowance was subsequently announced in the 1995- 96 Budget. The main changes from the anticipated scheme are that the allowance will comprise a lump sum payment equivalent to six weeks maximum parenting allowance, rather than being based on a 12 week period, and it will be subject to the same means tests that apply to the basic family payment. The MA will apply from 1 February 1996.

The proposed MA has received general support from groups concerned with the financial position of parents. However, there has been criticism of the proposal on the grounds that it may represent only half of the benefit that was anticipated when the Prime Minister made his announcement as the MA is calculated according to a six, rather than 12, week period. For example, media reports have suggested that the current value of the MA (the value of the MA will change as payments are subject to indexation) is approximately $816, while the value of 12 weeks unemployment benefit, as originally suggested by the ACTU as the appropriate basis for MA, would be approximately $1680. 3 It has also been reported that MA will be available to approximately 223 000 recipients per year and that the cost of the scheme over 4 years will be approximately $643 million. 4

Main Provisions

Schedule 1 of the Bill creates an additional benefit called "Maternity Allowance". The Explanatory Memorandum states at p2 that the maternity allowance is a once- off payment of around $816, which is designed to assist families with meeting the additional costs at the time of the birth of a child. It is payable for children born on or after 1 February 1996. The allowance is payable at the birth of the child and includes situations where the child is stillborn or dies shortly after birth. There is also a requirement that the child be entrusted to the care of the person or the person's partner within 13 weeks of the birth and that the child is likely to continue in that care for at least 13 weeks. This provision is designed to ensure that formally adopted children are included (and an allowance is payable) but children in temporary care are not included. Approved care organisations are specifically excluded from eligibility for the payment.

The remainder of item 1 of the Bill requires the person eligible to receive the maternity allowance to provide the usual information (eg relevant tax file numbers etc) to the Department of Social Security.

Section 900F(1) provides how the allowance will be calculated (three times the basic parenting allowance) and states that it will be paid as a lump sum. The allowance is only payable to one person in respect of each child and if two or more persons are eligible then the Secretary of the Department is to make a declaration as to which person will receive the allowance.

Division 4 of the Bill refers to how a claim for maternity allowance will be made. A written claim is necessary and it must be made within 26 weeks of the birth of the child. Persons who do not qualify for the allowance as at the date of their claim will still be entitled to receive it if they meet the qualifications at any time within the 13 weeks after the claim is lodged, by virtue of section 900J.

Section 900M restricts claimants to inhabitants of Australia (ie Australian residents or persons holding a visa specifically approved by the Minister for the purposes of the Act).

Section 900N allows undetermined claims to be withdrawn (either orally or in writing).

Section 900P covers the situation where eligible persons applied for some other benefit but neglected to apply for maternity allowance within time. This section will allow the claim to be made retrospective to the date of the application for the other benefit.

Section 900V allows the maternity allowance to be paid to another person if the eligible person dies before applying for or receiving the allowance. Such application must be made within 26 weeks of the date of death although there is a discretion given to the Secretary to extend this period.

Section 900X makes maternity allowance inalienable. It is therefore exempt from bankruptcy, charge, sale or assignment. There is an exception to this inalienability if the Commissioner of Taxation requests a deduction under section 218 of the Income Tax Assessment Act 1936. In that case the deduction is mandatory. Otherwise, a claimant can request a deduction from the maternity allowance to be paid to the Commissioner of Taxation.

Consistent with the above provision is section 900Y, which provides that the saved maternity allowance in a person's account can not be garnisheed under a court order.

Schedule 2

Schedule 2 of the Bill amalgamates the Basic Family Payment and the Additional Family Payment.

Item 11 of the Bill amends the assets test for potential recipients of the benefit. The new provision will restrict eligibility to those persons with less than $376,750 in assets (previously $550,000). Item 96 allows the Secretary some discretion in this regard when the applicant's assets are between $376,750 and $559,250. Items 11 and 96 deal with the assets test applicable for the amalgamated family payment and additional family payment. Currently, family payment is not payable where assets exceed approximately $550 000 and additional family payment is not available where assets exceed approximately $365 000. Under the amendments contained in the Bill, the amalgamated family payment assets limit will be $376 750 (Item 11). However, the Secretary will be given power to allow the payment of the amalgamated payment where assets are between $376 750 and $559 250 (Item 96). It should be noted that, under the Bill, there is no legal right to payment where assets exceed $376 750. There is currently a legal right to basic family payment where, if the other eligibility conditions are met, assets do not exceed approximately $550 000.

Item 14 defines income as including target foreign income and net rental property loss for the relevant period.

Item 27 introduces a formula for calculating the benefit to be paid as a family payment advance. The formula is:

Number of paydays x Minimum Family Payment child rate

Items 31 and 39 provide guidelines for when a benefit is to be recalculated. Previously, a 25% difference between the income estimated from a tax year and the income assessed by the Commissioner of Taxation was required before the amount of allowance payable was recalculated.. This has now been reduced to 10% being permitted before the allowance payable is recalculated.

Other provisions in the Bill specify the income taken into account when assessing eligibility for a particular period. For example, items 14, 30, 36 and 37 all reflect the fact that taxable income is only one of the sorts of income taken into account. Adjusted fringe benefits value, target foreign income and net rental property loss are also taken into account. Liquid assets, under the financial hardship provisions, are taken into account in item 100 when the person has $6,000 or more or, if they are part of a couple, $10,000 or more.

Item 144 protects family payments payable prior to the commencement date of 1 January 1996. It also protects the benefits of service pensioners. This occurs where:

. a person or their partner were receiving a service pension prior to 1 January 1996;

. the rate of the pension included a dependent child add- on or a guardian allowance; and

. the child to which the above add- on or guardian allowance related died before 1 January 1996; and

. if a payment would have been made but for the new amendments.

In those circumstances, the person will receive the same benefits that they would have otherwise been entitled to.

Schedule 3

Schedule 3 does not really introduce any new benefits or allowances but rather restructures the way the benefits and allowances are calculated. These provisions set out in detail how the family payment is to be calculated. There is a six step calculation (in Module A) where the benefit is to be paid to a person. Where the amount is payable to an approved care organisation, the rate is set at $28.90 per fortnight (indexed to the CPI).

Module B sets the standard family payment rate for children of different ages:

For a child under 13 - $88.90

For a child between 13 and 16 - $115.80

For a child over 16 but under 19 - $55.70

The provisions specify how the maximum and minimum payments are to be calculated and provide for CPI adjustment.

The new section 1069 - B5.(1) deals with the situation where an eligible person is absent from Australia for a period. If a person is out of the country for more than 13 weeks and returns for a period of less than 13 weeks before leaving again then they are taken to have been absent from Australia for the entire period.

The Module C in the Bill specifies how a large family supplement will be calculated. The amount is set at $7.20 for each dependent FP child (an existing term defined in the act that includes a dependent child who meets the criteria in section 831 to 836 inclusive) other than the first three children. The supplement is payable even if another person has the shared care and legal responsibility of any of the children but it is only payable to one person.

In addition to the large family supplement, there is a multiple birth allowance payable under Module D of the Bill. This is payable when a person has 3 or more FP children and at least 3 of those children were born during the same multiple birth and are under 6 years old.

Rent assistance is provided in Module E of the Bill. It is subject to Module K discussed below. To qualify for this benefit, a person must:

. not be an ineligible homeowner

. pay, or be liable to pay, rent, other than Government rent; and

. pay more than $83.40 per fortnight rent (if single or a member of an illness separated couple, a respite care couple or a temporarily separated couple) or $125.60 per fortnight (if a member of a couple); and

. the person (and/or their partner) is not receiving payments of incentive allowance.

Module F of the Bill provides for a guardian allowance. The allowance is added to the standard family payment rate where the person:

. is not a member of a couple; or

. is a member of an illness separated couple; or

. whose partner has been in gaol for a continuous period of at least 14 days.

There are exceptions where the person is outside Australia that are similar to section 1069 discussed above.

Module G in the Bill provides for situations where two persons (who are not a couple) have shared care and responsibility for an FP child. They receive the proportion of the benefit determined by the Secretary. Similar provisions apply to the sharing of a multiple birth allowance.

Module H of the Bill sets out the income test that applies where the neither the person nor their partner is receiving a social security pension/benefit , youth training allowance or a service pension. The definition of income is consistent with item 14 above and a persons taxable income is either their assessed taxable income or, if it is not available, the person's accepted estimate of their taxable income.

The Bill includes a ten step procedure for calculating whether a person satisfies the family payment income test. The procedure involves adding up a person's family payment income for the appropriate tax year. Then if the income does not exceed the person's income ceiling then their benefit can be calculated. The quantum of the benefit depends upon the particular income free threshold applicable (which depends upon the number of children) and the amount of annual income excess. There is a formula for converting it to the fortnightly benefit payable.

Module J establishes a six step method for calculating the effect of maintenance income on the family payment rate. Maintenance income for dependent children who are not FP children is disregarded. As with Module H there is a maintenance income threshold and an excess. The interaction of these with the calculation determines whether there will be any reduction in the person's maintenance income.

Module K provides that a person can not qualify for family payment if their income (or their partner's income) for the given year is unknown. The exceptions to this general provision are where:

. the person is in receipt of a social security benefit or pension;

. the person is in receipt of a service pension;

. the person is in receipt of a youth training allowance; or

. if the person provides an acceptable estimate of their income to the Secretary.

Schedule 4

The Explanatory Memorandum at p46 states that the proposed changes to the Social Security Act 1991 in Schedule 4 are designed to 'align the income and assets levels and indexation arrangements for family payment and AUSTUDY and youth training allowance'. Items 3 and 4 deal with either student children or dependent children aged between 16 and 22. In each case the Bill provides that they may earn $6,403 without affecting the respective benefits.

Schedule 5 includes maternity allowance in the list of social security payments which may be used under the data- matching program. This commences on 1 February 1996.

Schedule 6 amends the Income Tax Assessment Act 1936 so as to include maternity allowance in the list of payments that are exempt from taxation.

Schedule 7 amends the Veterans' Entitlements Act 1986 so as to include the family payment benefit when social security pensions are taken into account.

Schedule 8 makes consequential amendments to the Child Support (Assessment) Act 1989 so as to include references to family payment.

Schedule 9 similarly makes consequential amendments to the Health Insurance Act 1973 so that persons receiving the family payment continue to receive health concessions.

Schedule 10 repeals provisions rendered obsolete by this Bill in the Social Security (Non- Budget Measures) Legislation Amendment Act 1995.

Endnotes

1. Department of Industrial Relations, ILO Conventions in Australia 94, p. 228.

2. National Council for the International Year of the Family, Creating Links: Families and Social Responsibility, p. 178.

3. The Age, 10 May 1995.

4. Australian Financial Review, 10 May 1995.

Chris Field (Ph. 06 2772439)

Susan Downing (Ph. 06 277 2784)

Bills Digest Service

29 September 1995

Parliamentary Research Service

This Digest does not have any legal status. Other sources should be consulted to determine whether the Bill has been enacted and, if so, whether the subsequent Act reflects further amendments.

Commonwealth of Australia 1995.

Except to the extent of the uses permitted under the Copyright Act 1968, no part of this publication may be reproduced or transmitted in any form or by any means, including information storage and retrieval systems, without the prior written consent of the Parliamentary Library, other than by Members of the Australian Parliament in the course of their official duties.

Published by the Department of the Parliamentary Library, 1995.