Explanatory Memorandum
(Circulated by authority of the Minister for Family and Community Services, Senator the Hon. Jocelyn Newman)
Schedule 1 - amendment of the A New Tax System (Family Assistance) Act 1999 - Part 3 - common provisions relating to family assistance
Overview of Part 3 of Schedule 1
Part 3 amends provisions in the Family Assistance Act that are not specific to any particular type of family assistance payment. These amendments provide for the insertion of definitions that support other amendments contained in this Bill, amend the rules in Schedule 3 of the Family Assistance Act relating to adjusted taxable income and amend the indexation provisions as they apply to maximum rent assistance rates and rent thresholds.
Explanation of Amendments
Clause 7 of Part 3 of Schedule 4 to the Family Assistance Act provides for the adjustment of certain FTB child rates. This is done by reference to the "CPC rate".
Item 69 provides that the "CPC rate" has the meaning given by new subsection 3(3) of the Family Assistance Act. New subsection 3(3) is inserted by item 7 of Part 2 of Schedule 1 to this Bill. The "CPC rate" is twice the amount that is the maximum basic rate of age pension payable to a person who is partnered. Clause 7 of Schedule 4 then ensures that the FTB under 13 child rate cannot fall below 16.6% of the CPC rate and that the FTB 13-15 child rate cannot fall below 21.6% of the CPC rate.
These provisions are consistent with the existing family allowance rules that provide for the benchmarking and adjustment (if necessary) of the equivalent FA child rates.
Item 70 provides a rounding base of $3.65 for the "FTB advance rate".
Item 71 inserts a new definition of "FTB child" into the Family Assistance Act. The new definition does not change the meaning of "FTB child" for FTB purposes but inserts a corresponding definition for CCB purposes.
For CCB, an "FTB child" has the same meaning as it does for FTB but with the following modifications:
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- the references in paragraphs 22(7)(b) and 25(1)(b) to a claim for FTB are to be read as references to a claim for CCB; and
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- the references in subsections 24(4) and (6) to eligibility for FTB are to be read as references to eligibility, or conditional eligibility, for CCB.
For CCB, "FTB child" also means a child determined by the Secretary under subsection 42(2), 44(3) or 45(3) to be an FTB child.
Item 72 inserts a definition of "partnered (partner in gaol)" into subsection 3(1) of the Family Assistance Act. "Partnered (partner in gaol)" would have the same meaning as in the Social Security Act.
Item 73 defines "relevant shared carer" as an individual each of whose FTB children is subject to a determination under subsection 59(1) of the Family Assistance Act.
The terms "partnered (partner in gaol)" and "relevant shared carer" are used in determining the rent threshold amount and the maximum rate of rent assistance payable to an individual under clauses 13, 14 and 14A of Schedule 1 of the Family Assistance Act.
Item 74 inserts new section 3A into the Family Assistance Act to make it clear that a child can be in the care of more than one adult at the same time unless the family assistance law provides to the contrary. This clarification supports the new shared care arrangements provided for in Part 1 of Schedule 1 to this Bill.
Changes to the concept of adjusted taxable income
Assessment of income where individual or partner dies
Schedule 3 of the Family Assistance Act defines in detail what is meant by an individual's "adjusted taxable income". The income components that comprise adjusted taxable income are set out in clause 2 of Schedule 3. Each component (except taxable income) is then further defined. Under clause 3, the adjusted taxable income of an individual who is a member of a couple includes the adjusted taxable income of the individual's partner.
There will be instances where an individual or the individual's partner dies part way through an income year. Where this happens, the adjusted taxable income of the deceased individual will be calculated up to the time of death. This will invariably mean a "top up" payment of FTB or CCB after income reconciliation occurs. This outcome is not intended.
Item 76 therefore inserts new subclause 2(2) into Schedule 3 of the Family Assistance Act to modify the way in which adjusted taxable income is determined where an individual or the individual's partner dies part way through an income year. Where such a death occurs, the adjusted taxable income of the deceased individual for the relevant income year is annualised by multiplying what would have been the deceased individual's adjusted taxable income under clause 2 for the relevant income year by:
number of days in income year / number of days individual was alive during income year
Item 75 makes a consequential amendment to clause 2 of Schedule 3 to ensure that it is subject to the operation of new subclause 2(2).
Assessment of income where separation occurs
The assessment of income for an income year under the family assistance law may result in an FTB or CCB debt for the period in the year before a separation due to new circumstances that may apply after the separation. This includes an increase in the person's own income for the year due to the grant of an income support payment under the Social Security Actafter separation (eg, parenting payment), as well as an increase in the former partner's income for the year due to increased income after separation. Payment of FTB/CCB for the period before separation would have been made on the basis of an estimate of adjusted taxable income that would not have been able to take into account the new circumstances that may arise after a separation.
It is not intended that a debt for the period before a separation result from increased income after the separation.
Item 77 inserts new clause 3A into Schedule 3 to the Family Assistance Act to ensure that entitlement to FTB or CCB for the period before a separation is calculated on the basis of estimated income for that period if this is lower than the actual amount. This would avoid a debt being raised for that period in the end of year reconciliation where income had been underestimated, but would allow arrears to be paid if the income had been overestimated.
New clause 3A operates where the following conditions are met.
The first condition is that the individual was a member of a couple with partner A for a period or periods in an income year but not at the end of the income year. This may be more than one continuous period, for example, the couple separated, then reconciled, then separated again before the end of the income year.
Second, while the individual was a member of that couple, the individual's entitlement to FTB or CCB was based on an amount of the individual's adjusted taxable income (the current ATI amount).
Third, the current ATI amount differs from the individual's actual adjusted taxable income for that income year (the final ATI amount).
The current ATI amount would normally be based on an estimate/s provided during the income year and the final ATI amount would be based on an assessment of adjusted taxable income by the Commissioner of Taxation. There are, however, a number of other possible scenarios. For example, the current ATI amount may have been based on an estimate provided during the income year by an individual who is not required to lodge a tax return and the final ATI amount is based on the "known amount" provided after the income year has ended; or the current ATI amount may have been based on an initial assessment by the Commissioner of Taxation of a former partner's income that is later revised by the ATO.
Fourth, the individual's entitlement to FTB or CCB for the period or periods during which the individual was a member of that couple would be less if worked out using the final ATI amount as opposed to using the current ATI amount.
Finally, if the current ATI amount was based on an estimate provided by the individual that is less than the final ATI amount:
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- the individual did not know or did not have reason to suspect that the estimate was incorrect when it was provided; and
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- if, after providing the estimate but before ceasing to be a member of the couple, the individual knew or had reason to suspect that the estimate was incorrect, the individual provided a revised estimate as soon as practicable after knowing or suspecting the estimate was incorrect.
Where these conditions are satisfied, clause 3A provides that the individual's adjusted taxable income for the period or periods in the income year during which the individual was a member of a couple with partner A is taken to be the particular current ATI amount or amounts upon which the individual's entitlement was based.
Indexation of rent thresholds and maximum rent assistance rates applicable to an individual who is a relevant shared carer
Items 78 to 82 inclusive amend various indexation provisions in Schedule 4 to the Family Assistance Act to ensure that new rent threshold amounts and rent assistance rates are appropriately indexed. These amendments are consequential upon the changes made by items 26 and 30 of Schedule 1 to this Bill, which are described above.
Clause 2 of Schedule 4 to the Family Assistance Act specifies those amounts in the Family Assistance Act that require indexation.
Items 4 and 5 in the table in clause 2 currently refer to the maximum rent assistance amounts and rent threshold amounts specified in clauses 13 and 14 of Schedule 1 to the Family Assistance Act. The new threshold amounts applicable to an individual who is a relevant shared carer are not covered. Similarly, the new maximum rent assistance rates specified in new clause 14A (inserted by item 30 of Schedule 1 to this Bill) are not mentioned.
Item 78 inserts new items 4 and 5 into the table in clause 2. The new items incorporate references to the new thresholds and maximum rent assistance rates applicable to an individual who is a relevant shared carer. These amendments then link into items 4 and 5 in the CPI indexation table in clause 3 of Schedule 4 to ensure indexation of the new amounts.
Item 79 amends the rounding base in items 4 and 5 of the CPI indexation table from $7.30 to $3.65. The rounding base of $3.65 reflects division of annual rates by 365 and the rounding of daily rates to the nearest cent.
The new thresholds and maximum rent assistance rates provided for in clauses 13 and 14A of Schedule 1 of the Family Assistance Act will not be current immediately before 1 July 2000 (the equivalent income support rates would have been indexed again before that date). The transitional indexation provision in clause 8 of Schedule 4 is therefore amended by items 80 and 81 so that these new amounts can also be increased by the Secretary from 1 July 2000.
Schedule 4 of the A New Tax System (Compensation Measures Legislation Amendment) Act 1999 inserted a new clause 9 into Schedule 4 to the Family Assistance Act. Clause 9 provides for the adjustment of the maximum rent assistance amounts specified in column 3 of the table in clause 14 of Schedule 1 to the Family Assistance Act for a limited time after 19 March 2001.
Clause 9 is amended by item 82 so that it operates in the same way in relation to the new maximum rent assistance amounts specified in new clause 14A of Schedule 1 to the Family Assistance Act.