House of Representatives

Explanatory Memorandum

(Circulated by authority of the Minister for Family and Community Services, Senator the Hon. Jocelyn Newman)

Schedule 5 - transitional and saving provisions associated with the establishment of a scheme for the payment of family tax benefit, maternity allowance and maternity immunisation allowance

Overview of Schedule 5

Schedule 5 to the Bill contains provisions that deal with the transition from the existing family assistance regime in the Social Security Act to the new family assistance regime contained in the family assistance law.

Schedule 5 also contains a saving provision for certain family allowance customers with a child attracting payment of double orphan pension or carer allowance.

Explanation of amendments

Item 1 defines terms and concepts used in Schedule 5 . These definitions are explained in the context in which they appear.

Item 1 also ensures that any organisation that was an approved care organisation (ACO) under the Social Security Act immediately before 1 July 2000 is taken to be approved under section 20 of the Family Assistance Act. This provision avoids the need to re-approve organisations on 1 July 2000 to enable them to continue being paid family assistance in respect of children in their care.

Item 2 provides for the "transfer" of individuals receiving family benefit immediately before 1 July 2000 to FTB without the need to claim FTB. These individuals are taken to have lodged an effective claim for FTB by instalment under subsection 7(2) of the FA Admin Act.

For the purpose of this rule, "family benefit" is defined in item 1 as meaning family allowance, family tax payment or parenting payment in the nature of non-benefit PP (partnered).

To facilitate continuity of payments, item 2 also provides that if an individual was receiving family benefit into a bank account immediately before 1 July 2000, that bank account is taken to have been nominated by the individual as the account into which payments of FTB are to be paid.

Customers currently receiving assistance through the tax system will need to claim FTB in accordance with the rules in the FA Admin Act.

Item 3 provides for the "transfer" of ACOs receiving family allowance immediately before 1 July 2000 to FTB without the need to claim FTB. These ACOs are taken to have lodged an effective claim for FTB by instalment under subsection 7(2) of the FA Admin Act.

To facilitate continuity of payments, item 2 also provides that if an ACO was receiving family allowance into a bank account immediately before 1 July 2000, that bank account is taken to have been nominated by the ACO as the account into which payments of FTB are to be paid.

Item 4 provides special transitional rules relating to outstanding TFN requirements.

Under section 75 of the Social Security (Administration) Act 1999 (the Social Security Admin Act), the Secretary may request a person to provide his or her TFN and, if relevant, the TFN of the person's partner. The person then has 28 days within which to comply with the request. A failure to comply results in loss of payability.

Section 26 of the FA Admin Act allows the Secretary to make a similar TFN request. If an individual fails to comply with such a request within 28 days of its making, then the consequence in section 27 may apply, that is, the individual's entitlement determination may be varied with the effect that the individual is no longer entitlement to be paid FTB from a prescribed day.

Situations will arise where,

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the Secretary has requested the individual to provide a TFN under section 75 of the Social Security Admin Act; and

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immediately before 1 July 2000, the individual has not provided the TFN; and

•

as at 1 July 2000, the 28 day period within which to comply with the request has not ended.

Where this happens, the request under section 75 of the Social Security Admin Act is taken to be a request under section 26 of the FA Admin Act at the time it was made. While the individual will be transferred to FTB by instalment on 1 July 2000, if the individual does not provide the relevant TFN details within 28 days of the request being made, then payment of FTB may cease in accordance with section 27.

Item 5 provides special transitional rules relating to outstanding bank account requirements.

Under section 55 of the Social Security Admin Act, the Secretary may request a person (an individual or ACO) to nominate an account into which social security payments are to be paid. If, after 28 days, the person has not nominated an account, then the payment ceases to be payable to the person. The person then has 13 more weeks in which to provide the account to have payment reinstated from the day that payment ceased.

Section 26A of the FA Admin Act allows the Secretary to request the provision of a bank account into which payments of FTB by instalment are to be paid. The consequences of failing to comply with this requirement are set out in section 27A. Sections 26A and 27A are inserted into the FA Admin Act by Part 1 of Schedule 2 to this Bill.

Situations will arise where:

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the Secretary has requested an individual or ACO to provide bank account details under section 55 of the Social Security Admin Act; and

•

immediately before 1 July 2000, the individual or ACO has not provided those details; and

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as at 1 July 2000, the 28 day period in which the individual or ACO was required to provide those details has not ended.

Where this happens, the request under section 55 of the Social Security Admin Act is taken to be a request under section 26A of the FA Admin Act at the time it was made. While the individual will be transferred to FTB by instalment on 1 July 2000, if the individual does not provide bank account details within 28 days of the request being made, then payment of FTB may cease in accordance with section 27A.

Item 6 provides for the making of determinations.

Customers who are transferred to FTB on 1 July 2000 will need to have their entitlement to FTB by instalment assessed by the Secretary so that payment of FTB can commence. If the Secretary is satisfied that the transferee is eligible for FTB, then an entitlement determination, specifying a daily rate at which the Secretary considers the transferee is eligible, will be made under section 16 of the FA Admin Act. Otherwise, a no entitlement determination will be made in respect of the transferee under section 19 of the FA Admin Act.

As a general rule, the Secretary will have most of the information required about an individual or ACO to make a determination concerning their entitlement. Under the confidentiality rules in Division 2 of Part 6 of the FA Admin Act, information held in the records of the Department or Centrelink can be accessed and used for the purposes of the family assistance law. This includes the personal information about transferred customers and information about ACOs that is required to make an entitlement determination under the family assistance law.

However, the Secretary may not have all the information necessary to determine entitlement (for example, an estimate of adjusted taxable income for the 2000-2001 income year). In these cases, transferees will be requested to provide the relevant information before 1 July 2000. Subitem 6(2) makes it clear that if such information is not forthcoming, the Secretary may make a "no entitlement" determination under section 19 of the FA Admin Act.

Such a determination does not prevent a person from claiming FTB by instalment at a later time (and claiming for the past period going back to 1 July 2000) or from claiming FTB after the end of the 2000-2001 income year in respect of that year. As part of the claim process, the person would be required to provide the Secretary with all the relevant information needed by the Secretary to determine such a claim.

Item 7 provides for the continuation of payments to third parties on behalf of a transferee.

Under subsection 23(4) of the FA Admin Act, the Secretary has the discretion to pay a claimant's FTB to a third person on behalf of the claimant. This provision mirrors subsection 44(3) of the Social Security Admin Bill that provides a similar power in relation to social security periodic payments (including family allowance, family tax payment and parenting payment in the nature of non-benefit PP (partnered)).

The effect of item 7 is to continue nominee arrangements in place on 30 June 2000 into the new regime. This is done by deeming any direction by the Secretary under subsection 44(3) of the Social Security Admin Act relating to the payment of family benefit that is in force immediately before 1 July 2000 to be a decision by the Secretary under subsection 23(4) of the FA Admin Act in relation to the payment of FTB on or after 1 July 2000.

The Secretary would have the discretion to change this nominee arrangement at a later time.

Item 8 provides for the continuation of instalment periods in the transition from social security family payments to the new family assistance regime.

By way of example, a person's family allowance instalment period commences on

22 June 2000 and would end (but for the repeal of family allowance) on 5 July 2000. Because of the repeal of family allowance, the person can only be paid family allowance up to and including 30 June. Item 8 then provides that the person's first FTB instalment period runs from 1 July to 5 July.

The effect is that the person would receive a payment on their usual payday in respect of the fortnight commencing 22 June 2000. The payment would comprise an amount of family allowance for that part of the fortnightly period falling before 1 July and an amount of FTB for the period 1 to 5 July.

This ensures minimum disruption to customer payments.

Item 9 provides a series of rules that apply to claims for family benefit that are undetermined as at 1 July 2000.

Subitems 9(1) and 9(2) deal with claims for family allowance and family tax payment that are lodged before 1 July 2000 but are undetermined as at 1 July 2000.

If the claimant was qualified for the payment at the time of claim, or becomes qualified for payment before 1 July 2000, then the claim is to be considered under the Social Security Act as in force before 1 July 2000 as if it related only to the period preceding 1 July 2000.

If the claimant does not become qualified for the payment before 1 July 2000, then the claim is taken to have lapsed on that day.

Subitems 9(3) and 9(4) deal with claims for parenting payment that are lodged before 1 July 2000 but are undetermined as at 1 July 2000.

If the claimant was qualified for payment at the time of claim, or becomes qualified for payment before 1 July 2000, then the claim is to be considered under the Social Security Act as in force before 1 July 2000. If parenting payment would be paid under the Social Security Act at the rate applicable to non-benefit PP (partnered), then the claim is to be determined as if it only relates to the period preceding 1 July 2000.

If the claimant does not become qualified for the payment before 1 July 2000 and, if the claimant were to become qualified for the payment on or after 1 July, it would be parenting payment in the nature of non-benefit PP (partnered), then the claim is taken to have lapsed on that day.

Item 10 allows certain claims for family benefit lodged on or after 1 July 2000 to be considered. This transitional provisiontakes account of the backdating rules that apply in relation to family benefits under the social security law.

Item 10 operates where a person did not make a claim for family benefit before

1 July 2000 but, were it not for the repeal of family benefit from the social security law, could have made such a claim after 1 July 2000, backdated to the date of a particular event that occurred before 1 July. In this situation, the claim is to be dealt with as if family benefits were not repealed and on the basis that the claim relates to a period before 1 July 2000.

Item 11 deals with the transfer of claims for maternity allowance and maternity immunisation allowance from the social security law to the family assistance law From 1 July 2000, maternity allowance and maternity immunisation allowance will be paid under the family assistance law rather than the social security law. These payments are being relocated with very few substantive changes.

Subitem 11(1) deals with the situation where a person claims maternity allowance or maternity immunisation allowance under the social security law and the claim is undetermined as at 1 July 2000. In this situation, the claim is to be treated as a claim for MAT or MIA (as defined in item 1 ) under Division 3 of Part 3 of the FA Admin Act.

Subitem 11(2) addresses the situation where a person claims maternity allowance or maternity immunisation allowance under the social security law after 1 July 2000 (this might happen where the person has an old claim form and lodges it after 1 July 2000). In this situation also, the claim is to be treated as a claim for MAT/MIA under the Division 3 of Part 3 of the FA Admin Act.

Subitem 11(3) ensures that person who has been paid maternity allowance or maternity immunisation allowance for a particular child under the social security law cannot be paid MAT or MIA again for the same child under the family assistance law. Item 12 deals with applications for family benefit made after 1 July 2000 in respect of a deceased person.

Under section 58 of the Social Security Admin Act, if a person to whom a social security payment is payable dies before receiving their entitlement, another person can apply for the outstanding amount if the application is made within 26 weeks after the death or such further period allowed by the Secretary.

From 1 July 2000, a "social security payment" as defined in subsection 23(1) of the Social Security Act will not include family benefit, maternity allowance or maternity immunisation allowance. Section 58 will therefore not apply to claims for any of these payments made on or after 1 July 2000.

There will be situations, however, where such an application is made on or after

1 July 2000 in respect of an unpaid amount of family benefit, maternity allowance or maternity immunisation allowance. Subitems 12(1) and (2) allow such an application to be made on or after 1 July 2000 provided it is made within the same time limits as apply under the social security law and enable the Secretary to pay the unpaid amount to the person who, in the Secretary's opinion, is best entitled to receive it.

Subitems 12(3) and (4) ensure that if an amount is paid under subitems 12(1) or (2) , the Commonwealth has no further liability to pay any person that payment.

As a decision under subitems 12(1) and 12(2) involve the exercise of a discretion by the Secretary, subitem 12(5) ensures that such a decision is reviewable under the family assistance law.

Item 13 deals with requests for family allowance advance payments made under the social security law.

Section 864A of the Social Security Act provides for the payment of an advance to certain family allowance customers who request such a payment. Under subsection 864A(3), a person may request an advance for a particular advance period or for a particular advance period and all subsequent advance periods.

Item 13 operates where a person has requested an advance for a particular advance period and all subsequent advance periods under section 864A of the Social Security Act and the request has been granted. Where this happens, item 13 provides that the request is to be taken to be a request for an FTB advance under section 33 of the FA Admin Act.

The individual would then have the right to withdraw the request under subsection 33(4) of the FA Admin Act.

Item 14 is a saving provision relating to information collection. It allows the Secretary to require the provision of information relating to the payment of family benefit, maternity allowance or maternity immunisation allowance on or after 1 July 2000 as if these payments continued to be social security payments for the purpose of the Social Security Admin Act.

Item 15 outlines the transitional arrangements that apply in relation to payment portability.

Section 24 of the Family Assistance Act contains the portability rules for FTB. These rules impact on an individual's eligibility for FTB and the "FTB child" status of a child. In broad terms, an individual and/or FTB child can be absent from Australia for up to 3 years without eligibility for FTB being affected. However, absence of more than 26 weeks has an impact on the rate of FTB to which an individual is eligible. The effect of an absence from Australia on an individual's rate of FTB is covered in sections 62 and 63 of the Family Assistance Act.

The portability rules that apply in relation to family allowance and family tax payment are similar to those that operate in relation to FTB. The exception is that, for FTB, an individual's rate is limited after 26 weeks overseas while family allowance customers are limited to the minimum rate of family allowance after an absence of 13 weeks. Parenting payment has a 26 week portability rule.

Sections 24, 62 and 63 of the Family Assistance Act focus on when an individual or FTB child leaves Australia and periods of absence from Australia.

If an individual leaves Australia before the commencement of the new family assistance regime (ie, before 1 July 2000) and remains overseas for longer than 3 years, section 24 can be invoked with the effect that the individual is not eligible for FTB after the expiration of the 3 year period. Similarly, if the individual has been overseas longer than 26 weeks (irrespective of whether the individual left Australia before or after 1 July), section 62 can be invoked to reduce the individual's rate of FTB.

This is not the case where an FTB child is absent from Australia. Sections 24 and 63 operate where an FTB child leaves Australia or where a child born outside Australia is an FTB child at birth. The concept of a FTB child is a creation of the family assistance law that commences on 1 July 2000. A child cannot be an FTB child before that date. Accordingly, sections 24 and 63 can only operate where a child leaves Australia or is born outside Australia on or after 1 July 2000.

Item 15 therefore provides rules similar to those in sections 24 and 63 of the Family Assistance Act except that they apply to an individual (child) who attracts payment of family allowance or family tax payment or who is a PP child and operate where the child leaves Australia before 1 July 2000.

Items 16, 17 and 18 provide for the payment of lump sum bereavement payments because of the death of a child.

For parenting payment, bereavement payments are available under Division 9 of Part 2.10 of the Social Security Act. However, only section 514A is relevant for non-benefit PP (partnered). For a person who is receiving non-benefit PP (partnered) and whose only PP child dies, there is a bereavement period of 4 weeks, during which time the person continues to qualify for parenting payment as if the child had not died.

Item 16 applies where the person only PP child dies and the 4 week bereavement period in respect of the child's death has not ended by 1 July 2000. In this situation, so much of the parenting payment as would have been payment in respect of each day in the 4 week bereavement period that occurs after 13 June 2000 continues to be payable as if section 514A of the Social Security Act were in force until the end of the bereavement period. However, the amount payable for that period is payable as a lump sum as soon as practicable after 1 July 2000.

A decision made under section 514A as continued in force is a decision that can be reviewed under the social security law.

Where a dependent child in respect of whom family tax payment (FTP) is being paid dies, sections 900AZZC and 900AZZD of the Social Security Act ensure that qualification for FTP continues for 4 weeks as if the child has not died.

Item 17 applies where a child in respect of whom FTP is being paid dies and the 4 week bereavement period in respect of the child's death has not ended by 1 July 2000. In this situation, so much of the FTP as would have been payable in respect of each day in the 4 week bereavement period that occurs after 13 June 2000, and attributable to the deceased child, continues to be payable as if section 900AZZC of the Social Security Act were in force until the end of the bereavement period. However, the amount payable for that period is payable as a lump sum as soon as practicable after 1 July 2000.

A decision made under section 900AZZC as continued in force is a decision that can be reviewed under the social security law.

The bereavement provisions for family allowance (FA) where an FA child dies are contained in Division 10 of Part 2.17 of the Social Security Act. These provisions can be summarised as follows.

Where, immediately before the death of the FA child, a person was entitled to more than the minimum rate of FA, then the person continues to be qualified for FA for up to 14 weeks after the child's death as if the child had not died. Of relevance here are the definitions of "bereavement period" (relevant where the deceased child is not the person's only FA child) and "bereavement rate continuation period" (relevant where the deceased child is the person's only FA child). These terms are defined in subsection 21(2) of the Social Security Act.

Once the Secretary finds out about the child's death, the deceased child's FA component for whatever remains of the 14 week bereavement period is paid to the person as a lump sum.

In other situations where an FA child dies, a 4 week bereavement period applies. FA is then calculated for that 4 week period as if the deceased child had not died.

Item 18 applies where a child in respect of whom FA is being paid dies and the bereavement period applicable in respect of the childs death has not ended by 1 July 2000. In this situation, so much of the FA as would have been payable in respect of day in the bereavement period that occurs after 30 June 2000, and that is attibutable to the deceased child, continues to be payable as if Subdivision A or B of Division 10 of Part 2.17 of the Social Security Act (as applicable) were in force until the end of the bereavement period. However, the amount payable for that period is payable as a lump sum as soon as practicable after 1 July 2000.

A decision made under Subdivision A or B of Division 10 of Part 2.17 of the Social Security Act as continued in force is a decision that can be reviewed under the social security law.

Item 19 enables a family assistance debt incurred because of the death of a child before 1 July 2000 to be set off against a lump sum bereavement payment made under the transitional arrangement provided for in items 16, 17 or 18 in the following situations.

Where a child dies before 1 July 2000 and the Secretary is not notified, or does not become aware, of the death until after that date, payment of family benefit will continue until 30 June 2000 as if the child had not died and then the person receiving the family benefit will be transferred to FTB. If the Secretary has the information required to assess the person's eligibility and the person is eligible for FTB by instalment, an entitlement determination will be made under section 16 of the FA Admin Act. At this point, the relevant transitional provision would not have been applied because the Secretary was not aware of the child's death.

When the Secretary learns of the child's death, the Secretary will need to review the entitlement determination using section 104 of the FA Admin Act. Where the deceased child was the person's only child, the original determination would need to be set aside and a "no entitlement" determination substituted. Where the deceased child was not the person's only child, the original determination would need to be varied so that the person's rate of FTB does not take into account the deceased child. Any overpaid amount of FTB would then be a debt under Part 4 of the FA Admin Act.

The relevant transitional provision would then be invoked to provide the person with a lump sum bereavement payment for the deceased child.

Item 19 enables the lump sum bereavement payment worked out in accordance with the relevant transitional provision to be offset against the debt incurred under the family assistance law in the situation described above.

Item 20 provides for bereavement payments in relation to the death of a recipient.

Section 513A of the Social Security Act deals with the situation where there is an unpaid bereavement entitlement because of the death of a person who was or would have been qualified for parenting payment under the bereavement rules in Subdivision A of Division 9 of Part 2.10 of the Social Security Act in respect of a deceased child. The unpaid bereavement entitlement then becomes payable to the deceased person's partner if the partner claims the bereavement payment within 13 weeks after the death of the child.

A similar rule applies in relation to family allowance under section 900 of the Social Security Act.

Item 20 allowsthe deceased person's partner to access such a lump sum payment after 1 July 2000 if he or she claims the lump sum within 13 weeks of the child's death. Despite their repeals, sections 513A and 900 of the Social Security Act are taken to continue in force after 1 July 2000 to facilitate such a claim.

A decision made for the purposes of section 513A or 900 as continued in force is reviewable under the social security law.

Item 21 is a transitional provision related to the provision of tax file numbers (TFNs). Item 21 deems a TFN provided for the purposes of family allowance, family tax payment or parenting payment in the nature of non-benefit PP (partnered) to be a TFN provided for the purposes of new subsection 154A(1) of the FA Admin Act. New subsection 154A(1) provides for the exchange of TFNs between the Secretary and the Commissioner of Taxation for the purposes of income reconciliation.

Item 22 is a saving provision. It applies to an individual who, immediately before 1 July 2000, was receiving family allowance free of the income test (being an individual covered under subclause 52(2) or (3) of Schedule 1A to the Social Security Act) in respect of a child that also attracts double orphan pension or carer allowance. In this situation, the Part A rate of FTB for the individual would be the higher of:

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the Part A rate applicable under the family assistance law; or

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the rate (saved rate) that would have been the individual's minimum family allowance rate immediately before 1 July 2000 if that rate were worked out having regard to those FTB children of the individual who also attract double orphan pension or carer allowance.

If at any time the individual begins to receive the Part A rate calculated under the family assistance law, then the saved rate cannot apply again.