Explanatory Memorandum
(Circulated by the authority of the Minister for Family and Community Services, Senator the Hon Kay Patterson)Outline and financial impact statement
This Bill is the second of two bills giving effect to the More Help for Families package of measures announced in the 2004 Budget to provide extra assistance to families.
The Bill contains five elements:
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- An ongoing increase in the maximum and base rates of family tax benefit Part A of $600 annually for each FTB child. The new FTB Part A supplement would be paid as a lump sum on income reconciliation for the 2003-04 income year and later years.
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- A reduction in the rate at which family tax benefit Part A reduces from the maximum rate to the base rate, from 30 cents in the dollar to 20 cents in the dollar.
The financial cost of these measures is $1.9b in 2003-04, $2.5b in 2004-05, $2.5b in 2005-06, $2.6b in 2006-07 and $2.7b in 2007-08.
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- A new maternity payment of $3000, which will be payable as a lump sum to all mothers, regardless of income, from 1 July 2004. The maternity payment will increase to $4000 in July 2006 and $5000 in July 2008. The new maternity payment will replace the current (means tested) maternity allowance and the Baby Bonus. As the new maternity payment will be universal, the maternity immunisation allowance is also to be free of the means test and will be payable for all children who meet current immunisation requirements.
The Baby Bonus will be phased out, and a deadline imposed for lodging a valid Baby Bonus claim, by amendments to the Income Tax Assessment Act 1997. The changes relating to the phasing out of the Baby Bonus will take effect from 1 July 2004, with parents of children born on or after this time being able to claim a maternity payment instead of a Baby Bonus. The changes relating to the deadline for lodging valid Baby Bonus claims will take effect from 1 July 2001, the date of effect of the Baby Bonus.
The net additional financial cost of introducing the new maternity payment for the Family and Community Services portfolio is $559m in 2004-05, $567m in 2005-06, $797m in 2006-07 and $818m in 2007-08.
The Baby Bonus amendments will reduce expenses across the forward estimates period by $50m in 2005-06, $100m in 2006-07 and $140m in 2007-08.
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- A reduction in the rate at which family tax benefit Part B is withdrawn, from 30 cents in the dollar to 20 cents in the dollar.
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- An increase in the amount of income a secondary earner in a partnered relationship can earn before entitlement to family tax benefit Part B is affected, from $1825 to $4000 annually.
The financial cost of these measures is $414m in 2004-05, $438m in 2005-06, $459m in 2006-07 and $479m in 2007-08.
Commencement: The measures in the Bill generally commence on 1 July 2004. However, the further increases in the amount of the new maternity payment commence on 1 July 2006 (increase to $4000) and 1 July 2008 (increase to $5000) respectively. The amendments relating to the new FTB Part A supplement commence on 1 July 2004 but apply in relation to the 2003-04 income year and later income years.