House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Minister for Families, Community Services and Indigenous Affairs, the Hon Mal Brough MP)

Families, Community Services and Indigenous Affairs and Other Legislation (2006 Budget and Other Measures) Bill 2006

OUTLINE AND FINANCIAL IMPACT STATEMENT

This bill gives effect to a number of measures announced as part of the 2006-07 Budget, introduces a new disaster recovery payment, gives effect to some measures announced in the 2005-2006 Budget and as part of the Welfare to Work Reforms and makes other amendments as outlined below.

Increase in family tax benefit Part A income free area

From 1 July 2006, the lower income free area for family tax benefit Part A will be further increased to $40,000. This amount will then be indexed in accordance with movements in the Consumer Price Index on 1 July 2007 and each subsequent 1 July.

Financial impact (total resourcing)

Large family supplement

From 1 July 2006, families with 3 or more children will be eligible for an additional amount of family tax benefit Part A, known as the large family supplement. This extra payment is currently only available for families with 4 or more children.

Financial impact (total resourcing)

Extension of eligibility for utilities allowance

From 1 July 2006, eligibility for utilities allowance will be extended to persons who are under pension age and are receiving mature age allowance, widow allowance or partner allowance.

Financial impact (total resourcing)

Australian Government Disaster Recovery Payment

This Bill introduces a new payment into the social security law called the Australian Government Disaster Recovery Payment, which will provide an immediate, short-term payment to Australians affected by a major or widespread disaster. Adult Australian residents, who are affected by an eligible natural or non-natural disaster, whether within Australia or offshore, can claim the payment and receive financial assistance for themselves and their children, to aid with their recovery.

The Australian Government Disaster Recovery Payment is to be exempt from all Australian Government means testing arrangements and will be non-taxable.

The measure commences on 1 December 2006.

Financial impact (total resourcing)

Maintenance income credit balances

A maintenance income credit is introduced from 1 July 2006 to enable parents to access their unused maintenance income free area from previous years to offset late child support payments. When arrears of maintenance income are subsequently received, the maintenance income credit balance would be drawn upon to reduce the amount of arrears counted under the maintenance income test for family tax benefit Part A. The beneficial effect of the maintenance income credit for a given income year will apply on income reconciliation after the end of the income year.

Financial impact (total resourcing)

Extension of carer payment to carers of severely disabled children

From 1 July 2006, the qualification rules for carer payment will be extended to cover carers of children who are under 16 years of age with severe intellectual, psychiatric or behavioural disability who require constant care or supervision.

Financial impact (total resourcing)

Special disability trusts

This measure assists families who have the financial means to make private financial provision, through a special disability trust, for the future care and accommodation needs of their family members with severe disabilities.

The measure allows parents and immediate family members to establish a special disability trust for the current and future accommodation and care of the severely disabled person. All trust income and trust assets up to the value of $500,000 will not affect the family member's social security payments or payments to a person under the Veterans' Entitlements Act 1986 (the Veterans' Entitlements Act). In addition, as there are limits under the social security law and the Veterans' Entitlements Act to the assets a person can give away, gifts to the trust (to a total of $500,000) from parents or immediate family members will not affect the donor's social security payment or payments to a person under the Veterans' Entitlements Act.

The measure commences on 20 September 2006.

Financial impact (total resourcing)

Australian Institute of Family Studies

Amendments are made to the Family Law Act 1975 to implement changes to the governance arrangements of the Australian Institute of Family Studies in response to the recommendations of the Review of the Corporate Governance of Statutory Authorities and Office Holders conducted by Mr John Uhrig.

This measure has no financial implications.

Minor amendments to the family assistance law

Minor changes are made to the income test rules for family tax benefit Part B where a secondary earner returns to work for the first time since the birth of a child to ensure that certain technical aspects are consistent with intended policy outcomes. These changes commence on 1 July 2005 and first apply in relation to the 2005-06 income year on reconciliation after 1 July 2006.

The definition of 'income tax refund' is amended to include refundable tax offsets, with effect from 1 July 2002.

Technical amendments are made clarifying that there may be situations where a customer's rate of family tax benefit or the amount of a customer's child care benefit by fee reduction will need be worked out on the basis of an indexed estimate for the customer and a reasonable estimate of the partner's adjusted taxable income provided by the customer. These changes commence on 1 July 2006.

Technical amendments are made as a consequence of the recent family law reforms relating to shared parental responsibility.

These measures have no financial implications.

The bill also makes other minor technical amendments to the social security law. These amendments also have no financial implications.

NOTES ON CLAUSES

Clause 1 sets out how the Act is to be cited, that is, the Families, Community Services and Indigenous Affairs and Other Legislation (2006 Budget and Other Measures) Act 2006 .

Clause 2 provides a table that sets out the commencement dates of the various sections in, and Schedules to, the Act.

Clause 3 provides that each Act that is specified in a Schedule is amended or repealed as set out in that Schedule.

This Explanatory Memorandum uses the following abbreviations.

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'AGDRP' means Australian Government Disaster Recovery Payment.

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'CCB' means child care benefit.

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'Commonwealth Authorities and Companies Act' means the Commonwealth Authorities and Companies Act 1997 .

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'Family Assistance Act' means the A New Tax System (Family Assistance) Act 1999 .

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'Family Assistance Administration Act' means the A New Tax System (Family Assistance ) ( Administration) Act 1999 .

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'Family Law Act' means the Family Law Act 1975 .

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'Financial Management and Accountability Act' means the Financial Management and Accountability Act 1997 .

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'FTB' means family tax benefit.

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'Institute' means the Australian Institute of Family Studies.

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'Public Service Act' means the Public Service Act 1999 .

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'Social Security Act' means the Social Security Act 1991 .

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'Social Security Administration Act' means the Social Security (Administration) Act 1999 .

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'Uhrig Review' means the Review of Corporate Governance of Statutory Authorities and Office Holders by Mr John Uhrig AC.

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'Veterans' Entitlements Act' means the Veterans' Entitlements Act 1986 .