Explanatory Memorandum
(Circulated by the authority of the Minister for Families, Community Services and Indigenous Affairs, the Hon Mal Brough MP)Schedule 10 - Technical amendments relating to income estimates
Summary
This Schedule makes some technical amendments to income estimates provisions in the Family Assistance Administration Act. The changes clarify that there may be situations where a customer's rate of FTB or the amount of a customer's CCB by fee reduction will need be worked out on the basis of an indexed estimate or indexed actual income for the customer (default estimates) and a reasonable estimate of the partner's adjusted taxable income (ATI) provided by the customer. These amendments commence on 1 July 2006.
Background
From 1 July 2006, a new system of estimating income, incorporating automatic updating of estimates, commences. Under this new system, the Secretary will have the capacity to use default estimates to work out a customer's fortnightly rate of FTB or amount of CCB by fee reduction where the customer has not provided a reasonable estimate of ATI for the current income year.
There are two types of default estimates, an indexed estimate and indexed actual income.
At the beginning of each income year (commencing 1 July 2006), customers who are entitled to be paid FTB by instalment and whose rate is worked out on the basis of an estimate of ATI (as provided by the customer or a default estimate) will have their rate of FTB worked out on the basis of an indexed estimate unless they provide a reasonable estimate of ATI for the relevant income year. For members of a couple, this will ordinarily mean a rate of FTB worked out on the basis of an indexed estimate of ATI for both the customer and partner, unless a reasonable estimate of ATI is provided by the customer for each. Consistent with this, the legislation enables the Secretary to determine an individual's eligibility for, or rate of, FTB on the basis of an indexed estimate and, if the individual is a member of a couple, on the basis of an indexed estimate for the customer, combined with the most recent default estimate for the partner. The combination of an indexed estimate for the customer and a reasonable estimate provided by the customer for the partner is not contemplated in the existing legislation.
Some scenarios have been identified where such a combination may be relevant, albeit for a short period of time. Circumstances can arise where a customer is issued a notice advising an indexed estimate for the customer and, if the customer is partnered, the partner, together with a start date (generally 1 July of the relevant income year) from which the indexed estimate or estimates will be used to determine rate, but before the commencement date arrives, the customer partners or re-partners.
In these circumstances, there will be an indexed estimate for the customer with a specified start date but there will only be a customer provided estimate of ATI for the new partner. While the customer could be issued with another notice advising an indexed estimate for the new partner (assuming all the relevant statutory conditions are met), there may be a period where the customer's rate of FTB can only be determined on the basis of an indexed estimate for the customer and estimate of ATI provided by the customer for the partner.
Amendments are made by this Schedule to address this scenario by acknowledging the relevance of such a combination for the purposes of working out an individual's rate of FTB.
The same issue exists for CCB and is addressed in a similar way.
The other type of default estimate is indexed actual income. Where a customer is being paid FTB on the basis of a default estimate and actual ATI for the customer (or partner) becomes known, a further automatic uplift will be applicable provided specified statutory conditions are met.
Explanation of the changes
Section 20C of the Family Assistance Administration Act applies to members of a couple and ensures that an amount of ATI used for the purposes of calculating a customer's FTB Part A rate can include a combination of the most recent indexed estimates and/or indexed actual income as appropriate and that the appropriate lower amount is used for the purposes of calculating a rate of FTB Part B. Under existing section 20C, the potential relevance of a reasonable estimate of a partner's ATI as provided by the customer is not contemplated - for reasons set out above, it should be.
Item 1 reworks subsection 20C(3) to allow a customer's eligibility for, or rate of, FTB Part A to be determined on the basis of the customer's indexed estimate or indexed actual income and either the most recent indexed estimate or indexed actual income for the partner if there is one or, if not, a reasonable estimate of the partner's ATI provided by the customer.
Item 3 makes comparable amendments to subsection 55AC(3) of the Family Assistance Administration Act, which applies in relation to payment of CCB by fee reduction.
Item 2 reworks paragraph 20C(5)(b) to cover off the possibility of a customer's FTB Part B rate being based on the partner's most recent indexed estimate or indexed actual income if there is one or, if not, a reasonable estimate of the partner's ATI provided by the customer. An amount for the partner's ATI (indexed estimate, indexed actual income or reasonable estimate provided by the customer) would only be relevant for the purposes of FTB Part B if it is less than the customer's indexed estimate or indexed actual income.