Explanatory Memorandum
(Circulated by the authority of the Minister for Families, Housing, Community Services and Indigenous Affairs, the Hon Jenny Macklin MP)Schedule 2 - Indexation
Summary
Amendments are made to the indexation arrangements for certain family assistance income threshold amounts so that these amounts are not indexed on 1 July of 2009, 2010 and 2011. The relevant income threshold amounts are the higher income free area for FTB Part A (both the basic amount and the additional amount for each FTB child after the first), the FTB Part B income limit and the baby bonus income limit. Indexation will again occur in accordance with the usual rules on 1 July 2012.
Background
Higher income free area
Clause 1 of Schedule 1 to the Family Assistance Act outlines the overall rate calculation process for FTB. There are three different rate calculation processes for FTB Part A, depending on the individual's circumstances and their family income (whether or not the individual's adjusted taxable income exceeds the individual's higher income free area).
The concept of a higher income free area is then defined in clause 2 of Schedule 1. An individual's higher income free area is the basic amount ($94,316) plus an additional amount ($3,796) for each FTB child of the individual after the first.
The amounts that may comprise an individual's higher income free area are indexed annually on 1 July of each year in accordance with movements in the Consumer Price Index (CPI). The relevant indexation provisions are items 11 and 12 in the table in clause 2 of Schedule 4 to the Family Assistance Act (which identify the amounts and provide abbreviations for them) and Part 2 of Schedule 4, including items 11 and 12 in the table in subclause 3(1), which provide for CPI indexation of these amounts.
The indexation arrangements for the amounts that comprise the higher income free area are amended so that these amounts are not indexed on 1 July of 2009, 2010 and 2011.
FTB Part B income limit
Under clause 28B of Schedule 1 to the Family Assistance Act, an individual's FTB Part B rate is nil if the adjusted taxable income of the primary earner is more than $150,000. This rule does not apply if the individual or their partner is receiving a social security pension or benefit or a veterans' service pension or income support supplement.
This income limit of $150,000 for FTB Part B is indexed in accordance with the CPI on 1 July of each year. The relevant indexation provisions are item 17AA in the table in clause 2 of Schedule 4 to the Family Assistance Act (which identifies this amount and provides an appropriate abbreviation) and Part 2 of Schedule 4, including item 17AA in the table in subclause 3(1), which provides for CPI indexation of the amount.
The indexation arrangements for the FTB Part B income limit are amended so that this amount is not indexed on 1 July of 2009, 2010 and 2011.
Baby bonus income limit
The eligibility requirements for baby bonus are set out in section 36 of the Family Assistance Act. For each of the different categories of eligibility, there is a requirement that the individual provide, in their claim for baby bonus, an estimate of adjusted taxable income for the individual and their partner (if any) for the relevant six month period, that the estimate be less than or equal to $75,000 and be an estimate that the Secretary considers to be reasonable.
This income limit of $75,000 for baby bonus is indexed in accordance with the CPI on 1 July of each year. The relevant indexation provisions are item 17AAA in the table in clause 2 of Schedule 4 to the Family Assistance Act (which identifies this amount and provides an appropriate abbreviation) and Part 2 of Schedule 4, including item 17AAA in the table in subclause 3(1), which provides for CPI indexation of the amount.
The indexation arrangements for the baby bonus income limit are amended so that this amount is not indexed on 1 July of 2009, 2010 and 2011.
Explanation of the changes
Item 1 inserts a new subclause 3(7) into Schedule 4 to the Family Assistance Act. This new provision prevents indexation of specified amounts from occurring on 1 July of 2009, 2010 and 2011.
The specified amounts are:
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- FTB basic HIFA (A) - which is the basic higher income free area amount;
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- FTB additional HIFA (A) - which is the additional amount of the higher income free area for each FTB child of the individual after the first;
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- FTB income limit (B) - which is the FTB Part B income limit; and
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- baby bonus income limit.
The existing indexation rules will again apply on 1 July 2012 to ensure that these amounts are CPI indexed on that date and on each 1 July thereafter.
This change commences on 30 June 2009.