House of Representatives

Explanatory Memorandum

Circulated By the Authority of the Minister for Families, Housing, Community Services and Indigenous Affairs, the Hon Jenny Macklin MP

Schedule 2 - Clean energy payments under the family assistance law

Summary

The financial assistance provided by this Schedule will be delivered through increases to family payments equivalent to 1.7 per cent.

This Schedule provides families with a new lump sum clean energy advance, with most payments to occur during May to June 2012 before commencement of the carbon pricing scheme. Ongoing, permanent clean energy supplements will be paid from 1 July 2013, which will be separate components of an individual's Part A and Part B rates of family tax benefit. Provision is also made for the payment of clean energy advances and supplements to approved care organisations where they receive family tax benefit.

Background

Clean energy advances

Generally, the clean energy advance provisions for families receiving family tax benefit (Part A or Part B) apply from 14 May 2012, with most payments being made over the period 14 May to 30 June 2012. Eligible families will be able to receive top-ups if their circumstances change such as having a new baby and their rate of family payment increases.

The annual value of the clean energy advance payment would be equivalent to a 1.7 per cent increase in family payments. The clean energy advance will include:

•

the expected Consumer Price Index impact of carbon pricing (0.7 per cent); and

•

an additional increase amount above the Consumer Price Index impact (one per cent).

Clean energy supplements

From 1 July 2013, the rate of FTB would be increased through the introduction of new clean energy supplements (Part A and Part B). Consistent with the clean energy advance, the annual rate of the clean energy supplements would be equivalent to a 1.7 per cent increase in the standard rates and end of year supplements for FTB Part A and Part B.

The expected additional impact on the Consumer Price Index from carbon pricing (0.7 per cent) will be permanently included in the clean energy supplement, rather than in the indexation on the FTB child rates and FTB supplements. An additional amount equivalent to a one per cent increase to the FTB child rates and FTB supplements will also be permanently included in the clean energy supplement. Therefore, the expected impact of the carbon price on indexation (0.7 per cent) will effectively be transferred from the indexation of the relevant FTB child rates and FTB supplements to the clean energy supplement.

Regular indexation of the relevant FTB child rates will continue to apply, adjusted by the equivalent amount transferred to the clean energy supplement. The clean energy supplements will be permanent, and indexed by the Consumer Price Index so they maintain their value in real terms over time.

The new clean energy supplements would be available on an ongoing basis as part of an individual's fortnightly FTB payments or, if the individual chooses, on a quarterly basis. The supplements can also be paid as part of an individual's end of year entitlement if the individual claims their FTB for a previous income year.

An approved care organisation may currently receive FTB for the children in their care, paid at the same rate as the base standard rate of FTB Part A for an FTB child who has not turned 18. In 2010-11, around 60 organisations received FTB for an estimated 3,000 children. As children may be in the care of an approved care organisation for varying periods of time, it would not be appropriate to provide a clean energy advance in the same manner as that proposed for families. The Schedule will enable the determination of an administrative scheme for paying clean energy advances to an approved care organisation, by way of a legislative instrument made by a Minister administering the family assistance law.

From 1 July 2013, the rate of FTB for an approved care organisation would include the clean energy supplement, which would be indexed annually from 1 July 2014. The annual rate of the clean energy supplement on 1 July 2013 would be equivalent to a 1.7 per cent increase in the standard rate of FTB for an approved care organisation on 1 July 2013. The Consumer Price Index indexation of the standard rate of FTB for an approved care organisation would be adjusted in the same way as the indexation adjustment of the standard rate of FTB occurs for families.

The amendments made by this Schedule commence on 14 May 2012 (which is the date from which clean energy advances will be paid). The commencement of Schedule 2 is also conditional on the commencement of section 3 of the Clean Energy Act 2011.

Explanation of the changes

Part 1 - Clean energy advances for individuals

In broad terms, Part 1 of Schedule 2 to the Bill inserts new Part 8 into the Family Assistance Act, which sets out the entitlement rules for clean energy advances and the method for calculating the amount of an advance. The administrative framework supporting clean energy advances is provided by amendments to the Family Assistance Administration Act, and necessary consequential amendments are made.

Amendments to the Family Assistance Act

Items 1 and 2 define terms which are used in new Part 8 of the Family Assistance Act, as inserted by item 3, and in provisions in the Family Assistance Administration Act as relevant.

An absent overseas FTB child is defined by reference to section 63 of the Family Assistance Act. An FTB child generally becomes an absent overseas FTB child after the child has been absent from Australia for 13 weeks. An absent overseas recipient ( a concept also used in new Part 8) is already defined in subsection 3(1) of the Family Assistance Act.

A clean energy advance is defined to mean an advance to which an individual is entitled under new Division 1 of Part 8 (entitlement to clean energy advance) or new Division 3 of Part 8 (top-up payments of clean energy advance).

Item 3 inserts new Part 8 into the Family Assistance Act. New Part 8 sets out the circumstances in which an individual is entitled to a clean energy advance and a top-up and the method for calculating an individual's clean energy advance and clean energy daily rate.

New Part 8 - Clean energy advances

Division 1 - Entitlement to clean energy advances

Entitlement in normal circumstances

New section 103 sets out the conditions that need to be satisfied for an individual to be entitled to a clean energy advance in normal circumstances.

Clean energy advances will start being paid from 14 May 2012 and many families will receive their advance before 1 July 2012. As the advance is designed to cover the 2012-13 income year, there are some differences in the entitlement conditions where an entitlement determination is made during the period 14 May until 30 June 2011 or is made on or after 1 July 2012.

Families who are entitled to FTB instalments during the period 14 May to 30 June 2012, will be entitled to the advance if they meet conditions on the determination day.

However, some families elect to claim their FTB in a lump sum at the end of the financial year. These families will not have claimed FTB in this period, so will not receive the clean energy advance for 2012-13 until they claim FTB for this year. This could be at the end of the 2012-13 year for lump sum payment of FTB, or at any time during 2012-13 to receive fortnightly instalments of FTB. Families who have previously received FTB as a lump sum can claim FTB as fortnightly instalments at any time. If they wish to receive their clean energy advance in May to June 2012 at the same time as instalment recipients, they will need to claim FTB as fortnightly instalments prior to May 2012.

New subsection 103(1) enables the Secretary to make an entitlement determination for an individual on a day during the period 14 May to 30 June 2012 if specified conditions are met on the determination day.

The individual must be entitled to payment of FTB by instalments (under section 16 of the Family Assistance Administration Act) or because of the death of a child (under section 18 of the Family Assistance Administration Act because of eligibility under section 32 of the Family Assistance Act).

The individual must be in Australia on the day the determination is made.

The individual's rate of FTB on that day, worked out under Division 1 of Part 4, but disregarding any FTB advance reduction, must be greater than nil. That rate must also take into account at least one FTB child of the individual who is in Australia on the determination day.

Finally, neither the individual nor their partner must be prevented under section 32AA or 32AD of the Family Assistance Administration Act from being paid FTB on the basis of an estimate on that day.

A note at the end of new subsection 103(1) indicates to the reader that the amount of the advance is then worked out under new sections 105 and 106.

New subsection 103(2) applies where the Secretary makes the entitlement determination on or after 1 July 2012. Such an entitlement determination can be made where the following conditions are met on any day in the 2012-13 income year (the period covered by the advance).

As with new subsection 103(1), the individual must have a determination under section 16 or section 18 (because of the death of an FTB child). However, an individual can also have a determination under section 17 of the Family Assistance Administration Act (FTB entitlement determination in respect of a past period) in relation to a day during the 2012-13 income year.

The individual must not be an absent overseas recipient, disregarding any extension of the individual's FTB portability period under section 63A.

In broad terms, an individual becomes an absent overseas recipient after 13 weeks' absence from Australia (section 62 of the Family Assistance Act refers). For FTB purposes, the 13-week period can be extended under section 63A. However, for the purposes of the clean energy advance, an absent overseas recipient and an FTB recipient who is in an extended period under section 63A would be precluded from entitlement to a clean energy advance.

The individual's rate of FTB worked out under Division 1 of Part 4, but disregarding any FTB advance reduction, must be greater than nil. That rate must also take into account at least one FTB child of the individual who is not an absent overseas FTB child, disregarding section 63A of the Family Assistance Act. The concept of absent overseas FTB child is defined in subsection 3(1) of the Family Assistance Act (the definition is inserted by item 1). For the purposes of the clean energy advance, an individual would not be entitled to an advance if each FTB child of the individual is an absent overseas FTB child or an FTB child who is in an extended portability period under section 63A.

A note at the end of new subsection 103(2) indicates to the reader that the amount of the advance is worked out under new sections 105 and 106.

However, new subsection 103(3) provides that an entitlement determination under new subsection 103(2) cannot be made on a day before 1 July 2013 in prescribed circumstances. An entitlement determination cannot be made if the individual is outside Australia on the day, having left Australia before 1 April 2013 and the individual is not an absent overseas recipient (disregarding section 63A) on that day. Similarly, an entitlement determination cannot be made if each FTB child of the individual is outside Australia on the day, having left Australia before 1 April 2013 and each FTB child is not an absent overseas FTB child (disregarding section 63A) on that day.

The condition in paragraphs 103(1)(b) and (d) for the individual and at least one FTB child to be in Australia on the determination day, and the condition in subsection 103(3) preventing a determination under subsection 103(2) if the individual or each FTB child is outside Australia and left before 1 April 2013 but the absence has not yet exceeded 13 weeks, is intended to avoid paying clean energy advance for days occurring in the future during 2012-13 that may exceed the 13-week FTB portability period. The projected amount of clean energy advance for days occurring in the future during 2012-13 will be based on the individual's rate of FTB on the determination day. Therefore, if entitlement to a clean energy advance under subsection 103(1) or (2) could arise on a day before the absence from Australia exceeds 13 weeks, this would fail to exclude the period after 13 weeks' absence. In contrast, a determination under subsection 103(2) can be made on a day when the absence has exceeded 13 weeks, because the amount of clean energy advance will exclude any days during 2012-13 which are known to have exceeded the 13-week FTB portability period.

Under new subsection 103(4), section 32 is disregarded for the purposes of new paragraphs 103(1)(c) and (d) and 103(2)(c) and (d).

In broad terms, an FTB child who dies continues to be an FTB child for a bereavement period of 14 weeks for FTB purposes (the period is reduced in certain circumstances, such as where the child would have reached an age cut out). For instalment cases or cases where the period overlaps two income years, some or all of the amount for the deceased child may be paid as a lump sum. Where this happens, section 32 of the Family Assistance Act provides that the bereavement period is reduced by the period covered by the lump sum payment.

Disregarding section 32 would ensure that a deceased child continues to be an FTB child for the same period that would apply for FTB if a lump sum were not paid for the child, and would enable an individual to meet the entitlement rules for the clean energy advance.

New subsection 103(5) provides that an individual cannot be entitled to more than one advance under new section 103.

This rule does not prevent an individual, whose circumstances change, from also being entitled to a top-up under new section 108. It would also remain open for an individual to seek review of the amount of their clean energy advance as appropriate and, if the amount calculated was incorrect, to be paid the difference.

This rule also does not prevent a new carer from being entitled to a clean energy advance in respect of an FTB child where there is a change in care of the child. For example, one parent initially has sole care of a child and is entitled to FTB, and is paid a clean energy advance on 1 June 2012 for the full period of 1 July 2012 to 30 June 2013 (365 days). The sole care changes to the other parent on 1 August 2012 and FTB is granted from that day. The new carer would be entitled to a clean energy advance for the period 1 August 2012 to 30 June 2013 (334 days), provided they meet the other entitlement conditions.

Entitlement where death occurs

An individual who has an FTB entitlement determination under section 18 of the Family Assistance Administration Act because of the death of another individual (who was caring for a child) can also be entitled to a clean energy advance in circumstances where the deceased individual was, or would have been, entitled to an advance but has not been paid their entitlement. Subsection (1) of new section 104 covers this situation.

An example is where an individual has FTB children in 2012-13 and usually claims their FTB at the end of the year through a past period claim. If the individual dies before making such a claim, another individual (for example the new carer of the children) can claim and be entitled to the deceased individual's FTB under existing rules and clean energy advance under new section 104. The amount of the clean energy advance would then be the amount of clean energy advance that the deceased individual would have been entitled to (new section 107 refers).

A note at the end of this provision refers the reader to new section 107, which provides for rules for working out the amount of advance in this situation.

New subsection 104(2) ensures that only one individual can be entitled to the unpaid clean energy advance of a deceased individual.

Division 2 - Amount of clean energy advance

Amount of the clean energy advance where entitlement under section 103

New section 105 sets out the rules for working out the amount of an individual's clean energy advance where an individual is entitled to a clean energy advance under new section 103.

New subsection 105(1) provides that the amount of the individual's clean energy advance must be worked out on the day that the Secretary determines an individual is entitled to the advance (referred to as the decision day).

New subsection 105(2) applies where the decision day is before 1 July 2012 and provides for the amount of the advance to be worked out in accordance with a specified method statement. This amount may be affected by new subsection 105(5), which applies where there is a percentage determination under section 28 or 29 of the Family Assistance Act in force in relation to the day.

The amount may also be affected by new subsection 105(6), which provides for a different method of calculation, to be specified in a legislative instrument, where an individual is entitled to a clean energy advance under section 103 in relation a child, but the individual's former partner was previously entitled to an advance in relation to that child when the individual and the former partner were a couple.

In this situation, the intention is to avoid duplication of payment for a child, subject to enabling a top-up amount for the child where new circumstances result in a higher rate of FTB for the child. Therefore, for the period in 2012-13 that the individual is separated from the former partner and the individual is entitled to FTB for the child, it is intended that the individual would receive a daily amount for the child equal to the excess of the daily amount that would be payable if the former partner had not previously been entitled for the child, above the daily amount for the child that the former partner was previously entitled to when they were a couple. It is intended that no daily amount would be payable to the individual for the child if there is no excess amount.

An example is where a couple received the base rate of FTB Part A only for a child (paid to the child's father), but after separation, the mother receives the maximum rate of FTB Part A and Part B for the child. The mother would be paid an amount of clean energy advance based on the amount for maximum FTB Part A and Part B less the amount for the base rate of FTB Part A.

The first step in the method statement in new subsection 105(2) is to work out the individual's clean energy daily rate on the decision day (which will be based on the individual's FTB circumstances on that day) and using the FTB rates that will apply from 1 July 2012, after indexation occurs.

The second step of the method statement is to multiply the daily rate worked out under step 1 by 365 which then results in the amount of the individual's clean energy advance.

New subsection 105(3) applies where the decision day is in the 2012-13 income year and provides for the amount of the advance to be worked out in accordance with a specified method statement. This amount may be affected by new subsection 105(5) (where there is a percentage determination under section 28 or 29 of the Family Assistance Act) and new subsection 105(6) (which provides for a different method of calculation where a former partner was previously entitled to an advance for the same child when the individual and the former partner were a couple).

The first step is to work out the clean energy daily rates for each day in the period 1 July 2012 until the decision day. The daily rates are worked out under new section 106. The daily rate for each of these days would be based on the individual's circumstances on each day. The individual's clean energy daily rate for one or more of these days could be nil if, for example, the individual's only FTB child was an absent overseas FTB child on that day. This is made clear in new subsection 106(2).

The second step is to multiply the individual's clean energy daily rate on the decision day by the number of days remaining in the 2012-13 income year.

The sum of the amounts worked out under steps 1 and 2 would be the amount of the individual's clean energy advance.

New subsection 105(4) applies where the decision day is on or after 1 July 2013 and provides that the amount of the individual's clean energy advance is the sum of the daily rates for each day in the 2012-13 income year. The daily rate for each of these days would be based on the individual's circumstances on each day and would have regard, as relevant, to a percentage determination under section 28 or 29 of the Family Assistance Act (new subsection 105(5) refers). The daily rate could also be affected by new subsection 105(6), which provides for a different method of calculation where a former partner was previously entitled to an advance for the same child when the individual and the former partner were a couple.

New subsection 105(5) ensures that a percentage determination under section 28 or 29 of the Family Assistance Act in relation to a particular day is reflected in an individual's clean energy daily rate.

New subsection 105(6) applies where an individual is entitled to a clean energy advance under new section 103 in relation to a child and a former partner of the individual was previously entitled to an advance in relation to the same child while the individual and their former partner were a couple. In these circumstances, the individual's clean energy advance will be worked out in accordance with a method specified by the Minister in a legislative instrument. The instrument making power is in new subsection 105(7).

Clean energy daily rate

New section 106 provides for the calculation of an individual's clean energy daily rate.

In broad terms, an individual's clean energy daily rate would include:

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an amount relating to FTB Part A if the individual's Part A rate (disregarding any FTB advance reduction) exceeds nil; and

•

an amount relating to FTB Part B if the individual's Part B rate exceeds nil.

If an individual's FTB Part A or Part B rate is affected by a shared care percentage for a child, this will also affect the clean energy daily rate in the usual way.

An individual's clean energy daily rate is worked out using the method statement in new subsection 106(1).

Step1 of the method statement provides a method for working out an amount relating to the individual's FTB Part A.

The amount relating to FTB Part A would differ depending on whether the individual's income and maintenance tested rate under method 1 exceeds or does not exceed the base rate or, where method 2 applies, whether the individual's Method 2 income and maintenance tested rate exceeds or does not exceed the tapered base rate (the provisional Part A rate).

An individual's FTB Part A rate is worked out under Method 1 if the individual has at least one FTB child and either the individual's adjusted taxable income does not exceed the individual's higher income free area or the individual or their partner is receiving a prescribed social security or veterans' income support payment. Method 2 applies where the individual has at least one FTB child and the individual's adjusted taxable income exceeds the individual's higher income free area and neither the individual nor their partner is receiving a prescribed social security or veterans' income support payment.

Under step 1 of the method statement in new subsection 106(1), if the individual's Part A rate is worked out using method 1 (under clause 3 of Schedule 1) and their income and maintenance tested rate exceeds their base rate (as defined in clause 4 of Schedule 1), then the amount relating to FTB Part A is the sum of the individual's method 1 standard rate and FTB Part A supplement (being the amounts at paragraphs (a) and (ca) of step 1 of the method statement in clause 3 of Schedule 1).

If the individual's Part A rate is worked out using method 1 (under clause 3 of Schedule 1) and their income and maintenance tested rate is less than or equal to their base rate, then the amount relating to FTB Part A is the sum of the individual's method 2 standard rate and FTB Part A supplement (being the amounts at paragraphs (a) and (d) of step 1 of the method statement in clause 25 of Schedule 1).

If the individual's Part A rate is worked out using method 2 (under clause 25 of Schedule 1) and their Method 2 income and maintenance tested rate is less than or equal to their provisional Part A rate, then the amount relating to FTB Part A is the sum of the individual's method 2 standard rate and FTB Part A supplement (being the amounts at paragraphs (a) and (d) of step 1 of the method statement in clause 25 of Schedule 1).

If the individual's Part A rate is worked out using method 2 (under clause 25 of Schedule 1) and their Method 2 income and maintenance tested rate exceeds their provisional Part A rate, then the amount relating to FTB Part A is the sum of the individual's method 1 standard rate and FTB Part A supplement (being the amounts at paragraphs (a) and (ca) of step 1 of the method statement in clause 3 of Schedule 1).

In each of the above scenarios, the individual's standard rate will incorporate an amount for each FTB child (subject to new subsections 106(4) and (6) explained below) and will have regard to any applicable shared care percentage. The individual's FTB Part A supplement would be included in calculating the Part A element of their clean energy advance, regardless of whether the individual has satisfied the FTB reconciliation conditions for 2012-13 (under section 32B of the Family Assistance Administration Act). This is made clear by the amendment to section 32A of the Family Assistance Administration Act made by item 47.

The amount relating to FTB Part A will be an annual amount as are all the amounts referred to in step 1.

Step 2 of the method statement in new subsection 106(1) provides a method for working out an amount relating to the individual's FTB Part B.

The amount relating to FTB Part B would be based on the individual's standard rate under Division 2 of Part 4 of Schedule 1 (having regard to shared care percentages as relevant) and the individual's FTB Part B supplement on the relevant day. The individual's FTB Part B supplement would be included in calculating the Part B element of their clean energy advance, regardless of whether the individual has satisfied the FTB reconciliation conditions for 2012-13 (under section 32B of the Family Assistance Administration Act). This is made clear by the amendment to section 32A of the Family Assistance Administration Act made by item 47.

The result in step 2 relating to FTB Part B is also an annual amount.

Under step 3, the amounts at steps 1 and 2 are added together. The result is then multiplied by 0.017 in step 4. This is the equivalent of a 1.7 per cent increase in the relevant annual Part A and Part B amounts, and includes:

•

the expected CPI impact of carbon pricing (0.7 per cent); and

•

an additional increase above CPI (one per cent).

Step 5 then requires the amount in step 4 to be converted to a daily amount by dividing by 365. The daily amount would then be rounded to the nearest cent (rounding 0.5 cents upwards). The result is the individual's clean energy daily rate for that day. As is the case with FTB, an individual can have different daily rates on different days, depending on their circumstances.

New subsection 106(2) makes it clear that, if steps 1 and 2 of the method statement do not apply in relation to a day, then the individual's clean energy daily rate for that day is nil.

New subsection 106(3) also provides that the individual's clean energy daily rate for a day that the individual is an absent overseas FTB recipient (disregarding any FTB portability extension under section 63A of the Family Assistance Act) is nil.

New subsection 106(4) ensures that the calculation process set out in the method statement for a day does not have regard to an FTB child who is, on that day, an absent overseas FTB child of the individual or in a period of extended FTB portability period under section 63A of the Family Assistance Act. This rule disregards the child for the purposes of working out whether an individual's rate of FTB consisted of, or included, a Part A or Part B rate greater than nil, and in determining which of the paragraphs in steps 1 and 2 of the method statement apply.

New subsection 106(5) provides that the calculation of an individual's clean energy daily rate is to be done disregarding section 32 of the Family Assistance Act. The effect is that a deceased child would continue to be considered an FTB child of the individual for each day in the bereavement period (usually 14 weeks) even if the individual has been paid FTB for the deceased child as a single lump sum. Section 32 would otherwise operate in this situation to reduce the individual's bereavement period for the deceased child.

New subsection 106(6) applies where the decision day is before 1 July 2013 and an FTB child of the individual is outside Australia on the day, having left Australia before 1 April 2013 and is not an absent overseas FTB child (disregarding section 63A) on that day. In these circumstances, the child is disregarded for the purposes of calculating the individual's clean energy daily rate.

However, if the child returns to Australia before 1 July 2013, the return is taken to be a change in circumstances for the purposes of invoking the operation of new section 108, which allows for top-up payments of clean energy advance.

If the child does not return before 1 July 2013, then there is taken to be a trigger day on 30 June 2013 for the purposes of new section 108. In this situation also, new section 108 will allow for the recalculation of an individual's clean energy advance and the payment of a top-up as appropriate.

These rules are in new subsections 106(7) and (8) respectively.

Amount of advance where entitlement under section 104

New section 107 applies where an individual is entitled to a clean energy advance because of the death of another individual (where entitlement arises under new subsection 104(1)). An example is where the deceased individual was caring for a child in 2012-13 but died before claiming FTB for 2012-13. The amount of the individual's clean energy advance in this situation is the amount that the deceased individual was, or would have been, entitled to be paid had they not died.

Division 3-Top-up payments of clean energy advance

Top-up payments of clean energy advance

An individual's FTB circumstances may change after they are paid a clean energy advance (on the basis of an entitlement determination under new section 103). In broad terms, the intention is that new FTB circumstances would result in a top-up to the original clean energy advance if the change in circumstances results in a person receiving a higher rate of payment, for example, where a family has another FTB child, or a separated parent's shared care percentage for a child increases.

New section 108 provides the entitlement rules for top-up payments of clean energy advance.

An individual is entitled to a top-up payment of clean energy advance if the individual has been paid a clean energy advance on the basis of entitlement under new section 103 (where the amount was not worked out under new subsection 105(6) in accordance with a method specified in a legislative instrument), the decision day is before 1 July 2013 and, after the decision day and before 1 July 2013, the individual's circumstances change such that the amount of the original payment is less than the amount that would have been calculated if the decision day were the day on which the individual's circumstances changed (the trigger day). This allows the clean energy amount to be calculated having regard to the changed circumstances and compared with the original amount. The amount of the top-up payment to which the individual is entitled in these circumstances is the shortfall.

Where the individual has already been paid a top-up payment of clean energy advance and circumstances change again, then the relevant consideration is whether the sum of the amount of the original advance payment plus any previous top-up payment is less than the amount that would have been paid if the decision day were the day on which the latest circumstances changed. The amount of the top-up payment to which the individual is entitled in these circumstances is the shortfall.

These rules are in new subsection 108(1).

However, under new subsection 108(2), if an individual is entitled to an advance under new section 103 which is worked out under new subsection 105(6) (in accordance with a method specified in a legislative instrument), the decision day is before 1 July 2013 and the individual's circumstances change after the decision day and before 1 July 2013, then the individual's entitlement and amount of top-up payments are also to be worked out in accordance with a legislative instrument. New subsection 108(3) provides the Minister with the relevant instrument making power.

For members of a couple in a blended family, new subsection 108(4) makes it clear that neither a change in a percentage determination under section 28 of the Family Assistance Act nor the ending of such a determination is to be considered a change of circumstances for the purposes of invoking the operation of new section 108. For example, if a couple were each receiving 50 per cent of FTB for their two children and were each paid a clean energy advance on that basis, and then the couple decide to change their percentages of FTB to 80 and 20 per cent, that change will not result in a top-up.

Division 4 - General rules

New section 109 applies where an individual is entitled to a clean energy advance or top-up of clean energy advance in relation to a child, and the amount of the advance was not worked out having regard to a percentage determination under section 28 or 29 of the Family Assistance Act. In these circumstances, new section 109 ensures that, while the individual is a member of a couple, their partner cannot be entitled to an advance under new section 103 or 108 in relation to the same child.

Amendments to the Family Assistance Administration Act

Item 4 inserts new Division 4D into Part 3 of the Family Assistance Administration Act. This new Division contains new section 65J which sets out some payment rules for clean energy advances.

Where an individual is entitled to a clean energy advance, new subsection 65J(1) provides that the payment must be paid as a single lump sum on the day that the Secretary considers to be the earliest day on which it is practicable to make the payment and in such manner as the Secretary considers appropriate. In practice, a clean energy advance will usually be paid no later than the next FTB payment to the individual and in the same manner (deposit into a nominated account).

A note at the end of this provision informs the reader that there is no requirement for a claim for a clean energy advance as it will be paid automatically for eligible people.

New subsection 65J(2) applies where the decision day or the trigger day is in the 2012-13 income year and, on that day, the Secretary is prevented from paying FTB to an individual or their partner on the basis of an estimate because the relevant tax returns have not been lodged and there is an outstanding non-lodger FTB debt (sections 32AA and 32AD of the Family Assistance Administration Act refer). In these circumstances, the Secretary must not pay the individual a clean energy advance (an original advance or a top-up of a clean energy advance) until FTB is also paid for the decision day or the trigger day.

New subsection 65J(3) applies where the decision day is on or after 1 July 2013 and the Secretary is prevented from paying FTB to an individual or their partner on the basis of an estimate because of the application of section 32AA or 32AD of the Family Assistance Administration Act, for one or more days in the 2012-13 income year. In these circumstances, the Secretary must not pay the individual a clean energy advance until FTB is also paid for the day or days in the 2012-13 income year.

Item 5 amends subsection 66(1) with the effect that a clean energy advance is inalienable, consistent with other family assistance payments.

An amount paid by way of clean energy advance will only be a debt to the extent that a provision in the Family Assistance Administration Act expressly provides for it . Item 6 makes an amendment to section 70 of the Family Assistance Administration Act to this effect.

Item 7 then inserts the relevant debt provision, new section 71L, which sets out the circumstances in which a clean energy advance is a debt.

It is possible that a change in circumstances or a review will change the individual's FTB entitlement, resulting in FTB ceasing or an FTB debt. For example, the individual may cease to have care of an FTB child during 2012-13, or the FTB reconciliation for 2012-13 may result in the individual having a lower or nil FTB entitlement for 2012-13.

However, a debt for all or part of the clean energy advance due to an FTB reassessment would generally not occur. A clean energy advance debt would only arise if the FTB reassessment was because the individual knowingly made a false or misleading statement, or knowingly provided false information. This is similar to the debt rules for the economic stimulus payments that were linked to certain FTB entitlements in relation to 14 October 2008 and 3 February 2009.

New subsection 71L(1) provides that this section applies to an individual who has been paid a clean energy advance.

New subsection 71L(2) defines a relevant determination as the underlying FTB determination that must be in force in relation to the individual for the individual to be entitled to a clean energy advance. The relevant determinations are mentioned in new paragraphs 103(1)(a), (2)(a) and 104(1)(a) of the Family Assistance Act (as inserted by item 3).

If, after an advance is paid, the relevant determination, as it relates to a day in the 2012-13 income year, is changed, revoked, set aside or superseded and a reason for this was that the individual knowingly made a false or misleading statement or knowingly provided false information and, had the change, revocation etc occurred on or before the day the advance was paid, the advance would not have been paid, then the amount of clean energy advance paid is a debt. The relevant rules are in new subsection 71L(3).

Similar rules, set out in subsection 71L(4), would apply where an individual is paid in excess of the amount of their entitlement to a clean energy advance because of a subsequent change to the relevant determination, except that the amount of the debt would be the difference between the amount of advance paid and the amount that should have been paid.

Section 74 of the Family Assistance Administration Act deals with the situation where certain payments under the family assistance law are paid by cheque and a person other than the payee obtains possession of the cheque and its value without the payee's endorsement. In this situation, there is a resultant debt owed to the Commonwealth by the person . Item 8 amends section 74 so that it also applies where a clean energy advance cheque is misappropriated.

Section 82 of the Family Assistance Administration Act sets out the methods that can be used to recover a debt . Item 9 amends the definition of debt in subsection 82(3) to include a clean energy advance so that the methods of recovery are also available in relation to a clean energy advance debt.

Section 93A of the Family Assistance Administration Act allows for the recovery of a family assistance payment from a financial institution in prescribed circumstances . Item 10 includes a clean energy advance as a family assistance payment for the purposes of this provision.

Where the Secretary reviews certain decisions, there is a current requirement for the Secretary to give notice of the review decision to the person or people whose entitlement or possible entitlement to specified payments (such as family assistance or an economic security strategy payment to families) is affected by the review decision (subsection 106(3) of the Family Assistance Administration Act refers).

Item 11 amends subsection 106(3) so that the same rule also applies in relation to review decisions relating to clean energy advance.

As a general rule, an application for review of a decision must be made no later than 52 weeks after the applicant has been notified of the decision. There are exceptions, such as where the Commissioner of Taxation reviews and changes a person's taxable income . Items 12 and 13 amend subsection 109D(4) and paragraph 109D(5)(a) of the Family Assistance Administration Act respectively to ensure that the exceptions also apply to applications for review of decisions relating to the payment of clean energy advances.

Item 14 inserts a reference to clean energy advance at the end of the definition of relevant benefit in section 219TA of the Family Assistance Administration Act. This would enable the Secretary to appoint a payment nominee who would be paid the clean energy payment on behalf of the entitled individual.

Part 2 - Clean energy supplement for individuals

In broad terms, Part 2 of Schedule 2 to the Bill introduces new clean energy supplement (Part A) and new clean energy supplement (Part B) into the rate calculation process for FTB in Schedule 1 to the Family Assistance Act. The clean energy supplement (Part A) will be a separate new component of an individual's Part A rate while the clean energy supplement (Part B) will be a separate new component of an individual's Part B rate.

While the new supplements will generally be paid fortnightly with FTB, the amendments in Part 2 of this Schedule also provide the rules which allow an individual to elect to receive their supplements on a quarterly basis.

Part 2 also contains the indexation arrangements for the new supplements.

Amendments to the Family Assistance Act

Item 15 inserts a new section 58A into the FTB rate provisions in Part 4 of Division 1 of the Family Assistance Act. New section 58A sets out the rules that enable an individual who is entitled to payment of FTB by instalments to elect to have their clean energy supplement disregarded from the FTB rate calculation process. The supplements would then be included in rate at the end of the relevant quarter through the process of review. The effect of the election would be to allow individuals to be paid their supplement each quarter, rather than with their fortnightly FTB payment. The individual would only need to make one election (not an election in relation to each relevant quarter) which would continue to be in force until revoked by the individual or until the individual ceases to be entitled to payment of FTB by instalments.

New subsection 58A(1) enables an individual who is entitled to payment of FTB by instalments in a quarter to make an election to have the clean energy supplements disregarded in calculating their rate of FTB. The election would need to be in a manner or way approved by the Secretary.

Note 1 clarifies that the Divisions referred to in new subsection 58A(1) relate to the clean energy supplement (Part A) and the clean energy supplement (Part B).

Note 2 informs the reader that, if the clean energy supplements are disregarded because of an election, they are taken into account when entitlement is reviewed under section 105 of the Family Assistance Administration Act after the end of the quarter (because new section 105B requires such a review to occur at this time). This means that families who choose to receive their clean energy supplements quarterly will be paid in arrears.

New subsection 58A(2) provides that an election comes into force as soon as practicable after it is made. In practice, the intention is to adjust an individual's fortnightly payment of FTB as soon as possible after the election is made so that future fortnightly payments exclude the clean energy supplements.

Under new subsection 58A(3), an election ceases to be in force if the individual ceases to be entitled to payment of FTB by instalments.

An individual can also elect to revoke an election. Where this happens, the election ends as soon as practicable after the revocation. A revocation must be made in a manner or way approved by the Secretary. These rules are in new subsection 58A(4).

New subsection 58A(5) defines quarter as a period of three months beginning on 1 July, 1 October, 1 January or 1 April. A note then refers the reader to item 34 of Schedule 2 to this amending Act, which provides that new section 58A (inserted by item 15) applies in relation to the quarter beginning 1 July 2013 and all later quarters.

Clean energy supplement (Part A) as a component of the Part A rate

An individual's clean energy supplement (Part A) will be a separate component of an individual's Part A rate.

The method statement in clause 3 of Schedule 1 to the Family Assistance Act sets out the possible components of an individual's maximum rate where Method 1 applies to calculate their Part A rate. These include a standard rate (sum of the relevant FTB child rates), large family supplement, multiple birth allowance, FTB Part A supplement and rent assistance . Item 16 introduces a new component of rate as new paragraph (cb) of Step 1, being the individual's clean energy supplement (Part A) worked out under new clause 38AA of Schedule 1.

Item 17 inserts a new clause 6 into Schedule 1. This provision allows the Minister, by legislative instrument, to determine a method for working out the extent to which a Part A rate is attributable to the components of rate set out in Step 1 of the method statement in clause 3. This would, for example, enable the Minister to determine a method for working out the order in which reductions in rate due to the income and maintenance income tests affect the components of rate, including the new clean energy supplement (Part A).

The method statement in clause 25 of Schedule 1 to the Family Assistance Act sets out the possible components of an individual's Method 2 base rate where Method 2 applies to calculate their Part A rate. These include a standard rate (sum of the relevant FTB child rates), large family supplement, multiple birth allowance and FTB Part A supplement . Item 19 introduces a new component of rate at the end of step 1, new paragraph (e), being the individual's clean energy supplement (Part A) worked out under new clause 38AF of Schedule 1.

Item 18 makes a minor technical change to paragraph (d) in step 1 of the method statement in clause 25 of Schedule 1 to accommodate new paragraph (e).

Item 20 inserts a new clause 25B into Schedule 1. This provision allows the Minister, by legislative instrument, to determine a method for working out the extent to which a Part A rate is attributable to the components of rate set out in step 1 of the method statement in clause 25.

Clean energy supplement (Part B) as a component of the Part B rate

Clause 29 of Schedule 1 sets out the general method of calculating an individual's Part B rate.

Subclause 29(1) applies to work out an individual's Part B rate where the individual is not a member of a couple. The method statement in subclause 29(2) applies to an individual who is a member of a couple. In each case, there are two components of rate: the individual's standard rate and FTB Part B supplement.

Item 21 adds a new component of rate, the clean energy supplement (Part B), into subclause 29(1) as new paragraph (c).

Item 23 makes a similar amendment to the method statement in subclause 29(2) by adding the clean energy supplement (Part B) as new paragraph (c) in step 1 . Item 22 then makes a minor technical change to paragraph (b) in step 1 of the method statement in subclause 29(2) to accommodate new paragraph (c).

Item 25 inserts a new subclause 29(2A) into Schedule 1. This provision allows the Minister, by legislative instrument, to determine a method for working out the extent to which a Part B rate is attributable to the components of rate set out in step 1 of the method statement in subclause 29(2). This provision makes the order of reduction rule in brackets at the end of Step 3 of the method statement in subclause 29(2) superfluous . Item 24 therefore omits the rule in brackets.

Clause 29A of Schedule 1 sets out a method of working out an individual's Part B rate for an individual who returns to work after the birth of a child. An individual's Part B rate is worked out in accordance with subclause 29A(2). There are currently two components of rate: the individual's standard rate and FTB Part B supplement . Item 26 amends subclause 29A(2) by adding the clean energy supplement (Part B) as another component of an individual's Part B rate.

Working out the amount of an individual's clean energy supplement (Part B)

Part 4 of Schedule 1 provides for the calculation of an individual's Part B rate . Item 27 inserts a new Division 2B into Part 4 which contains the rules for working out the amount of an individual's clean energy supplement (Part B).

New clause 31B sets out the rules for working out the amount of clean energy supplement (Part B) that is to be added to an individual's Part B rate.

There would be an amount for the family situation where the individual's youngest child is under five years of age and an amount for the family situation where the individual's youngest child is aged five years or more. These are the two categories of family situation for the standard rate of Part B in clause 30 of Schedule 1.

New subclause 31B(2) provides a method statement to be used to work out the 'start up' amount of clean energy supplement (Part B) on 1 July 2013 for each of these family situations.

The first step is to work out the amount of standard rate applicable on 1 July 2013 for the corresponding item in the table in clause 30 of Schedule 1.

Step 2 is to work out the FTB (B) gross supplement amount on 1 July 2013 under subclause 31A(2).

These amounts are then added at Step 3 and the result multiplied by 0.017 at Step 4. The amount at Step 4 is then rounded in accordance with Step 5.

The result is an amount of clean energy supplement (Part B) for each family situation described in the table in subclause 31B(1).

These amounts are then subject to indexation in accordance with the Consumer Price Index on 1 July 2014 and each subsequent 1 July. The indexation arrangements for the clean energy supplement (Part B) amounts are provided for in new item 9B in the Indexed and Adjusted Amounts table in clause 2 of Schedule 4 and new item 9B in the CPI Indexation table at the end of subclause 3(1) of Schedule 4 (as inserted by items 30 and 32 respectively).

New subclause 31B(3) provides that clause 31B does not apply in relation to a day in respect of which an election under section 58A of the Family Assistance Act is in force. A note directs the reader to a related provision, new section 105B of the Family Assistance Administration Act (inserted by item 33), which enables the clean energy supplements to be paid to an individual at the end of a quarter on the assumption that their election was not in force for the relevant days in the quarter.

New clause 31C applies where an individual has a shared care percentage for an FTB child. Where the child is their only FTB child, then the individual's clean energy supplement (Part B) is that percentage of what would otherwise be their clean energy supplement (Part B). Where the child is not their only FTB child, then subclause 31C(2) requires a clean energy supplement (Part B) to be worked out for each FTB child of the individual as if they were the individual's only child and having regard to any shared care percentage that applies in relation to the child. The individual's clean energy supplement (Part B) is the highest of the amounts so calculated.

The rules in new clause 31C are similar to the rules in clause 31 of Schedule 1 which affect an individual's standard rate of FTB Part B.

Working out the amount of an individual's clean energy supplement (Part A)

Part 5 of Schedule 1 sets out some common rules that apply in working out an individual's Part A rate of FTB.

Item 28 inserts a new Division 2AA into Part 5 which contains the rules for working out the amount of an individual's clean energy supplement (Part A).

New Subdivision A sets out the rules for calculating the clean energy supplement (Part A-Method 1).

New Subdivision B sets out the rules for calculating the clean energy supplement (Part A-Method 2).

These new provisions align with the rate categories for the maximum standard rate of FTB Part A under Method 1 and the base standard rate of FTB Part A under Method 2, and include the same effect of a shared care percentage for an FTB child.

Families who receive more than the base rate of FTB Part A under Method 1, or more than the tapered base rate under Method 2, will receive a Clean Energy Supplement equivalent to a 1.7 per cent increase in the maximum standard rate and end of year supplements for FTB Part A.

Families who receive the base rate of FTB Part A under Method 1, or the tapered base rate under Method 2, will receive a Clean Energy Supplement equivalent to a 1.7 per cent increase in the base standard rate and end of year supplements for FTB Part A.

Clean energy supplement (Part A-Method 1)

New clause 38AA sets out the rules for working out the amount of clean energy supplement (Part A) that is to be added in working out an individual's maximum rate under clause 3 of Schedule 1 to the Family Assistance Act.

There would be an FTB clean energy child amount for each of the five categories of FTB child for the standard rate of Part A in clause 7 of Schedule 1, that is:

•

FTB child who is under 13 years of age;

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FTB child who has reached 13, but is under 16, years of age;

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FTB child who has reached 16 years of age and who is a senior secondary school child;

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FTB child who has reached 16, but is under 18, years of age and who is not a senior secondary school child;

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FTB child who has reached 18, but is under 22, years of age and who is not a senior secondary school child.

The FTB clean energy child amount for each category would be worked out under new subclause 38AA(2). The amount in respect of a particular child could be affected by new clauses 38AB to 38AE, which deal with shared care, the effect of maintenance rights and other matters (discussed further below). An individual's clean energy supplement (Part A) is then the sum of the relevant FTB clean energy child amounts.

The method statement in new subclause 38AA(2) is used to work out the 'start up' FTB clean energy child amount on 1 July 2013 for each of the FTB child categories.

The first step is to work out the amount of FTB child rate applicable on 1 July 2013 under the corresponding item of the table in clause 7 of Schedule 1.

Step 2 is to work out the FTB gross supplement amount on 1 July 2013 under subclause 38A(3).

These amounts are then added at Step 3 and the result multiplied by 0.017 at step 4. The amount at Step 4 is then rounded in accordance with step 5.

The result is the FTB clean energy child amount for each category of FTB child.

These amounts are then subject to indexation in accordance with the Consumer Price Index on 1 July 2014 and each subsequent 1 July. The indexation arrangements for the FTB clean energy child amounts are provided for in new item 8B in the Indexed and Adjusted Amounts table in clause 2 of Schedule 4 and new item 8B in the CPI Indexation table at the end of subclause 3(1) of Schedule 4 (as inserted by items 29 and 31 respectively).

New subclause 38AA(3) provides that new clause 38AA does not apply in relation to a day in respect of which an election under new section 58A of the Family Assistance Act is in force. A note directs the reader to a related provision, new section 105B of the Family Assistance Administration Act (inserted by item 33), which enables the clean energy supplements to be paid to an individual at the end of a quarter on the assumption that their election was not in force for the relevant days in the quarter.

New clauses 38AC and 38AD set out the circumstances in which an FTB clean energy child amount for an FTB child will be the base FTB clean energy child amount.

The circumstances are where:

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the individual or their partner are receiving a periodic payment under a law of the Commonwealth or under a scheme administered by the Commonwealth, and that payment has been increased by reference to the FTB child of the individual; or

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the individual or their partner are entitled to apply for maintenance in respect of the child, the Secretary considers it reasonable to do so, but neither has taken that action.

New clause 38AB defines the concept of a base FTB clean energy child amount to mean the amount that would be the FTB clean energy child amount under new subclause 38AF(2) if the individual's clean energy supplement (Part A) were being worked out under Subdivision B and the shared care rule in new clause 38AG did not apply.

These rules operate in a similar way to the rules in clauses 8 to 10 of Schedule 1, which restrict the FTB child rate for an FTB child to the base FTB child rate in the circumstances described above.

Under new clause 38AE, an individual's FTB clean energy child amount for a child in respect of whom the individual has a shared care percentage is that percentage of what would otherwise be the FTB clean energy child amount for the child.

This rule is similar to the rule in clause 11 of Schedule 1, which affects an individual's Method 1 standard rate for an FTB child where a percentage determination applies in relation to the child.

Clean energy supplement (Part A-Method 2)

New clause 38AF sets out the rules for working out the amount of clean energy supplement (Part A) that is to be added in working out an individual's Method 2 base rate under clause 25.

There would be an FTB clean energy child amount for each of the two categories of FTB child for the standard rate of Part A in subclause 26(2) of Schedule 1:

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FTB child who has not turned 18, or who has turned 18 and who is a senior secondary school child;

•

FTB child who has turned 18 and who is not a senior secondary school child.

The FTB clean energy child amount for each category would be worked out under new subclause 38AF(2). The amount in respect of a particular child could be affected by new clause 38AG, which deals with situations where there is a shared care percentage in relation to a child. An individual's clean energy supplement (Part A) is then the sum of the relevant FTB clean energy child amounts.

The method statement in new subclause 38AF(2) is used to work out the 'start up' FTB clean energy child amount on 1 July 2013 for each of the FTB child categories.

The first step is to work out the amount of FTB child rate applicable on 1 July 2013, which will be the amount in paragraph 26(2)(a) of Schedule 1 for an FTB child who has not turned 18, or who has turned 18 and who is a senior secondary school, or the amount in paragraph 26(2)(b) of Schedule 1 for an FTB child who has turned 18 and who is not a senior secondary school child.

Step 2 is to work out the FTB gross supplement amount on 1 July 2013 under subclause 38A(3).

These amounts are then added at Step 3 and the result multiplied by 0.017 at step 4. The amount at step 4 is then rounded in accordance with step 5.

The result is the FTB clean energy child amount for each category of FTB child.

These amounts are then subject to indexation in accordance with the Consumer Price Index on 1 July 2014 and each subsequent 1 July. The indexation arrangements for the FTB clean energy child amounts are provided for in new item 8B in the Indexed and Adjusted Amounts table in clause 2 of Schedule 4 and new item 8B in the CPI Indexation table at the end of subclause 3(1) of Schedule 4 (as inserted by items 29 and 31 respectively).

New subclause 38AF(3) provides that new clause 38AF does not apply in relation to a day in respect of which an election under new section 58A of the Family Assistance Act is in force. A note directs the reader to a related provision, new section 105B of the Family Assistance Administration Act (inserted by item 33), which enables the clean energy supplements to be paid to an individual at the end of a quarter on the assumption that their election was not in force for the relevant days in the quarter.

Under new clause 38AG, an individual's FTB clean energy child amount for a child in respect of whom the individual has a shared care percentage is that percentage of what would otherwise be the FTB clean energy child amount for the child.

This rule is similar to the rule in clause 27 of Schedule 1, which affects an individual's Method 2 standard rate for an FTB child where a percentage determination applies in relation to the child.

Items 29 to 32 provide for the indexation of the clean energy supplement (Part B) amounts and the FTB clean energy child amounts for family tax benefit (Part A) as mentioned above.

Amendments to the Family Assistance Administration Act

Item 33 inserts a new section 105B into the Family Assistance Administration Act.

New section 105B applies where an individual who is entitled to be paid FTB by instalments has elected not to receive their clean energy supplement on one or more days in a quarter. In these circumstances, the Secretary is required to review the individual's entitlement (under subsection 105(1) of the Family Assistance Administration Act) at the end of the quarter, having regard to the clean energy supplements as if the election were not in force for the relevant days in the quarter. The effect of this provision is that an individual's FTB entitlement determination must be reviewed at the end of the quarter and their rate recalculated to include the clean energy supplements that were disregarded due to the election.

A quarter is defined in new subsection 105B(3) to mean a period of three months beginning on 1 July, 1 October, 1 January or 1 April. A note then refers the reader to item 34 of Schedule 2 to this amending Act, which provides that new section 105B applies in relation to the quarter beginning 1 July 2013 and all later quarters.

Item 34 provides for the application of the amendments made by Part 2 of Schedule 2.

The amendments made by items 15 and 33 apply in relation to the quarter beginning 1 July 2013 and all later quarters. These amendments enable an individual to elect to have their clean energy supplements disregarded in calculating their rate of FTB and then require the individual's rate to be reviewed after the end of a quarter to add back into the individual's rate the clean energy supplements. The relevant quarters for the purposes of quarterly payment of clean energy supplements are the quarters beginning on 1 July, 1 October, 1 January and 1 April, with the first quarter being the quarter beginning on 1 July 2013.

The amendments made by items 16 to 28 apply in relation to the 2013-14 income year and later income years. These amendments introduce the new clean energy supplements.

The amendments made by items 29 to 32 apply in relation to the indexation day that is 1 July 2014 and all later indexation days. These amendments set out the indexation arrangements for the new clean energy supplements. For 1 July 2013, the supplements are calculated by reference to existing FTB child rates and supplements. These start-up amounts are then indexed on 1 July 2014 and each subsequent 1 July.

From 1 January 2012, the maximum child age of eligibility for FTB will be 21 (reduced from 24). Schedule 1 to the Family Assistance and Other Legislation Amendment Act 2011 ( the amending Act) makes the relevant amendments to the Family Assistance Act. However, item 6 of Schedule 1 preserves the existing rules for certain students aged 22 to 24 years . Item 35 ensures that a child who continues to be an FTB child of an individual due to this saving provision would also be counted for the purposes of working out the individual's clean energy supplement Part A by deeming that item 5 of the table in subclause 38AA(1) of Schedule 1 applies for the relevant period as if the reference in that item to 22 were a reference to 25.

Part 3 - Clean energy advances for approved care organisations

Item 36 in Part 3 contains provision for a Minister administering the Family Assistance Act to determine a scheme, by legislative instrument, under which clean energy advances will be paid to approved care organisations. The Minister may vary or revoke the scheme, also by legislative instrument.

Subitem 36(2) provides that the circumstances in which the scheme provides for payments must be circumstances occurring in relation to the period 14 May 2012 to 30 June 2013 . Subitem 36(3) lists some of the matters that may be dealt with by the scheme, such as the circumstances in which payments are to be paid, the amount of payment and other administrative matters.

Subitem 36(4) provides that an instrument determining or varying an administrative scheme cannot take effect until the end of the disallowance period.

Payments under the scheme are to be made out of the Consolidated Revenue Fund, which is appropriated accordingly (subitem 36(5) refers).

Part 4 - Clean energy supplement for approved care organisations

In broad terms, Part 4 introduces a new clean energy supplement into the FTB rate calculation process for an approved care organisation. The clean energy supplement would be a separate component of an approved care organisation's rate of FTB and will generally be paid on a fortnightly basis with FTB.

Part 4 also contains indexation arrangements for the new clean energy supplement for approved care organisations.

Amendments to the Family Assistance Act

Section 58 of the Family Assistance Act provides for the rate of FTB. For an approved care organisation, the annual rate of FTB for an individual is the amount specified in subsection 58(2).

Item 37 repeals subsection 58(2) and inserts new subsections 58(2), (2A) and (2B).

New subsection 58(2) provides that an approved care organisation's annual rate of FTB for an individual is the sum of the organisation's standard rate and their clean energy supplement.

New subsection 58(2A) sets out the amount of an approved care organisation's standard rate. The current rate is $1,372.40.

New subsection 58(2B) provides a method statement for working out an approved care organisation's clean energy supplement for an individual. The method involves working out the applicable standard rate as at 1 July 2013, multiplying that amount by 0.017 (1.7 per cent) and then rounding the result to the nearest multiple of $3.65. The result is the clean energy supplement.

Current subsection 58(3) then provides the method for converting the annual rate of FTB into a daily rate.

Subitem 42(1) provides that new paragraph 58(2)(b) and new subsection 58(2B) apply in relation to the 2013-14 income year and later income years. This ensures that the provisions introducing the approved care organisation clean energy supplement will only apply from 1 July 2013.

The indexed and adjusted amounts table in Clause 2 of Schedule 4 to the Family Assistance Act describes the amounts that are to be indexed or adjusted under Schedule 4 and provides convenient abbreviations for those amounts.

The CPI indexation table in clause 3 of Schedule 4 then provides for the indexation of specified amounts in accordance with the Consumer Price Index.

Item 10 of the indexed and adjusted amounts table currently refers to the FTB approved care organisation rate in subsection 58(2). This entry is updated by item 38 to refer to the new FTB standard approved care organisation rate in new subsection 58(2A) . Item 40 similarly updates the relevant reference in the CPI indexation table.

Item 39 inserts a new entry into the indexed and adjusted amounts table. New item 10A refers to the approved care organisation clean energy supplement under new subsection 58(2B) . Item 41 then inserts a new item 10A into the CPI indexation table relating to the new approved care organisation clean energy supplement.

Subitem 42(2) provides that the new indexation arrangements for the approved care organisation clean energy supplement apply in relation to the indexation day that is 1 July 2014 and all later indexation days.

Part 5 - Other amendments

Part 5 contains amendments to the Family Assistance Act that provide for an indexation adjustment for certain FTB child rates, FTB supplement amounts and the FTB standard approved care organisation rate. The expected impact of the carbon price on indexation (0.7 per cent) will be delivered through the clean energy supplement rather than indexation of these amounts. Regular indexation of the amounts will continue to apply, adjusted by the equivalent amount now being delivered through the clean energy supplement..

There are other consequential amendments to the Family Assistance Act and the Family Assistance Administration Act.

Amendments to the Family Assistance Act

To be eligible for FTB, paragraph 21(1)(c) of the Family Assistance Act provides that an individual's rate of FTB, worked out under Division 1 of Part 4 but disregarding reductions (if any) under clause 5 or 25A of Schedule 1, must be greater than nil.

If an election under new section 58A is in force and the individual's rate of FTB would be greater than nil if the election was not in force, the intention is that the individual should satisfy the eligibility rule in paragraph 21(1)(c) . Item 43 amends paragraph 21(1)(c) to this effect.

Item 45 pluralises the heading of Part 4 of Schedule 4 to the Family Assistance Act and item 46 adds new clauses 10 and 11 into Part 4.

The indexation factor is relevant in working out an indexed amount (the method statement in subclause 4(2) of Schedule 4 to the Family Assistance Act refers) and is worked out under clause 5 of Schedule 4.

New clause 10 provides for an adjustment to the indexation factor for certain amounts on and after 1 July 2013. These amounts, specified in new subclause 10(1) are the FTB child rates under Method 1 for Part A, the FTB child rates under Method 2 for Part A, the FTB Part B standard rates and the FTB standard approved care organisation rate.

New subclause 10(2) provides that the indexation factor, worked out under clause 5 for each indexation day that is on or after 1 July 2013, is to be adjusted by the brought forward indexation amount, but not below one.

New subclause 10(3) then defines the brought forward indexation amount as 0.007, less any adjustment made for a previous indexation day. The brought forward indexation amount is initially 0.007, the expected additional increase in the Consumer Price Index due to carbon pricing which is being delivered through the clean energy supplement rather than indexation of the relevant child rates.

A note at the end of new subclause 10(3) provides that, once the brought forward indexation amount is zero, there is no further adjustment of the indexation factor. An example is also included to provide the reader with a clear picture of how the adjustment of indexation will apply.

New clause 11 provides for an adjustment to the indexation factor for certain amounts on and after 1 July 2014. These amounts, specified in new subclause 11(1), are the FTB gross supplement amount (A) and the FTB gross supplement amount (B). As the Consumer Price Indexation of the end of year FTB Part A and Part B supplements will be paused on 1 July 2013, there would be no indexation adjustment on 1 July 2013.

New subclause 11(2) provides that the indexation factor, worked out under clause 5 for each indexation day that is on or after 1 July 2014, is to be adjusted by the brought forward indexation amount, but not below one. The FTB Part A and Part B supplements will not be affected, should the relevant CPI indexation factor be less than one plus the brought forward indexation amount.

New subclause 11(3) then defines the brought forward indexation amount in relation to this clause as 0.007, less:

•

any adjustment made under new subclause 10(2) on 1 July 2013; and

•

any adjustment made under this clause for a previous indexation day.

The brought forward indexation amount is the amount of the additional increase in the consumer price index due to carbon pricing that will be transferred from the indexation on FTB Part A and Part B supplements to the clean energy supplement, to the extent indexation arrangements for the FTB Part A and Part B supplements allow. It can only be equal to or less than the expected additional increase in the consumer price index due to carbon pricing (0.7 per cent or 0.007).

A note at the end of new subclause 11(3) provides that, once the brought forward indexation amount is zero, there is no further adjustment of the indexation factor. An example is also included to provide the reader with a clear picture of how the adjustment of indexation will apply.

Item 44 makes a consequential amendment to clause 5, which defines indexation factor, so that its operation is subject to the rules in new clauses 10 and 11.

Amendments to the Family Assistance Administration Act

Section 32A of the Family Assistance Administration Act ensures that the FTB Part A and Part B supplements are disregarded from the FTB rate calculation process unless and until the relevant FTB reconciliation conditions are satisfied for one or more same-rate benefit periods.

The clean energy advance and the start up amount of the clean energy supplements for individuals are calculated, in part, by reference to the FTB Part A and Part B supplements . Item 47 clarifies that the FTB Part A and Part B supplements can be included in those calculations, regardless of whether the individual has satisfied the FTB reconciliation conditions.