Revised Explanatory Memorandum
(Circulated by the authority of the Minister for Social Services, the Hon Kevin Andrews MP)
Schedule 9 - Indexation
Summary
This Schedule will extend the indexation pauses on certain higher income limits for three further years until 30 June 2017.
This will apply to the family tax benefit Part B primary earner income limit, the parental leave pay and dad and partner pay individual income limits, and the higher income free area for family tax benefit Part A. In addition, the annual end-of-year family tax benefit supplements will remain at current levels for three years.
This Bill will also maintain the annual child care rebate limit at $7,500 for three further income years starting from 1 July 2014, with the first indexation of this amount occurring on 1 July 2017. As a result, an individual will be able to receive up to the maximum amount of $7,500 per child per financial year for out-of-pocket child care costs for those three income years.
Background
Family tax benefit income thresholds
Schedule 4 to the Family Assistance Act sets out the arrangements for indexation of family assistance rates and income thresholds. Amendments to Schedule 4 will result in the continuation of indexation pauses until 30 June 2017 on the higher income free area for family tax benefit Part A (both the basic amount of $94,316 and the additional amount for each FTB child after the first of $3,796) and the $150,000 primary earner income limit for family tax benefit Part B.
Family tax benefit Part A and Part B end-of-year supplements
The indexation arrangements for the end-of-year family tax benefit Part A and family tax benefit Part B supplement amounts, also provided by Schedule 4, will be amended so that indexation of these amounts is paused until 30 June 2017. The supplement amounts are currently $726.35 for family tax benefit Part A for each FTB child, and $354.05 for a family tax benefit Part B recipient.
Child care rebate limit
Child care rebate is a payment assisting eligible individuals with the cost of child care fees for sessions of care provided by an approved child care service. The amount of child care rebate an individual may receive for a child for an income year is 50 per cent of the difference between the amount that the individual is liable to pay for care provided to the child and the sum of the individual's child care benefit entitlement (if any) and the Jobs, Education and Training Child Care fee assistance (if any) relating to that child, up to the maximum limit legislatively set at $7,500 for 2012-14 (the CCR limit). The legislation currently provides for the CCR limit to be indexed on 1 July 2014. Amendments in this Schedule will maintain the annual child care rebate limit at $7,500 for three further income years starting from 1 July 2014, with the first indexation of this amount occurring on 1 July 2017.
Paid parental leave income limit
The Paid Parental Leave Act provides that a person can only be eligible for parental leave pay if they meet certain requirements, which include having adjusted taxable income for the reference income year of no more than the relevant 'PPL income limit'. The PPL income limit before 1 July 2014 is $150,000 and is then subject to indexation. The amendments in this Schedule will further delay the commencement of indexation of the PPL income limit from 1 July 2014 to 1 July 2017.
The amendments made by this Schedule commence on 1 March 2014.
Explanation of the changes
Amendments to the Family Assistance Act
Section 84F specifies the child care rebate limit applicable in respect of a child and an income year. These amounts are relevant to the calculation of the amount of child care rebate for a quarter (under section 84AA), and for an income year (under section 84A), the amount of child care rebate relating to child care benefit in substitution (under section 84DA), and the amount of child care rebate for a week (under section 84AAA). Paragraph 84F(ea) currently specifies the income limit of $7,500 for the income years ending on 30 June 2012, 30 June 2013 and 30 June 2014.
Item 1 amends paragraph 84F(ea) to specify the limit of $7,500 for the additional income years ending on 30 June 2015, 30 June 2016 and 30 June 2017.
Item 3 amends subclause 3(6B) of Schedule 4 to the Family Assistance Act to prevent the indexation of specified child care rebate payments from occurring on 1 July 2014, 1 July 2015 and 1 July 2016. Item 2 makes a consequential amendment to the heading to subclause 3(6A) of Schedule 4.
Item 4 amends the note to subclause 3(6B) of Schedule 4 to state that the indexation of the child care rebate limit resumes on 1 July 2017.
Item 5 is a transitional provision to the effect that, for the purposes of working out the indexed amount for the child care rebate limit on 1 July 2017 under Schedule 4 to the Family Assistance Act, the current figure for the child care rebate limit immediately before that day is taken to be $7,500.
Item 7 amends subclause 3(7) of Schedule 4 to the Family Assistance Act. This amendment will prevent the indexation of specified family tax benefit income limits from occurring on 1 July 2014, 1 July 2015 and 1 July 2016. Item 6 makes a consequential amendment to the heading to subclause 3(7).
Item 9 amends subclause 3(8) of Schedule 4 to the Family Assistance Act to provide that indexation of the FTB gross supplement amount (A) and FTB gross supplement amount (B) will not occur on 1 July 2014, 1 July 2015 and 1 July 2016. Item 8 makes a consequential amendment to the heading to subclause 3(8).
Amendment to the Family Assistance Legislation Amendment (Child Care Budget Measures) Act 2011
Item 10 repeals item 5 of Schedule 1 to the Family Assistance Legislation Amendment (Child Care Budget Measures) Act 2011, which is a transitional provision that is superseded by item 5 above.
Amendments to the Paid Parental Leave Act
Item 11 amends the Guide to Part 2-3 by substituting the date 30 June 2017 for the date 30 June 2014 as the date before the first indexation of the PPL income limit.
Item 12 amends paragraph 41(a) to extend the time that the $150,000 figure applies for the PPL income limit from 'before 1 July 2014' to 'before 1 July 2017'.
Item 13 amends subsection 42(1) to provide for the first indexation of the PPL income limit to occur on 1 July 2017.
Item 14 amends the Guide to Part 3A-3 (Eligibility for dad and partner pay), which states that DAPP claimants must not have income exceeding the PPL income limit, which will not be indexed until after 30 June 2017.