Explanatory Memorandum
(Circulated by the authority of the Minister for Social Services, the Hon Kevin Andrews MP)Schedule 9 - Family tax benefit
Summary
This Schedule implements the following family payment reforms from 1 July 2015:
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- limit the family tax benefit Part A large family supplement to families with four or more children;
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- remove the per-child add-on that currently applies for each child after the first under the income test for the base rate of family tax benefit Part A;
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- better target the family tax benefit Part B by reducing the primary earner income limit from $150,000 per annum to $100,000 per annum;
Background
Limit large family supplement
The large family supplement is a component of family tax benefit Part A that is paid for the third and each subsequent FTB child in a family. From 1 July 2015, the large family supplement will no longer be paid for the third child but families with four or more children would continue to receive the large family supplement.
Remove child add-on amount
Under the current income test, families are able to receive the base rate of family tax benefit Part A until their annual income reaches the higher income free area of $94,316, plus a child add-on amount of $3,796 for each FTB child after the first. The per-child add-on will be removed from 1 July 2015.
Primary earner income limit for family tax benefit Part B
Family tax benefit Part B is currently limited to families where the higher earner in a couple, or a single parent, has an income of $150,000 per annum or less. From 1 July 2015, this income limit will be reduced to $100,000.
Explanation of the changes
Amendments to the Family Assistance Act
Limit large family supplement
Clause 34 of Schedule 1 to the Family Assistance Act provides for eligibility for the large family supplement, and is triggered if an individual has three or more children. Item 5 amends clause 34 to ensure that the provision only applies if an individual has four or more children.
A consequential amendment is made by item 6 to the formula in clause 35 so that a large family supplement is only paid in respect of the individual's fourth and subsequent FTB child/ren. The reference in the formula to '2' is changed to '3'.
Remove child add-on amount
Under the current income test, families are able to receive the base rate of family tax benefit Part A until their annual income reaches the higher income free area plus a child add-on amount for each FTB child after the first. Clause 2 of Schedule 1 to the Family Assistance Act defines an individual's higher income free area by reference to a 'basic amount' and an 'additional amount' for each FTB child after the first. The relevant amounts are in the table at the end of that provision.
Items 1 and 2 amend clause 2 so that an individual's higher income free area is the basic amount worked out under the table. The additional amount is removed from the table in clause 2.
The additional amount currently referred to in clause 2 of Schedule 1 is indexed in accordance with movement in the Consumer Price Index (CPI) each 1 July. As this amount is being removed, consequential amendments are also made to relevant provisions in Schedule 4 to remove indexation arrangements for the amount. The relevant amendments are made by items 7, 8 and 9.
Primary earner income limit for family tax benefit Part B
Family tax benefit Part B is currently limited to families where the higher earner in a couple, or a single parent, has an income of $150,000 per annum or less. The relevant rule is in clause 28B of Schedule 1 to the Family Assistance Act. Item 4 amends subclause 28B(1) to change the income limit to $100,000, while item 3 makes a consequential amendment to the heading to clause 28B to reflect the new limit. The $100,000 primary earner income limit for family tax benefit will then next be indexed on 1 July 2017.
Application and saving provisions
Item 10 provides some application and saving provisions that apply in relation to the amendments made by Part 2 of this Schedule.
Item 10 provides that the amendments made to specified provisions which affect the calculation of rate apply in relation to working out the rate of family tax benefit for days on or after 1 July 2015.