Revised Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Scott Morrison MP)Chapter 21A Income limit for family tax benefit Part A supplement
Outline of chapter
Schedule 21A to this Bill provides an income limit of $80,000 on payment of the family tax benefit (FTB) Part A supplement, commencing from the 2016-17 income year. If an individual's adjusted taxable income (which includes the adjusted taxable income of their partner if any) is more than $80,000 for the relevant income year, then the individual's FTB Part A supplement in relation to that year will be nil.
Background
The FTB Part A supplement is a component of the rate of FTB that is added in calculating an individual's rate of FTB when FTB is reconciled at the end of the relevant income year.
Clause 38A of Schedule 1 to the A New Tax System (Family Assistance) Act 1999 currently provides for the rate of the FTB Part A supplement. This clause is amended to introduce an income limit of $80,000 on payment of the FTB Part A supplement.
Detailed explanation of new law
A New Tax System (Family Assistance) Act 1999
Clause 38A of Schedule 1 to the Family Assistance Act provides for the rate of the FTB Part A supplement.
Item 1 inserts a new subclause 38A(1A) into Schedule 1 to the Family Assistance Act. Under this new provision, an individual's FTB Part A supplement for a given income year is nil if the individual's adjusted taxable income for that year is more than $80,000.
A note at the end of new subclause 38A(1A) informs the reader that where an individual is a member of a couple, the individual's adjusted taxable income also includes their partner's adjusted taxable income. The relevant rule is in clause 3 of Schedule 3 to the Family Assistance Act.
Item 2 is an application provision that ensures that the amendment made by item 1 applies in relation to working out the rate of FTB for days on or after commencement. The effect is that the income limit will apply in working out an individual's rate of FTB for the 2016-17 and later income years.
STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
This Schedule is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 .
Overview
This Schedule provides an income limit of $80,000 on payment of the family tax benefit (FTB) Part A supplement, commencing from the 2016-17 income year. If an individual's adjusted taxable income (which includes the adjusted taxable income of their partner if any) is more than $80,000 for the relevant income year, then the individual's FTB Part A supplement in relation to that year will be nil.
Human rights implications
The Schedule engages the following human rights:
- •
- The right of everyone to social security in Article 9, and the right of everyone to an adequate standard of living for an individual and their family, including adequate food, clothing and housing, and the continuous improvement of living conditions in Article 11of the International Covenant on Economic, Social and Cultural Rights; and
- •
- The rights of the child in Article 26 of the Convention on the Rights of the Child.
The right of everyone to social security and an adequate standard of living
Article 9 of the International Covenant on Economic, Social and Cultural Rights recognises the right of everyone to social security, while article 11 recognises the right to an adequate standard of living for an individual and their family, including adequate food, clothing and housing, and the continuous improvement of living conditions.
The objective of the family payment reform package is to ensure that the family payments system remains sustainable in the long-term. The United Nations Committee on Economic, Cultural and Social Rights has stated that a social security scheme should be sustainable and that the conditions for benefits must be reasonable, proportionate and transparent.
To the extent that introducing an income limit to determine eligibility for the FTB Part A supplement limits the right to social security, this is reasonable and proportionate.
The withdrawal of the FTB Part A supplement for families with an adjusted taxable income of over $80,000 per year does not limit their right to social security.
The $80,000 income limit is higher than Male Total Average Weekly Earnings (annualized) of $72,545 (as at May 2016) and ensures that nearly 80 per cent of the FTB Part A population will continue to be eligible for the end of year supplement.
Only removing the supplement for families with an income above $80,000 per year ensures that these recipients have the necessary resources to provide an adequate standard of living for their family.
The rights of the child
Article 26 of the Convention on the Rights of the Child requires countries to recognise the right of the child to benefit from social security. Benefits should take into account the resources and the circumstances of the child and persons having responsibility for the maintenance of the child.
The removal of the Family Tax Benefit Part A supplement for families with income above $80,000 per year will not impact the right of the child to benefit from social security and any changes to entitlement are based on the resources available to the family to support the needs of their children.
Families who cease to be eligible for the supplement will continue to receive the same amount of fortnightly assistance, however, will cease to be eligible for an end of year lump sum payment. These families have higher disposable income and will be able to continue to retain their living standards through their personal income and fortnightly family assistance.
The changes will ensure the family payments system is sustainable and support is better targeted to assist with the direct costs of raising dependent children for families that have limited resources.
Conclusion
This Schedule is compatible with human rights because they do not preclude people from gaining or maintaining access to social security in Australia and, to the extent that these changes limit access to family payments, these limitations are based on the capacity of families for self-provision.