House of Representatives

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)

Outline and financial impact statement

This Bill gives effect to the following changes announced as part of the Governments 2000-2001 Budget.

Abstudy Scheme payments and the income test

With effect from 1 January 2001, Abstudy Scheme payments will be generally excluded from the income test. This will achieve equity in the treatment of ABSTUDY Scheme recipients and their partners (where applicable) with that of other income support recipients.

The estimated program costs of this measure are $0.3m in each year.

In-home child care

From 1 January 2001, the choice of child care services for which child care benefit may be available will be extended to include in-home care. This measure will enable families who fall outside mainstream services, eg families in rural and remote locations, sole parents working shifts/non-standard hours or families with sick children, greater access to child care services.

Amendments are made to enable the approval of in-home care services for the purposes of child care benefit, to enable the payment of child care benefit for care provided by an approved in-home care service at the rate and amount applicable to care provided by a family day care service and to align the treatment of approved in-home care services in other aspects with the treatment afforded to approved family day care services.

Estimated program costs of these measures are:

2000-01

$1.9m

2001-02

$7.2m

2002-03

$15.1m

2003-04

$24.3m

Youth allowance family assets test

From 1 January 2001, 75% (instead of the existing 50%) of the value of a persons interest in farm and business assets will be disregarded under the youth allowance family assets test.

Estimated program costs of this measure are:

2000-01

$16.8m

2001-02

$34.6m

2002-03

$35.5m

2003-04

$36.4m

Period for data-matching of income details

From 1 January 2001, the period for data-matching of income details between the Australian Tax Office and Centrelink will be extended from 2 to 4 years.

Estimated program savings from this measure are:

2000-01

$2.3m

2001-02

$4.8m

2002-03

$2.5m

Social Security Agreement with the United Kingdom

The terms of the Social Security Agreement between the United Kingdom and Australia will be preserved for migrants who became Australian residents on or before 1 March 2000.

Estimated program savings of this measure and the termination of the Social Security Agreement with the United Kingdom are:

2000-01

$1.3m

2001-02

$2.9m

2002-03

$4.1m

2003-04

$5.5m

The measures in this Bill impact on the following legislation:

•

Social Security Act 1991;

•

Social Security (International Agreements) Act 1999;

•

A New Tax System (Family Assistance Act) 1999;

•

A New Tax System (Family Assistance) (Administration) Act 1999;

•

Fringe Benefits Tax Assessment Act 1986; and

•

Data-matching Program (Assistance and Tax) Act 1990 .

PRELIMINARY

Clause 1 of the Family and Community Services (2000 Budget and Related Measures) Bill 2000 sets out how the act is to be cited.

Clause 2 provides for the commencement of the Schedules (including various items in the Schedules) in the amending Act.

Clause 3 provides that each Act specified in a Schedule is amended or repealed as set out in the applicable items in that Schedule.

SCHEDULE 1-AMENDMENTS RELATING TO ABSTUDY SCHEME

Summary of proposed changes

The following amendments are made by Schedule 1 :

•

a general exclusion under the income test for a payment under the ABSTUDY Scheme is made except where the payment relates to a person who is a student child or a dependent child of another person;

•

provisions relating to educational and other schemes exclusion (currently only applying to ABSTUDY Scheme payments) for age pension, disability support pension, wife pension, carer payment, bereavement allowance, widow B pension and pension PP (single) are added;

•

technical amendments to replace references to ABSTUDY Tertiary Scheme with ABSTUDY Scheme;

•

removal of provisions relating to dependent spouse allowance previously payable under the ABSTUDY Scheme; and

•

a saving provision.

The proposed amendments will achieve equity in the treatment of ABSTUDY Scheme recipients and their partners (where applicable) with that of other income support recipients and their partners (where applicable). These amendments are required because of changes made, with effect from 1 January 2000, to the ABSTUDY Scheme which include the removal of the dependent spouse allowance component of the scheme.

Arrangements for ex-gratia payments for all people affected by the changes between 1 January 2000 until these amendments commence operation have been made.

Explanation of the changes

Section 8 of the Social Security Act 1991 (the Social Security Act) provides for income test definitions that generally apply to all social security payments. Subsection 8(8) of the Social Security Act provides for general exclusions of payments from the income test. Paragraph 8(8)(zf) provides for a specific exclusion from the income test for payments of pensioner education supplement under the Social Security Act or under the ABSTUDY Scheme to a person who is receiving a social security pension or a social security benefit. Item 1 repeals paragraph 8(8)(zf) and replaces it with a wider exclusion from the income test for any payment under the ABSTUDY Scheme.

A new subsection 8(8A) of the Social Security Act is inserted by item 2 which provides that for the purpose of determining whether a person is a student child or a dependent child under section 5 this new subsection has effect as if paragraph 8(8)(zf) were not included. This means that in respect of a person who is a student child or a dependent child and who is receiving a payment under the ABSTUDY Scheme, that payment is not excluded for the purposes of the income test. In this case, the income test is only relevant in ascertaining the income of the student child or the dependent child under subsections 5(1A), (3) and (4) of the Social Security Act. This amendment ensures consistency in the treatment of the income of a student child or dependent child for the purposes of the social security law.

Items 3 to 8 and 12 respectively insert new sections 47A (age pension), 103A (disability support pension), 151A (wife pension), 202A (carer payment), 321A (bereavement allowance), 368A (widow B pension) and 500VA (pension (PP) single) into the Social Security Act. All of these new sections provide an educational and other schemes exclusion in respect of the payment that they relate to. They ensure that the relevant payment is not payable to a person in respect of a period where the person receives a payment under the ABSTUDY Scheme on the basis that the person is a full-time student and the payment includes a component known as living allowance (the basic payment) (this is similar in character to an income support payment). These educational and other schemes exclusion provisions are similar to those that currently apply in respect of social security benefits except that they only apply to an ABSTUDY Scheme payment and in the circumstances described.

Items 9, 10 and 13 to 19 remove references to the ABSTUDY Tertiary Scheme in various provisions relating to multiple entitlement exclusion or educational and other scheme exclusion provisions for particular social security payments and replace them with references to the ABSTUDY Scheme to the extent that it applies to part-time students. These amendments are required because a payment under the ABSTUDY Scheme can be made to a person over the age of 18 years who is in part-time studies at a secondary school and it is contrary to Government policy to exclude an otherwise qualified person from receiving an income support payment in these circumstances.

Subsection 500V(3) of the Social Security Act is repealed at item 11 . This subsection inserted at item 29 of Schedule 7 of the A New Tax System (Family Assistance) (Consequential and Related Measures) Act (No 1) 1999 provides for parenting payment to not be payable if the persons partner is receiving a payment under the ABSTUDY Scheme that includes a dependent spouse allowance. The changes made to the ABSTUDY Scheme removed the payment of dependent spouse allowance and so subsection 500V(3) is redundant. Similar amendments are made to the Social Security Act at items 20 and 21 (the repeal of subparagraph 1067G-F3(c)(i) and paragraph 1068B-B2(c)).

A savings provision is inserted into the Social Security Act at item 22 . New clause 132 of Schedule 1A of the Social Security Act will provide that if a person was receiving before 1 January 2001 (the commencement date of the ABSTUDY Scheme amendments) an age pension, bereavement allowance, carer payment, disability support pension, pension PP (single), widow B pension or a wife pension and a payment under the ABSTUDY Scheme for full-time students, the person would continue to be eligible to receive the relevant pension and the ABSTUDY Scheme would continue to be treated as the income of the person. This provision ensures that no person is disadvantaged by the changes made by items 3 to 8 and 12 .

This measure commences on 1 January 2001 except for items 20 and 21 , which commence on Royal Assent of the Bill.

SCHEUDLE 2-AMENDMENTS RELATING TO IN-HOME CHILD CARE

Summary of proposed changes

As part of the 2000-2001 Budget initiative relating to the provision of flexible child care, from 1 January 2001, the choice of child care services for which child care benefit may be available will be extended to include in-home care. This measure will enable families who fall outside mainstream services, eg families in rural and remote locations, sole parents working shifts/non-standard hours or families with sick children, greater access to child care services.

To give effect to this measure, this Schedule makes amendments to the A New Tax System (Family Assistance) Act 1999 (the Family Assistance Act) and the A New Tax System (Family Assistance) (Administration) Act 1999 (Family Assistance Administration Act) to enable the approval of in-home care services for the purposes of child care benefit, to enable the payment of child care benefit for care provided by an approved in-home care service at the rate and amount applicable to care provided by a family day care service and to align the treatment of approved in-home services in other aspects with the treatment afforded to approved family day care services.

This Schedule also makes amendments to the Fringe Benefits Tax Assessment Act 1986 to ensure that residual benefits arising out of priority of access contributions to an approved in-home care service are exempt benefits.

Explanation of the changes

The Family Assistance Act and the Family Assistance Administration Act introduced from 1 July 2000 a new payment, child care benefit. Eligibility for child care benefit arises in respect of informal care provided to a child by registered carers and in respect of formal care provided by one of the four kinds of approved child care services: a centre based long day care service, a family day care service, an occasional care service and an outside school hours care service.

Amendments to the Family Assistance Administration Act made by items 7, 8 and 9 introduce a new kind of formal care for which child care benefit will be available, that is, in-home care provided by an approved child care service.

Section 194 of the Family Assistance Administration Act provides a mechanism for application by an operator of a child care service for approval of the service as one of the four specified kinds of a child care service for family assistance purposes (section 3 of the Family Assistance Act defines family assistance as including child care benefit). Item 9 inserts in section 194 a reference to an in-home care service; as a result an operator of an in-home care service will be able to apply to the Secretary for approval of the service for the family assistance purposes. Item 8 inserts in subsection 3(1) of the Family Assistance Administration Act a definition of an approved in-home care service as a service in respect of which an approval as an in-home care service is in force under Division 1 of Part 8 of that Act. Item 7 amends the definition of approved child care service in subsection 3(1) of that Act by adding to it a reference to an approved in-home care service.

Section 209 of the Family Assistance Administration Act dealing with application for approval as a registered carer prevents some individuals from applying for such an approval. Under paragraph 209(2)(c), a person who provides child care under a contract with an approved family day care service cannot apply for approval as a registered carer. A similar restriction on approval as a registered carer will apply if an individual provides care under a contract with an approved in-home care service. Item 10 makes an amendment to subsection 209(2) to achieve this effect.

Items 1 to 6 make amendments to the Family Assistance Act, which contains provisions relating to child care benefit eligibility and rates, to ensure that the amount of child care benefit paid for in-home care provided by an approved in-home care service is the same as the amount of child care benefit paid for care provided by an approved family day care service.

Clause 4 of Part 2 of Schedule 2 (Child care benefit rate calculator) of the Family Assistance Act defines the meaning of standard hourly rate applicable to the calculation of an individuals hourly rate of child care benefit. A table in subclause 4(1) sets out 3 standard hourly rates that depend on the kind of care provided. Table item 1 specifies the rate for care other than the care specified in table items 2 and 3 (the applicable rate is $2.40). Table item 2 specifies the rate for part-time family day care (the applicable rate is the lesser of one and a third times the item 1 rate and the ceiling rate worked out under subclause 4(2)). Table item 3 specifies the rate for non-standard family day care (the applicable rate is one and a third times the item 1 rate). The relevant terms are defined in section 3 of that Act. The term part-time family day care is defined as standard hours family day care provided by a family day care service for a child in a week during which the service provides a total of less than 50 hours of standard hours family day care for the child (the term standard hours family day care is defined as hours of care provided by a family day care at times that are identified in the services conditions of approval as being standard hours of care). The term non-standard hours family day care is defined as hours of care provided by a family day care service at times that are identified in the services conditions of approval as being non-standard hours of the service.

Item 5 amends the table in subclause 4(1) so that the rate which applies for part time family day care and non-standard hours family day care applies also to the analogous types of in-home care, that is, to part-time in-home care and non-standard hours in-home care respectively. Amendment made to the table by item 4 ensures that the table item1 rate applies to all other types of care. Items 1, 2 and 3 insert in section 3 definitions of non-standard hours in-home care, part-time in-home care and standard hours in-home care that are phrased in the same terms as the respective family day care definitions.

Item 6 makes a consequential amendment to item 18 of clause 2 of Part 1 of Schedule 4 (Indexation and adjustment of amounts) to the Family Assistance Act that provides for an indexation of the standard hourly rate of child care benefit specified in item 1 of the table in subclause 4(1) of Schedule 2.

Amendments to the Fringe Benefits Tax Assessment Act 1986 (the FBTA Act)

Section 47 of the FBTA Act exempts a number of residual benefits from fringe benefits tax. Certain recreational or child care facilities provided by employers, or an associate of an employer, for the benefit of employees, and contributions to secure priority of access to certain child care facilities, are exempt residual benefits under section 47. Paragraph 47(8)(a) of the FBTA Act, as it will operate from 1 July 2000, ensures that the residual benefits in the form of priority of access to the existing types of child care services, including family day care service, are exempt from fringe benefits tax . Items 11 and 12 amend this paragraph to include contributions made to an approved in-home care service so that the fringe benefits tax exemption applies to residual benefits arising from priority of access contributions to approved in-home care services.

This measure commences on 1 January 2001.

SCHEDULE 3-AMENDMENTS RELATING TO YOUTH ALLOWANCE

Summary of proposed changes

This measure gives effect to the 2000-01 Budget initiative to provide that 75% (instead of the existing 50%) of the value of a persons interest in farm and business assets will be disregarded under the youth allowance family assets test. In doing so, this will directly increase the Government's support of families, particularly those from rural areas.

Explanation of the changes

The youth allowance assets test is provided by Subdivision AB of Division 2 of Part 2.11 of the Social Security Act 1991. If a person is not independent, a family assets test applies through the higher assets value limit and the provision to count the value of the assets of the persons family members (see paragraphs 547C(1)(a) and 547D(c)).

If paragraph 547D(c) applies, ie, if the family assets test applies because the person is not independent, there is a special provision in section 547G on how to value the assets of a business in which the person or a family member is engaged. Under subsection 547G(2), 50% of the value of those assets is currently disregarded.

Under this measure, this exemption is increased to 75%, as provided by item 1 . Families in general, and rural families in particular, will benefit from this measure. Youth allowance will now be payable to young people previously excluded from the payment. Furthermore, fares allowance and the higher (category 1 student) level of student financial supplement may be available, if the young person is a full-time tertiary student.

This amendment commences on 1 January 2001.

SCHEDULE 4-MISCELLANEOUS AMENDMENTS

Summary of proposed changes

The following amendments are made by Schedule 4 :

•

the period for data-matching of income details between the Australian Taxation Office and Centrelink will be extended from 2 to 4 years; and

•

the terms of the Social Security Agreement between the United Kingdom and Australia will be preserved for new Australian residents who arrived in Australia on or before 1 March 2000.

Explanation of the changes

Period for data-matching of income details

The Data-matching Program (Assistance and Tax) Act 1990 (the Data-matching Act) provides for the matching agency (in this case Centrelink on behalf of the Department of Family and Community Services) to run a Data-matching Program against data from a source agency (in this case the tax agency) under Part 2 of the Data-matching Act.

Section 6 provides for the matching of data in accordance with the Data-matching Program made up of data matching cycles the steps in which are set out in section 7. Section 7 provides for six steps to be followed in a data matching cycle.

At present, matching of income details is limited to the two most recently completed financial years. However, as a tax assessment can be delayed or maybe reassessed beyond this period, matching is being extended from 2 to 4 years in alignment with the period for Australian Tax Office taxable income reassessments.

Accordingly, item 1 amends step 3 in section 7 of the Data-matching Act to replace the existing reference to "2 financial years with a reference to "4 financial years.

This amendment commences on 1 January 2001.

Social Security Agreement with the United Kingdom

On 13 July 1999, the Minister for Family and Community Services announcedAustralia's intention of terminating the international agreement on social security between Australia and the United Kingdom of Great Britain and Northern Ireland (the Agreement).

Under Article 26 of the Agreement, the Australian Government provided the United Kingdom Government, through the diplomatic channel, with a notice of its intention to terminate the Agreement. The note was received by the United Kingdom Government on 1 March 2000. The Agreement will therefore terminate from 1 March 2001. The last operative day of the Agreement will be 28 February 2001.

Article 26 provides that the Agreement will continue to have effect for all persons who by virtue of the Agreement are in receipt of benefits at the date of termination, or who have lodged a claim and would be entitled to receive benefits at the date of termination.

In addition, the Government has decided that people who migrated to Australia on or before 1 March 2000 and who would, if the Agreement had not been terminated, have been able to access the Australian social security system under the Agreement should continue to have that access as if the Agreement was still in force.

The protection provision inserted into Part 2 of the Social Security (International Agreements) Act 1999 by item 2 achieves this outcome. This amendment commences on 1 March 2001.