House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Minister for Family and Community Services, Senator the Hon Kay Patterson)

Outline and financial impact

Outline

This Bill makes several amendments to the family assistance law, and further amendments to the social security law and the Veterans' Entitlements Act 1986 in a number of family assistance related measures, as set out below.

Method of calculating Part B rate for those who return to paid work after the birth of a child etc.

As provided by the 2004 Budget, the bill makes amendments to protect family tax benefit Part B for a secondary earner in a family returning to the workforce after the birth of a child.

Maternity payment

In a 2005 Budget measure, the maternity payment eligibility criteria are being expanded for adopting parents to cover children adopted under age two, including from overseas. Amendments are also being made to clarify that maternity payment is not available if the former maternity allowance has already been paid for the child.

Family assistance amendments

Several family assistance measures are addressed:

•

ensure that a 'non-lodger' debt that arises because the relevant tax returns have not been lodged for a particular entitlement year can be set aside if the customer separates from his or her partner in the second income year after the end of the entitlement year and provided it is only the ex-partner's tax return that has not been lodged - the customer's family tax benefit entitlement (including supplement) would be determined under an interim reconciliation on the basis of the customer's actual and ex-partner's estimate of income for the entitlement year;

•

provide for the write-off of a family tax benefit or child care benefit non-lodger debt where separation occurs more than two years after the end of the entitlement year and reconciliation cannot occur for the entitlement year solely because the ex-partner has not lodged a tax return;

•

clarify the meaning of 'partner' as used in the non-lodger provision applicable to child care benefit, consistent with the equivalent family tax benefit provision;

•

ensure that eligibility for rent assistance in a lump sum claim made in the second lodgment year after the relevant income year is treated the same as in a claim made in the first lodgment year, that is, the claimant would only be eligible for rent assistance for a past period if fortnightly payments of FTB are claimed at the same time;

•

preclude a family tax benefit advance for certain child support debtors; and

•

introduce an order of reduction rule for family tax benefit Part B, whereby the application of the income test affects the components of the Part B rate in a specified sequence.

Rent assistance

The bill addresses two measures relating to rent assistance:

•

prevent duplicate payments of rent assistance between family tax benefit on the one hand and social security or veterans' entitlements payments on the other; and

•

provide for cancellation of the rent assistance portion of a person's family tax benefit or social security payment for failing to submit a rent certificate review (rather than cancellation of the whole payment as currently provided).

Financial impact statement

Schedule 1 - Method of calculating Part B rate for those who return to paid work after the birth of a child etc.

Commencement: 1 July 2005

Financial impact:

Schedule 2 - Maternity payment

Age extension

Commencement: 1 July 2005

Financial impact:

No maternity payment if maternity allowance paid

Commencement: Royal Assent

Financial impact: nil

Schedule 3 - Family assistance amendments

Setting aside certain non-lodger debts

Commencement: 1 January 2006

Financial impact:

Writing off non-lodger debts

Commencement: 1 January 2006

Financial impact:

Clarify meaning of 'partner'

Commencement: Royal Assent

Financial impact: Total resourcing - nil

Rent assistance and claims for FTB for a past period

Commencement: 1 July 2005

Financial impact: Total resourcing - nil

Precluding FTB advance for child support debtor

Commencement: 1 January 2006 (part), Royal Assent (remainder)

Financial impact: Total resourcing - nil

Order of reductions for FTB Part B rates

Commencement: 1 January 2005

Financial impact: Total resourcing - nil

Schedule 4 - Rent assistance

Duplicate rent assistance payments

Commencement: 1 July 2005 or Royal Assent, whichever later

Financial impact:

Rent certificates

Commencement: Royal Assent

Financial impact: Total resourcing - nil

Notes on clauses

Clause 1 sets out how the Act is to be cited, that is, the Family and Community Services Legislation Amendment (Family Assistance and Related Measures) Act 2005.

Clause 2 provides a table that sets out the commencement dates of the various sections in, and Schedules to, the Act.

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

This Explanatory Memorandum uses the following abbreviations:

•

'Family Assistance Act' means the A New Tax System (Family Assistance) Act 1999;

•

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

•

'Social Security Act' means the Social Security Act 1991;

•

'Social Security Administration Act' means the Social Security (Administration) Act 1999;

•

'FTB' means family tax benefit;

•

'CCB' means child care benefit; and

•

'Veterans' Entitlements Act' means the Veterans' Entitlements Act 1986.

Schedule 1 - Method of calculating Part B rate for those who return to paid work after the birth of a child etc.

Summary

The amendments made by this Schedule set out a new method of calculating FTB Part B for certain secondary earners who return to work after the birth of a child etc. These amendments give effect to the measure announced by the Government on 11 May 2004 as part of the More Help for Families package.

Background

FTB Part B is intended to assist families with one main income. In the case of couples, Part B is paid on the basis of the secondary (or lower) income earner provided that their income is under certain thresholds.

Under the current legislation, the income of a secondary earner who is a member of a couple who commences paid work for the first time or returns to paid work part-way during a particular income year is taken into account under the Part B income test for that income year. This can result in an overpayment on reconciliation and may act as a disincentive for those wanting to return to the work force.

The new method of calculating Part B is intended to ensure that the secondary earner receives the maximum rate of Part B for a day or days within a period that commences on a day worked out under new clause 29C and ending immediately before the day the secondary earner 'returns to paid work'.

The new method will be available to a secondary earner who is the natural parent or stepparent of the child. In addition, it will be available to adoptive parents and other secondary earners who are carers. For example, grandparents who have the care of a grandchild, as long as the natural parent or other carer has not previously benefited from the new method of calculating the Part B rate in respect of that child.

The amendments made by this Schedule apply in respect of the 2005-06 income year and later income years.

Explanation of changes

Amendments of the A New Tax System (Family Assistance) Act 1999

Item 1 inserts a new definition of 'paid work' into subsection 3(1) of the Family Assistance Act. This definition refers the reader to section 3B, which contains the detailed definition (see item 5). The definition does not apply to paragraph 15(1)(a) of the Family Assistance Act which uses the undefined phrase 'paid work' as this paragraph is relevant to child care benefit.

Item 2 inserts a new definition of 'passive employment income' into subsection 3(1) of the Family Assistance Act. 'Passive employment income' means:

(a)

Paid leave (such as paid maternity leave).

(b)

A payment of compensation or a payment of insurance in respect of the individual's inability to earn, derive or receive income from paid work during the period.

(c)

If the individual stops paid work as a self employed individual - income that is derived by the individual in respect of the period from an interest, or from investments, held in connection with the individual's previous self employment.

The definition of 'passive employment income' is intended to identify other forms of work related income that may be received by an individual despite the individual having stopped 'paid work' ('paid work' is defined to mean any work for financial gain or any other reward that involves a substantial degree of personal exertion on the part of the individual concerned - see item 5).

Paragraph (c) of the definition of 'passive employment income' is intended to cover passive income derived from the individual's continued right to receive income (such as a share of the profits) from the individual's previous self-employment (involving a substantial degree of exertion) in a business, partnership or other entity. This part of the definition would not apply to income from investments such as rental income on an investment property or income from shares that are unconnected with the individual's previous self-employment.

Item 3 inserts a new definition of 'returns to paid work' into subsection 3(1) of the Family Assistance Act. This definition refers the reader to section 3B, which contains the detailed definition (see item 5).

Item 4 inserts a new definition of 'secondary earner' into subsection 3(1) of the Family Assistance Act. Normally, the secondary earner will be the person worked out in accordance with subclause 3(2) of Schedule 3 to the Family Assistance Act and will be the member of the couple with the lower adjusted taxable income (ATI) worked out following reconciliation. If both members of the couple have the same adjusted taxable income, the secondary earner will be the member of the couple who returns to paid work first during the year.

Paragraph (b) of the definition of 'secondary earner' is intended to ensure that a primary (or 'equal') earner (based on actual income) who was during the year believed to be the secondary earner (based on the original estimated income of the person and his or her partner) will still be regarded as the secondary earner and hence be able to access this new measure. Subclause 3(2) of Schedule 3 is disregarded in determining whether paragraph (b) of the definition applies to a particular couple.

Item 5 adds new section 3B at the end of Division 1 of Part 2 of the Family Assistance Act.

New subsection 3B(1) contains a definition of 'paid work' which is intended to be used in conjunction with the definition of 'returns to paid work'.

The definition embraces all kinds of work including work undertaken as an employee in an employer/employee relationship and all forms of self-employment. Paid work means any work for financial gain or any other reward that involves a substantial degree of personal exertion on the part of the individual concerned. This definition does not include other forms of work related income that may be received by an individual included in the definition of 'passive employment income' (see item 2).

New subsection 3B(2) provides that an individual returns to paid work if the individual is neither engaging in paid work, nor receiving passive employment income during that year and the individual later engages in paid work for an average of at least 10 hours per week for 4 consecutive weeks that start during the income year.

New subsection 3B(3) applies in circumstances where the individual is neither engaging in paid work, nor receiving passive employment income during that income year and later engages in paid work but not for an average of at least 10 hours per week for 4 consecutive weeks. In these circumstances, there is an option of notifying the Secretary in writing that the individual has returned to paid work. The notification must be in accordance with new subsection 3B(4).

New subsection 3B(4) clarifies who is required to notify the Secretary for the purposes of paragraph 3B(3)(c) as there are some cases where both members of a couple can be eligible for family tax benefit for the same period or for different periods during a particular income year. Subsection 3B(4) applies if the individual is a member of a couple at any time during the income year before the individual engages in paid work.

Paragraph 3B(4)(a) is intended to apply to situations where both members of a couple are eligible for family tax benefit for the same period or different periods during an income year, before the individual engages in paid work and the individual is a member of the same couple at the time of the notification. In these circumstances, both members of the couple must notify the Secretary in writing. Paragraph 3B(4)(a) applies in the following situations:

•

Cases where a determination under section 28 of the Family Assistance Act is in place. Section 28 applies to blended families and covers members of a couple (person A and B) where A has at least one child from a previous relationship, and at least one of the other children is a child of the relationship between A and B or a child of a previous relationship of B. In this scenario, where A and B would both be eligible for FTB for the children but for section 26, then the Secretary has a discretion to determine that both A and B are to be eligible for FTB for the children and the percentage of each individual's FTB for the children.

•

Cases where a determination under section 29 of the Family Assistance Act is in place. Section 29 deals with the situation where two individuals (A and B) who are not members of a couple claim FTB for a past period during which A and B were members of the same couple with an FTB child or children. In this scenario, where A and B would both be eligible for FTB for the children but for section 26, then the Secretary has a discretion to determine that both A and B are to be eligible for FTB for the child or children and the percentage of each individual's FTB for the child or children.

•

Cases where members of a couple have agreed to swap who claims FTB and both receive payment of FTB at different times during an income year.

Paragraph 3B(4)(b) applies in similar circumstances to paragraph 3B(4)(a) except that the individual is no longer a member of the same couple at the time of notification. In these circumstances, the individual who returns to work (ie, engages in paid work) must notify the Secretary in writing. If both individuals return to work, the secondary earner must notify the Secretary.

Paragraph 3B(4)(c) applies in circumstances where only one member of a couple is eligible for FTB at all times during that income year. In these circumstances, the member of the couple who is eligible for FTB must notify the Secretary in writing.

As the new method for the Part B rate can only apply if the individual is a member of a couple at some time during the period before returning to work, new subsection 3B(4) does not refer to the situation where the individual is not a member of a couple at all times during the period before returning to work.

Currently Division 1 of Part 4 of Schedule 1 to the Family Assistance Act contains the overall rate calculation process applicable to Part B. These amendments split Division 1 into two separate Subdivisions. Item 6 inserts a new heading for Subdivision A that will contain the existing provisions in the Family Assistance Act relating to the general method of calculating the Part B rate.

Item 7 adds a note at the end of subclause 29(2) of Schedule 1 that advises the reader that an individual who is a member of a couple works out his or her Part B rate under Subdivision B if the secondary earner of the couple returns to paid work after the birth of a child etc. The heading to clause 29 of Schedule 1 is also amended by omitting 'Method' and substituting 'General method'.

Item 8 inserts a new Subdivision B after Subdivision A that contains the new provisions applying the method of calculating the Part B rate for those who return to paid work after the birth of a child etc. This item contains the substantive clauses that apply to the new method of calculating the Part B rate, new clauses 29A, 29B and 29C.

New clause 29A contains the method of calculating the Part B rate for those who return to paid work after the birth of a child etc.

New subclause 29A(1) sets out the basic eligibility criteria for the new method. An individual's Part B rate for a day in an income year will be worked out under subclause 29A(2) if:

•

the individual is a member of a couple (sole parents receive the maximum amount of Part B under subclause 29(1) of Schedule 1 to the Family Assistance Act); and

•

the conditions in subclauses (3) to (7) of clause 29A are met; and

•

the conditions in new clause 29C are met in respect of the day.

Subclause 29A(2) sets out the new method of calculating the Part B rate. This subclause enables Part B to be provided to the individual concerned at the maximum rate for the day or days within the period provided that all criteria for accessing the new method are met. If the person receives a period of paid leave or other type of work related income (see the definition of 'passive employment income' in item 2) for a day or days during the period, the general method of calculating the Part B rate would apply for the day or days in question.

Subclauses 29A(3) to (7) set out further conditions for the new method of calculating the Part B rate for those who return to paid work.

Subclause 29A(3) provides that during a period during the income year in which the day occurs, the secondary earner must not be engaging in paid work and must not be receiving 'passive employment income' in respect of that period. The intention is that the secondary earner will not receive Part B at the maximum rate for the day or days that he or she is working, on paid leave or other types of work related income. Again, if the person receives a period of paid leave or other type of work related income for a day or days during the period, the general method of calculating the Part B rate would apply for the day or days in question.

Subclause 29A(4) provides that one of the conditions is that the secondary earner returns to paid work for the first time since a child became a FTB child of the secondary earner.

Subclause 29A(5) provides that the conditions in new clause 29B must also be satisfied in respect of the child.

Subclause 29A(6) provides that the individual mentioned in subclause (1) (this could either be the secondary earner or his or her partner depending upon who has actually claimed FTB) must have satisfied the FTB reconciliation conditions under section 32B of the Family Assistance Administration Act for all of the same-rate benefit periods in that income year.

Another requirement is that either or both of the conditions set out in paragraphs 29A(7)(a) or (b) apply.

Paragraph 29A(7)(a) is intended to cover the case where the Secretary has been notified of the return to work by the individual.

Paragraph 29A(7)(b) would apply where the Secretary becomes aware of the return to work by some other means. For example, the individual's partner notifies the Secretary.

New clause 29B sets out the conditions to be met in respect of an FTB child.

Subclause 29B(1) provides that for the purpose of subclause 29A(5), the conditions in this clause are met if subclauses (2) and (3) are met in respect of the child on any single day that meets the conditions in clause 29C.

Subclause 29B(2) clarifies that the new measure applies to the child that most recently became an FTB child of the secondary earner. If all of the children became FTB children of the secondary earner at the same time the relevant child is the youngest FTB child of the secondary earner.

Provided the above criteria are met in relation to the child, the new measure would potentially be available where the secondary earner is the natural parent or stepparent of the child in question. It will also potentially be available to adoptive parents and carers such as grandparents who care for a grandchild.

Subclause 29B(3) is intended to clarify that the new method of calculating the Part B rate can only be accessed once in respect of any particular child. Subclauses 29B(4) and (5) provide for two exceptions to this general rule.

Subclause 29B(4) is intended to ensure that if both parties to a former relationship fulfill the criteria in relation to a particular child because they are in shared care arrangements with respect to that child, that both can access the new method of calculating Part B.

Subclause 29B(5) is intended to apply to cases where both individuals are eligible for family tax benefit for the same period or for different periods within the same income year. This subclause ensures that both individuals can access the new method of calculating Part B provided that they satisfy all the criteria in subsection 29B(5) and all other criteria for the new method of calculating Part B.

Subsection 29B(5) is firstly intended to apply to cases covered by a determination under section 28 or 29 of the Family Assistance Act. Section 28 allows the Secretary to make a determination that both members of a couple in a blended family are eligible for family tax benefit for the children for the same period. Section 29 allows the Secretary to make a similar determination in respect of separated members of a couple for the period before separation. Finally, subclause 29B(5) is also intended to apply to cases where members of a couple have agreed to swap who claims FTB with the result that both receive payment of FTB at different times during an income year.

New clause 29C sets out the conditions that need to be met for a particular day or days for an individual to receive Part B at the maximum rate.

Paragraph 29C(1)(a) defines the relevant period within which an individual can receive Part B at the maximum rate. The relevant period starts on the latest of the following days:

•

1 July of the income year;

•

the day after the secondary earner stops paid work;

•

the day after the secondary earner stops receiving passive employment income in respect of a period;

and ends immediately before the day on which the secondary earner returns to paid work.

However, the period defined in paragraph 29C(1)(a) may have to be adjusted if paragraph 29C(1)(b) applies. If the secondary earner is receiving passive employment income (such as paid leave or other work related income for the day) then the new method would not apply for that day or the days in question and the general method of calculating the rate of Part B would apply.

Subclause 29C(2) sets out the rules for determining the day on which the individual returns to work.

If an individual returns to work because of subsection 3B(2) (the definition of 'returns to paid work'), the day on which the individual returns to paid work is the first day of the 4 week period on which the individual is working.

If an individual has not worked an average of at least 10 hours per week for 4 consecutive weeks and elects to access the new method and returns to paid work because of subsection 3B(3), the day on which the individual returns to work is the first day in the income year that the individual was working.

Subclause 29C(3) is intended to clarify that the first and last days of the period mentioned in paragraph 29C(1)(a) fall in that period.

Item 9 makes a technical amendment to subclauses 31A(1) and (3) of Schedule 1. This amendment enables the relevant amount of the Part B supplement to be included for the day (or days) within the period the individual is able to access the new method of calculating Part B.

Amendment of the A New Tax System (Family Assistance) (Administration) Act 1999

Items 10 and 11 make amendments to the A New Tax System (Family Assistance) (Administration) Act 1999 (the Family Assistance Administration Act). Both amendments are technical amendments to ensure that any access to the Part B supplement associated with this measure (see new paragraph 29A(2)(b) of Schedule 1 to the Family Assistance Act) is dependent upon the individual satisfying the FTB reconciliation conditions.

Item 10 amends subsection 32A(2) of the Family Assistance Administration Act by adding a new paragraph (bba) that refers to paragraph 29A(2)(b) of Schedule 1 to the Family Assistance Act.

Item 11 amends paragraph 105A(2)(a) of the Family Assistance Administration Act by adding a new subparagraph (iiba) that refers to paragraph 29A(2)(b) of Schedule 1 to the Family Assistance Act.

Application of amendments

Item 12 provides that the amendments made by this Schedule apply in respect of the 2005-06 income year and later income years.

Schedule 2 - Maternity payment

Summary

This Schedule addresses a 2005 Budget measure, expanding the maternity payment eligibility criteria for adopting parents to cover children adopted under age two, including from overseas. Amendments are also being made to clarify that maternity payment is not available if the former maternity allowance has already been paid for the child.

Background

Maternity payment was introduced from 1 July 2004, replacing the former maternity allowance with a payment currently valued at $3079 for families with new children, and increasing by 1 July 2008 to $5000.

In the case of adoptions, the child must be entrusted to the care of the adopting parent, as part of the adoption process, within the child's first 26 weeks of life. Maternity payment must generally be claimed in these cases no later than 26 weeks after the child is entrusted to care.

These arrangements have prevented maternity payment from being available to many families adopting children from overseas (with most current adoptions in Australia in fact being from overseas). This is because the lengthy processes involved in overseas adoptions frequently prevent the child from being placed with the adopting family within the child's first 26 weeks of life. Alternatively, the child may be placed with the adopting family within the first 26 weeks but in the child's country of origin, with the parents and child not arriving in Australia in time to claim maternity payment within 26 weeks after the child is entrusted to care.

With the former baby bonus no longer available since the advent of the new maternity payment, these families have no access to a suitable payment to support them at this important time of taking a baby or toddler into their family. Therefore, this Schedule expands the maternity payment eligibility criteria so that the payment will be available to families taking on, as part of an overseas adoption, the care of a child who is aged under two and who arrives in Australia before turning two. These families will have 26 weeks from the child's arrival in Australia to claim maternity payment. This measure recognises that families who adopt children under the age of two face similar costs to families with newborns who attract maternity payment.

The age basis for local adoptions will also change so that maternity payment will be available for children adopted within Australia before turning two.

These changes, for both overseas and local adoptions, will commence on 1 July 2005, but will be backdated to the commencement of maternity payment on 1 July 2004. Therefore, for overseas adoptions, children entrusted to care, and arriving in Australia, on or after that date and while they were still under two will attract maternity payment. For local adoptions, children entrusted to care on or after that date and while they were still under two will attract maternity payment. (However, if maternity payment has already been paid for these children, no further payment will flow from these changes.) In these backdated cases, families will have at least 26 weeks from commencement of these changes to claim maternity payment.

Further amendments made by this Schedule will make clear the longstanding policy that only one maternity entitlement is available for each child. While this is already clear in relation to maternity payment itself (ie, the total maternity payment of, currently, $3079 cannot be exceeded for each child), it has not been explicit in the transition between the former maternity allowance and the new maternity payment. Therefore, it has been possible, for example, for a natural parent to have been paid maternity allowance for a child born before 1 July 2004 and for the same child, adopted after that date, to attract maternity payment for an adopting parent. Therefore, these amendments will ensure that, if maternity allowance has already been paid for a child, maternity payment is not also available.

Explanation of changes

Part 1 - Amendments

Part 1 of the Schedule provides for the main maternity payment amendments, increasing the age limit for the child.

Amendments to the Family Assistance Act

Item 1 amends paragraph 36(5)(b) of the Family Assistance Act, which currently provides the child's upper age limit (26 weeks) in order for the adopting parent to be eligible for maternity payment. The item increases the age limit for both overseas and local adoptions. It will now be the case that a child entrusted to care, as part of an overseas or local adoption process, while aged under two will fulfil the basic age criterion for maternity payment eligibility on the part of the adopting parent.

Item 2 inserts a new paragraph 36(5)(ba), to introduce the new maternity payment eligibility requirement that a child being adopted from overseas must arrive in Australia while aged under two. Therefore, a child being adopted from overseas must meet both age-related criteria - being entrusted to care and arriving in Australia while aged under two.

Amendments to the Family Assistance Administration Act

Item 3 amends subsection 39(2) of the Family Assistance Administration Act, relating to the claim requirements for maternity payment. The new paragraph 39(2)(c) preserves, for local adoptions only, the general rule in the current paragraph 39(2)(b) that a claim is not effective if it is made later than 26 weeks after the child is entrusted to the care of the adopting parent. The new paragraph 39(2)(b) sets up a new general rule so that a claim for maternity payment in relation to a child being adopted from overseas is not effective if it is made later than 26 weeks after the child's arrival in Australia.

Part 2 - Application, transitional and other provisions

Part 2 of the Schedule provides application and transitional provisions for the main maternity payment amendments, and also provides for the preclusion of maternity payment if maternity allowance has already been paid for a child.

Item 5 provides for the age increase and related amendments described under items 1 to 3 to apply with backdated effect to 1 July 2004, when maternity payment commenced. Therefore, the amendments will apply not only in relation to children entrusted to care, as part of an overseas or local adoption process, after the amendments commence, but also to those entrusted to care on or after 1 July 2004, as long as maternity payment has not already been paid for the child. This retrospective application is purely to the benefit of customers.

The usual claim requirements could undermine this backdating by making it impossible for an adopting parent to make an effective claim for maternity payment if the 26 week claim period after the date the child was entrusted to care expires before these amendments commence. Therefore, subitems 6(1) to (3) provide special transitional arrangements so that the claim period for affected cases will be extended to 26 weeks after commencement of the amendments. This will apply to children who, as part of an overseas adoption process, both are entrusted to care and arrive in Australia before the amendments commence. It will also apply to children who, as part of a local adoption process, are entrusted to care before the amendments commence. In other cases, the new ongoing rules provided by item 3 will give a better (later-ending) claim period and the transitional arrangements need not apply. The transitional arrangements have been designed so that no customer will have less than 26 weeks in which to make an effective maternity payment claim.

In a minor, related amendment, subitem 5(4) makes sure that subsection 39(3) of the Family Assistance Administration Act takes account of the extended, transitional claim period. That subsection provides for the Secretary to extend the usual 26 week claim period if satisfied that a maternity payment claimant could not claim within the usual period because of severe illness associated with the child's birth. It will remain open to the Secretary to extend the already extended, transitional claim period for customers encountering severe illness at the child's birth.

For the purposes of these application and transitional rules, item 4 sets up a definition of 'commencement' as meaning the commencement of items 1 to 3 on 1 July 2005.

Lastly, item 7 makes it clear that an individual is not eligible for maternity payment for a child if maternity allowance has already been paid for the same child. This will apply prospectively, in relation to a child entrusted to the care of the individual after commencement of this item on Royal Assent.

Schedule 3 - Family assistance amendments

This Schedule makes a range of family assistance amendments that can be broadly grouped as follows:

•

Setting aside certain non-lodger debts;

•

Writing off certain non-lodger debts;

•

Clarify meaning of partner;

•

Rent assistance and claims for FTB for a past period;

•

Precluding FTB advances for child support debtor;

•

Order of reduction rule for FTB Part B.

Each of these topics is addressed separately below.

Setting aside certain non-lodger debts

Summary

Where a 'non-lodger' debt arises because the relevant tax returns have not been lodged in relation to a particular entitlement year and the customer separates from his or her partner in the second income year after the end of the entitlement year, the non-lodger debt would be set aside after separation if it is only the ex-partner's tax return that has not been lodged. The customer's FTB entitlement would then be determined under an interim reconciliation on the basis of the customer's actual and ex-partner's estimate of income for the entitlement year.

Background

Section 28 of the Family Assistance Administration Act currently provides a two-year time limit for a customer and their partner to lodge tax returns to be entitled to a top-up of FTB. The two-year period consists of periods known as the first and second lodgment years. After the end of the first lodgment year, if tax returns have not been lodged where required, the customer's entitlement determination for the entitlement year is varied in accordance with subsection 28(2) of the Family Assistance Administration Act and an 'FTB non-lodger debt' is raised for the amount of FTB received during the entitlement year.

If the outstanding tax returns are lodged before the end of the second lodgment year, then the customer's entitlement determination is again varied in accordance with paragraph 28(3)(c), the FTB non-lodger debt is set aside and the normal FTB reconciliation process occurs to determine the customer's full entitlement for the entitlement year (which can include a top-up as appropriate).

If the outstanding tax returns are lodged after the end of the second lodgment year, then the customer's entitlement determination is again varied in accordance with paragraph 28(3)(d), the FTB non-lodger debt is set aside and a modified FTB reconciliation process occurs - the customer can only be entitled to the lesser of the amount of the customer's entitlement based on actual income or the amount that the customer was entitled to before the non-lodger debt was raised. A top-up is not available.

An unintended outcome may occur where a couple separate during the second lodgment year. It is not intended that the failure of an ex-partner to lodge his or her tax return by the end of the second lodgment year result in the customer being denied access to their full entitlement, including any FTB top-up payment as appropriate. However, that is the effect of the current legislation.

Amendments are made to section 28 of the Family Assistance Administration Act to ensure that an FTB non-lodger debt that was raised after the end of the first lodgment year should be set aside after separation if it is only the ex-partner's tax return that has not been lodged. Where this happens, an 'interim' FTB reconciliation would occur to determine whether the customer has a top-up or a debt. The interim reconciliation would use the customer's actual income, and the estimate of the ex-partner's income. When the ex-partner's tax return is lodged, a re-reconciliation would occur using the ex-partner's actual income, which could result in a top-up or a debt.

Explanation of the changes

Items 1 and 5 to 9 inclusive make the relevant amendments.

Item 8 inserts additional provisions into section 28 of the Family Assistance Administration Act to enable a non-lodger debt to be set aside by further variation of the individual's entitlement determination in certain circumstances.

A non-lodger debt can arise where existing subsection 28(2) applies because the relevant tax returns are not lodged by the end of the income year after the entitlement year, or under new subsection 28(6), which deals with the situation where, after a variation under new subsection 28(4) is made because the couple separate, the couple reconcile and the individual's partner has still not lodged a tax return for the entitlement year.

The circumstances in which a non-lodger debt can be set aside are where:

•

the claimant and partner separate during the income year that began two years after the start of the entitlement year (the 'later income year');

•

the individuals remain separated at the time of the decision to vary the claimant's entitlement determination under this provision;

•

if the claimant was required to lodge a tax return for the entitlement year, the claimant has done so and the Commissioner of Taxation has determined the claimant's taxable income for that year;

•

the ex-partner was required to lodge a tax return for the entitlement year but had not done so by:

•

if the claimant was required to lodge a tax return for the entitlement year, the later of the time when separation last occurred or the time when an assessment of the claimant's taxable income is made; or

•

otherwise, when separation last occurred;

•

the Secretary is satisfied that the claimant was eligible for an amount of FTB for some or all of the entitlement year.

Where these conditions are satisfied, the 'no entitlement' determination made under subsection 28(2) must be varied (and the non-lodger debt set aside) and the claimant becomes entitled to be paid FTB in accordance new subsection 28(5).

If the claimant was required to lodge a tax return for the entitlement year and has done so before the end of the later income year, then the claimant is entitled to be paid their full entitlement. The outcome is the same if the claimant is not required to lodge a tax return for the entitlement year.

If the claimant lodges the relevant tax return after the end of the later income year, then entitlement is limited to the lesser of the claimant's full entitlement or the amount that the claimant was entitled to be paid before the 'no entitlement variation' that triggered the non-lodger debt. This is consistent with the outcome in existing subsection 28(3) that applies where the relevant tax returns are finally lodged but outside the required time frames.

If the separated couple reconcile after a variation has been made under new subsection 28(4) with the effect of restoring the claimant's entitlement and the claimant's partner has still not lodged a tax return for the entitlement year, then new subsection 28(6) operates to negate again the claimant's entitlement for the entitlement year. A non-lodger debt will then arise.

This rule ensures that claimants who are members of a couple are ultimately treated in the same way, even if there has been a separation and reconciliation.

Under subsection 28(3), a determination that has been varied under subsection 28(2) with the effect that the claimant is not entitled to be paid FTB for an entitlement year must again be varied after all the relevant tax returns have been lodged. The outcome of the required variation is set out in subsection 28(3). Item 5 makes a consequential amendment to subsection 28(3) to ensure that this provision also operates where a claimant is not entitled to be paid FTB for an entitlement year because of new subsection 28(6) and all the relevant tax returns are subsequently lodged.

Item 1 inserts a definition of 'member of the same couple' into subsection 3(1) of the Family Assistance Act. This term is used in section 28 of the Family Assistance Administration Act, as amended, and elsewhere in the family assistance law. Its meaning will be the same as the meaning of 'member of a couple' which, in turn, is defined by reference to the Social Security Act.

Item 6 makes a consequential amendment that ensures that subsection 28(3) cannot apply if new subsection 28(4) applies.

Item 7 is a minor technical correction to the terminology used in paragraph 28(3)(c).

Item 9 sets out the application and transitional rules that apply in relation to these amendments.

The substantive amendments made to section 28 of the Family Assistance Administration Act apply in respect of a cancellation income year (entitlement year) that is the 2001-02 income year or a later income year (subitem 9(1) refers). This coincides with the first income year affected by changes that extended by 12 months the time frame for payment of top-ups of FTB. These changes were made by the Family Assistance Legislation Amendment (Extension of Time Limits) Act 2004.

The effect is that claimants who have a non-lodger debt for 2001-02 and who separate during 2003-04 will benefit from the new rules, provided they have lodged their tax return (if required) for 2001-02. The same will apply in relation to non-lodger debts for subsequent income years.

There are some individuals who may have been paid an amount equal to a top-up payment of FTB under the act of grace provisions in the Financial Management and Accountability Act 1997 as they were not able to access a top-up payment because of the current operation of section 28 of the Family Assistance Administration Act. The amendments made by item 8 to section 28 would enable these customers to be paid a top-up of FTB under section 28. The intention is not to pay these customers a top-up twice, once under the act of grace rules and once under section 28, as amended. Subitem 9(2) therefore precludes such a payment under new section 28(5) in circumstances where an amount equal to a top-up payment of FTB has already been paid to the customer by act of grace payment.

The existing date of effect rules in sections 107 and 109E of the Family Assistance Administration Act limit the availability of arrears of FTB where there is a favourable review decision relating to payment of FTB by instalment. A transitional provision is inserted by subitem 9(3) to ensure that these date of effect rules do not apply in relation to a review decision that is made on or before 30 June 2006 that results in a decision under new subsection 28(4) in respect of the 2001-02, 2002-03 or 2003-04 income year.

Writing off non lodger debts

Summary

If there is a non-lodger debt (either FTB or CCB) and separation occurs more than two years after the end of the entitlement year, there would be capacity to write off the non-lodger debt after separation but only if it is the ex-partner's tax return that has not been lodged.

Background

If an FTB or CCB non-lodger debt has been raised as a result of the application of section 28 or section 60D of the Family Assistance Administration Act, and separation occurs after the second lodgment year, the legislation currently provides that the non-lodger debt can only be set aside (through further variation of the relevant entitlement determination) if both the customer and the ex-partner have lodged their tax returns.

However, where the sole reason for being unable to set aside a non-lodger debt is a delay by the customer's ex-partner in lodging their tax return, the taking of action to recover the non-lodger debt from the customer is an inappropriate outcome for the customer. If there is acrimony between the customer and the ex-partner, there is the possibility that the ex-partner may not co-operate with lodging their tax return as soon as possible.

This situation is addressed by amendments to the write off provisions in the Family Assistance Administration Act to enable recovery of the non-lodger debt to be suspended pending the lodgment of the ex-partner's tax return.

Explanation of the changes

Items 14 to 17 make the relevant amendments.

Section 95 of the Family Assistance Administration Act enables the Secretary to write off a debt (for a stated period or otherwise) where certain conditions are met. As a general proposition, if a debt is able to be recovered by withholding future payments (either ongoing, arrears or advances) or by setting off against an income tax refund, then the debt cannot be written off unless recovery would cause the customer severe financial hardship.

Item 16 inserts two new provisions into section 95 that set out additional circumstances in which certain debts can be written off.

New subsection 95(4A) applies to a debt that arises because of subsection 28(2) or 28(6) of the Family Assistance Administration Act, that is, an FTB non-lodger debt. An FTB non-lodger debt can be written off if the following conditions are satisfied:

•

the claimant and partner (as referred to in subparagraph 28(1)(b)(iii)) cease to be members of the same couple more than two years after the end of the entitlement year;

•

if the claimant was required to lodge a tax return for the entitlement year, the claimant has done so and the claimant's taxable income has been assessed under the relevant tax law;

•

the claimant's ex-partner was required to lodge a tax return for the entitlement year but still has not done so by the time that the claimant and ex-partner separated.

New subsection 95(4B) applies to a debt that arises because of subsection 60D(2) of the Family Assistance Administration Act, that is, a CCB non-lodger debt. A CCB non-lodger debt can be written off if the following conditions are satisfied:

•

the claimant and partner (as referred to in paragraph 60D(1)(b)) cease to be members of the same couple more than two years after the end of the entitlement year;

•

if the claimant was required to lodge a tax return for the entitlement year, the claimant has done so and the claimant's taxable income has been assessed under the relevant tax law;

•

the claimant's ex-partner was required to lodge a tax return for the entitlement year but still has not done so by the time that the claimant and ex-partner separated.

The write off would take effect as currently provided for in subsection 95(5) of the Family Assistance Administration Act - in practice, suspension of recovery action would commence on the date on which separation occurs. The write off would operate until such time as the ex-partner's actual income is known (ie, the ex-partner has lodged the relevant tax return and an assessment of income has been made by the Commissioner of Taxation).

Existing subsection 95(6) makes it clear that action to recover a debt that has been written off can recommence at any time. If the separated couple reconcile after the debt has been written off under the new provisions, then recovery of the debt can recommence under existing subsection 95(6).

Item 14 makes a consequential amendment to subsection 95(1) to ensure that write off is also available where new subsection 95(4A) or (4B) applies.

Item 15 makes a consequential amendment to subsection 95(2) to remove some words that become superfluous because of the amendment made by item 14.

Notes after items 15 and 16 insert appropriate headings to subsections 95(2), (5) and (6).

Item 17 provides that the amendments made by items 14 to 16 (write off of certain non-lodger debts) apply to the 2000-01 and later income years.

However, subitem 17(2) modifies the application of these amendments in relation to FTB non-lodger debts for 2000-01, to reflect the different rules that applied in respect of that income year.

For 2000-01, the relevant tax returns needed to be lodged by the end of the income year after the relevant income year in order to avoid loss of entitlement to payment of FTB in respect of the relevant income year. If the relevant tax returns were subsequently lodged, the customer could only be entitled to the lesser of the amount actually received in respect of the relevant income year or their entitlement - there was no capacity to pay a top-up in this situation.

For 2001-02 and subsequent years, the relevant tax returns still needed to be lodged by the end of the income year after the relevant income year in order to avoid loss of entitlement for the relevant income year. However, if the relevant tax returns were lodged before the end of two years after the relevant income year, the customer's full entitlement for the relevant income year could be restored. If the relevant tax returns were subsequently lodged, the customer could only be entitled to the lesser of the amount actually received in respect of the relevant income year or their entitlement based on actual income - there was no capacity to pay a top-up in this situation. The relevant amendments were contained in the Family Assistance Legislation Amendment (Extension of Time Limits) Act 2004.

Clarify meaning of 'partner'

Summary

The meaning of 'partner', as used in the non-lodger provision applicable to CCB will be clarified, consistent with the equivalent FTB provision. Partner will mean a person who was the customer's partner at the end of the second income year after the entitlement year and was also the customer's partner at some time in the entitlement year.

Background

Section 60D of the Family Assistance Administration Act provides a two-year time limit for a CCB customer and 'partner' to lodge their tax returns. After the end of the second lodgment year, if tax returns have not been lodged where required, a CCB 'non-lodger debt' may be raised equal to the amount of CCB above the minimum rate that was received during the entitlement year. If the outstanding tax returns are subsequently lodged, the non-lodger debt is set aside (through further variation of the customer's entitlement determination), and the normal reconciliation process occurs to determine whether the customer has a top-up or a debt.

The legislation is not precise about which 'partner' is being referred to in section 60D, noting that a person can have more than one partner in the course of the three year time span covered by the provision. This can be contrasted to section 28 of the Family Assistance Administration Act that clearly refers to the customer's partner at the 'particular time', provided he or she was also the customer's partner at some time in the relevant income year (the 'cancellation income year').

Amendments are made to clarify the meaning of 'partner' in section 60D, consistent with the meaning in section 28 of the Family Assistance Administration Act.

Explanation of the changes

Item 13 amends section 60D of the Family Assistance Administration Act to clarify the meaning of 'partner' as used in that provision. Partner will mean a person who was the claimant's partner at the end of the second income year following the particular income year, provided that the person was also the claimant's partner in the particular income year.

While section 60D has been reworked to accommodate this clarification, this is the only substantive change to the provision.

Rent assistance and claims for FTB for a past period

Summary

An amendment is made to ensure that eligibility for rent assistance under an FTB past period claim made in the second income year after the relevant income year is treated the same as eligibility for rent assistance under a claim made in the first year. The general effect is that an individual is only eligible for rent assistance for a past period if the individual claims fortnightly payments of FTB at the same time.

Background

When FTB was introduced, the policy for rent assistance in FTB was that an individual would need to claim fortnightly payments through Centrelink, rather than a lump sum through the Australian Taxation Office. The effect is that an individual can get rent assistance for a past period only if they also claim fortnightly payments of FTB at the same time.

In 2004, the family assistance law was amended to extend the time limit for claiming FTB by a further year. This allowed for a lump sum claim to be made by the end of the second lodgment year after the relevant income year.

Due to the extended time limit, a further amendment is needed to ensure that rent assistance eligibility for a past period claim made in the second lodgment year after the relevant income year is treated the same as a claim made in the first lodgment year.

Explanation of the changes

Items 2 and 3 make the relevant amendments.

Clause 13 of Schedule 1 to the Family Assistance Act sets out the eligibility rules for rent assistance. Under subclause 13(2), rent assistance is not available as part of a past period claim for FTB for the previous income year unless accompanied by an instalment claim.

Item 2 amends this provision to ensure that rent assistance is also not available as part of a claim for a past period that occurs in the second income year before the one in which the claim is made. This ensures that the eligibility rules for rent assistance on effective past period claims are consistent.

This amendment commences on 1 July 2005. Given the two-year time limit in which to make an effective past period claim, this amendment can apply in relation to a period that occurs in the 2003-04 income year and subsequent income years (item 3 refers). A past period claim for FTB for 2003-04 that is made during the second income year after 2003-04 will first occur from 1 July 2005.

Precluding FTB advance for child support debtor

Summary

This measure makes amendments to preclude a family tax benefit advance for certain child support debtors.

Background

The Child Support Legislation Amendment Act 2001 included amendments to allow certain child support debts to be recovered from the debtor's FTB. New section 227 of the Family Assistance Administration Act and new section 72AB of the Child Support (Registration and Collection) Act 1988 allow this recovery from the debtor's FTB by instalment or FTB for a past period.

However, none of the amendments allow similar deductions from an FTB advance, nor is an FTB advance precluded for a child support debtor. This is a weakness in the amendments because a debtor could undermine the debt recovery process by choosing to reduce his or her FTB by instalment entitlement into an FTB advance.

Accordingly, the amendments made by this Part will prevent a debtor from doing this by making an advance unavailable in these circumstances. This is equivalent to the current situation for people who owe a social security or family assistance debt.

However, an individual who has repaid a debt he or she may have had at the start of an FTB advance 'standard advance period' (which would have precluded the advance at that point) should be able to get an advance for the remaining period. This extra refinement is also addressed by these amendments.

Explanation of changes

Items 10 to 12 make minor amendments to preclude an FTB advance for certain child support debtors, as described under 'background' above.

Item 10, commencing on 1 January 2006, repeals current subsection 33(1A) of the Family Assistance Administration Act, and substitutes a new subsection (1A) to extend the coverage of paragraph 33(1)(d) in precluding an FTB advance. That will now apply, not only for the existing range of debtors covered by subsection (1A) (notably, family assistance and social security debtors), but also for certain child support debtors. These child support debtors are individuals who are currently having their FTB instalments reduced under section 227 of the Family Assistance Administration to recover debts as required under section 72AB of the Child Support (Registration and Collection) Act 1988.

Items 11 and 12, commencing on Royal Assent, insert a new subsection 33(2A) to alter the meaning of the individual's 'advance assessment day' for the purposes of the FTB advance entitlement in these circumstances. This will ensure that an individual who has repaid a debt he or she may have had at the start of an FTB advance 'standard advance period' (which would have precluded the advance at that point) will have access to an advance for the remaining period.

Order of reduction rule for FTB Part B

Summary

An order of reduction rule for FTB Part B will be introduced. The rule specifies the order in which the income test for FTB Part B affects the components of rate.

Background

An individual's Part B rate is calculated using the method statement set out in clause 29 of Schedule 1 if the individual is a member of a couple. The first step is to add together the individual's standard rate and the FTB Part B supplement - the result is the individual's 'maximum rate'. An income test is then applied to the maximum rate to arrive at the individual's Part B rate.

The legislation is silent on how the reduction for income is applied to the components of rate. Amendments are made to introduce a sequential order of reduction whereby any required reduction for income affects the individual's standard rate first and then, if necessary, the individual's FTB Part B supplement.

Explanation of the changes

Clause 29 of Schedule 1 to the Family Assistance Act sets out the overall rate calculation process for FTB Part B. Item 4 amends step 3 in the method statement in clause 29 to ensure that any reduction required under the Part B income test (the 'reduction for adjusted taxable income') affects the components of rate in the following order:

•

standard rate;

•

FTB Part B supplement.

The new sequential order of reduction rule for FTB Part B commences on 1 January 2005 (which coincides with the commencement date for the FTB Part B supplement).

Schedule 4 - Rent assistance amendments

This Schedule is divided into the following Parts:

•

Part 1 - Duplicate rent assistance payments;

•

Part 2 - Rent Certificates.

Each Part is addressed separately below.

Part 1 - Duplicate rent assistance payments

Summary

Amendments are made to ensure that rent assistance cannot be paid as part of both family assistance and social security or veterans' affairs entitlements at the same time.

Background

Duplicate rent assistance payments can occur when a customer receives arrears of FTB Part A that include an amount of rent assistance at a time when they, or their partner, have already received rent assistance with a social security or veterans' entitlements payment. Duplicate payments can also occur where a person, or their partner, is incorrectly paid rent assistance with both their ongoing family assistance and social security or veterans' entitlements payments. Essentially, this means that the customer gets double the rent assistance to which they are otherwise entitled.

Explanation of the changes

This Part addresses duplicate rent assistance payments as follows:

•

by amending the Family Assistance Act to ensure that any rent assistance paid as part of a social security or veterans' entitlements payment in respect of a particular day is taken into account in calculating a customer's entitlement to arrears of FTB Part A in respect of that day; and

•

by amending the social security law and the Veterans' Entitlements Act to ensure that where a customer has an entitlement to rent assistance through the family assistance system, any duplicate payment of rent assistance through the social security system or by the Department of Veterans' Affairs can be recovered, and to make some other related consequential amendments.

Division 1 - Amendments

Amendments to the Family Assistance Act

Schedule 1 to the Family Assistance Act outlines the rate calculation process for FTB. An individual's annual rate of FTB comprises a Part A rate and a Part B rate. An individual's Part A rate can be worked out under method 1 or 2, depending on whether the individual's adjusted taxable income exceeds the higher income free area and whether the individual or the individual's partner is receiving a social security pension, a social security benefit or a service pension.

In accordance with the method statement in clause 3 of Schedule 1, an individual's 'maximum rate' of FTB Part A (method 1) is made up of a number of components including, potentially, rent assistance. The eligibility conditions for rent assistance are, in turn, set out in Division 3 of Part 2 of Schedule 1 to the Family Assistance Act.

Item 3 inserts new clauses 4A and 4B into Schedule 1 to deal with the issue of duplicate rent assistance payments.

In broad terms, new clause 4A outlines an offsetting arrangement to deal with duplicate rent assistance under the family assistance and social security laws.

Subclause 4A(1) outlines the situation in which the offsetting arrangement applies. The situation is where:

•

a social security decision was made to include rent assistance in an individual's or an individual's 'eligible partner's' rate of social security payment for a day (the reference to an eligible partner in this context means an eligible partner on the relevant day);

•

at the time that social security decision was made, there was no family assistance decision that included rent assistance when calculating an individual's Part A rate for that day;

•

a family assistance decision was then made to include rent assistance as part of the individual's Part A rate (this criterion would not be satisfied if the decision involved an increase in the amount of rent assistance already included in the individual's Part A rate); and

•

the relevant day comes before the day on which the family assistance decision was made (ie, the individual is entitled to arrears of FTB including rent assistance).

A note refers the reader to the definition of 'eligible partner' in subclause 4A(5).

An individual is an eligible partner of another individual if they are members of a couple other than an 'illness separated couple', a 'respite care couple' or a 'temporarily separated couple'. The relevant definitions, which cross reference the Social Security Act, are in subsection 3(1) of the Family Assistance Act. The exceptions acknowledge that in some situations members of a couple must live apart and have separate housing costs. In these cases, each member of the couple may receive rent assistance for their respective home and it would be inappropriate to reduce the payment to one member of the couple because their partner is entitled to assistance for a separate home.

Subclause 4A(2) outlines the offsetting rules. Where the conditions in subclause 4A(1) are satisfied, the individual's Part A rate for the relevant day is to be reduced by the 'individual's annual social security RA amount' for the day and then by the 'individual's eligible partner's annual social security RA amount' for that day.

An individual's annual social security RA amount is worked out using the method statement in subclause 4A(3). The process involves working out the individual's actual rate of social security payment for the day (step 1) and the individual's notional rate of social security payment for the day assuming that rent assistance was not included in that calculation of rate (step 2). The difference between the two rates is referred to as the 'individual's daily social security RA amount' for the relevant day (step 3). As the individual's FTB Part A rate for the day is an annual rate and social security rates are daily rates, step 4 converts the individual's daily social security RA amount into an annual amount that can then be subtracted from the annual Part A rate for the day in accordance with subclause 4A(2).

Subclause 4A(4) provides a similar process for calculating the individual's eligible partner's annual social security RA amount for the relevant day.

There are some limits on how much an individual's Part A rate can be reduced under the new offsetting arrangements. These are set out in paragraphs 4A(2)(c) and (d).

Where rent assistance is included in an individual's Part A rate for the first time under an original entitlement determination (for example, a determination under section 17 of the Family Assistance Administration Act that the individual is entitled to be paid FTB for a past period), then the individual's Part A rate can be reduced to nil if appropriate.

Where an individual's Part A rate has been recalculated to include rent assistance, then the individual's Part A rate cannot be reduced to less than the Part A rate as it was immediately before the recalculation. This ensures that only an arrears payment can be subject to reduction.

New clause 4B outlines equivalent offsetting arrangement for duplicate rent assistance under the family assistance and veterans' entitlements laws. There are only minor differences in this provision that reflect different rules that apply under the Veterans' Entitlements Act.

The relevant veterans' entitlements payments (service pension and income support supplement) are annual rates based on a 364 day year. The FTB Part A rate is also an annual rate but based on a 365 day year. The conversion process in step 4 in the method statements in subclauses 4B(3) and (4) ensures that annual rates that are deducted from each other under subclause 4B are similarly based. There are some necessary differences in the labels used in the method statements for similar reasons.

The other difference is in the definition of 'eligible partner' in subclause 4B(5). There is no concept of 'temporarily separated couple' in the Veterans' Entitlements Act and this is reflected in this definition.

Items 1, 2, 4 and 5 make some related and consequential changes.

Item 1 inserts a definition of income support supplement into subsection 3(1) of the Family Assistance Act. The new definition adopts the meaning provided for in the Social Security Act. Item 5 makes a technical amendment to clause 17 as a result of the insertion of this definition.

Item 2 inserts a reference to the new clauses 4A and 4B into clause 3 of Schedule 1. Clause 3 outlines the calculation process for FTB Part A - this process is made subject to the reductions provided for in new clauses 4A and 4B.

Under clause 5 of Schedule 1 to the Family Assistance Act, an individual's Part A rate can be reduced to repay an FTB advance. However, a reduction under clause 5 happens after any relevant reduction is made under clause 4A and/or clause 4B. Item 4 amends clause 5 to reflect this.

Amendments to the Social Security Act

Item 6 inserts a definition of 'Part A rate of family tax benefit' into subsection 23(1) of the Social Security Act and refers to the rate worked out under Part 2 or 3 of Schedule 1 to the Family Assistance Act.

Items 7 to 18 clarify that a person remains qualified for the rent assistance paid as part of their social security entitlement where their amount of FTB has been reduced by the offsetting mechanism in clause in 4A or 4B of Schedule 1 to the Family Assistance Act.

Item 7 repeals and substitutes a new subsection 1070D(3) of the Social Security Act. This provision sets out the specific requirement in relation to a person's qualification for rent assistance as part of a carer payment as well as certain age, disability support and wife pensions. The new specific requirement is that the person, or any partner of the person, should not be in receipt of another payment of rent assistance in conjunction with a payment of FTB, unless clause 4A or 4B of Schedule 1 to the Family Assistance Act applies to reduce the person's, or any partner's, rate of FTB to take the double payment of rent assistance into account, whether or not any reduction in fact occurs.

Item 8 amends section 1070E of the Social Security Act, which sets out the specific requirement for a person to qualify for rent assistance as part of their bereavement allowance, widow B pension and certain parenting payments. The new requirement is that the person's rate of FTB does not include rent assistance or that, if it does, clause 4A of Schedule 1 to the Family Assistance Act applies to reduce the person's rate of FTB to take the double payment of rent assistance into account, whether or not any reduction in fact occurs.

Item 9 amends paragraph 1070F(2)(c) of the Social Security Act, which applies to a single person, including a member of an illness separated couple, respite care couple or a temporarily separated couple who is under 18 years of age. This item amends the specific requirement in relation to a person's qualification for rent assistance as part of certain disability support pensions. The new specific requirement is that the person should not be in receipt of another payment of rent assistance in conjunction with a payment of FTB, unless clause 4A of Schedule 1 to the Family Assistance Act applies to reduce the person's rate of FTB, to take the double payment of rent assistance into account, whether or not any reduction in fact occurs.

Item 10 amends paragraph 1070F(2)(d) of the Social Security Act, which applies to a person who is a member of a couple and is under 18 years of age. This item amends the specific requirement in relation to a person's qualification for rent assistance as part of certain disability support pensions. The new specific requirement is that the person, or the partner of the person, should not be in receipt of another payment of rent assistance in conjunction with a payment of FTB, unless clause 4A or 4B of Schedule 1 to the Family Assistance Act applies to reduce the person's, or their partner's, rate of FTB, to take the double payment of rent assistance into account, whether or not any reduction in fact occurs.

Item 11 amends paragraph 1070F(3)(c) of the Social Security Act, which applies to a single person, including a member of an illness separated couple, respite care couple or a temporarily separated couple, who is 18 years of age or over. This item amends the specific requirement in relation to a person's qualification for rent assistance as part of certain disability support pensions. The new specific requirement is that the person should not be in receipt of another payment of rent assistance in conjunction with a payment of FTB, unless clause 4A of Schedule 1 to the Family Assistance Act applies to reduce the person's rate of FTB, to take the double payment of rent assistance into account, whether or not any reduction in fact occurs.

Item 12 amends paragraph 1070F(3)(d) of the Social Security Act, which applies to a person who is a member of a couple and who is 18 years of age or over. This item amends the specific requirement in relation to a person's qualification for rent assistance as part of certain disability support pensions. The new specific requirement is that the person, or the partner of the person, should not be in receipt of another payment of rent assistance in conjunction with a payment of FTB, unless clause 4A or 4B of Schedule 1 to the Family Assistance Act applies to reduce the person's, or the partner's, rate of FTB, to take the double payment of rent assistance into account, whether or not any reduction in fact occurs.

Item 13 amends paragraph 1070G(1)(c) of the Social Security Act, which applies to a single person or a person who is a member of an illness separated couple, respite care couple or a temporarily separated couple. This item amends the specific requirement in relation to a person's qualification for rent assistance as part of youth allowance. The new specific requirement is that the person should not be in receipt of another payment of rent assistance in conjunction with a payment of FTB, unless clause 4A of Schedule 1 to the Family Assistance Act applies to reduce the person's rate of FTB, to take the double payment of rent assistance into account, whether or not any reduction in fact occurs.

Item 14 amends paragraph 1070G(1)(d) of the Social Security Act, which applies to a person who is a member of a couple. This item amends the specific requirement in relation to a person's qualification for rent assistance as part of youth allowance. The new specific requirement is that the person, or the partner of the person, should not be in receipt of another payment of rent assistance in conjunction with a payment of FTB, unless clause 4A or 4B of Schedule 1 to the Family Assistance Act applies to reduce the person's, or the partner's, rate of FTB, to take the double payment of rent assistance into account, whether or not any reduction in fact occurs.

Item 15 amends paragraph 1070H(2)(c) of the Social Security Act, which applies to a single person, including a person who is a member of an illness separated couple, respite care couple or a temporarily separated couple. This item amends the specific requirement in relation to a person's qualification for rent assistance as part of mature age allowance under Part 2.12B of the Social Security Act, newstart allowance, partner allowance, sickness allowance and widow allowance. The new specific requirement is that the person should not be in receipt of another payment of rent assistance in conjunction with a payment of FTB, unless clause 4A of Schedule 1 to the Family Assistance Act applies to reduce the person's rate of FTB, to take the double payment of rent assistance into account, whether or not any reduction in fact occurs.

Item 16 amends paragraph 1070H(2)(d) of the Social Security Act, which applies to a person who is a member of a couple. This item amends the specific requirement in relation to a person's qualification for rent assistance as part of mature age allowance under Part 2.12B of the Social Security Act, newstart allowance, partner allowance, sickness allowance and widow allowance. The new specific requirement is that the person, or the partner of the person, should not be in receipt of another payment of rent assistance in conjunction with a payment of FTB, unless clause 4A or 4B of Schedule 1 to the Family Assistance Act applies to reduce the person's, or the partner's, rate of FTB, to take the double payment of rent assistance into account, whether or not any reduction in fact occurs.

Item 17 amends paragraph 1070J(b) of the Social Security Act, which applies to a person who is a member of an illness separated couple, respite care couple or a temporarily separated couple. This item amends the specific requirement in relation to a person's qualification for rent assistance as part of certain parenting payments. The new specific requirement is that the person should not be in receipt of another payment of rent assistance in conjunction with a payment of FTB, unless clause 4A of Schedule 1 to the Family Assistance Act applies to reduce the person's rate of FTB, to take the double payment of rent assistance into account, whether or not any reduction in fact occurs.

Item 18 amends paragraph 1070J(c) of the Social Security Act, which applies to a person who is a member of a couple. This item amends the specific requirement in relation to a person's qualification for rent assistance as part of certain parenting payments. The new specific requirement is that the person, or the partner of the person, should not be in receipt of another payment of rent assistance in conjunction with a payment of FTB, unless clause 4A or 4B of Schedule 1 to the Family Assistance Act applies to reduce the person's, or the partner's, rate of FTB, to take the double payment of rent assistance into account, whether or not any reduction in fact occurs.

Amendment to the Social Security Administration Act

Item 19 inserts new subsection 118(12A) into the Social Security Administration Act. This provision deals with the date of effect of an adverse determination. This new subsection applies where a person is receiving a social security payment that includes rent assistance as a component, contrary to Part 3.7 of the Social Security Act, which precludes a person from receiving a payment of rent assistance in conjunction with a social security payment where that person, or their partner, is already receiving rent assistance as a component of their FTB payment (see, in particular, Division 2 of Part 3.7). This new provision applies so that, where such a situation is detected and a new determination is made in relation to the person's rate of social security payment, which removes the payment of rent assistance from the person's rate of social security payment, this determination can be backdated to the start of any period where the person, or their partner, was receiving rent assistance through both the social security and family assistance systems.

Amendments to the Veterans' Entitlement Act 1986

Item 20 inserts a listing in the section 5 index of definitions for the placement of the definition of 'maximum Part A rate of family tax benefit' in subsection 5F(1).

Item 21 inserts a definition of the term 'maximum Part A rate of family tax benefit' into subsection 5F(1). The 'Part A rate of family tax benefit' is defined as the Part A rate of family tax benefit worked out in step 1 of the method statement in clause 3 of Schedule 1 to the Family Assistance Act.

Item 22 amends subsection 56H(3) by replacing the reference to subsection 56H(8) and substituting a reference to subsections 56H(8), (9) and (10).

Subsection 56H(3) provides that an adverse determination not taking effect on the day that it is made has to take effect on a later day. However, an exception can be made in certain circumstances so that the date of effect may be earlier than the date the determination is made.

The amendment adds a reference to subsections 56H(9) and (10) to the list of exceptions that will allow for an earlier date of effect for an adverse determination.

Item 23 inserts new subsections 56H(9) and (10). The combined effect of the new subsections is to provide that the date of effect of a determination to either reduce or cancel the rate of service pension or income support supplement payable to a person who has received a duplicate payment of rent assistance will be the first day of the period in which duplicate rent assistance was received.

New subsection 56H(9) sets out the three conditions to be met for such a determination to be made. The first condition is that there has been a decision (referred to as the 'veterans' entitlements decision') to include rent assistance in the person's service pension or income support supplement for the period.

The second condition set out in subsection 56H(10) must be met for each day of the period.

The final condition is that the adverse determination to reduce or cancel the person's rate of service pension or income support supplement arises because the person was ineligible for rent assistance as part of the person's rate of service pension or income support supplement.

In these circumstances, the person was ineligible for rent assistance because point SCH6-C3 precludes the payment where the person or the person's partner's maximum Part A rate of FTB includes rent assistance and the FTB rent assistance is not reduced by rent assistance payable under social security law or the Veterans' Entitlement Act.

New subsection 56H(10) sets out in paragraphs (a), (b) and (c) the circumstances in which the second condition referred to in subsection 56H(9) will be satisfied for each day of the period for which duplicate rent assistance was payable.

Paragraph 56H(10(a) is applicable for the period in which a person was a member of a couple other than an illness separated couple or a respite care couple and, when the decision to include rent assistance in the person's service pension or income support supplement was made, a determination was in force that rent assistance was to be included in the person's or the person's partner's Part A rate of FTB.

Paragraph 56H(10)(b) is applicable for the period in which a person was not a member of a couple or was a member of either an illness separated couple or a respite care couple and, when the decision to include rent assistance in the person's service pension or income support supplement was made, a determination was in force that rent assistance was to be included in the person's Part A rate of FTB.

Paragraph 56H(10)(c) is applicable in the circumstances where neither paragraph 56H(10)(a) or (b) applies. It provides that the second condition in subsection 56H(9) is met if the decision to include rent assistance in the Part A rate of FTB is made after the decision to include rent assistance in the payment of service pension or income support supplement and the period for which duplicate rent assistance was payable either commenced on the day the determination was made or on a later day.

Item 24 repeals and substitutes paragraph SCH6-C3(f). Point SCH6-C3 provides the requirements to be met before a person will be eligible for rent assistance to be included in their service pension or income support supplement.

Repealed paragraph SCH6-C3(f) had provided that a person would not be eligible for rent assistance where either the person or the person's partner was entitled to be paid FTB and the Part A component of the FTB included rent assistance.

New paragraph SCH6-C3(f) provides that rent assistance will be payable to a person if, in addition to satisfying paragraphs SCH6-C3(a) to (e), the person also satisfies the requirements of either point SCH6-C3A or SCH6-C3B.

Item 25 inserts new points SCH6-C3A and SCH6-C3B.

New point SCH6-C3A is applicable to a person entitled to be paid FTB who is not a member of a couple other than an illness separated couple or a respite care couple.

It provides that a person will be eligible for rent assistance where the person is entitled to be paid FTB and the Part A component of the FTB does not include rent assistance. It also provides that a person will also be eligible for rent assistance where rent assistance has been included in the Part A component of the FTB and clause 4B of Schedule 1 to the Family Assistance Act has been applied to reduce the person's Part A rate of FTB.

New point SCH6-C3B is applicable to a person who a member of a couple other than an illness separated couple or a respite care couple and who is entitled to be paid FTB or whose partner is entitled to be paid FTB.

It provides that a person will be eligible for rent assistance where the person or the person's partner is entitled to be paid FTB and the Part A component of the FTB does not include rent assistance. It also provides that a person will be eligible for rent assistance where rent assistance has been included in the Part A component of the FTB and either clause 4A or 4B of Schedule 1 to the Family Assistance Act has been applied to reduce the person's or the person's partner's Part A rate of FTB.

Division 2 - Application of Amendments

Item 26 provides an application provision for the substantive amendments made to the Family Assistance Act (items 2 to 4 of Division 1) to deal with the issue of duplicate payments of rent assistance.

The relevant amendments will apply to a decision made after commencement (the later of 1 July 2005 or Royal Assent) to make or vary a determination to include rent assistance when calculating an individual's Part A rate for a day that occurs before or after commencement. This means that, following the commencement date, when a decision is made to pay arrears of FTB that include rent assistance, an adjustment may be made for amounts of rent assistance already paid with a social security or veterans' entitlements payment.

Item 27 provides an application provision for the amendments made to the Social Security Act (items 7 to 18) that deal with the issue of duplicate payments of rent assistance.

The relevant amendments will apply to a decision made after commencement (the later of 1 July 2005 or Royal Assent) to make or vary a determination to include rent assistance when calculating an individual's rate of social security entitlement for a day that occurs before or after commencement.

Item 28 provides an application provision for the amendment made to the Social Security Administration Act (item 19) that deals with the issue of duplicate payments of rent assistance.

The relevant amendment will apply to an adverse determination made after commencement (the later of 1 July 2005 or Royal Assent) that reduces the rate of, or cancels, a person's social security payment in regard to a day that occurs after commencement.

Item 29 provides an application provision for the amendments made to the Veterans' Entitlements Act (items 22 and 23 of Division 1) that deals with the issue of duplicate payments of rent assistance.

The relevant amendment will apply to an adverse determination made after commencement (the later of 1 July 2005 or Royal Assent) that reduces the rate of, or cancels, a person's service pension or income support supplement in regard to a day that occurs after commencement.

Item 30 provides an application provision for the amendments made to the Veterans' Entitlements Act (items 24 and 25 of Division 1) that deals with the issue of duplicate payments of rent assistance.

The relevant amendments will apply to a decision made after commencement (the later of 1 July 2005 or Royal Assent) to make or vary a determination to include rent assistance when calculating an individual's rate of service pension or income support supplement for a day that occurs before or after commencement.

Part 2 - Rent certificates

Summary

Amendments are made to provide for cancellation of the rent assistance portion of a person's FTB or social security payment for failing to submit a rent certificate review (rather than cancellation of the whole payment as currently provided).

Background

Rent assistance is an amount added to a person's standard rate of FTB Part A, or to a person's maximum basic rate of social security payment, to assist low-income customers with their home rental costs. It is not a separate payment in its own right, but there are qualification/eligibility and rate provisions for rent assistance that are separate to the similar provisions for the customer's main payment.

A customer's ongoing entitlement to rent assistance is reviewed regularly, using a system of rent certificates, which gathers information necessary to confirm the customer's ongoing entitlement to, and rate of, rent assistance.

The legislation as it stands permits the suspension or cancellation of the customer's whole FTB or social security payment for failure to return a rent certificate as required. However, a more appropriate response would be to allow the suspension or cancellation of the rent assistance alone. Technically, this means that the customer's total rate of FTB or social security payment should be reduced by no longer adding rent assistance as part of the rate calculation for the whole payment. Any remaining components of the total rate should continue to be paid.

This measure ensures that the less onerous response of a rate reduction is available if a customer should fail to give the necessary information via their rent certificate.

Explanation of changes

Items 31 to 35 give effect to this measure in relation to FTB paid by instalment, and items 36 to 41 in relation to social security payments.

Amendments to the Family Assistance Administration Act

Item 31 inserts a new subsection 29(2A) into the Family Assistance Administration Act. This will provide a new rate reduction capacity if a claimant fails to give required information or documents that relate to eligibility for, or the amount of, rent assistance (ie, fails to return the rent certificate). This is an alternative to the existing capacity in subsection 29(2) to reduce the claimant's entitlement to nil for failure to give required information or documents. For a relatively small number of claimants, whose rate of FTB without rent assistance would be nil because of the income test, the existing capacity to reduce the entitlement to nil will remain the most appropriate response. Generally, however, new subsection 29(2A) will provide the correct outcome in these cases, which is to allow the reduction of the claimant's rate of FTB to a rate that does not add rent assistance to the standard rate of FTB Part A as part of the overall rate calculation.

The rate reduction will take effect from the beginning of the instalment period in which the rate reduction variation takes place, or from a later specified day.

Item 32 makes sure that subsection 29(3) applies to the new rate reduction variation as well as to the existing nil entitlement variation under section 29. Therefore, if the claimant eventually gives the rent certificate, after the rate reduction but before the end of the following income year, the rate reduction variation must be further varied to undo the rate reduction. That is, the former rate would be restored. If it were then necessary to change the rate as a result of the information gained from the rent certificate (either to reflect a different amount of rent assistance being added in the rate calculation or to withdraw rent assistance altogether), a further variation under section 31 would be necessary.

Items 33, 34 and 35 make minor refinements to subsections 31(3), 31A(3) and 31B(3) respectively of the Family Assistance Administration Act. These subsections currently identify a series of variation provisions (including section 29) that are capable of varying a claimant's entitlement to nil and that might otherwise clash with a variation under one of sections 31, 31A and 31B that would, instead, have the effect that the claimant is entitled. In that case, any variation under one of the identified series of variation provisions will prevail over a variation under section 31, 31A or 31B.

The purpose of these amendments is to maintain the current effect of these prevalence provisions by making sure that the rule as it applies to section 29 is restricted to the existing, nil entitlement variation capacity in subsection 29(2). Because the rate reduction variation capacity in new subsection 29(2A) will not clash with any 'entitled' variation capacity in section 31, 31A or 31B, there is no need for a variation under new subsection 29(2A) to prevail over an 'entitled' variation under section 31, 31A or 31B, nor vice versa.

Amendments to the Social Security Administration Act

Item 36 inserts a new section 81A into the Social Security Administration Act. This provides a rate reduction alternative to the cancellation or suspension capacity already present for social security payments in section 81. The new rate reduction capacity will apply if a person whose social security payment is currently calculated to include rent assistance fails to give a required statement, information or document that relates to qualification for, or amount of, rent assistance (ie, fails to return the rent certificate).

Through the amendment made by item 40, this rate reduction will take effect under the existing rules for adverse determinations. Therefore, subsection 118(12) of the Social Security Administration Act would apply so that the rate reduction would apply from the date of the reduction determination or a later specified day.

Item 37 inserts a new section 85A. This provides a new rule allowing the person's rate of social security payment to be increased if he or she subsequently gives the rent certificate and if the information gained from it suggests that the rate of social security payment that is being, or has been, paid is lower than the social security law provides. The rate in these circumstances would be increased to reflect the person's correct entitlement in light of the rent certificate information, and not necessarily to the previous rate. This new rule is equivalent to existing section 85, which allows resumption of payment following cancellation or suspension of a person's whole social security payment under section 81 (among other provisions).

Similarly, the same date of effect rules would apply to the new section 85A as apply to section 85, through the amendment made by item 39 to include the new section within the favourable determination date of effect rules. Therefore, section 114 would generally provide for the rate increase to take effect from the date of the increase determination, or a later specified day, or a specified day that is up to 13 weeks earlier. Alternatively, if the rate increase were to be triggered by the person applying for review of the rate reduction determination, section 109 would provide the date of effect rules, including allowing for backdating if the review was sought within 13 weeks of the decision being notified. These rules will accommodate the policy of backdating a person's rate increase in these circumstances if the rent certificate is given within 13 weeks after it was originally required to be given.

Item 38 changes a relevant subdivision heading to refer to new sections 81A and 85A. Item 41 amends paragraph 123(3)(a) so that a determination made under either of the new sections correctly brings to an end whatever previous rate determination was in effect for the person. The new rate determination will then remain in effect until brought to an end by a further rate determination or the operation of another specified provision of the social security law.