House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Minister for Families, Housing, Community Services and Indigenous Affairs, the Hon Jenny Macklin MP)

SOCIAL SECURITY AND FAMILY ASSISTANCE LEGISLATION AMENDMENT (2009 BUDGET MEASURES) BILL 2009

OUTLINE

This bill gives effect to a number of measures announced as part of the 2009 Budget.

Carer supplement

A new ongoing payment, carer supplement, will be introduced into the social security law.

A person will be qualified for carer supplement if the carer is qualified for and receives an instalment of a qualifying payment. The qualifying payments are carer allowance, carer payment and Department of Veterans' Affairs carer service pension. A person who receives wife pension or Department of Veterans' Affairs partner service pension as well as carer allowance will also be eligible for carer supplement.

Around 500,000 carers are expected to benefit each year.

In 2009, carer supplement will be paid to people who received a qualifying payment for the period including 12 May 2009.

From 1 July 2010, carer supplement will be paid to people who receive a qualifying payment for a period which includes the test day (1 July) each year.

The amount of carer supplement payable in relation to a single qualifying instalment will be $600. A person can be eligible for more than one amount of $600 as part of their carer supplement.

Carer supplement will not be indexed.

Indexation

Amendments are made to the indexation arrangements for certain family assistance income threshold amounts so that these amounts are not indexed on 1 July of 2009, 2010 and 2011. The relevant income threshold amounts are the higher income free area for family tax benefit (FTB) Part A (both the basic amount and the additional amount for each FTB child after the first), the FTB Part B income limit and the baby bonus income limit. Indexation will again occur in accordance with the usual rules on 1 July 2012.

Financial impact statement

Carer supplement

Indexation

NOTES ON CLAUSES

Clause 1 sets out how the Act is to be cited, that is, as the Social Security and Family Assistance Legislation Amendment (2009 Budget Measures) Act 2009.

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Clause 3 provides that each Act that is specified in a Schedule is amended or repealed as set out in that Schedule.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

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

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'FTB' means family tax benefit;

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

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

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

Schedule 1 - Carer supplement

Summary

A new ongoing payment, carer supplement, will be introduced into the social security law.

A person will be qualified for carer supplement if the carer is qualified for and receives an instalment of a qualifying payment. The qualifying payments are carer allowance, carer payment and Department of Veterans' Affairs carer service pension. A person who receives wife pension or Department of Veterans' Affairs partner service pension as well as carer allowance will also be eligible for carer supplement.

Around 500,000 carers are expected to benefit each year.

In 2009, carer supplement will be paid to people who received a qualifying payment for the period including 12 May 2009.

From 1 July 2010, carer supplement will be paid to people who receive a qualifying payment for a period which includes the test day (1 July) each year.

The amount of carer supplement payable in relation to a single qualifying instalment will be $600. A person can be qualified for more than one amount of $600 as part of their carer supplement.

For example, a person may be qualified for and receive an instalment of both carer allowance and wife pension during a period which includes the test day. The person will receive carer supplement both in respect of carer allowance, and in respect of wife pension and carer allowance, giving a total of $1,200. A person may receive an amount of $600 in respect of each care receiver for whom the carer receives carer allowance. For example, if a person receives carer allowance in respect of three children as well as carer payment, then the person will receive a total of $2,400 in carer supplement. However, a person will only receive one payment of $600 in relation to their receipt of carer payment.

Carer supplement will not be indexed.

Background

Since 2004, ad hoc bonus provisions have been introduced each year to provide one-off assistance to carers. However, this assistance has not been ongoing.

The Government examined ways to provide greater security to carers and, as a result, has introduced the carer supplement as an ongoing supplement to alleviate some of the financial pressures on carers.

The carer supplement is part of the secure and sustainable Pension Reform package announced as part of the 2009-10 Budget.

Explanation of changes

Part 1 - Main amendments

Amendments of the Social Security Act

Item 1 inserts a definition of carer supplement into subsection 23(1) and provides that it means carer supplement under Part 2.19B.

Item 2 inserts a new Part 2.19B after Part 2.19A.

New section 992X sets out how a person's qualification for carer supplement is determined in 2009 and later years. Subsection (1) provides that the test day for determining a person's eligibility is 12 May 2009, and then 1 July in each year from 2010. A note clarifies that there may be more than one qualifying instalment for a person. Subsection (2) sets out how the amount of carer supplement payable to a person is determined. For recipients of carer allowance, a person receives an amount of carer supplement for each eligible care receiver (a term which is defined in subsections (4) and (5)). Recipients of carer allowance who also receive wife pension or partner service pension (qualification for which is determined under the Veterans' Entitlement Act) will receive a further amount of carer supplement. Recipients of carer payment or carer service pension (which is defined in subsection (6)), will receive one amount of carer supplement.

Subsection (5) provides that, if the person was eligible for carer allowance under subsection 953(2) in relation to two disabled children, the two children are to be treated as a single eligible care receiver, with the result that the person caring for them is only qualified for a single amount of carer supplement. Subsection 953(2) deals with entitlement to carer allowance in relation to two children, where neither child alone has a score on the Child Disability Assessment Tool to entitle his or her carer to carer allowance, but the children's total score under the Child Disability Assessment Tool means that the person is qualified for one payment of carer allowance.

It is intended that a person may be qualified for more than one amount of carer supplement.

Subsection 981(1) provides that the Secretary may determine that two people are each qualified for carer allowance for a particular care receiver or care receivers, and specify the share of the carer allowance for the care receiver or care receivers that each of the two people is to receive. Paragraph 992X(3)(b) provides that carer supplement is to be split in the same way as a determination made under subsection 981(1), if any, splitting carer allowance. Only carer allowance may be split; this provision does not affect carer payment, wife pension, carer service pension or partner service pension.

Item 3 inserts an item into the table in subsection 1222(2) about the new debt provisions inserted by item 4. Section 1222 provides an outline of how debts are dealt with.

Item 4 inserts new sections after section 1223ABB. The new sections deal with debts in relation to carer supplement.

New section 1223ABC deals with when debts arise in relation to payments of carer supplement made in respect of 12 May 2009. Consistently with bonuses paid in previous years, section 1223ABC provides that a payment of carer supplement will only become a debt if there is evidence that the person made a false or misleading statement or knowingly provided false information. Because a person will not actually claim carer supplement, the false or misleading statement or provision of false information will relate to the person's carer allowance, carer payment, wife pension, carer service pension or partner service pension. The false or misleading statement or knowingly false information must be one of the reasons why a determination is made revoking, setting aside or superseding the earlier determination.

For example, a person provides information which indicates that the person should be qualified for carer payment, and that carer payment should be payable to the person, and the Secretary makes a determination to that effect. However, later investigations reveal that the person knowingly provided false information about his or her income, such that carer payment should not have been payable to the person. The Secretary makes a determination cancelling the person's carer payment from a particular date prior to 12 May 2009. The person's carer supplement paid in respect of 12 May 2009 would become a debt (see subsection 1223ABC(2)).

In another example, the person received carer payment, but was also qualified for and received carer allowance, and therefore received $1,200 in carer supplement. The person knowingly provided false information about his or her carer payment, but the false information only affected his or her carer payment and not carer allowance. Therefore $600 (the part of carer supplement related to carer payment) of the total carer supplement payment of $1,200 would become a debt (see subsection 1223ABC(3)).

Subsection 1223ABC(4) provides that the total debt in relation to carer supplement cannot exceed the amount of carer supplement paid to the person.

Subsection 1223ABC(5) provides that normal debt arrangements do not apply, except for a debt which arises when a person other than the intended recipient receives a cheque for a social security payment, and manages to obtain value from that cheque.

New section 1223ABD deals with debts in respect of carer supplement for 2010 and later years. Because carer supplement will be an ongoing payment, and eligibility will be tested each 1 July from 2010, the debt arrangements are consistent with treatment of other debts under the social security law.

Section 1223ABD applies when a person's instalment of carer allowance, carer payment or carer service pension (or a person's instalment of wife pension or partner service pension which affects the amount of carer supplement paid) has become a debt (called the primary debt ). Subsection 1223ABD(2) provides that, if the carer supplement, or a part of it, would not have been paid if the circumstances which gave rise to the primary debt had not existed, then the carer supplement, or part of it, is also a debt due to the Commonwealth. For example, a person received carer payment and two amounts of carer allowance, and thus received $1,800 as carer supplement. However, it was later shown that the person was only qualified for one amount of carer allowance, and one payment of carer allowance became a debt. In that situation, $600 of the carer supplement would also become a debt.

Subsection (3) provides that, if the carer supplement debt arose as a result of failure to take a splitting determination in relation to carer allowance under subsection 981(1) into consideration, the amount of carer supplement a person would not have received had the splitting determination been taken into consideration becomes a debt.

Subsection (4) provides that debts which arise under section 1223ABD, whether under subsection (2) or (3), may be consolidated, but any carer supplement debt will not be greater than the amount of carer supplement originally paid to the person.

A reduction in the amount of a qualifying payment paid to a person will not result in carer supplement becoming a debt. So long as the person received an amount of a qualifying payment during a period which includes the test day, the person is qualified for carer supplement.

Amendments of the Social Security Administration Act

Item 5 inserts section 12G, which provides that a claim is not required for carer supplement.

Item 6 inserts reference to carer supplement into subsection 47(1), which sets out the definition of lump sum benefit . The inclusion of carer supplement in the definition of lump sum benefit will mean that carer supplement can be paid to a person's payment nominee, if a payment nominee has been appointed.

Item 7 inserts new section 47AB, which provides that, if a person is qualified for carer supplement for a year, the Secretary must pay the carer supplement in a lump sum to the person on the earliest practicable date or dates and in the manner the Secretary considers appropriate.

Carer supplement will be a payment that may be subject to income management. Carer supplement will be treated in the same way as child disability assistance for the purposes of income management relating to child protection, school enrolment and attendance and the Queensland Commission. As the new carer supplement is an annual lump sum payment, 100 per cent of the payment would be subject to income management under the rules relating to the Northern Territory, consistent with the treatment of annual family tax benefit lump sums and social security advances.

This effect is achieved by items 8 to 12, which insert references to carer supplement into the definitions of category C welfare payment, category G welfare payment, category I welfare payment, category Q welfare payment and category S welfare payment in section 123TC of the Social Security Administration Act.

Part 2 - Related amendments

Amendments of the Income Tax Assessment Act 1997

Carer supplement will be exempt from income tax. Items 14 and 15 make amendments to section 52-10 of the Income Tax Assessment Act 1997 to achieve this effect.

Item 13 makes a consequential amendment to the table in section 11-15 to add a reference to carer supplement.

Schedule 2 - Indexation

Summary

Amendments are made to the indexation arrangements for certain family assistance income threshold amounts so that these amounts are not indexed on 1 July of 2009, 2010 and 2011. The relevant income threshold amounts are the higher income free area for FTB Part A (both the basic amount and the additional amount for each FTB child after the first), the FTB Part B income limit and the baby bonus income limit. Indexation will again occur in accordance with the usual rules on 1 July 2012.

Background

Higher income free area

Clause 1 of Schedule 1 to the Family Assistance Act outlines the overall rate calculation process for FTB. There are three different rate calculation processes for FTB Part A, depending on the individual's circumstances and their family income (whether or not the individual's adjusted taxable income exceeds the individual's higher income free area).

The concept of a higher income free area is then defined in clause 2 of Schedule 1. An individual's higher income free area is the basic amount ($94,316) plus an additional amount ($3,796) for each FTB child of the individual after the first.

The amounts that may comprise an individual's higher income free area are indexed annually on 1 July of each year in accordance with movements in the Consumer Price Index (CPI). The relevant indexation provisions are items 11 and 12 in the table in clause 2 of Schedule 4 to the Family Assistance Act (which identify the amounts and provide abbreviations for them) and Part 2 of Schedule 4, including items 11 and 12 in the table in subclause 3(1), which provide for CPI indexation of these amounts.

The indexation arrangements for the amounts that comprise the higher income free area are amended so that these amounts are not indexed on 1 July of 2009, 2010 and 2011.

FTB Part B income limit

Under clause 28B of Schedule 1 to the Family Assistance Act, an individual's FTB Part B rate is nil if the adjusted taxable income of the primary earner is more than $150,000. This rule does not apply if the individual or their partner is receiving a social security pension or benefit or a veterans' service pension or income support supplement.

This income limit of $150,000 for FTB Part B is indexed in accordance with the CPI on 1 July of each year. The relevant indexation provisions are item 17AA in the table in clause 2 of Schedule 4 to the Family Assistance Act (which identifies this amount and provides an appropriate abbreviation) and Part 2 of Schedule 4, including item 17AA in the table in subclause 3(1), which provides for CPI indexation of the amount.

The indexation arrangements for the FTB Part B income limit are amended so that this amount is not indexed on 1 July of 2009, 2010 and 2011.

Baby bonus income limit

The eligibility requirements for baby bonus are set out in section 36 of the Family Assistance Act. For each of the different categories of eligibility, there is a requirement that the individual provide, in their claim for baby bonus, an estimate of adjusted taxable income for the individual and their partner (if any) for the relevant six month period, that the estimate be less than or equal to $75,000 and be an estimate that the Secretary considers to be reasonable.

This income limit of $75,000 for baby bonus is indexed in accordance with the CPI on 1 July of each year. The relevant indexation provisions are item 17AAA in the table in clause 2 of Schedule 4 to the Family Assistance Act (which identifies this amount and provides an appropriate abbreviation) and Part 2 of Schedule 4, including item 17AAA in the table in subclause 3(1), which provides for CPI indexation of the amount.

The indexation arrangements for the baby bonus income limit are amended so that this amount is not indexed on 1 July of 2009, 2010 and 2011.

Explanation of the changes

Item 1 inserts a new subclause 3(7) into Schedule 4 to the Family Assistance Act. This new provision prevents indexation of specified amounts from occurring on 1 July of 2009, 2010 and 2011.

The specified amounts are:

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FTB basic HIFA (A) - which is the basic higher income free area amount;

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FTB additional HIFA (A) - which is the additional amount of the higher income free area for each FTB child of the individual after the first;

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FTB income limit (B) - which is the FTB Part B income limit; and

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baby bonus income limit.

The existing indexation rules will again apply on 1 July 2012 to ensure that these amounts are CPI indexed on that date and on each 1 July thereafter.

This change commences on 30 June 2009.