House of Representatives

Further Supplementary Explanatory Memorandum

(Circulated by authority of the Minister for Community Services, the Hon Larry Anthony MP)

Outline and financial impact statement

These amendments provide for two new measures relating to family tax benefit (FTB) and change the commencement provisions for some of the measures in the Bill, in light of the delayed passage of the Bill.

Waiver of FTB eligibility

The first new measure builds on the existing rule in the FTB provisions that prevents a child from being an FTB child of an individual who has less than 10% care of the child. The new measure will retain the 10% care threshold, but will provide further rules to allow a non-resident parent, who may be entitled to receive part of an FTB entitlement on the basis of care for the child of between 10% and 30%, to waive his or her eligibility for FTB for a period. This will allow the resident parent to receive the full amount of FTB for the child for the period.

Recovery from FTB of amounts of a persons child support debt

The second new measure relates to a person who has failed to pay, by the due date, a child support debt of the person in respect of one or more children, and who is also entitled to be paid FTB, by instalment or for a past period, for those children. In that case, the Child Support Registrar will have the discretion to require that that FTB be paid to the Registrar by the Secretary (to the Department of Family and Community Services) in whole or partial satisfaction of the child support debt.

Changed commencement dates

The measures in the Bill for which the commencement dates will change (due to the delayed passage of the Bill) are:

•

lower child support percentages for children with whom liable parent has 10% to 30% contact (Schedule 1) - now to commence on 1 July 2002 (formerly 1 July 2001);

•

lower cap on income subject to child support formula assessment (Schedule 2) - now to commence on 1 January 2002 (formerly 1 January 2001); and

•

income earned for the benefit of resident children (Schedule 3) - now to commence on Royal Assent (formerly 1 January 2001).

The commencement dates for all other measures in the Bill are not to change. The changed dates mean that the costing for the package of measures in the Bill has changed.

Notes on amendments

Amendments 1 to 6 change the commencement provisions in the Bill for three of the Budget measures, due to the delayed passage of the Bill. The measures in the Bill for which the commencement dates will change are:

•

lower child support percentages for children with whom liable parent has 10% to 30% contact (Schedule 1) - now to commence on 1 July 2002 (formerly 1 July 2001);

•

lower cap on income subject to child support formula assessment (Schedule 2) - now to commence on 1 January 2002 (formerly 1 January 2001); and

•

income earned for the benefit of resident children (Schedule 3) - now to commence on Royal Assent (formerly 1 January 2001).

The commencement dates for all other measures in the Bill are not to change.

These commencement changes will themselves commence on Royal Assent.

The remaining amendments add a new Part 2, containing items 18 to 26 , to the end of Schedule 1 to the Bill. The new items are not directly related to the rest of Schedule 1.

Amendment 7 reorders all of the original amendments contained in Schedule 1 into Part 1 of the Schedule.

Amendment 8 inserts the new Part 2, containing new items 18 to 26 , providing variously for both new measures.

The first new measure introduced by these amendments relates to the waiver of FTB eligibility and is addressed by items 18 to 21 .

Item 20 inserts into the A New Tax System (Family Assistance) Act 1999 new subsections 25(1A), (1B), (1C) and (1D). These new subsections do not change the 10% care threshold that is already provided by section 25, but provide additional rules that allow a non-resident parent who has between 10% and 30% care of a child to waive, by written declaration, eligibility for FTB in respect of the child for a nominated period.

New subsection 25(1A) applies if the following requirements are all met:

•

there has been, or will be, a pattern of care in relation to a child during which the child was, or will be, an FTB child of more than one individual;

•

one of the individuals makes, or has made, a claim for FTB in respect of the child for some or all of the period of the pattern of care;

•

that claiming individual had, or will have, care of the child for not less than 10%, but less than 30%, of the period; and

•

that individual makes a written declaration waiving his or her eligibility for FTB in respect of the child for a nominated period.

In this case, the child is taken not to be an FTB child of that individual for the nominated period.

New subsection 25(1B) applies if the following requirements are all met:

•

there has been, or will be, a pattern of care in relation to a child during which the child was, or will be, an FTB child of more than one individual;

•

the Secretary is satisfied that, if one of the individuals were to claim FTB in respect of the child for some or all of the period of the pattern of care, the Secretary would be satisfied that that claiming individual would have had, or would have, care of the child for not less than 10%, but less than 30%, of the period; and

•

that individual makes a written declaration waiving his or her eligibility for FTB in respect of the child for a nominated period.

In this case, the child is taken not to be an FTB child of that individual for the nominated period.

New subsection 25(1B) allows an individual who has not previously claimed FTB to waive eligibility for FTB without having to claim payment first. This contrasts with new subsection 25(1A), which covers an individual who has previously claimed FTB and who subsequently wishes to waive eligibility.

New subsection 25(1C) enables an individual to revoke such a declaration to waive eligibility.

New subsection 25(1D) provides that a written declaration or a revocation must be made in a form and manner required by the Secretary.

The heading to section 25 is also amended to reflect the new scope of the provision.

Item 21 makes consequential amendments to ensure that subsections 25(2) and (3) apply to individuals covered by new subsections 25(1A) and (1B), as well as to individuals covered by existing subsection 25(1).

Items 18 and 19 also make consequential amendments. Both add to existing references to subsection 25(1), reference to new subsections 25(1A) and (1B) - again, the same treatment should apply to all cases covered by section 25. Item 18 does this to the definition in subsection 3(1) of FTB child for child care benefit purposes, and item 19 amends paragraph 22(7)(c) relating to a pattern of care.

This first new measure will commence on 1 December 2001, or (should Royal Assent not be given on or before that date) on proclamation.

The second new measure introduced by these amendments relates to the recovery from FTB of amounts of a persons child support debt and is addressed by items 22 to 26 .

Item 26 inserts new section 72AB into the Child Support (Registration and Collection) Act 1988 (the Registration and Collection Act). The new section applies if a person is entitled to be paid FTB by instalment or for a past period, and if the person has at least one FTB child (for whom he or she is eligible for FTB) who is also a designated child support child.

A designated child support child is basically a child in respect of whom the person has a registrable maintenance liability of a kind mentioned in section 17 of the Registration and Collection Act. However, it must be the case that an amount payable under the liability is a child support debt (see section 30 of that Act) and the amount has not been paid, in whole or in part, even though the day when it was due and payable under section 66 has passed.

If the new section applies, the Registrar may give a notice to the Secretary directing the Secretary to deduct from each instalment amount of FTB by instalment, or from an amount of FTB for a past period, an amount specified, or worked out as specified. The notice must comply with certain requirements to give effect to the Registrars discretion.

Item 24 inserts new sections 227 and 228 into the A New Tax System (Family Assistance) (Administration) Act 1999 . New section 227 provides a rule comparable to the existing section 226, under which the Commissioner of Taxation essentially may recover a persons primary tax liability from family assistance entitlements. The Secretary must, if given a notice under new section 72AB of the Registration and Collection Act, make the directed deductions from a persons FTB entitlement and pay them to the Registrar. The persons FTB entitlement may be reduced to nil as a result of the deductions.

New section 228 limits the amount that may be deducted in this way. Firstly, no more may be deducted than the total amount of the persons child support debts on the day of the deduction. The persons child support debts in this sense are debts mentioned in new subsection 72AB(2) of the Registration and Collection Act.

Secondly, only that part of the persons FTB entitlement that relates to the designated child support child or children in question may be deducted. This rule applies if the person has at least one FTB child (for whom he or she is eligible for FTB) who is not a designated child support child. The amount that may be deducted is worked out on the basis of the difference between the persons FTB entitlement for all FTB children and the FTB entitlement that would apply if each designated child support child were not an FTB child of the person. That is, the second (notional) FTB entitlement relates to the FTB children who are not designated child support children. Thus, the difference between the two amounts represents the FTB entitlement for the designated child support child or children.

Thirdly, there is a special rule if each FTB child of the person is a designated child support child (ie, there are no remaining FTB children) and if an income support payment or an income support supplement is payable to the person. The payments covered are social security pensions and benefits, and veterans affairs service pensions and income support supplements. These people receive their rent assistance, for example, as part of their FTB rather than their main payment. In this case, there is no intention to recover the rent assistance part of the FTB. Therefore, the amount that may be deducted is worked out on the basis of the difference between the persons FTB entitlement and the forgone amount (the forgone amount being primarily the rent assistance that is no longer received as part of the main payment). A person who has other FTB children who are not designated child support children will continue to have a rent assistance entitlement as part of the FTB that is preserved by the second rule mentioned above.

Items 22 and 23 make consequential amendments to the FTB payment and inalienability rules to allow this measure to work correctly.

Item 25 makes sure that a decision to give a notice requiring FTB to be deducted (and paid to the Registrar) is reviewable.

This second new measure will commence on 1 July 2002, or (should Royal Assent not be given on or before that date) on proclamation.