House of Representatives

Explanatory Memorandum

Jenny Macklin Mp (Minister for Families, Housing, Community Services and Indigenous Affairs)

Schedule 5 - Other amendments

Summary

This Schedule will amend certain Acts to provide further consequential amendments relating to the household stimulus package payments provided for in this bill. Notably, the amendments ensure that the payments will not count as income for social security, family assistance and farm household assistance purposes, and will be income tax-free. The amendments will also ensure that, where an individual is subject to income management, any household stimulus package payment they receive will be income managed at 100 per cent.

Background

In the past, one-off lump-sum welfare-related payments have typically been income tax-exempt and not treated as income for the purposes of income tests in welfare-related legislation (such as the Social Security Act, Family Assistance Act and Veterans' Entitlements Act). In addition, recovery of those payments from recipients has been limited to circumstances where the payments have been obtained fraudulently. The household stimulus payments under this bill will be treated in a similar fashion.

Accordingly, amendments to income tax and other Acts are necessary.

The amendments made by this Schedule commence on Royal Assent.

Explanation of the changes

Amendments to the Farm Household Support Act

The Farm Household Support Act regulates the provision of income support and advice to farmers and certain small business operators who are dependent on income from agriculture or farmers. Centrelink administers the Farm Household Support Act and, where applicable, its operation mirrors the provisions of the Social Security Act and the Social Security Administration Act. The amendments provide for the payment of benefits in a manner similar to other welfare support payments delivered under the Social Security Act.

Items 1, 2 and 3 amend sections 24A, 24AA and 24B of the Farm Household Support Act to clarify that the calculation of rates of exceptional circumstances relief payment and farm help income support under those sections must disregard the farmers hardship bonus payable under the proposed Division 2 of Part 2.18 of the Social Security Act.

These amendments are necessary to ensure that the one-off bonus payment does not affect the rate of income support payment for individuals in receipt of the Exceptional Circumstances Relief Payment or Farm Help Income Support, Transitional Income Support or Interim Income Support payments. As guidelines for Transitional Income Support and Interim Income Support are based on the Farm Household Support Act, these legislative amendments will also amend the calculations used to determine the rate at which these payments are made.

Amendments to the 1936 Tax Act

A taxpayer's dependants' separate net income (SNI) is used to determine the taxpayer's eligibility to certain dependant offsets. SNI is income and other specified amounts earned, derived or received, less certain expenses incurred in earning that income. Payments such as carer allowance, child care benefit and FTB are not included as part of SNI. It is not intended that the household stimulus package payments (or any payment under an administrative scheme determined under Schedule 4 to the bill) form part of SNI.

Item 4 amends paragraph (ac) of the definition of separate net income in subsection 159J(6) of the 1936 Tax Act to exclude the back to school bonus and single income family bonus.

Item 5 inserts paragraphs (adai), (adaj) and (adak) into subsection 159J(6) to amend the definition of separate net income to exclude the training and learning bonus and the farmers hardship bonus paid under the Social Security Act, the education entry payment supplement paid under the Social Security Act or a payment made under an administrative scheme set out in Schedule 4 to this bill from the concept of SNI.

Amendments to the 1997 Tax Act

Items 6 to 10 make consequential amendments to the table in section 11-15 of the 1997 Tax Act, inserting references to the various household stimulus payments payable under this bill.

The effect of items 11 and 12 is to make the training and learning bonus, farmers hardship bonus and education entry payment supplement exempt from income tax under section 52-10 of the 1997 Tax Act.

Item 13 amends subsection 52-150(1) to make the back to school bonus and the single income family bonus exempt from income tax.

Item 14 inserts a new section 52-165 into Subdivision 52-H, which provides that payments made under an administrative scheme, as set out in Schedule 4 to this bill, are exempt from income tax.

Amendments to the Social Security Act

The back to school bonus and single income family bonus payments will not be counted as income for social security purposes. Subsection 8(8) of the Social Security Act lists payments that are not income for social security purposes. Item 15 adds a reference to the back to school bonus and single income family bonus into paragraph 8(8)(jaa).

Item 16 inserts new paragraph (yj) into subsection 8(8) of the Social Security Act, to provide that a payment made under an administrative scheme determined under Schedule 4 to the bill is not to be treated as income for the purposes of the social security law.

Item 17 inserts new section 1223ABAAB into Part 5.2 of the Social Security Act. This new provision sets out when a training and learning bonus, a farmers hardship bonus and an education entry payment supplement made to an individual is a debt. In broad terms, a debt would only arise where the payment was incorrectly paid because a relevant individual knowingly made a false or misleading statement or knowingly provided false or misleading information.

Under proposed subsections (1) and (2), an individual will owe the Commonwealth a debt of an amount equal to the training and learning bonus, farmers hardship bonus or education entry payment supplement paid to them if:

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a determination has been made that the individual is entitled to the payment or allowance that qualifies the individual for the bonus or supplement; and

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the determination is changed, revoked, set aside or superseded; and

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the reason, or one of the reasons, the determination was changed, etc, was that the individual knowingly made a false or misleading statement or knowingly provided false or misleading information; and

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had the determination been changed, etc, before 3 February 2009, the individual would not have been paid the bonus or supplement.

Under proposed subsection (3), a person will owe the Commonwealth a debt of an amount equal to the training and learning bonus paid to them if:

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the Secretary has made payment to the person under subsection 47C(3) or (4) of the Administration Act (relating to payment of the bonus to parents or others); and

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the reason, or one of the reasons why the Secretary paid the bonus to that person was that the person made a statement or provided information; and

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the Secretary becomes satisfied that the statement or information was false or misleading and had been provided by the person knowing that it was false or misleading; and

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the Secretary is satisfied the payment should have been paid to another person.

Apart from section 1224AA (relating to fraudulent cashing of social security cheques), the other provisions in the social security law relating to creation of social security debts do not apply to the training and learning bonus, farmers hardship bonus or education entry payment supplement (proposed subsection (4)) That is, debts in relation to those stimulus payments cannot arise other than under this section (and section 1224AA).

Amendments to the Social Security Administration Act

The amendments made to the Social Security Administration Act by items 18, 19 and 20 of this Schedule provide for deductions to be made from household stimulus payments, in certain circumstances, for the purposes of the income management regime established under Part 3B of the Social Security Administration Act.

Item 18 inserts a newly defined term, household stimulus payment , into section 123TC of the Social Security Administration Act. The definition refers to each of the payments provided for by the amendments contained in Schedules 1, 2, 3 and 4 to this bill (other than education entry payment payable to youth allowance (other) recipients under proposed Division 12A of Part 2.13A of the Social Security Act).

Item 19 omits the current heading to Subdivision DB of Division 5 of Part 3B of the Social Security Administration Act, and inserts a new heading to the Subdivision. Subdivision DB currently contains provisions relating to economic security strategy payments introduced by the Government in 2008, and its title reflects this. Provisions relating to the new household stimulus payments are inserted into Subdivision DB by item 20 of this Schedule. As a consequence, item 19 alters the heading to Subdivision DB so that it refers to economic security strategy payments and household stimulus payments.

Item 20 inserts new section 123XPD in Subdivision DB of Division 5 of Part 3B of the Social Security Administration Act. New section 123XPD provides for the deduction of amounts from a person's household stimulus payment if the person is subject to the income management regime.

New subsection 123XPD(3) provides that, if section 123XPD applies, the Secretary must deduct 100 per cent of the net amount of a person's household stimulus payment and credit the person's income management account and the Income Management Special Account accordingly. (The terms income management account, net amount and Special Account are defined in section 123TC of the Social Security Administration Act.) The treatment of household stimulus payments under subsection 123XPD(3) is consistent with the existing treatment of other lump sum payments under Part 3B of the Social Security Administration Act.

New subsection 123XPD(1) provides that section 123XPD applies if a person is subject to the income management regime and a household stimulus payment is payable to the person.

The phrase subject to the income management regime is defined in section 123TC of the Social Security Administration Act. A person can be subject to the income management regime because of the operation of any of the following sections contained in Part 3B of the Social Security Administration Act: section 123UB (the Northern Territory scheme of income management); section 123UC (the child protection scheme of income management); section 123UD or 123UE (school enrolment and attendance requirements, which have not, at this time, been implemented); section 123UF (the Cape York Welfare Reform trials); section 123UFA (voluntary income management agreements).

Amendments to the Veterans' Entitlements Act

Items 21 and 22 amend subsection 5H(8) of the Veterans' Entitlements Act to provide that the back to school bonus and the single income family bonus payable under Family Assistance Act, and payments under the administrative scheme established under Schedule 4 to this bill are not income for the purposes of the Veterans' Entitlements Act. (All payments under the Social Security Act are not income under the Veterans' Entitlements Act, so there is no need to specify separately the training and learning bonus, the farmers hardship bonus and the education entry payment supplement in subsection 5H(8).)