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

Schedule 1 - Family tax benefit advance

Summary

This Schedule to the Bill introduces a further element from the election commitment package titled Better Access to Family Payments. This will provide for more flexible advance payments of family tax benefit, to help families meet unexpected expenses.

Background

From 1 July 2011, families will be able to receive a larger and more flexible advance of their family tax benefit entitlements. This will give families more choice and greater scope to choose the size and timing of an advance payment.

This Schedule modifies the current arrangements for family tax benefit (FTB) advance payments in order to make more flexible: first, the rules for determining whether an individual is entitled to an advance and the amount of the advance; second, the rules as to reducing the individual's rate of FTB Part A to effect repayment of the advance; and, third, the circumstances in which a debt for the unrepaid amount of the FTB advance is raised. The conditions under which regular advances will operate in the context of these more flexible arrangements are also modified.

Entitlement to an FTB advance

Entitlement to an advance will continue to depend, as it does now, upon the individual being entitled to FTB by instalment, having at least one FTB child, and the individual having made a request to the Secretary for the payment of an FTB advance. The individual will need to have an annual Part A rate of FTB, before any reduction for an advance, of at least the base standard rate for an FTB child who has not turned 18.

However, unlike the current approach where a fixed amount of advance applies, the individual will now be able to request a specified amount of advance to suit their needs. The approach is similar to that taken in relation to social security advances, which were amended to be more flexible from 1 July 2010 as the result of the pension reforms (under the Social Security and Other Legislation Amendment (Pension Reform and Other 2009 Budget Measures) Act 2009).

The individual is generally excluded from being paid a family tax benefit advance if at the time they make the request, they owe a debt to the Commonwealth. Further, no advance is available if the amount of an advance that the person received more than 12 months ago has not been fully repaid. However, the individual may be paid a further advance while a previous advance is still being repaid, so long as the new advance does not exceed the individual's remaining maximum advance. This allows an individual to choose to be paid some of their maximum advance at one time, and some at a later time (rather than receiving all of their maximum advance at the one time).

The individual will not be entitled to an advance if they would only be entitled to an advance amount of less than the minimum amount.

To be entitled to an advance, the Secretary must be satisfied that the individual will not suffer financial hardship from the individual's Part A rate being reduced to repay the advance.

Amount of FTB advance

The amount of advance to which an individual may be entitled will be more flexible than the current arrangements. The amount will be subject to an upper and lower limit. Within these limits, the maximum amount payable to any individual will generally vary depending upon their Part A rate, and whether they are still repaying a previous advance. For the 2011-12 year, the maximum advance available will be limited to $1,000. The minimum for 2011-12 for most individuals will be $160.96. For subsequent years, the maximum and minimum limits will be linked to the FTB child rate for one FTB child who is under 13 years of age, which is indexed on 1 July of each year, and will consequently be adjusted annually.

If the individual is repaying a previous advance, then their maximum amount for the new advance will be reduced by the original amount of the previous advance. This will ensure that the reduction in the individual's rate required to repay the additional advance, when added to reductions already being made, will not place them in a situation of financial hardship. The combined reduction from the two advances is the same reduction that would apply if the individual had chosen to receive one advance equal to the amount of the two advances.

The individual will generally be entitled to the smaller of the amount of advance sought, and the maximum amount of advance payable to the individual. Subject to the ceiling amount noted above ($1000 in 2011-12), the maximum amount is the greater of 7.5 per cent of their Part A rate or 7.5 per cent of the maximum standard rate for a child under 13, less any existing advances. This amount is subject to a remaining discretion to determine that the individual should be entitled to a lesser amount based upon financial hardship criteria. If the decision is that any amount of advance (even the minimum) will place the individual in financial hardship, then the individual is not entitled to receive an advance.

Repayment of advance payment

The current fixed repayment periods of 1 January to 30 June and 1 July to 31 December will no longer apply. Instead, an individual may request an advance on any day, and will have some flexibility as to the period and rate of repayment of the advance.

The default repayment period over which the advance will ordinarily be repaid by reduction of the individual's FTB Part A instalment rate is 182 days, or 26 weeks. This period may span two financial years. However, a different repayment period may be appropriate, depending upon the individual's circumstances. An example is where the period for repayment of the advance is known to be shorter than 182 days because the individual's eligibility for FTB will end at an earlier time because the individual's only child ceases to be an FTB child due to the child's age and other circumstances. The repayment period may also be varied from time to time.

If the Secretary determines that an individual is entitled to be paid an advance, it must be repaid, as currently, first by reduction of the individual's ongoing rate of FTB Part A during the repayment period (if possible), although other means of repayment are available. The repayment period, and reduction of the individual's Part A rate will generally start from the beginning of the next instalment period after the advance is determined.

The practical effect of the reduction of the annual Part A rate to repay an advance in the ordinary case is that the individual's daily rate of FTB is reduced by the amount of the advance payment divided by 182.

The individual may seek either a reduction or increase in the number of days in their repayment period. If the individual requests it, the Secretary may determine that the repayment period is shortened if satisfied that the individual would not suffer severe financial hardship. The individual may also request a longer repayment period, producing a lower rate of reduction of their FTB Part A rate. However, this request will only be granted in unanticipated and unusual circumstances, where the individual would suffer severe financial hardship if the request were not granted. In these cases, the Secretary may vary the decision to extend the repayment period where satisfied that the individual would not suffer severe financial hardship as a result, provided that this does not result in the individual's FTB Part A reduction being greater than the standard reduction (the original advance amount divided by the number of days in the original repayment period is the daily equivalent of the annual standard reduction).

The individual also has the option to seek a suspension of repayment in unforeseen and unusual circumstances. The suspension may be revoked by the Secretary, and adjustment to the repayment period must also be considered at the same time. Similarly, if the individual requests it, and it is satisfactory to the Secretary, the individual may repay all or part of the advance in another way, for example, by cash refund. If so, it would generally be appropriate for the individual to also request a shorter repayment period due to the cash refund.

During the repayment period, the individual's Part A rate is reduced on each day by a figure representing the annualised amount of the result of dividing the unrepaid amount of the advance (at that time) by the number of days remaining in the repayment period.

It will be possible for an individual to be repaying more than one advance at the same time. Each advance that has been paid will have its own repayment period and daily reduction amount, and the point at which each advance is fully repaid will therefore differ. During the period of overlapping repayment periods, the reduction of the individual's annual Part A rate will be the sum of the reductions for each advance that is being repaid on that day.

If a retrospective recalculation of an individual's Part A rate takes place once the advance was thought to be entirely repaid, that is, after the end of the repayment period, and as a result, all or part of the advance is now not repaid, the outstanding amount must still be repaid. This could arise as the result of a change of circumstances during an income year, or due to the reconciliation of FTB after the end of the income year. However, an advance debt will not arise where the individual is, at the time of the recalculation, entitled to FTB by instalment with a Part A rate greater than nil, such that reduction of the FTB Part A rate may be restarted to repay the outstanding amount.

In this case, the device of a new notional advance is used. The Secretary must determine that a new notional advance is taken to have been paid, in the amount of the balance outstanding at that time, triggering a new repayment period. The notional advance is taken to have been paid on the day the Secretary undertakes the recalculation of the previous period. The Secretary will also determine a repayment period for the notional new advance. Once a new repayment period is created, it may be adjusted, or suspended, in the same way as for the original repayment period.

FTB advance debts

These more flexible arrangements will result in an individual generally repaying their advance from ongoing reductions of the Part A rate, rather than a debt arising (a debt prevents the individual from seeking further advances should they wish it). A debt will arise if, when an amount of the advance remains outstanding, the individual has a nil ongoing rate of FTB Part A before any reduction for an advance, or loses entitlement to FTB.

A debt will also arise if the individual was not entitled to the advance when it was paid, or was not entitled to the full amount of advance paid.

Additionally, a debt will arise if relevant tax returns are not lodged, and the Secretary determines under section 28 of the Family Assistance Administration Act that the claimant was not entitled to family tax benefit for an income year, and the amount of advance that had been repaid in that year is now not repaid. However, if the relevant tax returns are subsequently lodged, the debt will be extinguished.

Regular advances

For individuals who prefer to make a single request to receive advances of the same amount at regular intervals, regular advances will remain available. An individual may request an advance of the minimum amount be paid to them and simultaneously request that similar advances of the minimum amount be paid to them at regular intervals of 182 days. Provided the individual is able to repay each such advance by reduction of their Part A rate within the 182-day interval, then such arrangement may continue indefinitely.

Transitional arrangements will apply to maintain the payment of an advance to families in receipt of continuous advances immediately prior to commencement.

The amendments made by this Schedule commence on 1 July 2011.

Explanation of the changes

Amendments to the Family Assistance Act

Items 1 and 3 repeal the definitions of 'FTB advance rate' and 'standard advance period'. These concepts will no longer be required under this system of more flexible advances.

Item 2 inserts a definition of 'repayment period', by reference to new subclause 40(3) of Schedule 1, inserted by item 8, below.

Item 4 inserts the concept of a 'standard reduction' by reference to new clause 41 of Schedule 1, also inserted by item 8, below.

Item 5 makes a minor amendment to paragraph 21(1)(c), which deals with eligibility for family tax benefit. In most cases, in order to be eligible, an individual must have at least one FTB child (or at least one regular care child and not be an absent overseas recipient), and meet residency requirements. The individual must additionally have a rate of family tax benefit, worked out under Division 1 of Part 4, that is greater than nil. However, where an individual's Part A rate is being reduced to repay an advance, and they have a nil Part B rate, the reduction may result in their rate of family tax benefit being nil. This amendment results in the individual's rate, as considered for eligibility purposes, being the rate that disregards any reductions under clause 5 or 25A of Schedule 1 (to repay an advance).

Item 6 repeals and replaces clause 5 of Schedule 1. Clause 5 reduces an individual's Part A rate to effect repayment of an advance, where the individual's Part A rate is calculated under method 1. Method 1 applies where the individual's adjusted taxable income does not exceed the higher income free area (currently $94,316 a year, plus $3,796 for each FTB child after the first) or where the individual or their partner is receiving prescribed social security or veterans' payments.

New subclause 5(1) sets out when the individual's Part A rate is to be reduced. Reduction of the individual's Part A rate is required if:

•

the individual is entitled to be paid family tax benefit by instalment; and

•

the individual is paid a family tax benefit advance; and

•

the individual has not repaid the whole of the advance; and

•

the amount of unrepaid family tax benefit advance is not an FTB advance debt.

The Part A rate upon which this provision operates is the rate after reduction, if any, under clauses 38J and 38K, which deal with offsetting for duplicate rent assistance. The subclause is subject to new clauses 44 and 49, which deal with suspension of repayments. The reduction to be made is prescribed by new Division 4 of Part 5 of Schedule 1 (see item 8 below).

New subclause 5(2) makes it clear that, if an individual satisfies the paragraphs of subclause 5(1) above for more than one family tax benefit advance, the individual's Part A rate is to be reduced under subclause (1) for each of those advances.

Item 7 repeals and replaces clause 25A of Schedule 1. Clause 25A effects reduction of an individual's Part A rate to effect repayment of an advance, where the individual's Part A rate is calculated under method 2. Method 2 applies where the individual's adjusted taxable income exceeds the higher income free area and where neither the individual nor their partner is receiving prescribed social security or veterans' payments. Clause 25A is identical in effect to new clause 5.

Item 8 adds a new Division at the end of Part 5 of Schedule 1.

Division 4 - Reduction for family tax benefit advance

An individual's annual rate of family tax benefit is calculated in accordance with the rate calculator in Schedule 1, as stated by subsection 58(1). New Division 4 deals with reduction of an individual's Part A rate to repay an FTB advance.

New clause 40 prescribes how to work out the reduction of an individual's Part A rate under new clauses 5 or 25A. It prescribes, at subclause (1), a formula that divides the amount of unrepaid family tax benefit advance by the remaining days in the repayment period, and annualises the result by multiplying by 365. This formula produces an annualised rate of reduction of the Part A rate for each day in the repayment period.

Where the person requesting the advance is a member of a couple in a blended family, and the Secretary has determined a percentage that is the individual's share of the family tax benefit for the children under section 28, subclause (2) provides for the reduction in the individual's Part A rate during the repayment period to repay an advance paid to the individual.

Subclause (2) inflates the reduction in the Part A rate produced by subclause (1) by the individual's section 28 percentage. This is necessary because when the ultimate annual rate of FTB for all children of the individual is calculated under Schedule 1, section 60 provides that the individual's annual rate of FTB is the section 28 percentage of this rate. When the individual's rate, including the reduction for repayment of the advance, is reduced under section 60, the earlier inflation by this percentage under this subclause produces the correct reduction.

The 'repayment period' is defined in new subclause (3).

The repayment period begins on either the first day of the instalment period after the individual is paid the advance, or if it is not practicable for the reduction to start on that day, the first day on which it is practicable to reduce the individual's Part A rate.

If the individual has sought regular advances at 182-day intervals under new section 35B of the Family Assistance Administration Act (inserted by item 13 below), the repayment period begins on the day the determination of entitlement to each successive advance is made. This ensures that the regular advances may be paid at six-monthly intervals.

In some particular situations, the repayment period will start on such other day determined by the Secretary under this Division. For example, new clause 51 provides for the Secretary to determine a repayment period for a notional new advance where the original repayment period has expired.

The repayment period is then a period of either 182 days, or such other period as determined by the Secretary under the Division. Subsequent new clauses 42, 43, 44, 45, 46, 47, 48 and 49 of the Division provide for either a shorter or longer repayment period, or suspension of the repayment period.

New clause 41 provides for a standard reduction by reference to the original repayment period. Subject to subclause (2), the standard reduction is the original amount of a family tax benefit advance, divided by the number of days in the original repayment period.

The original repayment period is defined at subclause (3) as a period of 182 days, unless the Secretary has determined a different period for the advance under clause 42 or 51. This reflects the fact that the default repayment period for repayment of an advance will ordinarily be 26 weeks. However, subclause (3) provides for the original repayment period to be shorter or longer than 182 days under new clauses 42 or 51.

Where an advance is paid to a member of a couple in a blended family, and the Secretary has determined a percentage that is the individual's share of the family tax benefit for the children under section 28, subclause (2) provides that the standard reduction is the standard reduction under subclause (1) inflated by the individual's section 28 percentage.

The standard reduction concept will guide the Secretary's decision-making when applying a different repayment period in order to produce a different repayment rate.

New clause 42 provides for the Secretary to determine a shorter payment period when determining an individual's entitlement to an advance. The Secretary may determine that the repayment period for the family tax benefit advance is a period of less than 182 days if the Secretary is satisfied that it is appropriate to determine the shorter repayment period having regard to:

(a)

circumstances affecting the individual's eligibility for family tax benefit; and

(b)

circumstances affecting the rate of family tax benefit that the individual is entitled to be paid.

An example is where the period for repayment of the advance is known to be shorter than 182 days because the individual's eligibility for FTB will end at an earlier time because the individual's only child ceases to be an FTB child due to the child's age and other circumstances. This is similar to the existing discretion in subsection 34(4) of the Family Assistance Administration Act.

New clause 43 adjusts the reduction made under new clause 40 where the individual's Part A rate is insufficient to cover the calculated reduction, where the individual's Part A rate is to be reduced to repay only one family tax benefit advance.

It may be that, as a result of a variation reducing an individual's Part A rate, the Part A rate before reduction is less than the reduction which would result from the relevant formula in new clause 40. In this case, new subclause 43(2) provides that, subject to clause 45, the Secretary must determine that the number of days in the repayment period for the particular unrepaid advance is to be increased so that the individual's Part A rate is reduced under clause 5 or 25A by an amount that is no more than the individual's unreduced Part A rate. This will leave the individual with a nil Part A rate after the reduction. Alternatively, the Secretary may exercise the discretion under clause 45 and determine that the amount of unrepaid family tax benefit advance is a debt.

If the individual's unreduced Part A rate later exceeds the amount by which the individual's Part A rate would be reduced under clause 40 (this reduction will be lower as a result of the increase in the number of days in the repayment period under subclause 43(2)), then new subclause 43(3) provides that the Secretary may determine that the number of days in the repayment period for the unrepaid advance is decreased.

However, new subclause 43(4) provides that the amount by which the individual's Part A rate is to be reduced under clause 40 as the result of a determination under subclause 43(3) must be no more than the standard reduction.

A note advises the reader that the individual may also request that the Secretary determine a shorter or longer repayment period under clause 46 or 47.

New clause 44 adjusts the reduction made under new clause 40 where the individual's Part A rate is insufficient to cover the calculated reduction, where the individual's Part A rate is being reduced to repay more than one family tax benefit advance.

A method statement is set out in subclause (2) to guide the amount by which the individual's Part A rate is to be reduced. The advances are approached one by one, taking the oldest advance first, and working through to the youngest. The reduction is adjusted individually because reductions for older advances may result in a nil Part A rate, such that payment of a younger advance cannot occur at that time. The method statement provides, at step 4, for suspension of the repayment period for such a younger advance.

Subclause (3) authorises the Secretary to vary a previous determination to reduce a repayment rate to the rate of FTB Part A available, and subclause (4) authorises the Secretary to revoke a previous determination to suspend reductions where only a nil rate is available.

Subclause (5) provides that, if the Secretary revokes a determination to suspend a repayment period under step 4, the Secretary must determine the number of days remaining in the repayment period for the advance. However, the Secretary need not adjust the repayment period if the Secretary instead invokes the discretion in new clause 45 to create an FTB advance debt.

Subclause (6) requires that the amount by which the individual's Part A rate is to be reduced as the result of a decision under subclause (3) or (5) must be no more than the standard reduction.

New clause 45 provides a discretion for the Secretary to create an FTB advance debt under subsection 71A(7) of the Family Assistance Administration Act. However, the Secretary must not make a determination that an amount of unrepaid family tax benefit is a debt unless the individual's Part A rate before reduction under clause 5 or 25A is less than the amount that would, under clause 26 be the FTB child rate for an FTB child who had not turned 18 if the individual's Part A rate were required to be worked out using Part 3 of Schedule 1, and clause 27 of that Schedule did not apply. This is the minimum rate of FTB Part A for an individual to be entitled to an advance.

The discretion in clause 45 would be exercised so as to avoid long periods of repayment for people on higher incomes who are no longer entitled to further advances. Under the current law, all cases where the Part A rate would be reduced to nil by an advance reduction becomes an FTB advance debt. Under the new law, the reduction of the Part A rate will be the general method for repaying an advance, rather than creating a debt. However, it will remain appropriate to create a debt to avoid lengthy repayment periods.

For example:

•

The amount of the unrepaid advance is $600.

•

The Part A rate before reduction under clause 5 or 25A is $100.

•

If the Part A rate reduction method is used, the repayment period would be 6 years, which is not appropriate.

Therefore, the discretion in clause 45 will enable the $600 to become an FTB advance debt. Normal debt recovery methods will enable a more appropriate period to recover the amount.

New clause 46 deals with decreasing the number of days in a repayment period where an individual requests it. It allows an individual to request the Secretary to shorten their repayment period if they wish to repay their advance more quickly. The Secretary may determine that the number of days in the repayment period is to be decreased if the individual has made a request for the decrease, and the Secretary is satisfied that the individual would not suffer severe financial hardship if the number of days in the repayment period were decreased as determined.

Subclause (2) provides that the request must be made in a form and manner, contain any information, and be accompanied by any documents required by the Secretary.

Subclause (3) allows the individual, if they have previously requested a decrease in the number of repayment days and the Secretary has determined a smaller number of days under subclause (1), to request that the Secretary vary the determination to increase the number of days in the repayment period.

However, subclause (4) limits the variation that the Secretary may make under subclause (3) such that the deduction amount cannot go below the standard reduction.

A note advises the reader that, if, after the variation under subclause (3), the reduction in the individual's Part A rate under clause 5 or 25A would cause the individual to suffer severe financial hardship, the individual may request a longer repayment period under clause 47.

New clause 47 allows the Secretary to determine that the number of days in a repayment period is to be increased if the individual requests it, and the Secretary is satisfied that special circumstance relevant to the repayment of the advance exist in relation to the individual that could not reasonably have been foreseen at the time of the individual's request for a family tax benefit advance. Additionally, the Secretary must be satisfied that the individual would suffer severe financial hardship if the number of days in the repayment period were not increased as determined.

The request must be made in a form and manner, contain any information, and be accompanied by any documents, required by the Secretary (subclause (2)).

Subclause (3) then empowers the Secretary to vary a previous determination made under subclause (1), so as to reduce the number of days in the repayment period (and increase the rate of repayment). However, this can only occur if the Secretary is satisfied that the individual would not suffer severe financial hardship because of the variation. The Secretary may not vary the determination under this subclause such that the variation would result in the amount by which the individual's Part A rate is to be reduced under clause 5 or 25A being greater than the standard reduction.

New clause 48 requires the Secretary to increase an individual's repayment period if there is a recalculation resulting in an increase in the amount of unrepaid family tax benefit advance during the repayment period. The clause applies if, during the repayment period for a family tax benefit advance, the amount of the family tax benefit advance that is unrepaid is increased due to a variation in a determination or a variation or substitution of a decision on review, so that the amount by which the individual's Part A rate is to be reduced is more than the standard reduction. The Secretary must determine that the number of days in a repayment period is to be increased so that the amount by which the individual's part A rate is to be reduced is not more than the standard reduction.

New clause 49 empowers the Secretary to determine that the individual's Part A rate is not to be reduced under clause 5 or 25A while the determination is in force. However, subclause (2) provides that such a determination may only be made if the individual makes a request for the repayment period to be suspended, and the Secretary is satisfied of a number of things. The Secretary must be satisfied that special circumstances relevant to the repayment of the advance exist in relation to the individual that could not reasonably have been foreseen at the time of the individual's request for a family tax benefit advance. The Secretary must also be satisfied that the individual would suffer severe financial hardship if the individual's Part A rate were to be reduced for that period.

Subclause (3) provides that the request must be made in a form and manner, contain any information, and be accompanied by any documents, required by the Secretary.

Subclause (4) empowers the Secretary to revoke the suspension at any time, upon the Secretary's own initiative. However, the Secretary may only do so, in writing, where satisfied that the individual would not suffer severe financial hardship from the individual's Part A rate being reduced under clause 5 or 25A as a result of the revocation.

Subclause (5) provides that, if the Secretary revokes the determination, the Secretary must determine the number of days remaining in the repayment period such that the amount by which the individual's Part A rate is to be reduced under clause 5 or 25A would not be greater than the standard reduction.

In practice, the Family Assistance Office will be in contact with the individual to whom the suspension applies, monitoring their financial situation, and assessing whether the suspension is still needed from time to time. Any revocation of the suspension would only occur after the individual is given an opportunity to discuss ongoing arrangements.

New clause 50 provides for repayment of a family tax benefit advance by another method.

Subclause (1) empowers the Secretary to determine that an individual who has requested it, may repay all or part of an unrepaid family tax benefit advance by a method other than by reduction under clause 5 or 25A. For example, the individual may request repayment by an amount in cash. However, a determination that this may occur is dependent upon the method being acceptable to both the individual and the Secretary. In general, it would be expected that the alternative method of repayment would be accepted when the individual also agrees to seek a shorter repayment period for the remaining unrepaid amount of the advance, such that repayment would generally remain at the standard reduction amount.

Subclause (2) provides that the request must be made in a form and manner, contain any information, and be accompanied by any documents, required by the Secretary.

New clause 51 provides for the recalculation of the amount of unrepaid family tax benefit advance where, in retrospect, the full amount has not been repaid despite the repayment period ending.

Subclause (1) provides that the clause applies if:

•

an individual is paid a family tax benefit advance, ('the old advance'); and

•

the individual's Part A rate has been reduced under clause 5 or 25A to repay the old advance; and

•

the repayment period for the old advance has expired; and

•

due to a variation in a determination, or a variation or substitution of a decision on review, (other than a variation under subsections 28(2) or (6) of the Family Assistance Administration Act relating to non-lodgement of tax returns) the reduction in the individual's Part A rate under clause 5 or 25A has not been sufficient to repay the old advance; and

•

at the time of the variation of the determination or the variation or substitution of the decision on review, the individual is entitled to be paid family tax benefit by instalment, with a Part A rate greater than nil (before reduction under clause 5 or 25A).

A note alerts the reader that, if a variation or review occurs during the repayment period for a family tax benefit advance, the Secretary may be required to make a determination under clause 48 to increase the number of days in the repayment period.

Subclause (2) provides for a determination that the individual is taken to have been paid a family tax benefit advance equal to the amount of the previous family tax benefit advance left unrepaid on the day on which the Part A rate is recalculated. This is the 'new advance'.

Subclause (3) provides that in the situation covered by subclause (2), the individual is taken to have repaid the old advance.

Subclause (4) provides that the Secretary must determine the repayment period for the new advance and the day on which the repayment period is to begin.

Subclause (5) provides that the Secretary must not make a determination under subclause (4) that would cause the individual to suffer severe financial hardship.

Subclause (6) empowers the Secretary to vary or revoke a determination made under subclause (2) or (4), if a subsequent variation in the determination or a variation or substitution of the decision on review occurs.

Amendments to the Family Assistance Administration Act

Item 9 inserts a definition of advance assessment day, in relation to a family tax benefit advance, as having the meaning given by subsection 35A(3), and in relation to regular advances, by paragraph 35B(3)(b).

Item 10 inserts a definition of 'FTB advance debt', as having the meaning given by section 71A.

Item 11 inserts a definition of 'maximum amount' in relation to family tax benefit advance, and provides that it has the meaning given by section 35D.

Item 12 inserts a definition of minimum amount, in relation to a family tax benefit advance, as meaning either:

•

3.75 per cent of the FTB child rate worked out under clause 7 of Schedule 1 to the Family Assistance Act for one child aged under 13 years (disregarding clauses 8 to 11 of that Schedule); or

•

if the Secretary determines under section 28 a percentage of the family tax benefit for FTB children of the individual, that percentage of the above amount; or

•

if the amount that would be the minimum amount under either of the above is not a number of whole cents - the amount rounded down to the nearest cent.

Payment of family tax benefit advances

Item 13 repeals and substitutes Division 2 of Part 3. The Division is now broken into subdivisions.

Division 2 - Payment of family tax benefit advances

Subdivision A - Request for family tax benefit advance

New section 33 enables an individual to request a family tax benefit advance.

Subsection (2) provides that, if an individual makes a request for a family tax benefit advance, this request may be accompanied by a request under new section 35B for further advances at regular intervals. The individual may also request that entitlement to the first advance be determined on a specified future day. This gives flexibility for the individual to nominate the start date of their regular advance sequence . Item 19 provides that a request under subsection (2) for a family tax benefit advance to be paid on a specified future day may only be made on or after 1 January 2012.

New section 34 provides for the form of such a request. To be effective, a request must:

•

be made in a form and manner, contain any information, and be accompanied by any documents required by the Secretary;

•

specify the amount of family tax benefit advance sought; and

•

the amount of family tax benefit advance sought must be at least the minimum amount.

If an effective request is made, the Secretary must determine the request in accordance with Division 2. If a request is not effective, it is taken never to have been made. However, the individual making the request may seek review of the decision that the request is not effective.

New section 35 provides that an individual may withdraw or vary a request before the request is determined. The individual may only do so in a manner determined by the Secretary. However, if the individual does so, the request is taken never to have been made.

Subdivision B - Entitlement to family tax benefit advance

New section 35A provides that the Secretary must determine that an individual is entitled to be paid a family tax benefit advance if a number of conditions are met. The conditions are generally assessed by reference to the advance assessment day, defined at subsection (3) as the day the Secretary determines the individual's entitlement to be paid a family tax benefit advance. The conditions are:

•

on the advance assessment day, the individual is entitled to be paid family tax benefit by instalment; and

•

the individual has made an effective request under section 34 for a family tax benefit advance; and

•

on the advance assessment day, the individual's Part A rate, disregarding clause 5 and 25A of Schedule 1 (dealing with reduction of an individual's Part A rate to repay an advance) is equal to or exceeds the amount that would, under clause 26 of that Schedule, be the FTB child rate for an FTB child who had not turned 18 if the individual's Part A rate were required to be worked out using Part 3 of that Schedule, and clause 27 of that Schedule did not apply; and

•

on the advance assessment day, the individual has at least one FTB child; and

•

on the advance assessment day, the amount of advance that the individual would be entitled to is at least the minimum amount; and

•

the Secretary considers, on the basis of information available to the Secretary on the advance assessment day, that the individual will not suffer financial hardship from the individual's Part A rate being reduced as a result of being paid the advance; and

•

on the advance assessment day, the individual is not excluded from being paid a family tax benefit advance under subsection (2).

Subsection (2) excludes an individual from being paid a family tax benefit advance if:

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an amount of family tax benefit advance paid to the individual more than 12 months before the advance assessment day has not been fully repaid; or

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an amount of family tax benefit advance paid to the individual more than 12 months before the advance assessment day is being repaid as a new advance due to a determination under clause 51 of Schedule 1 to the Family Assistance Act; or

•

the individual owes a debt to the Commonwealth (whether arising under this Act or not) that is recoverable under Part 4 by means of deductions from the individual's instalments of family tax benefit under section 84 (unless that debt has been written off because of subsection 95(4A) or (4B)) or is being recovered by deductions from the individual's instalments of family tax benefit under section 227; or

•

on the advance assessment day, the Secretary is prohibited from making a payment of family tax benefit to the individual under section 32AA or 32AD (non-payment for non-lodgment of tax returns).

Subsection (4) provides that, if the individual is not entitled to be paid a family tax benefit advance, the Secretary must determine that the individual is not entitled to the family tax benefit advance.

Subdivision C - Regular family tax benefit advances

New section 35B enables an individual to request regular family tax benefit advances. Subsection (1) provides that an individual who makes a request in accordance with section 34 for a family tax benefit advance of the minimum amount, when making the request, may also request that a family tax benefit advance of the minimum amount be paid to the individual at regular intervals of 182 days.

Subsection (2) provides that, for the request for payment of family tax benefit advance at regular intervals to be effective, the request must be made in a form and manner, contain any information, and be accompanied by any documents, required by the Secretary.

Subsection (3) provides that, if the individual makes an effective request for family tax benefit advance at regular intervals under this section, the Secretary must make a determination under section 35A, in relation to the individual's eligibility for a family tax benefit advance of the minimum amount, at intervals that would best facilitate payment in accordance with the request.

For this particular case, the 'advance assessment day' is either:

•

if the individual has not previously been paid a family tax benefit advance requested under this section-the day that falls immediately after the end of an interval of 182 days that began on the day the first advance was paid; or

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if the individual has previously been paid a family tax benefit advance requested under this section-the day that falls immediately after the end of the last of the intervals of 182 days, the first of which began on the day the first advance was paid

Subsection (4) provides that the Secretary must, in making the determination under section 35A, treat paragraph 35A(1)(b) (requirement to make an effective request) as having been satisfied if:

•

the individual has made an effective request under this section; and

•

the request has not been withdrawn before the determination is made; and

•

the individual has not failed to repay the last family tax benefit advance to which the request relates within 182 days.

Subsection (5) makes it clear that a request under subsection (1) ceases to be effective if the Secretary, in making a determination referred to in subsection (3), determines that the individual is not entitled to a family tax benefit advance, or if the individual withdraws the request under subsection (6). This does not affect the effectiveness of the request in relation to regular advances already paid, but removes the requirement for the Secretary to consider further regular advances.

Subsection (6) makes it clear that the individual may, in a manner determined by the Secretary, withdraw the request at any time. This will similarly remove the requirement for the Secretary to consider further regular advances.

Subdivision D - Amount of family tax benefit advance

New section 35C provides for the amount of family tax benefit advance. The amount is the smaller of the amount of advance sought, and the maximum amount of advance payable to the individual on the advance assessment day worked out under new section 35D, less the original amount of each family tax benefit advance paid to the individual that is unrepaid on that day.

In working out the original amount of each family tax benefit advance unrepaid on a day, subsection (2) provides for clause 51 of Schedule 1 to the Family Assistance Act to be disregarded. In other words, where a new notional advance is created in response to a retrospective recalculation resulting in an advance not having been fully repaid during its repayment period, the Secretary must take into account the amount of payment of the original advance for this purpose, rather than the amount of payment of the new notional advance.

Additionally, the Secretary may determine, under subsection (3) that the amount of family tax benefit advance payable to an individual is a lower amount than the amount under subsection (1), if the Secretary is satisfied that the individual would suffer financial hardship if the individual's Part A rate were reduced as a result of being paid that amount.

New section 35D provides for the maximum amount of family tax benefit advance payable.

Subsection (1) provides that the maximum amount that may be an individual's FTB advance on any particular day is calculated by reference to their Part A rate (excluding the FTB Part A Supplement). If 7.5 per cent of the individual's adjusted Part A rate is greater than or equal to 23.3 per cent of the standard rate for a child under 13 (which will be $1,000 for 2011-12 due to item 18), the individual's maximum is 23.3 per cent of the standard rate for a child under 13. The standard rate for a child under 13 is linked to the FTB child rate for one FTB child who is under 13 years of age, which is indexed on 1 July of each year, and will consequently increase annually. The terms 'adjusted Part A rate' and 'standard rate for a child under 13' are both defined in subsection (4).

The individual's maximum amount is 7.5 per cent of their adjusted Part A rate if that amount is less than 23.3 per cent and greater than 7.5 per cent of the standard rate for a child under 13. For 2011-12, 7.5 per cent of the standard rate for a child under 13 will be $321.93.

If 7.5 per cent of the individual's adjusted Part A rate is less than or equal to 7.5 per cent of the standard rate for a child under 13, then their maximum amount of family tax benefit advance is 7.5 per cent of the standard rate for a child under 13.

However, if the individual has a section 28 percentage as the result of being a member of a couple treated as a blended family, then for the purposes of section 35D, their maximum amount of family tax benefit advance payable to the individual is the section 28 percentage of the amount worked out for the individual under subsection (1).

Subsection (3) provides for rounding of all the required amounts to the nearest cent (rounding 0.5 cents upwards).

Subdivision E - Payment of family tax benefit advance

New section 35E provides for the payment of an advance.

Subsection (1) provides that, if an individual is entitled to be paid a family tax benefit advance, the Secretary must, at such time and in such manner as the Secretary considers appropriate, pay the individual the advance.

Subsection (2) provides that this section is subject to Part 4 (dealing with overpayment and debt recovery), Division 3 of Part 8B (dealing with nominees) and sections 225 and 226 (dealing with payments to the Commissioner of Taxation).

Item 14 repeals and substitutes section 71A.

Subsections (1) and (2) mirror the terms of section 71 for the purposes of family tax benefit advances. As a result, where a family tax benefit advance has been paid to an individual and either the individual was not entitled to the advance, or the received amount is greater than the amount of family tax benefit advance that should have been paid to the individual, the difference is a debt due to the Commonwealth by the individual.

Subsection (3) deals with debts arising during the repayment period for a family tax benefit advance. If:

•

an individual is paid a family tax benefit advance; and

•

the repayment period for the advance has not expired; and

•

either the individual ceases to be entitled to be paid family tax benefit by instalment, or the individual's Part A rate becomes nil (before reduction under clause 5 or 25A of Schedule 1 to the Family Assistance Act);

then the amount of unrepaid family tax benefit advance becomes a debt due to the Commonwealth by the individual.

Subsection (4) deals with debts arising due to a variation or review after the repayment period for a family tax benefit advance has expired. If:

•

an individual is paid a family tax benefit advance; and

•

the individual's Part A rate has been reduced under clause 5 or 25A of Schedule 1 to the Family Assistance Act to repay the advance; and

•

the repayment period for the advance has expired; and

•

due to a variation in a determination, or a variation or substitution of a decision on review (other than a variation under subsection 28(2) or (6)), the reduction in the individual's Part A rate under clause 5 or 25A of Schedule 1 to the Family Assistance Act has not been sufficient to repay the advance; and

•

at the time of the variation of the determination, or the variation or substitution of the decision on review, the individual is not entitled to be paid family tax benefit by instalment, or the individual's Part A rate is nil (before reduction under clause 5 or 25A of Schedule 1 to the Family Assistance Act);

then the amount of the family tax benefit advance left unrepaid as a result of the variation of the determination, or the variation or substitution of the decision on review, becomes a debt due to the Commonwealth by the individual.

A note alerts the reader to the fact that, if the individual is entitled to be paid family tax benefit by instalment and has a Part A rate greater than nil, the unrepaid amount of the advance is to be repaid by reductions in the individual's Part A rate (see clause 51 of Schedule 1 to the Family Assistance Act).

Subsection (5) deals with debts where relevant tax returns have not been lodged, and the Secretary varies a determination under section 28 of the Family Assistance Administration Act so that the claimant was not entitled to family tax benefit for an income year, and the amount of advance that had been repaid in that year is now not repaid. The outstanding amount as a result of the variation of the determination will become a debt regardless as to whether the individual is at that time entitled to FTB by instalment and has a Part A rate greater than nil.

However, subsection (6) then provides that, if the relevant tax returns are subsequently lodged, and the Secretary varies (reverses) the prior determination under section 28, the debt is taken never to have been created.

A note alerts the reader to the fact that, if, after the variation, the individual's Part A rate was not sufficient to repay the advance, the unrepaid amount of the advance is to be repaid either by reductions in the individual's Part A rate (see clause 48 and 51 of Schedule 1 to the Family Assistance Act) or as a debt under subsection (3) or (4).

Subsection (7) provides that, if the Secretary determines under clause 45 of Schedule 1 to the Family Assistance Act that the amount of the advance that is unrepaid is to be a debt, then the outstanding amount becomes a debt due to the Commonwealth by the individual.

Subsection (8) provides for the meaning of 'FTB advance debt', as a debt due to the Commonwealth under subsection (1), (2), (3), (4), (5) or (7).

Items 15 and 16 make consequential amendments to paragraph 111(2)(a) to exclude from review by the SSAT the new powers to determine the form and manner of requests under subsection 34(1) and subsection 35B(2) of the Family Assistance Administration Act, and subclause 46(2), 47(2), 49(3) or 50(2) of Schedule 1 to the Family Assistance Act.

Part 2 - Application and transitional

Item 17 deals with application of these amendments, and provides that the amendments apply to family tax benefit advances requested on or after the commencement of Part 1.

Item 18 provides that, for the purposes of subsection 35D(1) of the Family Assistance Administration Act as inserted by this Schedule, 23.3 per cent of the standard rate for a child under 13 is taken to be $1,000 for the 2011-12 financial year.

Item 19 provides that a request under subsection 33(2) of the Family Assistance Administration Act (as inserted by this Schedule) for a family tax benefit advance to be determined on a specified future day may only be made on or after 1 January 2012.

Part 3 - Transitional advance payment

Item 20 provides for a transitional advance payment, to maintain the payment of an advance to families who currently receive continuous advances.

The item applies if the individual was paid a family tax benefit advance for the family tax benefit advance period that ended on 30 June 2011, and:

•

under paragraph 33(3)(b) of the Family Assistance Administration Act as in effect immediately before the commencement of this Schedule, the request for the advance operated for a particular standard advance period and all subsequent standard advance periods; and

•

the individual had not withdrawn the request before 30 June 2011; and

•

under clause 5 or 25A of Schedule 1 to the Family Assistance Act as in force immediately before the commencement of this Schedule, the individual's Part A rate was reduced for the period by the FTB advance rate.

If the item applies on 1 July 2011, the individual is taken to have made an effective request for a single family tax benefit advance under section 34 of the Family Assistance Administration Act as inserted by this Schedule (subitem (2)), the individual's advance assessment day is taken to be 1 July 2011 (subitem (3)), and the amount of the family tax benefit advance is the smaller of:

•

$333.06 (which is the daily equivalent of the current FTB advance rate ($1.83) multiplied by 182 days);

•

the maximum amount of advance payable to the individual on the advance assessment day worked out under section 35D of the Family Assistance Administration Act as inserted by this Schedule;

•

the amount determined by the Secretary under subsection 35C(3) of the Family Assistance Administration Act as inserted by this Schedule.

Further, clauses 47 and 49 of Schedule 1 to the Family Assistance Act as inserted by this Schedule do not apply to the advance. That is, the individual may neither request a longer period for repayment of the advance, nor seek suspension of the repayment period.