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

OUTLINE

The Bill contains four 2011-2012 Budget measures, a 2010-2011 Budget measure the implementation of which was brought forward in the 2011-2012 Budget, and a minor, non-Budget measure, as described below.

Age of FTB child for family tax benefit

The Bill lowers the maximum child age of eligibility for family tax benefit Part A from 24 to 21 on 1 January 2012. This will align with the age at which a person becomes independent for the purposes of youth allowance from 1 January 2012.

Indexation

The Bill makes amendments to some indexation arrangements for family assistance and paid parental leave.

Indexation will be paused until 1 July 2014 for the higher income free area for family tax benefit Part A (FTB Part A) (both the basic amount and the additional amount for each FTB child after the first), the family tax benefit Part B income limit and the baby bonus income limit. As paid parental leave is a new entitlement, indexation of the paid parental leave income limit will not commence until 1 July 2014.

This Bill also pauses indexation of FTB Part A and Part B supplements for three years from 1 July 2011.

Assessing qualification for disability support pension

The Bill introduces a requirement, commencing from 3 September 2011, that people test their future work capacity by participating in training or work-related activities in order to be qualified for disability support pension. This new requirement will not apply to claimants for disability support pension who have a severe impairment, such as those who are clearly unable to work.

As part of the Job Capacity Assessment - more efficient and accurate assessments for Disability Support Pension and employment services 2010-2011 Budget measure, the Government undertook to reform assessments for disability support pension in this way. Implementation of this aspect of the measure was brought forward to September 2011 (instead of January 2012) in the 2011-2012 Budget.

Extending Cape York welfare reform trial

The Bill amends the Social Security Administration Act to enable a proposed 12-month extension of the welfare reform trial in the Cape York area.

Aboriginal Land Trusts

The Bill amends the Aboriginal Land Rights (Northern Territory) Act 1976 to clarify that the Public Works Committee Act 1969 does not apply to Aboriginal Land Trusts.

Financial impact statement

Age of FTB child for family tax benefit

Expense

Indexation

Indexation - pause indexation of FTB Part A and Part B supplements for three years

Expense

Indexation - pause indexation of certain family assistance and paid parental leave income threshold amounts for a further two years

Expense

Related revenue*

*These estimated related revenue impacts arise because the income limit for receiving the dependency tax offsets links to the income limit for FTB Part B, which will remain at $150,000. These impacts also take into account forgone taxation revenue from pausing indexation of the paid parental leave income limit.

Assessing qualification for disability support pension

The measure in this Bill is part of the Job Capacity Assessment - more efficient and accurate assessments for the Disability Support Pension and employment services 2010-2011 Budget measure, originally due to commence on 1 January 2012 with implementation brought forward to 3 September 2011 in the 2011-2012 Budget. The overall financial impact of the measure as brought forward is as follows:

Total resourcing

Extending the Cape York welfare reform trial

The measure in this Bill is part of a 2011-2012 Budget measure which has the following financial impact:

Total resourcing

Aboriginal Land Trusts

Nil impact.