House of Representatives

Explanatory Memorandum

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

Schedule 2 - Baby bonus

Summary

This Schedule pauses the indexation of baby bonus for three years from 1 July 2012, and resets the amount of baby bonus to $5,000 per child for an individual who becomes eligible (for example, their child is born) on or after 1 September 2012.

Background

The family assistance law currently provides that the amount of baby bonus for a child is $5,437, and the amount is to be indexed annually each 1 July based on the Consumer Price Index. Baby bonus is paid in 13 fortnightly instalments.

Explanation of the changes

Part 1 - Amendments

Amendments to the Family Assistance Act

Item 1 repeals and substitutes subsection 66(1), commencing on 1 September 2012. The new provision resets the amount of baby bonus to $5,000 on 1 September 2012.

Item 2 adds a new subclause 3(9) to Schedule 4 to the Family Assistance Act, commencing on the day this Act receives the Royal Assent. This new provision provides that baby bonus will not be indexed on 1 July 2012, 1 July 2013 and 1 July 2014.

The note at the end of new subclause 3(9) notes that indexation of baby bonus will resume on 1 July 2015 based on a current figure of $5,000, and refers to the transitional provision in item 6 of this Schedule.

Amendments to the Family Assistance Administration Act

Item 3 amends paragraph 47(2A)(a) to extend to 31 August 2012 the period that the upfront part of the amount of baby bonus is $879.77. This extension is a consequence of indexation not occurring on 1 July 2012 because of the item 2 amendment and baby bonus being reset to $5,000 on 1 September 2012 by item 1 .

Item 4 repeals paragraph 47(2A)(b) and substitutes new paragraphs 47(2A)(b) and (c). New paragraph 47(2A)(b) provides that the upfront part will be $846.15 for eligibility between 1 September 2012 and 30 June 2015. This reflects the resetting of baby bonus to $5,000 by item 1 , and ensures that the upfront part exceeds subsequent instalments of baby bonus by $500. New paragraph 47(2A)(c) provides that the upfront part for eligibility from 1 July 2015 (when indexation resumes) will be 16.92 per cent of the amount of baby bonus. The new figure of 16.92 per cent for the upfront part from 1 July 2015 reflects the upfront part of $846.15 from 1 September 2012 as a percentage of $5,000.

Part 2 - Application and transitional provisions

Item 5 sets out that item 1 (resetting baby bonus to $5,000) applies to individuals who become eligible for baby bonus on or after 1 September 2012.

Item 6 is a transitional provision due to the amendments made by this Schedule. This item sets out that, when indexation of baby bonus resumes on 1 July 2015, the current figure immediately before 1 July 2015 (that is, the amount to be indexed) is taken to be $5,000. This reflects the resetting of baby bonus to $5,000 on 1 September 2012.