House of Representatives

Second Reading Speech

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

I move:

That this bill be now read a second time.

This bill contains measures from the 2008-09 budget that aim to reduce customers' family assistance debts and assist customers to avoid accumulating debts into the future.

Family tax benefit provides considerable support to more than 2.2 million Australian families, with annual expenditure worth around $17 billion.

The Australian government understands that families need the family payments system to help them, not complicate and frustrate their lives.

These new measures will help stop families getting into cycles of overpayment and debt.

They will help prevent tens of thousands of families a year from potentially losing control of their household budgets and will ensure they are paid the correct amount of family tax benefit to which they are entitled.

There are three measures in this bill that will help families receive their correct entitlement and reduce debts.

The first provides for continuous adjustment of customers' family tax benefit rate. This is intended to prevent reconciliation debts by Centrelink automatically adjusting a customer's family tax benefit rate following an increase in the customer's income estimate. The second measure precludes certain payments in an effort to reduce the number of existing and newly-accrued family tax benefit debts for people who fail to lodge tax returns. The third measure makes minor amendments to the tax file number provisions in the family assistance law.

Continuous adjustment is currently a voluntary practice that assists customers to avoid being overpaid family tax benefit where there has been an increase in their income estimate during the income year. Around three-quarters of all families currently utilise continuous adjustment on a voluntary basis. This measure will make the continuous adjustment practice used by Centrelink and the Family Assistance Office mandatory for families who have an increased income estimate that reduces their ongoing rate of family tax benefit.

Around 90 per cent of all customers, or two million families, receive family tax benefit by fortnightly instalment. These payments are determined on the basis of an estimate of income. Currently, if there is a change in this estimate during the income year, this changed estimate is applied prospectively to determine the family's rate of payment from the time of the changed estimate. This measure will require the prospective instalment payments to be reduced to adjust for this increase in income. The new rate of payment will take into account the amount of benefit that the family has already been paid in that year.

This measure will assist in reducing the risk of the claimant having an overpayment on reconciliation and limiting the possibility of a debt.

This measure will prevent around $15 million of reconciliation debt for 28,500 families for the 2009-10 entitlement year, with another 29,000 families receiving an increased top-up as a result of being paid their entire supplement.

The second measure will limit how family tax benefit payments can be made in certain circumstances. It is aimed at reducing the number of existing and newly-accrued family tax benefit debts among families who have not lodged necessary tax returns. In November 2006, the Australian National Audit Office recommended in its report Management of Family Tax Benefit Overpayments that measures be introduced to reduce this type of debt, known as non-lodger debt.

As at September 2008, debts in this group amounted to approximately $460 million and it is predicted that, with no corrective action, it will be $680 million by September 2011.

This measure responds to the Australian National Audit Office recommendations on non-lodger debt. Within 18 months after the end of the relevant financial year, families will be required to lodge their tax returns or advise the Family Assistance Office that they are not required to lodge a tax return. If a tax return is not lodged within this time frame, the Family Assistance Office will temporarily restrict a customer's family tax benefit payment options, precluding options that are based on an estimate of income. The most commonly used payment mechanism that uses income estimates is fortnightly payments of family tax benefit. Therefore, where a family has not lodged their tax returns within 18 months of the end of the relevant financial year, they will not receive fortnightly payments of family tax benefit.

During the non-payment period, the family will continue to be entitled to family tax benefit as a lump sum, which can be paid following lodgement of required tax returns. The measure limits only the method by which those families can be paid.

When the customer or their partner lodge the relevant tax returns for the entitlement years for which they have non-lodger debts, the suspension will be lifted. They may then be able to receive their family tax benefit entitlement based on an estimate again, including by fortnightly payments.

This measure will help families avoid cycles of overpayment and debt when they continue receiving family tax benefit payments based on an estimate and having it turned into debt year after year. This measure will help around 40,000 families a year maintain control of their household budgets and receive their correct levels of payments.

Lodging tax returns and undertaking a final family tax benefit reconciliation for the year can result in a benefit to families where they have been underpaid family tax benefit for that year. Families who lodge their tax returns within two years after the end of the relevant financial year and complete their reconciliation will also be eligible to receive their full end of year lump sum payments.

The third measure makes minor amendments to the tax file number provisions in the family assistance law. These amendments will extend the time for which the Australian Taxation Office can provide details of a customer's income particulars to Centrelink for the purpose of the family assistance law. These amendments will also assist in specifying when and how tax file numbers can be used for the purpose of the family assistance law to assist in the reconciliation and debt offsetting processes.

I commend the bill to the House.

Debate (on motion by Mr Wood) adjourned.