House of Representatives

Second Reading Speech

Ms Collins (Parliamentary Secretary for Community Services)

I move:

That this bill be now read a second time.

This bill delivers on three important election commitments made by the government during the 2010 election campaign to improve support for Australian families and children. These will make the system of family tax benefit advances more flexible to better meet families' needs and make sure children have a health check before they start school.

The bill also includes a measure from the 2010-11 budget on streamlining notification of compensation payments, along with some minor clarifications to family payments and technical amendments.

An additional two election commitments for Australian families were included in an earlier bill. These were:

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improved support for families with teenagers, which will provide substantial increases in family assistance for families with teenagers aged 16 to 19 in secondary school or vocational equivalent; and

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better access to the baby bonus to assist families with the upfront costs of having a new baby.

Together, these commitments will significantly improve the assistance available to Australian families to assist with the costs of raising children.

More flexible family tax benefit advances

The first election commitment in the bill being introduced today overhauls the advance payment rules for family tax benefit part A to better meet families' needs. This initiative is part of the government's Better Access to Family Payments package, which will give families improved and more flexible access to their family payments.

One element of the Better Access to Family Payments package has already been introduced in a recent bill-a $500 upfront payment of the baby bonus for eligible parents.

Managing the household budget can be a delicate balance, especially when something unexpected happens. The fridge or washing machine can break down, or a school uniform can get damaged and need replacing.

The measure in this bill will ensure that advance payment rules for family tax benefit part A are more flexible, helping families deal with unexpected expenses.

Under the new rules that will apply from 1 July 2011, families will have more choice over the size and timing of their advance payments.

For some families, this new flexibility will mean avoiding higher credit card bills or small loans from high interest providers such as payday lenders. For others, it will make it easier to manage the family budget around one-off expenses like the car registration or a broken fridge.

Currently the maximum advance amount is fixed at around $330 for six months for all families, and this full amount can only be advanced twice a year-on 1 July and 1 January. This means that families do not have the flexibility to request advances when they actually need them to meet unexpected costs.

Under the new rules, families will be able to choose the value of their advance payment between minimum and maximum amounts. The minimum amount for all families will be 3.75 per cent of the maximum standard rate for a child aged under 13-this would give a minimum advance amount of around $160.

The maximum amount will be linked to the family's usual annual rate of payment. Generally, a maximum of 7.5 per cent of that rate will be available for advance payment.

For a family not receiving rent assistance, and with one child under 13, this would give a maximum advance amount of around $320. For a family not receiving rent assistance, and with two children under 13, the maximum advance would be around $640.

The maximum advance would be higher for a family receiving rent assistance.

An overall maximum will apply, set initially at $1,000 in 2011-12, and maintained at the same percentage of the maximum rate for one child under 13 as in the first year.

Some families on the base rate of family tax benefit part A would have access to a smaller advance amount because of their smaller existing entitlements.

Families will repay their advances through adjustments to their ongoing fortnightly family tax benefit part A entitlement in the following six months.

From 1 July, families will be also able to request advances at any point in the year, and can have multiple advances up to their maximum advance amount.

However, Centrelink will not approve advance payment requests if they would result in financial hardship. Families making repeated requests will also be assessed to see whether they may benefit from financial advice or financial counselling.

There are currently around 1.5 million families that could benefit from this measure if they choose to take these more flexible family tax benefit advances.

These reforms for families are similar to the improvements that this government has already implemented for age pensioners as part of its historic pension reforms.

Healthy start for school

The second election commitment delivered through this bill will set up a new requirement for income support recipient parents of four-year-olds, to make sure their children have a health check before they start school.

The new arrangement will make payment of the family tax benefit part A supplement (which is paid to families at the end of a financial year) conditional for these families on the children undergoing a health assessment, such as the Healthy Kids Check.

The new requirements apply to families where either member of a couple has received income support for any part of the year.

The requirement will also apply to non-parent carers who have received family tax benefit for a child in their care for at least 26 weeks, and who also received an income support payment at some time during the financial year. In addition, the new requirement will only apply to non-parent carers who still have the care of the child at the end of the financial year.

Preschool health checks make sure children are healthy, fit and ready to learn when they start school. These important checks promote early detection of developmental issues and illnesses.

Research indicates that disadvantaged children not only begin school less well prepared, but that early gaps persist and even widen as children progress through school. An early check is critical to help detect any developmental barriers, such as hearing or sight impairment.

The health checks to be included will be set by ministerial determination. Many children receive health checks through child and maternal health clinics or through other health services. In 2008, the federal Labor government also introduced a Healthy Kids Check for four-year-olds so that families also have the option of receiving these services from a general practitioner or practice nurse.

Parents will need to confirm with Centrelink that the check has been done. There will be an exceptional circumstances provision to waive the new requirement, such as when the child has a severe disability or terminal illness.

This requirement will apply from the entitlement year that begins on 1 July 2011 and it is estimated around 92,000 children aged four, whose families receive income support at some point in the year, will be affected by this measure each year.

This important measure is another example of the government putting the health and wellbeing of children and families at the centre of our welfare reform agenda.

The government's welfare reforms reflect the expectations of the broader Australian community-that people receiving welfare support should take personal responsibility for themselves and their families. People must participate in study, training or work and parents must care for their children.

It builds on the new model of non-discriminatory income management already rolled out in the Northern Territory, and the income management trials in Cape York and across metropolitan Perth and the Kimberley. Income management makes sure welfare payments are spent in the best interests of the child.

Income management is having positive results:

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More welfare money is being spent on food, clothing and school related expenses and less on alcohol, gambling, cigarettes and drugs.

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Over half of those who could have left the scheme in the Northern Territory have volunteered to stay on it-they find the BasicsCard is a helpful budgeting tool.

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And in Western Australia, two-thirds of people on compulsory income management and 82 per cent on voluntary income management said they recommended income management to others-a pretty good endorsement.

Strengthening child support compliance

In the third election commitment in this bill, the compliance regime on the use of default income in child support assessments will be strengthened.

A new, more accurate, default income arrangement will be introduced that uses a parent's previous taxable income, increased by wages growth, instead of a lower default income in cases where they have not lodged a tax return.

Currently, when a parent has not lodged a tax return, their child support assessment is estimated at two-thirds of the male total average weekly earnings. However, this figure often understates the parent's actual income.

Almost one in four child support cases have incorrect assessments due to late or non-lodgement of tax returns. Some parents have failed to lodge returns for over seven years. This non-compliance with tax obligations works against the policy objective of the Child Support Scheme that parents contribute towards the cost of raising their children according to their capacity to pay.

Under legislative changes made in 2006, and implemented during 2008, a new default income of two-thirds of male total average weekly earnings has applied in child support cases where a person does not lodge their tax return for more than two years. This default income is around $39,000 per annum.

Since 1 July 2008, there has been a 570 per cent increase in the use of this default income where it is lower than the person's previous taxable income.

To ensure a more accurate child support assessment and therefore better support for children in separated families, the new process will generally use the parent's last known taxable income, indexed by the growth in average wages. However, if the current calculation of two-thirds of male total average weekly earnings would produce a higher income, that figure will be used instead.

This measure will help ensure that child support assessments are fairer and more accurate and remove the unintended incentive for parents on higher incomes to benefit from a lower child support assessment if they do not lodge a tax return.

Streamlining of compensation payments notification

A measure from the 2010-11 budget will also be introduced in this bill. This measure will streamline the process of notifying Centrelink when payments are made by compensation payers and insurers.

These compensation payers and insurers will now need to tell Centrelink before compensation payments (lump sum payments as well as ongoing periodic payments) are made to compensation recipients or their partners.

The new requirement will help make sure people are paid their correct Centrelink entitlements and avoid overpayments and unnecessary debts accruing.

This measure will help simplify the process of Centrelink notification for recipients of compensation who also receive Centrelink payments.

Minor amendments

Lastly, some minor clarifications will be made to several family assistance and child support provisions. These clarifications do not change current policy.

This bill delivers on three important election commitments and a measure from last year's budget. The measures in this bill will improve support for Australian families, improve child support assessments and help prevent compensation recipients accruing unnecessary debts with Centrelink.

I commend the bill to the House.

Debate (on motion by Ms Gambaro ) adjourned.