House of Representatives

Second Reading Speech

Mr Porter(Minister for Social Services)

I move:

That this bill be now read a second time.

This bill will introduce a package of new reforms that help us support families while encouraging parents' participation in the workforce. This bill will supersede measures that have stalled in the Senate, including the following measures: that of maintaining family tax benefit part A thresholds, where savings were estimated at $525 million; that of maintaining FTB payment rates, where savings were estimated at $1 billion; that of limiting FTB Part B to families with children under six, where savings were estimated at $1.8 billion; and that of revising the FTB end-of-year supplements down to their original value of $600 and $300 per year respectively, where the accompanying savings were estimated at $1.3 billion.

This present bill anticipates withdrawal of these measures relating to FTB from the 2014-15 budget and instead proposes changes which focus squarely on the principles of structural reform of the social welfare system by simplifying the payment structure of the FTB system. At the same time, the bill provides more assistance to families when they need it the most, and it is fiscally responsible.

The measures in this bill have been introduced in order to make sure the Jobs for Families package that was introduced in the 2015-16 budget is fully paid for. This present package contains the required savings to offset the additional investment in the childcare package, which, as well as helping families and encouraging workforce participation, also represents substantive reform of a complicated inflationary childcare system.

In this bill the government is increasing the fortnightly payment rates of family tax benefit part A by $10.08 for each FTB child in the family aged up to 19. This has the effect that around 1.2 million lower income families, including income support families, who receive family tax benefit part A for around 2.2 million children, will receive higher payments from 1 July 2018. The increase in their fortnightly payments will help families better manage their day-to-day budgets by providing them with timely, regularised assistance when they need it the most.

We will also provide an additional $10.44 for under 18-year-old youth allowance recipients who are living at home, bringing the payments to the same standard rate as a family tax benefit part A child aged between 13 and 19.

Aligning these two rates of payment is itself a much needed part of the reform process to align the large variety of payment rates where possible. These alignment reforms will avoid confusion for families and make sure there is no financial incentive for an FTB child to leave full-time secondary study to claim youth allowance.

Importantly, this alignment reform will also flow on to people who are on disability support under the age of 18, special benefit and ABSTUDY. These alignment changes are based squarely on the McClure reform recommendations. They simplify the system, making it easier for parents and their older children to navigate the system in order to get the assistance appropriate to their circumstances.

The bill will introduce a new rate structure for family tax benefit part B and make other amendments to the rules for part B from 1 July 2016.

Firstly, the maximum standard rate will increase by $1,000.10 per year for families with a youngest child aged under one. This will provide more choice for families when their children are very young.

Family tax benefit part B will also be limited where a family's youngest child is aged under 13. This supports the government's broader participation agenda, which is central to the childcare reforms introduced in the 2015-16 budget, and strongly supports the policy imperative that families be encouraged and enabled to re-enter the workforce as their children begin secondary school.

A new family tax benefit part B rate of up to $1,000.10 per year will be available for single parent families and grandparents with a youngest child aged 13 to 16. The government also therefore recognises that grandparent carers take on a large responsibility when caring for their children, yet they are less likely to be working and more likely to be retired. Family assistance, it is acknowledged, helps grandparent carers meet the costs of raising their grandchildren. Similarly, we also recognise that sometimes it is difficult for single parents to transition to work, even when their youngest children are into secondary school, and this is why we are applying different payment assistance for these categories once the relevant children turns 13, providing them with some additional appropriate assistance while they prepare to re-enter the workforce.

This bill will also provide for the phase-out of both the family tax benefit part A supplement and the family tax benefit part B supplement.

The part A supplement will reduce to $602.25 a year from 1 July 2016 and to $302.95 a year from 1 July 2017. The part B supplement will reduce to $302.95 a year from 1 July 2016 and to $153.30 a year from 1 July 2017. Both supplements will then be withdrawn from 1 July 2018.

The family tax benefit part A and B supplements were introduced at a time when, under the Howard government, the surplus anticipated in the 2004-05 budget paper was $13.6 billion, and it was complicated in that a substantial use of the supplements would be used to offset potential family tax benefit overpayments arising from underestimates by recipients of their FTB relevant annual income.

In the near future, the Australian Taxation Office is introducing a single-touch payroll system, a system which will allow for accurate fortnightly reporting of income, which measure, in 2018-19, will very significantly reduce the problem of family tax benefit debts.

The fundamental and critical reform component inherent in the changes now proposed is that the measures reduce the number of supplements in the system. One of the biggest frustrations of the social security system, as expressed eloquently in a report by Patrick McClure entitled A new system for better employment and social outcomes, is that there are far too many payments and allied supplements. In fact, there are some 20 main payment types and 53 existing supplements, and that second figure of 53 existing supplements has been reduced from 55 because the government has already removed the senior supplement and the low-income supplement. This measure will further reduce the number of supplements in the system, as indeed will the associated reform measures in child care.

In summary, this package of family tax benefit and dependent youth measures enhances support for families with their day-to-day living expenses and helps them support their children from birth through to education, and with the transition to independence. This increase in day-to-day support has been achieved through reforming the supplements and increasing fortnightly payments, including aligning the rates of reduced youth payments. Together, the revised package demonstrates the government's commitment to assisting families; providing additional assistance to families when they need it the most; supporting family choice to spend more time with children when they are very young, if they wish to do so; recognising that families still have caring responsibilities when their children are in secondary school; and recognising that the most vulnerable families in the secondary schooling years, such as grandparent carers, should receive some additional support during a child's adolescent years.

At the same time, these reforms will improve the sustainability of family payments, ensuring that we as a government and as a society can achieve three important goals: first, continue to assist families in raising their children over the long term; second, fund the childcare reforms designed to enable and encourage greater workforce participation; and, third, continue a deservedly needed process of simplifying FTB, consistent with the recommendations of the McClure review, which highlights the unworkability of a system that maintains 20 main payment types with in excess of 50 supplementary categories.

I commend the bill to the House.