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 two family-related measures from the 2015 budget, which will simplify the family payments system and achieve combined savings of $219.4 million over the forward estimates.

Firstly, from 1 January 2016, families will be eligible for family tax benefit and additional payments that rely on Family Tax Benefit eligibility for a period of six weeks when outside of Australia. Currently, family tax benefit part A recipients who are overseas are able to receive their usual rate of payment for six weeks, and then the base rate for a further 50 weeks. This change will achieve savings of $42.1 million over the forward estimates.

This measure will align the portability rules for family tax benefit part A with those for family tax benefit part B and most other income support payments. It is a move consistent with the principle that the primary purpose of family assistance payments, which is to assist Australian families with the costs of raising children in Australia.

At the same time, the government acknowledges that families have business to attend to overseas from time to time - such as going on vacations, visiting family members-and therefore an appropriate amount of time will still be allowed overseas while retaining eligibility for their payments. Families will also be able to remain overseas for a further 13 weeks without needing to reapply for their FTB.

However, these measures make clear that for payments to continue, families in receipt of family tax benefit A will need to maintain a strong connection to Australia.

Family tax benefits are linked to other payments, so that this measure will have flow-on effects to other payments that rely on family tax benefit eligibility including child care benefit, child care rebate, double orphan pension, schoolkids bonus and single income family supplement if the family is outside the portability period.

Importantly, this change will not impact individuals who are members of the Australian Defence Force or Australian Federal Police who are deployed overseas, assisted by the Medical Treatment Overseas Program, or unable to return to Australia for a specified reason (such as a serious accident, or natural disaster). The Secretary of the Department of Social Services will retain discretion to increase the six-week timeframe for up to three years. This ensures those who serve our country overseas, travelling for medical reasons or delayed for reasons not of their own doing are not unfairly impacted by these changes. This ensures that equity remains at the heart of our social security system and continues to support those most in need and provides peace of mind for people serving our country overseas. This will ensure that their families will not be worse off whilst they selflessly serve all of us abroad.

The second measure in this bill will seek to wind back the large family supplement from 1 July 2016. This will help the government achieve savings of $177.3 million over the forward estimates.

The large family supplement is only a small component of the overall family tax benefit part A currently around $12.46 per fortnight for the fourth and each subsequent child thereafter.

Evidence from the National Centre for Social and Economic Modelling in 2002, 2007 and 2013 consistently found that each additional child in a family costs less than a first child. The most recent research found that, on average, a second child costs 83 per cent of the cost of the first, while a third child costs 69 per cent of the cost of the first. The reason for this is that families experience 'economies of scale', in which fixed costs are shared and spread among the children. That is, after the first child, many items have already been purchased and can be re-used by subsequent children. This highlights the appropriateness in this modest change to the FTB part A payment structure.

Removing the large family supplement has also been supported by both the Henry tax review and the National Commission of Audit.

The Henry tax review in 2010 recommended that the large family supplement be abolished, as the policy rationale behind the payment was not strong. The National Commission of Audit reiterated this position in 2014 by stating that the basic rates of FTB part A payment were sufficient for the costs of raising children.

Ceasing the large family supplement delivers on the recommendations of both of these reviews and the change therefore achieves a legitimate objective of better targeting family payments to those most in need of assistance by removing a non-essential component of FTB part A. This again reinforces the logical and evidence based approach that the government takes to achieving policy outcomes.

Importantly, this change is also in line with the recommendations of the McClure review. As noted above, this removes a non-essential component of FTB part A. This is at the very heart of what the McClure review stated. The removal of one supplement helps to simplify what is such a complicated system for families. These families are often left confused about what social security payments they are eligible for. Whilst this is a small start, it highlights the government's commitment to undertaking meaningful welfare reform and simplifying the system in a coherent manner. This will ensure those eligible for income support payments, family assistance payments and other forms of social security will be better able to understand the system.

Despite the reduced costs associated with successive children, the government acknowledges the significant costs incurred when raising children. Therefore families affected by this change will continue to receive per-child family tax benefit part A payments. This will continue to help cover the costs associated with raising children.

These provisions ensure that fairness remains at the centre of these reforms. Fairness has always been at the heart of our social security system. This realignment of the portability rules is a logical and fair change. It ensures that portability rules for most income support payments remain consistent across the board. This is important in simplifying what is already a confusing and complicated social security system.

These two budget measures, along with the reform package introduced recently by the Social Services Legislation Amendment (Family Payments Structural Reform and Participation Measures) Bill 2015, will improve the sustainability of family payments, while providing continued support to those most in need of assistance.

In 2015-16, the government will provide around $20 billion in family tax benefit payments the second-biggest item of expenditure within the Social Services portfolio, and the fourth-biggest item of expenditure in the Commonwealth budget. A modest save of $177.3 million is a reasonable and prudent measure to help ensure family tax benefit remains affordable and the government can continue to assist families in raising their children.

These measures are sensible, practical and aimed at ensuring the sustainability of our system, and guarantee that payments are targeted to those most in need. Sustainability and fairness are at the heart of these reforms and I urge all members to vote for these measures to ensure that the government is in a position to support those most in need now and into the future.

I urge also members opposite to listen to the evidence found in the Henry tax review and National Commission of Audit report and to ensure the sustainability of our social security system. These measures will also ensure portability measures for FTB part A recipients are in line with most other income support and family assistance payments. I commend the bill to the House.