House of Representatives

Families, Community Services and Indigenous Affairs Legislation Amendment (Child Support Reform Consolidation and Other Measures) Bill 2007

Explanatory Memorandum

(Circulated by authority of the Minister for Families, Community Services and Indigenous Affairs, the Hon Mal Brough MP)

Schedule 6 - Baby bonus amendments

Summary

This Schedule amends the family assistance law to:

ensure that under 18 year old claimants are paid the baby bonus in 13 fortnightly instalments;
require registration of the birth with the relevant state/territory authority as a condition of eligibility for the baby bonus;
rename maternity payment to 'baby bonus'.

Part 1 - Baby bonus payments to those under 18

Background

Under the existing rules, maternity payment is generally payable as a lump sum. However, there is discretion for the Secretary to pay maternity payment in six fortnightly instalments in appropriate circumstances or in another way. The relevant payment provision is section 47 of the Family Assistance Administration Act.

Maternity payment is currently $4,133, is subject to indexation on 20 March and 20 September each year and will increase to $5,000 on 1 July 2008 (unless the amount is already greater on that date because of indexation).

There are concerns about the appropriateness of paying a large lump sum to young people with no experience in managing large amounts of money. For young claimants, the payment of such a large amount of money in one payment can cause unintended negative consequences, primarily due to their lack of financial literacy and management skills, or the pressure placed on them by partners and other relatives to use the payment for other than its intended purpose.

The current discretionary arrangements in section 47 of the Family Assistance Administration Act are insufficient to address these issues. Accordingly, from 1 July 2007, amendments are made to the payment provision for maternity payment (which will be renamed baby bonus from that date) so that a baby bonus must be paid in 13 fortnightly instalments to claimants who are under 18 years of age.

Explanation of the changes

Section 47 of the Family Assistance Administration Act provides for the payment of maternity payment (to be renamed baby bonus) and maternity immunisation allowance. Items 2 to 6 amend various provisions in section 47 to ensure that the baby bonus is paid in 13 fortnightly instalments to claimants who are under 18.

The amendment made by item 2 ensures that a baby bonus cannot be paid to a claimant aged under 18 in 6 fortnightly instalments. It does so by inserting an additional requirement into subsection 47(2) that the claimant has turned 18 on the day on which the claim for baby bonus is made. A note at the end of this item modifies the heading to subsection 47(2) accordingly.

Item 3 repeals existing subsection 47(3). Subsection 47(3) currently defines 'instalment period'. This definition is relocated, without substantive change, into new subsection 47(9) by item 6 .

New subsection 47(3) applies where the claimant has not turned 18 on the day on which the claimant makes a claim for baby bonus and the claimant is entitled to be paid baby bonus in respect of a child. In these circumstances, the Secretary must pay the claimant their baby bonus in 13 fortnightly instalments. As a general rule, the payments must be made at such times as the Secretary considers appropriate and to the credit of a bank account nominated and maintained by the person. However, new subsection 47(3A) enables the Secretary to direct that payments be made in a manner other than by direct credit into a bank account.

Subsection 47(4) enables the Secretary to change the day on which instalment periods are to begin in relation to a claimant or a class of claimants. This rule currently applies in relation to payment by instalments under subsection 47(2). Item 4 ensures that this rule also applies in relation to the payment of baby bonus by instalments under new subsection 47(3). This item also inserts an appropriate heading for subsection 47(4).

Subsection 47(6) enables the Secretary to change the day on which an instalment is paid where payment cannot reasonably made on the designated day (for example, if the day is a public holiday). Item 5 ensures that this rule also applies in relation to the payment of baby bonus by instalments under new subsection 47(3).

Item 1 makes a consequential amendment to subparagraph 38(c)(ii) of the Family Assistance Act so that any unpaid baby bonus to a claimant aged under 18 can be paid to a third party if the eligible individual dies before receiving their full entitlement.

These amendments commence on 1 July 2007 and apply to claims for payment of baby bonus made after commencement ( item 7 refers).

Part 2 - Registration of birth

Background

Relevant State and Territory laws require the birth of a child to be registered (generally within 60 days of the birth) and it is usually the parents of the child who have joint responsibility for registration of the birth of the child.

A proportion of parents delay registering their child's birth, sometimes for an extended period. This change will improve the timeliness and accuracy of birth statistics and enhance the integrity of the payment.

Explanation of the changes

The eligibility rules for maternity payment (to be renamed baby bonus) are set out in Division 2 of Part 3 of the Family Assistance Act.

Amendments are made to insert a new birth registration requirement for parents claiming the baby bonus. The relevant provision is subsection 36(2) of the Family Assistance Act which sets out the eligibility requirements applicable to a parent claiming baby bonus in respect of a child.

Item 8 amends subsection 36(2) by inserting new paragraph (c) which outlines the new birth registration requirement.

The requirement would apply to an individual who is responsible (whether jointly with another person or alone) for the registration of the birth of the child under the relevant State or Territory law relating to the registration of births.

Such an individual would satisfy the registration requirement if, at the time of claiming baby bonus, the birth of the child has been registered.

An individual would also satisfy the registration requirement if the individual has made an application to have the birth of the child registered in accordance with the relevant State/Territory law at the time the claim is made.

The third way in which the registration requirement can be satisfied is if the Secretary is notified, or becomes aware, within 26 weeks of the birth of the child, that the individual has applied to have the birth registered. This 26 week time frame is consistent with the time limit for claiming payment (paragraph 39(2)(a) of the Family Assistance Administration Act refers).

Under new subsection 36(2A), inserted by item 9 , the Secretary would have a discretion to extend the 26 week time limit where the Secretary is satisfied that the individual was unable to claim payment of baby bonus because of severe illness associated with the birth of the child concerned. Again, this new rule is consistent with the rule in subsection 39(3) of the Family Assistance Administration Act that enables the time limit for claiming to be extended beyond the usual 26 week period.

The changes made by Part 2 commence on 1 July 2007 and apply to claims for payment of baby bonus made in relation to children born on or after that date ( item 10 refers).

Part 3 - Name change to baby bonus

Background

From 1 July 2007, maternity payment will be renamed as the baby bonus. Maternity payment has always been commonly referred to as the baby bonus, and changing its official name is expected to reduce confusion.

Explanation of the changes

Amendments to the family assistance law

Amendments are made to the maternity payment provisions in the Family Assistance Act and the Family Assistance Administration Act to rename maternity payment as baby bonus. This is achieved by amending all existing references to maternity payment to reflect the name change. Changes are also made to the headings of provisions as appropriate.

Items 11 to 24 amend the relevant references in the Family Assistance Act, while items 25 to 36 amend the relevant references in the Family Assistance Administration Act.

Item 37 sets out the application provisions for the renaming of maternity payment to baby bonus. The changes will apply to claims for payment of baby bonus made on or after 1 July 2007. Claims for maternity payment that are undetermined on 1 July 2007 will be treated as claims for baby bonus, noting that the new rules relating to payment of baby bonus by instalments and the birth registration requirement have their own application rules. 'Incorrect' claims for maternity payment made after 1 July 2007 will be treated, as a matter of administration, as claims for baby bonus (rather than requiring claimants to reclaim using a very similar form).

For example, a claim for maternity payment is made after 1 July 2007 by a claimant who is 17 years old in respect of a child born before 1 July 2007. The claim would be determined as if it were a claim for baby bonus. The birth registration requirement would not apply as the child in respect of whom the claim was made was born before 1 July 2007. If the claimant is otherwise eligible for baby bonus and the claim is granted, then baby bonus would be payable to the customer in 13 fortnightly instalments, as the claim was made on or after 1 July 2007 and the claimant was aged under 18 at the time of claim.

Income Tax Assessment Acts

Consequential amendments are also made to the Income Tax Assessment Act 1936 and the Income Tax Assessment Act 1997 to reflect the name change.

Subsection 159J(6) of the Income Tax Assessment Act 1936 defines 'separate net income' for the purpose of working out a taxpayer's rebate for dependants. Currently, 'separate net income' in relation to a dependant does not include maternity payment. Item 38 inserts a reference to baby bonus to maintain this current treatment for baby bonus.

Item 39 includes a reference to baby bonus in section 11-15 of the Income Tax Assessment Act 1997 (table item headed 'family assistance') while item 40 amends section 52-150 by inserting a reference to baby bonus. These changes are to retain the tax exempt status of the new baby bonus on the same basis as the existing maternity payment.

These changes commence on 1 July 2007.


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