Explanatory Memorandum - Extracts Only
(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)Outline and financial impact statement
The Family and Community Services Legislation (Simplification and Other Measures) Bill 2001 forms a part of the measures being undertaken to give effect to the Governments commitment to implement a simpler and more coherent social security system.
The Bill repeals Part 3.14 of the Social Security Act 1991 that deals with compensation recovery and substitutes a new Part 3.14.
The new Part is simpler than the current Part. It also implements the 2000-2001 Budget measures to:
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- remove the existing direct deduction rules for the partners of compensation recipients; and
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- recover debts arising from the payment of arrears of periodic compensation payments directly from compensation payers and insurers.
Under the new Part the existing income tests under the social security law will apply to partners of compensation recipients. This will provide more generous treatment for these partners.
When the compensation recipients rate of payment is reduced to nil because of the dollar for dollar deductions, the excess of the periodic compensation will reduce the partners rate under the ordinary income tests. Partners will have access to the applicable free areas and taper rates.
This initiative recognises the move in other areas of the social security law away from the concept of dependency based payments and towards entitlements for payment in a persons own right.
Overall this measure will increase the amount of social security pensions and benefits paid to couples with low levels of income derived largely, or solely, from compensation payments.
The Bill also gives effect to a number of minor simplification measures that were outlined in the 2000-2001 Budget:
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- the current treatment of gross rental income will be clearly set out in the social security law;
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- the deeming exemption provisions are streamlined by providing an automatic exemption for financial investments that are unrealisable for the purpose of the assets test hardship provisions;
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- the means test treatment of income streams are amended to ensure the conditions that income streams must meet to gain favourable means test treatment are unambiguous and a number and anomalies and unintended consequences corrected;
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- amendments will allow compensation arrears debts that are treated as income to be recovered directly from compensation payers or insurers.
The Bill also contains an amendment that changes the taper rate for the income cut-out formula that is used in working out the preclusion period for recipients of lump sum compensation. Although retrospective, it is beneficial to customers.
The Bill also makes two minor technical amendments that relate to the A New Tax System package legislation.
Date of effect
Schedule 1, other than item 15, commences on 20 September 2001.
Item 15 of Schedule 1 is taken to have commenced on 1 July 2000.
Schedule 2, other than items 1 and 25, commence on 20 September 2001.
Item 1 of Schedule 2 is taken to have commenced on 3 May 2000 immediately after the A New Tax System (Family Assistance and Related Measures) Act 2000 received the Royal Assent.
Item 25 of Schedule 2 is taken to have commenced on 1 July 1998 immediately after the commencement of item 10 of Schedule 5 to the Youth Allowance Consolidation Act 2000.
Financial Impact
The additional costs of the removal of the direct deduction rules for partners of compensation recipients are as follows:
| nbsp; | nbsp; | 2000-01 | 2001-02 | 2002-03 | 2003-04 | ||
| Measure | Administered | 0.000 | 2.298 | 3.113 | 3.272 | ||
| nbsp; | Departmental | 0.269 | 1.515 | 0.980 | 0.984 | ||
| nbsp; | Total | 0.269 | 3.813 | 4.093 | 4.256 |
The additional costs and savings of the simplification changes are as follows:
| $nbsp; | 2000-01 | 2001-02 | 2002-03 | 2003-04 | |
| Measure | Administered | 0.000 | -0.978 | -0.797 | -1.092 |
| Departmental | 0.206 | 0.792 | 0.097 | 0.098 | |
| Total | 0.206 | -0.186 | -0.700 | -0.994 |
There are no financial implications for any other measures in the Bill.
Notes on clauses
Clause 1 - Short title
This clause specifies that the short title of the Bill, when enacted, will be the Family and Community Services Legislation (Simplification and Other Measures) Act 2001 .
Clause 2 - Commencement
This clause specifies that:
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- clauses 1, 2 and 3 of the Bill commence on Royal Assent;
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- Schedule 1 (other than item 15) commences on 20 September 2001;
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- Item 15 of Schedule 1 is taken to have commenced on 1 July 2000;
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- Schedule 2 (other than item 1 and 25) commences on 20 September 2001;
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- Item 1 of Schedule 2 is taken to have commenced immediately after the A New Tax System (Family Assistance and Related Measures) Act 2000 received the Royal Assent; and
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- Item 25 of Schedule 2 is taken to have commenced on 1 July 1998 immediately after the commencement of item 10 of Schedule 5 to the Youth Allowance Consolidation Act 2000.
The retrospective commencement to item 15 is beneficial because it brings the formula for calculating the income cut-out amount in subsection 17(8) into line with the 40% pension income taper introduced as part of the A New Tax System changes. The change has the effect of reducing the length of the lump sum preclusion period.
Similarly, the retrospective commencement of items 1 and 25 of Schedule 2 are purely technical and will have no adverse impact on anyone.
Clause 3 - Schedules
This clause gives effect to the Schedules to the Bill.
Schedule 2 - Other amendments
Amendments to A New Tax System (Family Assistance and Related Measures) Act 2000
Item 1 makes a minor technical amendment to a commencement provision in subsection 2(11) of the A New Tax System (Family Assistance and Related Measures) Act 2001.
Amendments to the Taxation Administration Act 1953
Item 24 reinserts into paragraph 8WA(1)(b) of the Taxation Administration Act 1953 a reference that was incorrectly deleted in an earlier amendment.
A reference to paragraph 202(ka) of the Income Tax Assessment Act 1936 was included in paragraph 8WA(1)(b) of the Taxation Administration Act 1953 as part of the Superannuation (Unclaimed Money and Lost Members) Consequentials and Transitional Act 1999, which commenced on 2 June 1997.
However, item 10 of Schedule 5 to the Youth Allowance Consolidation Act 2000 repealed paragraph 8WA(1)(b) of the Taxation Administration Act 1953 and substituted a new paragraph. The substituted wording unintentionally omitted the reference to paragraph 202(ka) of the Income Tax Assessment Act 1936. The repeal was retrospective to 1 July 1998.
This item will restore the reference to paragraph 202(ka) of the Income Tax Assessment Act 1936 into paragraph 8WA(1)(b) of the Taxation Administration Act 1953, in accordance with the original intention of the Superannuation (Unclaimed Money and Lost Members) Consequentials and Transitional Act 1999.