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House of Representatives

Family Assistance Legislation Amendment (Adjustment of Certain FTB Child Rates) Bill 2004

Explanatory Memorandum

(Circulated by authority of the Minister for Family and Community Services, Senator the Hon Kay Patterson)

Outline and financial impact statement

This Bill amends the family tax benefit (FTB) adjustment provisions in clause 7 of Schedule 4 to the A New Tax System (Family Assistance) Act 1999 that apply in relation to the FTB under 13 and age 13-15 child rates.

Under the adjustment arrangements provided for in this Bill, if the FTB under 13 child rate (as CPI indexed) is less that the amount worked out using the formula "CPC rate x 16.6%", the FTB under 13 child rate is increased to the amount determined under the formula. The position is similar in relation to the FTB age 13-15 child rate, except that the formula is "CPC rate x 21.6%".

The new arrangements are consistent with the pre 1 July 2004 adjustment arrangements for the FTB under 13 and age 13-15 child rates.

The total financial cost of these changes is:

2004-05    $0.0m
2005-06    $0.0m
2006-07    $1.4m
2007-08    $24.5m

Notes on Clauses

Clause 1 sets out how the Act is to be cited, that is, the Family Assistance Legislation Amendment (Adjustment of Certain FTB Child Rates) Act 2004.

Clause 2 provides a table that sets out the commencement dates of the various sections in, and Schedule to, the Act.

Clause 3 provides that each Act that is specified in a Schedule is amended or repealed as set out in that Schedule.

Schedule 1 - Amendments

Summary

Schedule 1 amends the A New Tax System (Family Assistance) Act 1999 (the Family Assistance Act) to provide new adjustment arrangements for the FTB under 13 and age 13-15 child rates.

Background

Clause 7 of Schedule 4 to the Family Assistance Act provides for certain FTB child rates to be adjusted in accordance with a prescribed formula where the amount of the relevant FTB child rate would be less under CPI indexation. Clause 7 applies to the FTB under 13 child rate and to the FTB age 13-15 child rate.

With effect from 1 July 2004, the formulae for these FTB child rates were amended to take account of the introduction of the FTB Part A supplement. The supplement is a separate and additional amount that is added to an individual's maximum and base rates in respect of an FTB child. The supplement is subject to CPI indexation on 1 July 2004 and each subsequent 1 July.

Schedule 1 replaces these adjustment arrangements for the FTB under 13 and age 13-15 child rates.

Explanation of changes

Clause 7 of Schedule 4 to the Family Assistance Act provides for the adjustment of the FTB under 13 and age 13-15 child rates in accordance with a specified formula where the relevant FTB child rate would be less under CPI indexation.

Item 1 repeals the formula in subclause 7(1) that applies in relation to the FTB under 13 child rate and replaces it with the formula "CPC rate x 16.6%".

"CPC rate" is defined in subsection 3(7) of the Family Assistance Act by reference to the combined pensioner couple maximum basic rate plus pension supplement.

Item 2 repeals the formula in subclause 7(3) that applies in relation to the FTB age 13-15 child rate and replaces it with the formula "CPC rate x 21.6%".

Item 3 makes a technical amendment by repealing subclause 7(6) of Schedule 4. Subclause 7(6) defines "FTB gross supplement amount" for the purposes of clause 7 of Schedule 4. The amendments made by items 1 and 2 make this definition superfluous. It is therefore repealed by item 3.

Item 4 provides that the amendments made by Schedule 1 apply in relation to FTB for the 2003-04 income year or later income years.


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