House of Representatives

Families, Housing, Community Services and Indigenous Affairs and Other Legislation Amendment (2008 Budget and Other Measures) Bill 2008

Second Reading Speech

Ms Macklin (Minister for Families, Housing, Community Services and Indigenous Affairs)

I move:

That this bill be now read a second time.

This bill introduces amendments to the social security law, the family assistance law, the Veterans' Entitlements Act and related acts to implement certain measures from the 2008 budget and some minor amendments.

The Rudd government's first budget delivered over $55 billion to support working families, seniors, carers and people with disability.

The budget delivered our election commitments and invested responsibly in building a modern Australia.

It was carefully framed to meet challenging economic times. It recognised that many Australians are under increasing financial strain from rising cost of living expenses and high interest rates.

The budget also reflected the economic reality that inflation is the No. 1 enemy of families, pensioners and the vulnerable in our community.

Fighting inflation is essential to responsible economic management, and this budget delivers critical measures to achieve this.

Central is the better targeting of government payments so that assistance is being directed to those who need it most.

The first of the budget measures in this bill will establish a $150,000 limit on primary earner income for family tax benefit part B. Claimants of related tax offsets will be subject to a similar income limit.

Family tax benefit part B, along with part A, is one of the two components that may make up a person's rate of family tax benefit. The part B rate for a single person is not currently subject to an income test. For a member of a couple, the part B rate is currently subject to an income test on the secondary earner only. As a result, very high income singles and couples with children may currently be eligible for taxpayer funded family assistance, a situation that has been of some community concern.

Under this measure, a family will not be eligible for family tax benefit part B where the primary earner in a couple, or a sole parent, has adjusted taxable income of more than $150,000 for the financial year. Single parent families with income at or below the $150,000 limit will continue to receive the maximum rate of payment. The limit will be indexed each year in line with movements in the Consumer Price Index.

Related dependency offsets delivered through the tax system-namely, dependent spouse, housekeeper, child housekeeper, parent or parent-in-law and invalid relative tax offsets-will also be targeted to those on incomes of $150,000 or less per year.

There are four measures in the bill relating to baby bonus. Baby bonus is currently a flat rate, one-off payment made on the birth of a child or the adoption of a child under the age of two. The payment is currently indexed twice a year, in March and September. The baby bonus will increase to $5,000 on 1 July 2008.

The government is committed to a child centred approach to family policy and this bill will make baby bonus simpler and fairer, and help direct it to those families who need it most.

The first of the baby bonus measures in this bill will introduce an income test, limiting eligibility to families with incomes equivalent to $150,000 or less per year. The income test will be applied on a pro rata basis for the six months after the birth. Families with estimated adjusted taxable income of over $75,000 in the six months following the birth, or following the commencement of care by an adoptive parent or a long-term carer, will no longer be eligible for the payment.

Families will need to provide a reasonable estimate of their income over this period. This can be easily provided through things like evidence of their income, their partner's income and any approved leave, including paid leave. The government's emphasis in administering the income test will be on up-front verification of estimates. Families do not have to worry that a debt may be raised against them because their income changes. If false or misleading information is provided then the usual sanctions will apply.

The new income test takes into account the fact that family income is often reduced when a new child arrives, and ensures that the timing of the birth or adoption within a financial year does not arbitrarily affect a family's eligibility.

As with the family tax benefit part B income limit, the baby bonus income limit will be indexed each year in line with movements in the CPI.

The second baby bonus measure will result in eligible families being paid their baby bonus in 13 fortnightly instalments from the date of claim. This will provide families with financial support and certainty over an ongoing period, providing families with the cash they need to pay the bills as they come in.

The third measure will change the indexation date for baby bonus to 1 July each year after the legislated increase to $5,000, in line with other family payments. The first application of annual indexation will be on 1 July 2009.

The fourth change will increase the age limit for baby bonus eligibility from two to 16 years where a child is adopted. A parent will now be eligible for baby bonus for an adopted child if the child is aged under 16 when adopted, and if the adoptive parent claims the bonus within 26 weeks of the child being placed into their care by the appropriate authority. The baby bonus will be available for a locally adopted child, regardless of whether this payment was previously made to the birth parent or other primary carer.

Extending the eligibility criteria for the baby bonus to allow more adoptive parents to claim payment will create a fairer system and treat all new parents in the same way. It recognises that, as with a newborn, an adoptive parent incurs similar set-up costs and may need to spend periods of time out of the workforce to welcome and settle their child.

A further budget measure recently announced will see the development of a compliance regime for the Commonwealth seniors health card. The card helps self-funded retirees of age pension, veteran pension or qualifying age, who pass an income test with living costs, by allowing access to transport and health services at a cheaper rate and providing entitlement to the seniors concession allowance and telephone allowance. There is currently no mechanism to determine ongoing eligibility for the card, unlike other concessions and benefits in the social security system.

The bill provides for the collection of tax file numbers to enable data matching, similar to existing arrangements for social security payments and payments under the Veterans' Entitlements Act, to ensure compliance with the income test.

The bill also introduces amendments to the social security law to allow a person to enter into an agreement with the secretary under which the person voluntarily agrees to be subject to income management.

Income management redirects a percentage of a person's income support and family payments to meet costs associated with shelter, household essentials, food and clothing. Currently, income management is being implemented under three differing models, all with the objective of ensuring that income support and family payments which are paid for the benefit of children are used as intended. The three models are:

income management in the Northern Territory emergency response;
income management for child protection cases in Western Australia; and
the Cape York welfare reform trials.

The bill allows people to refer themselves for income management where they feel, for example, that this would assist them to manage their finances better. Anecdotal evidence from the Northern Territory and other areas within Australia has indicated that some people would like the option of using income management to ensure the priority needs for themselves and their children are met. The voluntary scheme of income management introduced by this bill will give people this option. Income management will provide an avenue for individuals to learn money management skills in the longer term and will assist in meeting any essential financial priorities.

The final budget measure will align the minimum eligible age for partner service pension, paid under the Veterans' Entitlements Act, with that of veteran service pension age. This measure will increase the eligible age for partner service pension-for males, from 50 to 60 years of age; and, for females, from 50 to 581/2 years of age-as currently set under age equalisation rules.

Lastly, the bill will make some minor policy and technical amendments to portfolio legislation, including to the family assistance law in relation to the 1 July 2008 child support reforms, and to provide a discretion for the Child Support Registrar to deduct child support arrears from Centrelink and Department of Veterans' Affairs payments at less than the full prescribed amount in cases of hardship.

Debate (on motion by Mrs Gash ) adjourned.