Speech by The Hon Jenny Macklin MP

Family Assistance and Other Legislation Amendment Bill 2011 – Second Reading Speech

*** Check Against Delivery ***

This Bill delivers on five measures from the recently announced 2011-2012 Budget, and a minor non-Budget measure.

Reform of family payments

The Bill introduces three measures that make important changes to the family payments system to make it fairer and simpler, and ensure its long-term sustainability.

The first measure lowers the maximum child age of eligibility for Family Tax Benefit Part A from 24 to 21, from 1 January 2012.

Family payments are designed to support families with the costs of raising children while they are dependent. This change recognises that young people aged 22 and over are considered independent, and will bring Family Tax Benefit Part A in to line with the reduction in the Youth Allowance age of independence from 1 January 2012.

Young people aged 22 and over in full-time study may be able to access Youth Allowance independent of their parents’ income, subject to means testing and academic progress rules.

Transitional arrangements will mean that families with a young person who is already enrolled in a course which started before 1 January 2012 will continue to receive Family Tax Benefit Part A until that course finishes.

The second measure builds on reforms introduced in the 2009-10 Budget that better targeted the family payments system to focus on low and middle income families.

The Government is a strong supporter of the family payments system. Family payments are a fundamental part of the Australian social fabric.

Next year, we will spend around $30 billion combined on Family Tax Benefit, the Baby Bonus, Paid Parental Leave and child care assistance.

We have added to the system since coming to government by increasing the child care rebate to 50 per cent, introducing Australia’s first national Paid Parental Leave scheme and the Education Tax Refund, and also, in the recent Budget, increasing family payments for older teenagers by up to $4200 a year.

But we also believe in a targeted system that is sustainable for the long term.

That’s why the Government is extending indexation pauses on higher income limits for a further two years, until 30 June 2014, for Family Tax Benefit Part A and B, the Baby Bonus and Paid Parental Leave.

This Bill will extend indexation pauses on higher income limits for a further two years, until 30 June 2014, in the following areas:

  • the Family Tax Benefit Part B primary earner income limit will remain at $150,000;
  • the Baby Bonus eligibility limit will remain at $75,000 family income in the six months following the birth or adoption of a child (equivalent to $150,000 a year);
  • the Paid Parental Leave income limit will stay at $150,000 for the primary carer in the previous financial year before the birth or adoption of a child; and
  • the higher income free area, and the per child add on, of Family Tax Benefit Part A will remain constant. This threshold is the income level at which the base rate of Family Tax Benefit Part A begins to reduce, until the benefit ends completely. The income level at which a family’s benefit is completely withdrawn varies by family circumstance, depending on the number and age of the children.

The Family Tax Benefit Part A lower income free threshold and the Family Tax Benefit Part B secondary earner income threshold will continue to be indexed, providing support to low and middle income households.

Fortnightly payment rates for Family Tax Benefit and the Baby Bonus will also continue to be indexed every year to meet increases in the cost of living. The rate of Parental Leave Pay is linked to the National Minimum Wage and is also not affected by this change.

Pauses to the upper income limits mean that some families will no longer be eligible for payments, and some families will get less family payments – but only if their income rises.

No family will lose any family payments unless their income rises.

Families whose income does not increase will also have more money in their pockets as the fortnightly rates of Family Tax Benefit continue to rise, due to normal indexation.

In the first year, fewer than two per cent of families will no longer be eligible for family payments as the result of these changes.

Indexation on the upper income limits for Family Tax Benefit Part A and B, and the Baby Bonus, was paused in the 2009-2010 Budget.

The Opposition supported this very same measure in 2009. In the Parliament two years ago, on 13 May 2009, the Leader of the Opposition, the relevant Shadow Minister at the time, said these changes were too “soft”.

The extension of these pauses will save $1.2 billion over the forward estimates. These are the decisions an economically-responsible Government must make – to bring the Budget back to surplus, and make sure our family payments system is sustainable now and into the future.

Under the third measure, indexation of Family Tax Benefit end of year supplements will also be paused for three years. End of year supplements were first introduced to address overpayments of family payments because of underestimation of income.

The number of families with overpayments has decreased since supplements were first introduced, and pausing indexation of these supplements will help make family payments more sustainable.

The end of year supplements are generally paid as a lump sum after the end of an entitlement year, when a family has completed their tax return and reconciled their actual Family Tax Benefit entitlement.

This amendment will keep the end of year supplements at their current level of $726.35 per child for Family Tax Benefit Part A, and $354.05 per family for Family Tax Benefit Part B, for the next three entitlement years.

Building Australia’s Future Workforce – implementing more efficient and accurate assessments for disability support pension

This Bill also introduces changes to the assessment arrangements for Disability Support Pension to help Australians with a disability into work wherever possible, while continuing to provide an essential safety net for Australians unable to work.

To qualify for Disability Support Pension, a person must have a physical, intellectual or psychiatric impairment of 20 points or more under the Impairment Tables, and have a continuing inability to work for at least 15 hours per week.

Currently a person’s inability to work can be assessed before the person has investigated alternative employment options or assistance from employment services, or had any retraining or rehabilitation.

This means that assessments of a person’s inability to work, for the purposes of Disability Support Pension, can occur without the person having tested whether the help available could find them suitable work.

This Bill refines the test for determining whether a person has a continuing inability to work.

Under the new rules, most people applying for Disability Support Pension will be required to have actively participated in a program of support to find employment through an open employment service or vocational rehabilitation.

People with a severe impairment, such as those who are clearly unable to work and are fast-tracked to ensure they receive financial support more quickly, will not need to have actively participated in a program of support.

These changes were first announced in the 2010-2011 Budget and, in the most recent Budget, were fast-tracked so that they will now apply from 3 September 2011, rather than from 1 January 2012.

These reforms will provide faster, more sustainable support for people with severe disabilities, while referring others with the potential to work to employment services including Job Services Australia and Disability Employment Services.

The new assessment procedure for Disability Support Pension will help people with disabilities return to the workforce wherever possible by focusing on their ability, rather than their disability.

Enabling the extension of the Cape York Welfare Reform Trial

In the 2011-2012 Budget, the Government provided $16.1 million for a proposed extension of the Cape York Welfare Reform Trial for an additional year.

The Trial is a partnership between the communities of Aurukun, Coen, Hope Vale and Mossman Gorge, the Australian Government, the Queensland Government and the Cape York Institute for Policy and Leadership. It aims to restore positive social norms, re-establish local Indigenous authority and support community and individual engagement in the real economy.

To date, the Trial has made a real and lasting difference in the lives of Indigenous people in the Cape. Since it began in July 2008, the Cape York Welfare Reform communities have seen improved school attendance, care and protection of children and community safety.

The Queensland Government is currently leading a process of consultation with Cape York communities about extension of the Trial. Queensland Government legislation would also need to be changed in order for the Trial to be extended.

While these discussions occur, the Government is seeking to put in place the amendments required to enable the extension of the income management element of the Trial.

It is important these enabling legislative changes are put in place to ensure they do not delay any extension of the Trial and to ensure the four communities are not adversely affected.

The extension of the Trial will not go ahead until the communities of Aurukun, Coen, Hope Vale and Mossman Gorge have been consulted and the Queensland Government legislates to extend the operation of the Family Responsibilities Commission.

The Family Responsibilities Commission, which is established under Queensland Government legislation, is a key plank of Cape York Welfare Reform. Local Family Responsibility Commissioners hold conferences with community members, refer people to support services and, when necessary, arrange income management.

Currently, a person can only be subject to income management under the Trial after a decision by the Family Responsibilities Commission, made before 1 January 2012.

The Bill before the Parliament extends this date to 1 January 2013, to enable income management to continue in Cape York for a further 12 months.

Minor measure

The Bill also includes a minor non-Budget measure, which clarifies that the Public Works Committee Act 1969 does not apply to Aboriginal Land Trusts established in the Northern Territory under the Aboriginal Land Rights (Northern Territory) Act 1976.

The concept of an authority of the Commonwealth was first introduced into the Public Works Committee Act by way of amendment in 1981. Aboriginal Land Trusts are a mechanism to give effect to what is private ownership of land for the benefit of Aboriginal traditional owners. Land Trusts were never intended to be Commonwealth authorities to which that Act applies. This amendment puts that position beyond doubt.

This amendment will not affect the application of the Public Works Committee Act to any proposed arrangement that involves the carrying out of a work by or for the Commonwealth, or by or for an authority of the Commonwealth to which the Public Works Committee Act applies.

Where the Parliamentary appropriation requirements of section 5AA of the Public Works Committee Act are otherwise satisfied, the work will be a ‘public work’ for the purposes of that Act, even if the work is proposed to be carried out on land owned by a Land Rights Act Aboriginal Land Trust.