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FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS AND OTHER LEGISLATION AMENDMENT (FURTHER ELECTION COMMITMENTS AND OTHER MEASURES) BILL 2011 Explanatory Memorandum

FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS AND OTHER LEGISLATION AMENDMENT (FURTHER ELECTION COMMITMENTS AND OTHER MEASURES) BILL 2011


2010-2011





               THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA





                          HOUSE OF REPRESENTATIVES











   FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS AND OTHER
   LEGISLATION AMENDMENT (FURTHER ELECTION COMMITMENTS AND OTHER MEASURES)
                                  BILL 2011






                           EXPLANATORY MEMORANDUM













                     (Circulated by the authority of the
 Minister for Families, Housing, Community Services and Indigenous Affairs,
                          the Hon Jenny Macklin MP)
   FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS AND OTHER
   LEGISLATION AMENDMENT (FURTHER ELECTION COMMITMENTS AND OTHER MEASURES)
                                  BILL 2011



OUTLINE


This Bill  will  introduce  three  further  election  commitments  affecting
families, a 2010-11 Budget measure streamlining the  notification  processes
for compensation recipients, and some minor family assistance amendments.

Family tax benefit advance

The Bill introduces a further element from the election  commitment  package
titled Better Access  to  Family  Payments.   This  will  provide  for  more
flexible advance payments of family  tax  benefit,  to  help  families  meet
unexpected costs.

Health checks for young FTB children

As one of its election commitments, the  Government  announced  the  Healthy
Start for School measure for family tax benefit (FTB) recipients  on  income
support payments.  This measure will make the payment  of  the  FTB  Part  A
supplement for a child turning four in a particular income year  conditional
on the child undertaking a health  check.   The  measure  will  commence  on
1 July 2011.

Determinations of adjusted taxable income

The Bill introduces an election commitment from  the  Government's  package,
Strengthening Compliance - child support.  The measure modifies the  current
rules applicable to the Child Support Registrar in  determining  a  person's
adjusted taxable income  where  a  parent's  taxable  income  has  not  been
formally assessed.  A new, more accurate, default  income  arrangement  will
be introduced that uses a  parent's  previous  taxable  income,  indexed  by
growth in wages, instead of a  lower  default  income  (two-thirds  of  Male
Total Average Weekly Earnings), in cases where they have not  lodged  a  tax
return.

Notice of payments of recompense for personal injuries

The 2010-11  Budget  measure,  Streamline  the  Notification  Processes  for
Compensation Recipients, is included  in  this  Bill.   The  new  provisions
require payers of compensation,  such  as  insurance  companies,  to  notify
Centrelink of proposed payments of compensation.  Centrelink will  then  use
this information to  determine  the  social  security  entitlements  of  the
compensation recipient or their partner.   This  will  reduce  the  risk  of
individuals incurring unnecessary debt to  the  Commonwealth  and  receiving
income support payments to which they or their partner are not entitled.

Other amendments

The Bill also makes minor amendments to the family assistance law and  child
support legislation to clarify technical or  drafting  matters,  and  ensure
the legislation operates as intended.  There  are  no  policy  changes  from
these amendments.

Financial impact statement

Family tax benefit advance

Total resourcing

|2010-11      |2011-12     |2012-13     |2013-14     |2014-15     |
|$3.5 m *     |$22.0 m *   |$11.6 m     |$11.2 m     |$11.2 m     |


* Does not include Centrelink capital costs of $1.6 m in 2010-11 and $1.3  m
in 2011-12.

Health checks for young FTB children

Total resourcing

|2010-11      |2011-12     |2012-13     |2013-14     |2014-15     |
|$4.0 m *     |$2.8 m *    |$1.2 m      |$1.2 m      |$1.4 m      |


* Does not include Centrelink capital costs of $0.8 m in 2010-11 and $0.7  m
in 2011-12.

Determinations of adjusted taxable income

Total change in resourcing *

|2010-11         |2011-12        |2012-13        |2013-14        |
|- $18.7 m       |- $19.4 m      |- $20.1 m      |- $20.4 m      |


* Includes impacts for the Department of Human Services and  the  Department
of Families, Housing, Community Services and Indigenous Affairs.

Notice of payments of recompense for personal injuries

Total resourcing

|2010-11         |2011-12        |2012-13        |2013-14        |
|$0.2 m          |- $7.1 m       |- $12.8 m      |- $14.3 m      |

Other amendments

Nil.


   FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS AND OTHER
   LEGISLATION AMENDMENT (FURTHER ELECTION COMMITMENTS AND OTHER MEASURES)
                                  BILL 2011



NOTES ON CLAUSES


              Abbreviations used in this explanatory memorandum

    . 'Child Support Assessment Act' means the  Child  Support  (Assessment)
      Act 1989.


    . 'Family Assistance Act' means the A New Tax System (Family Assistance)
      Act 1999


    . 'Family Assistance Administration Act' means  the  A  New  Tax  System
      (Family Assistance) (Administration) Act 1999


    . 'Social Security Act' means the Social Security Act 1991


Clause 1 sets out how the new Act is to be cited, that is, as the  Families,
Housing, Community Services and Indigenous  Affairs  and  Other  Legislation
Amendment (Further Election Commitments and Other Measures) Act 2011.

Clause 2 provides a table that  sets  out  the  commencement  dates  of  the
various sections in, and Schedules to, the new 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 - Family tax benefit advance


                                   Summary

This Schedule to the Bill introduces a further  element  from  the  election
commitment package titled Better  Access  to  Family  Payments.   This  will
provide for more flexible advance payments of family tax  benefit,  to  help
families meet unexpected expenses.

                                 Background

From 1 July 2011, families will  be  able  to  receive  a  larger  and  more
flexible advance of their family tax benefit entitlements.  This  will  give
families more choice and greater scope to choose the size and timing  of  an
advance payment.

This Schedule modifies the  current  arrangements  for  family  tax  benefit
(FTB) advance payments in order to make more  flexible:   first,  the  rules
for determining whether an individual is entitled  to  an  advance  and  the
amount of the advance; second, the rules as  to  reducing  the  individual's
rate of FTB Part A to effect repayment  of  the  advance;  and,  third,  the
circumstances in which a debt for the unrepaid amount of the FTB advance  is
raised.  The conditions under which regular advances  will  operate  in  the
context of these more flexible arrangements are also modified.

Entitlement to an FTB advance

Entitlement to an advance will continue to depend, as it does now, upon  the
individual being entitled to FTB by instalment,  having  at  least  one  FTB
child, and the individual having made a request to  the  Secretary  for  the
payment of an FTB advance.  The individual will need to have an annual  Part
A rate of FTB, before any reduction for an advance, of  at  least  the  base
standard rate for an FTB child who has not turned 18.

However, unlike the  current  approach  where  a  fixed  amount  of  advance
applies, the individual will now be able to request a  specified  amount  of
advance to suit their needs.  The approach  is  similar  to  that  taken  in
relation to  social  security  advances,  which  were  amended  to  be  more
flexible from 1 July 2010 as the result of the pension  reforms  (under  the
Social Security and Other Legislation Amendment (Pension  Reform  and  Other
2009 Budget Measures) Act 2009).

The individual is generally excluded from being paid a  family  tax  benefit
advance if at the time they make  the  request,  they  owe  a  debt  to  the
Commonwealth.  Further, no advance is available if the amount of an  advance
that the person received more than 12 months ago has not been fully  repaid.
 However, the individual may be paid a  further  advance  while  a  previous
advance is still being repaid, so long as the new advance  does  not  exceed
the individual's remaining maximum advance.  This allows  an  individual  to
choose to be paid some of their maximum advance at one time, and some  at  a
later time (rather than receiving all of their maximum advance  at  the  one
time).

The individual will not be entitled to an advance  if  they  would  only  be
entitled to an advance amount of less than the minimum amount.

To be entitled to an advance, the  Secretary  must  be  satisfied  that  the
individual will not suffer financial hardship from the individual's  Part  A
rate being reduced to repay the advance.

Amount of FTB advance

The amount of advance to which an individual may be entitled  will  be  more
flexible than the current arrangements.  The amount will be  subject  to  an
upper and lower limit.  Within these limits, the maximum amount  payable  to
any individual will generally vary depending upon their  Part  A  rate,  and
whether they are still repaying a previous advance. For  the  2011-12  year,
the maximum advance available will be limited to $1,000.   The  minimum  for
2011-12 for most individuals will be $160.96.   For  subsequent  years,  the
maximum and minimum limits will be linked to the FTB child rate for one  FTB
child who is under 13 years of age, which is  indexed  on  1  July  of  each
year, and will consequently be adjusted annually.

If the individual is repaying a previous advance, then their maximum  amount
for the new advance will be reduced by the original amount of  the  previous
advance.  This will ensure that  the  reduction  in  the  individual's  rate
required to repay the additional advance, when added to  reductions  already
being made, will not place them in a situation of financial  hardship.   The
combined reduction from the two advances is the same  reduction  that  would
apply if the individual had chosen to  receive  one  advance  equal  to  the
amount of the two advances.

The individual will generally be entitled to the smaller of  the  amount  of
advance  sought,  and  the  maximum  amount  of  advance  payable   to   the
individual.  Subject to the ceiling amount noted above ($1000  in  2011-12),
the maximum amount is the greater of 7.5 per cent of their Part  A  rate  or
7.5 per cent of the maximum standard rate for a child  under  13,  less  any
existing advances.  This amount is subject  to  a  remaining  discretion  to
determine that the individual should be entitled to a  lesser  amount  based
upon financial hardship criteria.  If the decision is  that  any  amount  of
advance (even the minimum) will place the individual in financial  hardship,
then the individual is not entitled to receive an advance.

Repayment of advance payment

The current fixed repayment periods of 1 January to 30 June and  1  July  to
31 December will no longer apply.  Instead, an  individual  may  request  an
advance on any day, and will have some flexibility  as  to  the  period  and
rate of repayment of the advance.

The default repayment period over  which  the  advance  will  ordinarily  be
repaid by reduction of the individual's FTB Part A instalment  rate  is  182
days, or 26 weeks.  This period may span two financial  years.   However,  a
different  repayment  period  may  be  appropriate,   depending   upon   the
individual's circumstances.  An example is where the  period  for  repayment
of  the  advance  is  known  to  be  shorter  than  182  days  because   the
individual's eligibility for FTB will end at an  earlier  time  because  the
individual's only child ceases to be an FTB child due  to  the  child's  age
and other circumstances.  The repayment period may also be varied from  time
to time.

If the Secretary determines that an individual is entitled  to  be  paid  an
advance, it must  be  repaid,  as  currently,  first  by  reduction  of  the
individual's ongoing rate of FTB Part A  during  the  repayment  period  (if
possible), although other means of repayment are available.   The  repayment
period, and reduction of the individual's Part A rate will  generally  start
from the beginning of the  next  instalment  period  after  the  advance  is
determined.

The practical effect of the reduction of the annual Part A rate to repay  an
advance in the ordinary case is that the individual's daily rate of  FTB  is
reduced by the amount of the advance payment divided by 182.

The individual may seek either a reduction or  increase  in  the  number  of
days in  their  repayment  period.   If  the  individual  requests  it,  the
Secretary may determine that the repayment period is shortened if  satisfied
that the  individual  would  not  suffer  severe  financial  hardship.   The
individual may also request a longer repayment  period,  producing  a  lower
rate of reduction of their FTB Part A  rate.   However,  this  request  will
only be granted  in  unanticipated  and  unusual  circumstances,  where  the
individual would suffer severe financial hardship if the  request  were  not
granted.  In these cases, the Secretary may vary the decision to extend  the
repayment period where  satisfied  that  the  individual  would  not  suffer
severe financial hardship as a result, provided that this  does  not  result
in the individual's FTB Part A reduction being  greater  than  the  standard
reduction (the original advance amount divided by the number of days in  the
original repayment period is the daily equivalent  of  the  annual  standard
reduction).

The individual also has the option to seek  a  suspension  of  repayment  in
unforeseen and unusual circumstances.  The suspension may be revoked by  the
Secretary, and adjustment to the repayment period must  also  be  considered
at the same time.  Similarly, if the  individual  requests  it,  and  it  is
satisfactory to the Secretary, the individual may repay all or part  of  the
advance in another way, for example,  by  cash  refund.   If  so,  it  would
generally be appropriate for  the  individual  to  also  request  a  shorter
repayment period due to the cash refund.

During the repayment period, the individual's Part  A  rate  is  reduced  on
each day by a figure representing the annualised amount  of  the  result  of
dividing the unrepaid amount of the advance (at that time) by the number  of
days remaining in the repayment period.

It will be possible for an individual to be repaying more than  one  advance
at the same time.  Each advance  that  has  been  paid  will  have  its  own
repayment period and daily reduction amount, and the  point  at  which  each
advance is fully  repaid  will  therefore  differ.   During  the  period  of
overlapping repayment periods, the  reduction  of  the  individual's  annual
Part A rate will be the sum of the  reductions  for  each  advance  that  is
being repaid on that day.

If a retrospective recalculation of an individual's Part A rate takes  place
once the advance was thought to be entirely repaid, that is, after  the  end
of the repayment period, and as a result, all or part of the advance is  now
not repaid, the outstanding amount must still be repaid.  This  could  arise
as the result of a change of circumstances during an income year, or due  to
the reconciliation of FTB after the end of the  income  year.   However,  an
advance debt will not arise where the individual is,  at  the  time  of  the
recalculation, entitled to FTB by instalment with  a  Part  A  rate  greater
than nil, such that reduction of the FTB Part A rate  may  be  restarted  to
repay the outstanding amount.

In this case, the device of a new notional advance is used.   The  Secretary
must determine that a new notional advance is taken to have  been  paid,  in
the amount of the  balance  outstanding  at  that  time,  triggering  a  new
repayment period.  The notional advance is taken to have been  paid  on  the
day the Secretary undertakes the recalculation of the previous period.   The
Secretary will also determine  a  repayment  period  for  the  notional  new
advance.  Once a new repayment period is created, it  may  be  adjusted,  or
suspended, in the same way as for the original repayment period.

FTB advance debts

These more flexible arrangements will  result  in  an  individual  generally
repaying their advance from ongoing reductions of the Part  A  rate,  rather
than a debt arising (a debt prevents the  individual  from  seeking  further
advances should they wish it).  A debt will arise if, when an amount of  the
advance remains outstanding, the individual has a nil ongoing  rate  of  FTB
Part A before any reduction for an advance, or loses entitlement to FTB.

A debt will also arise if the individual was not  entitled  to  the  advance
when it was paid, or was not entitled to the full amount of advance paid.

Additionally, a debt will arise if relevant tax returns are not lodged,  and
the  Secretary  determines  under  section  28  of  the  Family   Assistance
Administration Act that the claimant was not entitled to family tax  benefit
for an income year, and the amount of advance that had been repaid  in  that
year  is  now  not  repaid.   However,  if  the  relevant  tax  returns  are
subsequently lodged, the debt will be extinguished.

Regular advances

For individuals who prefer to make a single request to receive  advances  of
the  same  amount  at  regular  intervals,  regular  advances  will   remain
available.  An individual may request an advance of the  minimum  amount  be
paid to them  and  simultaneously  request  that  similar  advances  of  the
minimum amount be paid to them at regular intervals of 182  days.   Provided
the individual is able to repay each such  advance  by  reduction  of  their
Part A rate within the 182-day interval, then such arrangement may  continue
indefinitely.

Transitional arrangements will apply to maintain the payment of  an  advance
to  families  in  receipt  of  continuous  advances  immediately  prior   to
commencement.

The amendments made by this Schedule commence on 1 July 2011.

                         Explanation of the changes

Amendments to the Family Assistance Act

Items 1 and 3 repeal the definitions of 'FTB  advance  rate'  and  'standard
advance period'.  These concepts will  no  longer  be  required  under  this
system of more flexible advances.

Item 2 inserts a definition of  'repayment  period',  by  reference  to  new
subclause 40(3) of Schedule 1, inserted by item 8, below.

Item 4 inserts the concept of a 'standard reduction'  by  reference  to  new
clause 41 of Schedule 1, also inserted by item 8, below.

Item 5 makes a minor amendment  to  paragraph  21(1)(c),  which  deals  with
eligibility for  family  tax  benefit.   In  most  cases,  in  order  to  be
eligible, an individual must have at least one FTB child (or  at  least  one
regular care child and not  be  an  absent  overseas  recipient),  and  meet
residency requirements.  The individual must additionally  have  a  rate  of
family tax benefit, worked out under Division 1 of Part 4, that  is  greater
than nil.  However, where an individual's Part A rate is  being  reduced  to
repay an advance, and they have a nil Part B rate, the reduction may  result
in their rate of family tax benefit being nil.  This  amendment  results  in
the individual's rate, as considered for  eligibility  purposes,  being  the
rate that disregards any reductions under clause 5 or 25A of Schedule 1  (to
repay an advance).

Item 6 repeals and replaces clause 5 of Schedule 1.   Clause  5  reduces  an
individual's Part A rate to  effect  repayment  of  an  advance,  where  the
individual's Part A rate is calculated under method  1.   Method  1  applies
where the individual's adjusted taxable income does not  exceed  the  higher
income free area (currently $94,316 a year, plus $3,796 for each  FTB  child
after the first) or where the  individual  or  their  partner  is  receiving
prescribed social security or veterans' payments.

New subclause 5(1) sets out when the individual's  Part  A  rate  is  to  be
reduced.  Reduction of the individual's Part A rate is required if:

    .  the  individual  is  entitled  to  be  paid  family  tax  benefit  by
      instalment; and

    . the individual is paid a family tax benefit advance; and

    . the individual has not repaid the whole of the advance; and

    . the amount of unrepaid family  tax  benefit  advance  is  not  an  FTB
      advance debt.

The Part A rate upon  which  this  provision  operates  is  the  rate  after
reduction, if any, under clauses 38J and 38K,  which  deal  with  offsetting
for duplicate rent assistance.  The subclause is subject to new  clauses  44
and 49, which deal with suspension of repayments. The reduction to  be  made
is prescribed by new Division 4 of Part 5 of Schedule 1 (see item 8 below).

New subclause 5(2) makes it clear  that,  if  an  individual  satisfies  the
paragraphs of subclause 5(1) above for more  than  one  family  tax  benefit
advance, the individual's Part A rate is to be reduced under  subclause  (1)
for each of those advances.

Item 7 repeals and replaces clause 25A of Schedule 1.   Clause  25A  effects
reduction of an individual's Part A rate to effect repayment of an  advance,
where the individual's Part A rate is calculated under method 2.   Method  2
applies where the individual's adjusted taxable income  exceeds  the  higher
income free area and where neither  the  individual  nor  their  partner  is
receiving prescribed social security or veterans' payments.  Clause  25A  is
identical in effect to new clause 5.

Item 8 adds a new Division at the end of Part 5 of Schedule 1.

Division 4 - Reduction for family tax benefit advance

An  individual's  annual  rate  of  family  tax  benefit  is  calculated  in
accordance with the rate calculator in Schedule 1, as stated  by  subsection
58(1).  New Division 4 deals with reduction of an individual's Part  A  rate
to repay an FTB advance.

New clause 40 prescribes how to work out the reduction  of  an  individual's
Part A rate under new clauses 5 or 25A.  It prescribes, at subclause (1),  a
formula that divides the amount of unrepaid family tax  benefit  advance  by
the remaining days in the repayment period, and  annualises  the  result  by
multiplying by 365.  This formula produces an annualised rate  of  reduction
of the Part A rate for each day in the repayment period.

Where the person requesting the advance  is  a  member  of  a  couple  in  a
blended family, and the Secretary has determined a percentage  that  is  the
individual's share of the family tax benefit for the children under  section
28, subclause (2) provides for the reduction  in  the  individual's  Part  A
rate  during  the  repayment  period  to  repay  an  advance  paid  to   the
individual.

Subclause (2) inflates  the  reduction  in  the  Part  A  rate  produced  by
subclause (1) by the individual's section 28 percentage.  This is  necessary
because when the ultimate annual  rate  of  FTB  for  all  children  of  the
individual is calculated under Schedule 1,  section  60  provides  that  the
individual's annual rate of FTB is the section 28 percentage of  this  rate.
When the individual's rate, including the reduction  for  repayment  of  the
advance,  is  reduced  under  section 60,  the  earlier  inflation  by  this
percentage under this subclause produces the correct reduction.

The 'repayment period' is defined in new subclause (3).

The repayment period begins on  either  the  first  day  of  the  instalment
period  after  the  individual  is  paid  the  advance,  or  if  it  is  not
practicable for the reduction to start on that day, the first day  on  which
it is practicable to reduce the individual's Part A rate.

If the individual has sought regular advances  at  182-day  intervals  under
new section 35B of the Family Assistance  Administration  Act  (inserted  by
item 13 below), the repayment period begins on the day the determination  of
entitlement to each successive advance  is  made.   This  ensures  that  the
regular advances may be paid at six-monthly intervals.

In some particular situations, the  repayment  period  will  start  on  such
other day determined by the Secretary under  this  Division.   For  example,
new clause 51 provides for the Secretary to  determine  a  repayment  period
for a notional new advance where the original repayment period has expired.

The repayment period is then a period of either  182  days,  or  such  other
period as determined by the Secretary under the  Division.   Subsequent  new
clauses 42, 43, 44, 45, 46, 47, 48  and  49  of  the  Division  provide  for
either a shorter or longer repayment period, or suspension of the  repayment
period.

New clause 41  provides  for  a  standard  reduction  by  reference  to  the
original repayment period. Subject to subclause (2), the standard  reduction
is the original amount of a family  tax  benefit  advance,  divided  by  the
number of days in the original repayment period.

The original repayment period is defined at subclause (3)  as  a  period  of
182 days, unless the Secretary has determined a  different  period  for  the
advance under clause 42 or 51. This  reflects  the  fact  that  the  default
repayment period for repayment of an advance will ordinarily  be  26  weeks.
However, subclause (3) provides for the  original  repayment  period  to  be
shorter or longer than 182 days under new clauses 42 or 51.

Where an advance is paid to a member of a couple in a  blended  family,  and
the Secretary has determined a percentage that is the individual's share  of
the family tax benefit for the children  under  section  28,  subclause  (2)
provides that  the  standard  reduction  is  the  standard  reduction  under
subclause (1) inflated by the individual's section 28 percentage.

The standard reduction concept will guide  the  Secretary's  decision-making
when applying a different repayment period in order to produce  a  different
repayment rate.

New clause 42 provides for the Secretary  to  determine  a  shorter  payment
period when determining an individual's  entitlement  to  an  advance.   The
Secretary may determine  that  the  repayment  period  for  the  family  tax
benefit advance is a period of less  than  182  days  if  the  Secretary  is
satisfied that it is appropriate to determine the shorter  repayment  period
having regard to:

   (a)      circumstances affecting the individual's eligibility for  family
      tax benefit; and

   (b)      circumstances affecting the rate of family tax benefit that  the
      individual is entitled to be paid.

An example is where the period for repayment of the advance is known  to  be
shorter than 182 days because the individual's eligibility for FTB will  end
at an earlier time because the individual's only child ceases to be  an  FTB
child due to the child's age and other circumstances.  This  is  similar  to
the existing  discretion  in  subsection  34(4)  of  the  Family  Assistance
Administration Act.

New clause 43 adjusts the reduction made  under  new  clause  40  where  the
individual's Part A rate is insufficient to cover the calculated  reduction,
where the individual's Part A rate is  to  be  reduced  to  repay  only  one
family tax benefit advance.

It may be that, as a result of a variation reducing an individual's  Part  A
rate, the Part A rate before reduction is  less  than  the  reduction  which
would result from the relevant formula in new clause 40.  In this case,  new
subclause 43(2) provides that, subject to  clause  45,  the  Secretary  must
determine  that  the  number  of  days  in  the  repayment  period  for  the
particular unrepaid advance is to be  increased  so  that  the  individual's
Part A rate is reduced under clause 5 or 25A by an amount that  is  no  more
than  the  individual's  unreduced  Part  A  rate.   This  will  leave   the
individual with a nil Part A rate after the reduction.   Alternatively,  the
Secretary may exercise the discretion under clause  45  and  determine  that
the amount of unrepaid family tax benefit advance is a debt.

If the individual's unreduced Part A rate later exceeds the amount by  which
the individual's Part  A  rate  would  be  reduced  under  clause  40  (this
reduction will be lower as a result of the increase in the  number  of  days
in the repayment period under subclause  43(2)),  then  new  subclause 43(3)
provides that the Secretary may determine that the number  of  days  in  the
repayment period for the unrepaid advance is decreased.

However,  new  subclause  43(4)  provides  that  the  amount  by  which  the
individual's Part A rate is to be reduced under clause 40 as the  result  of
a determination under subclause 43(3) must be  no  more  than  the  standard
reduction.

A note advises the reader that the individual  may  also  request  that  the
Secretary determine a shorter or longer repayment  period  under  clause  46
or 47.

New clause 44 adjusts the reduction made  under  new  clause  40  where  the
individual's Part A rate is insufficient to cover the calculated  reduction,
where the individual's Part A rate is being reduced to repay more  than  one
family tax benefit advance.

A method statement is set out in subclause (2) to guide the amount by  which
the individual's Part A rate is to be reduced.  The advances are  approached
one by one, taking the oldest advance first,  and  working  through  to  the
youngest.  The reduction is adjusted  individually  because  reductions  for
older advances may result in a nil Part A  rate,  such  that  payment  of  a
younger advance cannot occur at that time.  The method  statement  provides,
at step 4, for suspension  of  the  repayment  period  for  such  a  younger
advance.

Subclause (3) authorises the Secretary to vary a previous  determination  to
reduce  a  repayment  rate  to  the  rate  of  FTB  Part  A  available,  and
subclause (4) authorises the Secretary to revoke  a  previous  determination
to suspend reductions where only a nil rate is available.

Subclause (5) provides that, if the Secretary  revokes  a  determination  to
suspend a repayment period under step 4, the Secretary  must  determine  the
number of days remaining in the repayment period for the advance.   However,
the Secretary need not adjust the repayment period if the Secretary  instead
invokes the discretion in new clause 45 to create an FTB advance debt.

Subclause (6) requires that the amount by  which  the  individual's  Part  A
rate is to be reduced as the result of a decision  under  subclause  (3)  or
(5) must be no more than the standard reduction.

New clause 45 provides a discretion for  the  Secretary  to  create  an  FTB
advance  debt   under   subsection   71A(7)   of   the   Family   Assistance
Administration Act.  However, the Secretary must not  make  a  determination
that an amount  of  unrepaid  family  tax  benefit  is  a  debt  unless  the
individual's Part A rate before reduction under clause  5  or  25A  is  less
than the amount that would, under clause 26 be the FTB  child  rate  for  an
FTB child who had not turned  18  if  the  individual's  Part  A  rate  were
required to be worked out using Part 3 of Schedule 1, and clause 27 of  that
Schedule did not apply.  This is the minimum rate  of  FTB  Part  A  for  an
individual to be entitled to an advance.

The discretion in clause 45 would be exercised so as to avoid  long  periods
of repayment for people on higher incomes who  are  no  longer  entitled  to
further advances.  Under the current law, all cases where the  Part  A  rate
would be reduced to nil by an  advance  reduction  becomes  an  FTB  advance
debt.  Under the new law, the reduction of the  Part  A  rate  will  be  the
general method for  repaying  an  advance,  rather  than  creating  a  debt.
However, it will remain appropriate  to  create  a  debt  to  avoid  lengthy
repayment periods.

For example:

    . The amount of the unrepaid advance is $600.

    . The Part A rate before reduction under clause 5 or 25A is $100.

    . If the Part A rate reduction method  is  used,  the  repayment  period
      would be 6 years, which is not appropriate.

Therefore, the discretion in clause 45 will enable the  $600  to  become  an
FTB  advance  debt.   Normal  debt  recovery  methods  will  enable  a  more
appropriate period to recover the amount.

New clause 46 deals with decreasing  the  number  of  days  in  a  repayment
period where an individual requests it.  It allows an individual to  request
the Secretary to shorten their repayment period if they wish to repay  their
advance more quickly.  The Secretary may determine that the number  of  days
in the repayment period is to be decreased if  the  individual  has  made  a
request  for  the  decrease,  and  the  Secretary  is  satisfied  that   the
individual would not suffer severe financial hardship if the number of  days
in the repayment period were decreased as determined.

Subclause (2) provides that the request must be made in a form  and  manner,
contain any information, and be accompanied by  any  documents  required  by
the Secretary.

Subclause (3) allows the individual, if they  have  previously  requested  a
decrease in the number of repayment days and the Secretary has determined  a
smaller number of days under subclause (1), to request  that  the  Secretary
vary the determination to increase the  number  of  days  in  the  repayment
period.

However, subclause (4) limits the variation  that  the  Secretary  may  make
under subclause (3) such that the  deduction  amount  cannot  go  below  the
standard reduction.

A note advises the reader that, if,  after  the  variation  under  subclause
(3), the reduction in the individual's Part A rate under  clause  5  or  25A
would  cause  the  individual  to  suffer  severe  financial  hardship,  the
individual may request a longer repayment period under clause 47.

New clause 47 allows the Secretary to determine that the number of  days  in
a repayment period is to be increased if the  individual  requests  it,  and
the Secretary  is  satisfied  that  special  circumstance  relevant  to  the
repayment of the advance exist in relation to the individual that could  not
reasonably have been foreseen at the time of the individual's request for  a
family tax benefit advance.  Additionally, the Secretary must  be  satisfied
that the individual would suffer severe financial hardship if the number  of
days in the repayment period were not increased as determined.

The request must be made in a form and manner, contain any information,  and
be accompanied by any documents, required by the Secretary (subclause (2)).

Subclause (3) then empowers the Secretary to vary a  previous  determination
made under subclause (1), so  as  to  reduce  the  number  of  days  in  the
repayment period (and increase the rate of repayment).   However,  this  can
only occur if the Secretary is  satisfied  that  the  individual  would  not
suffer severe financial hardship because of the  variation.   The  Secretary
may not vary the determination under this subclause such that the  variation
would result in the amount by which the individual's Part A rate  is  to  be
reduced under clause 5 or 25A being greater than the standard reduction.

New clause 48 requires the Secretary to increase an  individual's  repayment
period if there is a recalculation resulting in an increase  in  the  amount
of unrepaid family tax benefit advance during  the  repayment  period.   The
clause applies if, during the repayment period  for  a  family  tax  benefit
advance, the amount of the family tax benefit advance that  is  unrepaid  is
increased  due  to  a  variation  in  a  determination  or  a  variation  or
substitution of a decision on review,  so  that  the  amount  by  which  the
individual's Part A rate  is  to  be  reduced  is  more  than  the  standard
reduction.  The Secretary must determine  that  the  number  of  days  in  a
repayment period is to  be  increased  so  that  the  amount  by  which  the
individual's part A rate is to be reduced is  not  more  than  the  standard
reduction.

New clause 49 empowers the Secretary  to  determine  that  the  individual's
Part A rate  is  not  to  be  reduced  under  clause  5  or  25A  while  the
determination is in force.  However, subclause  (2)  provides  that  such  a
determination may only be made if the individual makes  a  request  for  the
repayment period to be suspended,  and  the  Secretary  is  satisfied  of  a
number  of  things.   The  Secretary  must   be   satisfied   that   special
circumstances relevant to the repayment of the advance exist in relation  to
the individual that could not reasonably have been foreseen at the  time  of
the individual's request for a family tax benefit  advance.   The  Secretary
must also be satisfied that the individual  would  suffer  severe  financial
hardship if the individual's Part  A  rate  were  to  be  reduced  for  that
period.

Subclause (3) provides that the request must be made in a form  and  manner,
contain any information, and be accompanied by any  documents,  required  by
the Secretary.

Subclause (4) empowers the Secretary to revoke the suspension at  any  time,
upon the Secretary's own initiative.  However, the  Secretary  may  only  do
so, in writing, where satisfied that the individual would not suffer  severe
financial hardship from the individual's Part A  rate  being  reduced  under
clause 5 or 25A as a result of the revocation.

Subclause (5) provides that, if the  Secretary  revokes  the  determination,
the Secretary must determine the number of days remaining in  the  repayment
period such that the amount by which the individual's Part A rate is  to  be
reduced under clause 5 or  25A  would  not  be  greater  than  the  standard
reduction.

In practice, the Family Assistance  Office  will  be  in  contact  with  the
individual to  whom  the  suspension  applies,  monitoring  their  financial
situation, and assessing whether the suspension is still  needed  from  time
to time.  Any revocation of  the  suspension  would  only  occur  after  the
individual is given an opportunity to discuss ongoing arrangements.

New clause 50 provides for repayment of a  family  tax  benefit  advance  by
another method.

Subclause (1) empowers the Secretary to determine  that  an  individual  who
has requested it, may repay all or part of an unrepaid  family  tax  benefit
advance by a method other than by reduction under  clause  5  or  25A.   For
example, the  individual  may  request  repayment  by  an  amount  in  cash.
However, a determination that this may occur is dependent  upon  the  method
being acceptable to both the individual and the Secretary.  In  general,  it
would be  expected  that  the  alternative  method  of  repayment  would  be
accepted when the individual also agrees to seek a shorter repayment  period
for the remaining unrepaid amount of the advance, such that repayment  would
generally remain at the standard reduction amount.

Subclause (2) provides that the request must be made in a form  and  manner,
contain any information, and be accompanied by any  documents,  required  by
the Secretary.

New clause 51 provides for the  recalculation  of  the  amount  of  unrepaid
family tax benefit advance where, in retrospect, the  full  amount  has  not
been repaid despite the repayment period ending.

Subclause (1) provides that the clause applies if:

    . an individual  is  paid  a  family  tax  benefit  advance,  ('the  old
      advance'); and

    . the individual's Part A rate has been reduced under clause 5 or 25A to
      repay the old advance; and

    . the repayment period for the old advance has expired; and

    . due to a variation in a determination, or a variation or  substitution
      of a decision on review, (other than  a  variation  under  subsections
      28(2) or (6) of the Family Assistance Administration Act  relating  to
      non-lodgement of tax returns) the reduction in the individual's Part A
      rate under clause 5 or 25A has not been sufficient to  repay  the  old
      advance; and

    . at the time of the variation of the determination or the variation  or
      substitution of the decision on review, the individual is entitled  to
      be paid family tax benefit by instalment, with a Part A  rate  greater
      than nil (before reduction under clause 5 or 25A).

A note alerts the reader that, if a variation or review  occurs  during  the
repayment period for a family tax benefit  advance,  the  Secretary  may  be
required to make a determination under clause 48 to increase the  number  of
days in the repayment period.

Subclause (2) provides for a determination that the individual is  taken  to
have been paid a family tax benefit advance  equal  to  the  amount  of  the
previous family tax benefit advance left unrepaid on the day  on  which  the
Part A rate is recalculated.  This is the 'new advance'.

Subclause (3) provides that in the situation covered by subclause  (2),  the
individual is taken to have repaid the old advance.

Subclause (4) provides that  the  Secretary  must  determine  the  repayment
period for the new advance and the day on which the repayment period  is  to
begin.

Subclause (5) provides that the Secretary  must  not  make  a  determination
under subclause (4)  that  would  cause  the  individual  to  suffer  severe
financial hardship.

Subclause (6) empowers the Secretary to vary or revoke a determination  made
under subclause (2) or (4), if a subsequent variation in  the  determination
or a variation or substitution of the decision on review occurs.

Amendments to the Family Assistance Administration Act

Item 9 inserts a definition of advance assessment  day,  in  relation  to  a
family tax benefit advance,  as  having  the  meaning  given  by  subsection
35A(3), and in relation to regular advances, by paragraph 35B(3)(b).

Item 10 inserts a definition of 'FTB advance debt', as  having  the  meaning
given by section 71A.

Item 11 inserts a definition of 'maximum amount' in relation to  family  tax
benefit advance, and provides that it has the meaning given by section 35D.

Item 12 inserts a definition of minimum amount, in relation to a family  tax
benefit advance, as meaning either:

    . 3.75 per cent of the FTB child rate  worked  out  under  clause  7  of
      Schedule 1 to the Family Assistance Act for one child  aged  under  13
      years (disregarding clauses 8 to 11 of that Schedule); or

    . if the Secretary determines under  section  28  a  percentage  of  the
      family tax benefit for FTB children of the individual, that percentage
      of the above amount; or

    . if the amount that would be the minimum amount  under  either  of  the
      above is not a number of whole cents - the amount rounded down to  the
      nearest cent.

Payment of family tax benefit advances

Item 13 repeals and substitutes Division 2 of Part 3.  The Division  is  now
broken into subdivisions.

Division 2 - Payment of family tax benefit advances

Subdivision A - Request for family tax benefit advance

New section 33 enables  an  individual  to  request  a  family  tax  benefit
advance.

Subsection (2) provides that, if an individual makes a request for a  family
tax benefit advance, this request may be accompanied by a request under  new
section 35B for further advances at regular intervals.  The  individual  may
also request that entitlement to  the  first  advance  be  determined  on  a
specified future day. This gives flexibility for the individual to  nominate
the start date of their regular advance sequence.  Item 19 provides  that  a
request under subsection (2) for a family tax benefit advance to be paid  on
a specified future day may only be made on or after 1 January 2012.

New section 34 provides for the form of such a request.  To be effective,  a
request must:

    . be made in  a  form  and  manner,  contain  any  information,  and  be
      accompanied by any documents required by the Secretary;

    . specify the amount of family tax benefit advance sought; and

    . the amount of family tax benefit advance sought must be at  least  the
      minimum amount.

If an effective request is made, the Secretary must  determine  the  request
in accordance with Division 2.  If a request is not effective, it  is  taken
never to have been made.  However, the individual  making  the  request  may
seek review of the decision that the request is not effective.

New section 35 provides that an individual may withdraw or  vary  a  request
before the request is determined.  The  individual  may  only  do  so  in  a
manner determined by the Secretary.  However, if  the  individual  does  so,
the request is taken never to have been made.

Subdivision B - Entitlement to family tax benefit advance

New  section  35A  provides  that  the  Secretary  must  determine  that  an
individual is entitled to be paid a family tax benefit advance if  a  number
of conditions are met.  The conditions are generally assessed  by  reference
to the advance assessment day, defined at subsection  (3)  as  the  day  the
Secretary determines the individual's entitlement to be paid  a  family  tax
benefit advance.  The conditions are:

    . on the advance assessment day, the individual is entitled to  be  paid
      family tax benefit by instalment; and

    . the individual has made an effective request under section  34  for  a
      family tax benefit advance; and

    .  on  the  advance  assessment  day,  the  individual's  Part  A  rate,
      disregarding clause 5 and 25A of Schedule 1 (dealing with reduction of
      an individual's Part A rate to  repay  an  advance)  is  equal  to  or
      exceeds the amount that would, under clause 26 of  that  Schedule,  be
      the FTB child rate for an FTB child who  had  not  turned  18  if  the
      individual's Part A rate were required to be worked out using  Part  3
      of that Schedule, and clause 27 of that Schedule did not apply; and

    . on the advance assessment day, the individual has  at  least  one  FTB
      child; and

    . on the  advance  assessment  day,  the  amount  of  advance  that  the
      individual would be entitled to is at least the minimum amount; and

    . the Secretary considers, on the basis of information available to  the
      Secretary on the advance assessment day, that the individual will  not
      suffer financial hardship from the  individual's  Part  A  rate  being
      reduced as a result of being paid the advance; and

    . on the advance assessment day, the individual  is  not  excluded  from
      being paid a family tax benefit advance under subsection (2).

Subsection (2) excludes an individual from being paid a family  tax  benefit
advance if:

    . an amount of family tax benefit advance paid to  the  individual  more
      than 12 months before the advance assessment day has  not  been  fully
      repaid; or

    . an amount of family tax benefit advance paid to  the  individual  more
      than 12 months before the advance assessment day is being repaid as  a
      new advance due to a determination under clause 51 of  Schedule  1  to
      the Family Assistance Act; or

    . the individual owes a debt to the Commonwealth (whether arising  under
      this Act or not)  that  is  recoverable  under  Part  4  by  means  of
      deductions from the individual's instalments  of  family  tax  benefit
      under section 84 (unless that debt has been  written  off  because  of
      subsection 95(4A) or (4B)) or is being recovered  by  deductions  from
      the individual's instalments of family tax benefit under section  227;
      or

    . on the advance assessment day, the Secretary is prohibited from making
      a payment of family tax benefit to the individual  under  section 32AA
      or 32AD (non-payment for non-lodgment of tax returns).

Subsection (4) provides that, if the individual is not entitled to  be  paid
a family  tax  benefit  advance,  the  Secretary  must  determine  that  the
individual is not entitled to the family tax benefit advance.

Subdivision C - Regular family tax benefit advances

New section 35B enables an individual to request regular family tax  benefit
advances.  Subsection (1) provides that an individual who  makes  a  request
in accordance with section 34 for  a  family  tax  benefit  advance  of  the
minimum amount, when making the request, may also request that a family  tax
benefit advance of the minimum amount be paid to the individual  at  regular
intervals of 182 days.

Subsection (2) provides that, for the request  for  payment  of  family  tax
benefit advance at regular intervals to be effective, the  request  must  be
made in a form and manner, contain any information, and  be  accompanied  by
any documents, required by the Secretary.

Subsection (3) provides that, if the individual makes an  effective  request
for family tax benefit advance at regular intervals under this section,  the
Secretary must make a determination under section 35A, in  relation  to  the
individual's eligibility for a family tax benefit  advance  of  the  minimum
amount, at intervals that would best facilitate payment in  accordance  with
the request.

For this particular case, the 'advance assessment day' is either:

    . if the individual has not previously been paid a  family  tax  benefit
      advance requested under this section-the day  that  falls  immediately
      after the end of an interval of 182 days that began  on  the  day  the
      first advance was paid; or

    . if the individual has  previously  been  paid  a  family  tax  benefit
      advance requested under this section-the day  that  falls  immediately
      after the end of the last of the intervals of 182 days, the  first  of
      which began on the day the first advance was paid

Subsection  (4)  provides  that  the   Secretary   must,   in   making   the
determination under section 35A, treat paragraph 35A(1)(b)  (requirement  to
make an effective request) as having been satisfied if:

    . the individual has made an effective request under this section; and

    . the request has not been withdrawn before the determination  is  made;
      and

    . the individual has not failed to repay the  last  family  tax  benefit
      advance to which the request relates within 182 days.

Subsection (5) makes it clear that a request under subsection (1) ceases  to
be effective if the Secretary, in making  a  determination  referred  to  in
subsection (3), determines that the individual is not entitled to  a  family
tax benefit advance, or  if  the  individual  withdraws  the  request  under
subsection (6).  This does not affect the effectiveness of  the  request  in
relation to regular advances already paid, but removes the  requirement  for
the Secretary to consider further regular advances.

Subsection (6)  makes  it  clear  that  the  individual  may,  in  a  manner
determined by the Secretary, withdraw the request at any  time.   This  will
similarly remove the requirement  for  the  Secretary  to  consider  further
regular advances.

Subdivision D - Amount of family tax benefit advance

New section 35C provides for the amount of family tax benefit advance.   The
amount is the smaller of the amount  of  advance  sought,  and  the  maximum
amount of advance payable to the individual on the  advance  assessment  day
worked out under new section 35D, less the original amount  of  each  family
tax benefit advance paid to the individual that is unrepaid on that day.

In working out the original  amount  of  each  family  tax  benefit  advance
unrepaid on a day, subsection (2) provides for clause 51 of  Schedule  1  to
the Family Assistance Act to be disregarded.  In other words,  where  a  new
notional advance is created in response  to  a  retrospective  recalculation
resulting in an advance not having been fully repaid  during  its  repayment
period, the Secretary must take into account the amount of  payment  of  the
original advance for this purpose, rather than the amount of payment of  the
new notional advance.

Additionally, the Secretary may determine, under  subsection  (3)  that  the
amount of family tax benefit advance payable to an  individual  is  a  lower
amount than the amount under subsection (1), if the Secretary  is  satisfied
that the individual would suffer  financial  hardship  if  the  individual's
Part A rate were reduced as a result of being paid that amount.

New section 35D provides for  the  maximum  amount  of  family  tax  benefit
advance payable.

Subsection (1) provides that the maximum amount that may be an  individual's
FTB advance on any particular day is calculated by reference to  their  Part
A rate (excluding the FTB Part A  Supplement).   If  7.5  per  cent  of  the
individual's adjusted Part A rate is greater than or equal to 23.3 per  cent
of the standard rate for a child under 13 (which will be $1,000 for  2011-12
due to item 18), the individual's maximum is 23.3 per cent of  the  standard
rate for a child under 13.  The standard  rate  for  a  child  under  13  is
linked to the FTB child rate for one FTB child who  is  under  13  years  of
age, which is  indexed  on  1 July  of  each  year,  and  will  consequently
increase annually.  The terms 'adjusted Part A rate' and 'standard rate  for
a child under 13' are both defined in subsection (4).

The individual's maximum amount is 7.5 per cent of  their  adjusted  Part  A
rate if that amount is less than 23.3 per  cent  and  greater  than  7.5 per
cent of the standard rate for a child under 13.  For 2011-12,  7.5 per  cent
of the standard rate for a child under 13 will be $321.93.

If 7.5 per cent of the individual's adjusted Part A rate  is  less  than  or
equal to 7.5 per cent of the standard rate for a child under 13, then  their
maximum amount of family  tax  benefit  advance  is  7.5  per  cent  of  the
standard rate for a child under 13.

However, if the individual has a section 28  percentage  as  the  result  of
being a member of a couple  treated  as  a  blended  family,  then  for  the
purposes of section 35D, their maximum amount of family tax benefit  advance
payable to the individual is the section 28 percentage of the amount  worked
out for the individual under subsection (1).

Subsection (3) provides for rounding of all  the  required  amounts  to  the
nearest cent (rounding 0.5 cents upwards).

Subdivision E - Payment of family tax benefit advance

New section 35E provides for the payment of an advance.

Subsection (1) provides that, if an individual is  entitled  to  be  paid  a
family tax benefit advance, the Secretary must, at such  time  and  in  such
manner as the  Secretary  considers  appropriate,  pay  the  individual  the
advance.

Subsection (2) provides that this section is  subject  to  Part  4  (dealing
with overpayment and debt recovery), Division 3 of  Part  8B  (dealing  with
nominees)  and  sections  225  and  226  (dealing  with  payments   to   the
Commissioner of Taxation).

Item 14 repeals and substitutes section 71A.

Subsections (1) and (2) mirror the terms of section 71 for the  purposes  of
family tax benefit advances.  As  a  result,  where  a  family  tax  benefit
advance has been paid to an individual and either  the  individual  was  not
entitled to the advance, or the received amount is greater than  the  amount
of family tax benefit advance that should have been paid to the  individual,
the difference is a debt due to the Commonwealth by the individual.

Subsection (3) deals with debts arising during the repayment  period  for  a
family tax benefit advance.  If:

    . an individual is paid a family tax benefit advance; and

    . the repayment period for the advance has not expired; and

    . either the individual ceases to be entitled  to  be  paid  family  tax
      benefit by instalment, or the individual's Part  A  rate  becomes  nil
      (before reduction under clause 5 or 25A of Schedule 1  to  the  Family
      Assistance Act);

then the amount of unrepaid family tax benefit advance becomes  a  debt  due
to the Commonwealth by the individual.

Subsection (4) deals with debts arising due to a variation or  review  after
the repayment period for a family tax benefit advance has expired.  If:

    . an individual is paid a family tax benefit advance; and

    . the individual's Part A rate has been reduced under clause 5 or 25A of
      Schedule 1 to the Family Assistance Act to repay the advance; and

    . the repayment period for the advance has expired; and

    . due to a variation in a determination, or a variation or  substitution
      of a decision on review (other than a variation under subsection 28(2)
      or (6)), the reduction in the individual's Part A rate under clause  5
      or 25A of Schedule 1  to  the  Family  Assistance  Act  has  not  been
      sufficient to repay the advance; and

    . at the time of the variation of the determination, or the variation or
      substitution of the decision on review, the individual is not entitled
      to be paid family tax benefit by instalment, or the individual's  Part
      A rate is nil (before reduction under clause 5 or 25A of Schedule 1 to
      the Family Assistance Act);

then the amount of the family tax benefit advance left unrepaid as a  result
of the variation of the determination, or the variation or  substitution  of
the decision on review, becomes a  debt  due  to  the  Commonwealth  by  the
individual.

A note alerts the reader to the fact that, if the individual is entitled  to
be paid family tax benefit by instalment and has a Part A rate greater  than
nil, the unrepaid amount of the advance is to be  repaid  by  reductions  in
the individual's Part A rate (see clause 51 of  Schedule  1  to  the  Family
Assistance Act).

Subsection (5) deals with debts where relevant tax  returns  have  not  been
lodged, and the Secretary varies a determination under  section  28  of  the
Family Assistance Administration Act so that the claimant was  not  entitled
to family tax benefit for an income year, and the  amount  of  advance  that
had been repaid in that year is now not repaid.  The outstanding  amount  as
a  result  of  the  variation  of  the  determination  will  become  a  debt
regardless as to whether the individual is at that time entitled to  FTB  by
instalment and has a Part A rate greater than nil.

However, subsection (6) then provides that, if the relevant tax returns  are
subsequently  lodged,  and  the  Secretary  varies  (reverses)   the   prior
determination under section 28,  the  debt  is  taken  never  to  have  been
created.

A note alerts the reader to the fact that,  if,  after  the  variation,  the
individual's Part A rate was  not  sufficient  to  repay  the  advance,  the
unrepaid amount of the advance is to be repaid either by reductions  in  the
individual's Part A rate (see clause 48 and 51 of Schedule 1 to  the  Family
Assistance Act) or as a debt under subsection (3) or (4).

Subsection (7) provides that, if the Secretary determines  under  clause  45
of Schedule 1 to the Family Assistance Act that the amount  of  the  advance
that is unrepaid is to be a debt, then  the  outstanding  amount  becomes  a
debt due to the Commonwealth by the individual.

Subsection (8) provides for the meaning of 'FTB advance  debt',  as  a  debt
due to the Commonwealth under subsection (1), (2), (3), (4), (5) or (7).

Items 15 and 16 make  consequential  amendments  to  paragraph 111(2)(a)  to
exclude from review by the SSAT the new powers to  determine  the  form  and
manner of requests under subsection  34(1)  and  subsection  35B(2)  of  the
Family Assistance Administration  Act,  and  subclause 46(2),  47(2),  49(3)
or 50(2) of Schedule 1 to the Family Assistance Act.

Part 2 - Application and transitional

Item 17 deals with application of these amendments, and  provides  that  the
amendments apply to family tax benefit advances requested on  or  after  the
commencement of Part 1.

Item 18 provides that, for the purposes of subsection 35D(1) of  the  Family
Assistance Administration Act as inserted by this Schedule,  23.3  per  cent
of the standard rate for a child under 13 is taken  to  be  $1,000  for  the
2011-12 financial year.

Item 19 provides that  a  request  under  subsection  33(2)  of  the  Family
Assistance Administration Act (as inserted by this Schedule)  for  a  family
tax benefit advance to be determined on a specified future day may  only  be
made on or after 1 January 2012.

Part 3 - Transitional advance payment

Item 20 provides  for  a  transitional  advance  payment,  to  maintain  the
payment  of  an  advance  to  families  who  currently  receive   continuous
advances.

The item applies if the individual was paid a  family  tax  benefit  advance
for the family tax benefit advance period that ended on 30 June 2011, and:

    . under paragraph 33(3)(b) of the Family Assistance  Administration  Act
      as in effect immediately before the commencement of this Schedule, the
      request for the advance operated for  a  particular  standard  advance
      period and all subsequent standard advance periods; and

    . the individual had not withdrawn the request before 30 June 2011; and

    . under clause 5 or 25A of Schedule 1 to the Family Assistance Act as in
      force immediately  before  the  commencement  of  this  Schedule,  the
      individual's Part A rate was reduced for the period by the FTB advance
      rate.

If the item applies on 1 July 2011, the individual is taken to have made  an
effective request for a single family tax benefit advance under  section  34
of the Family Assistance Administration Act as  inserted  by  this  Schedule
(subitem (2)), the individual's  advance  assessment  day  is  taken  to  be
1 July 2011 (subitem (3)), and the amount of the family tax benefit  advance
is the smaller of:

    . $333.06 (which is the daily equivalent of the current FTB advance rate
      ($1.83) multiplied by 182 days);

    . the maximum amount of advance payable to the individual on the advance
      assessment day worked out under section 35D of the  Family  Assistance
      Administration Act as inserted by this Schedule;

    . the amount determined by the Secretary under subsection 35C(3) of  the
      Family Assistance Administration Act as inserted by this Schedule.

Further, clauses 47 and 49 of Schedule 1 to the  Family  Assistance  Act  as
inserted by this Schedule do  not  apply  to  the  advance.   That  is,  the
individual may  neither  request  a  longer  period  for  repayment  of  the
advance, nor seek suspension of the repayment period.
              Schedule 2 - Health checks for young FTB children

                                   Summary

As one of its election commitments, the  Government  announced  the  Healthy
Start for School measure for family tax benefit (FTB) recipients  on  income
support payments.  This measure will make the payment  of  the  FTB  Part  A
supplement for a child turning four in a particular income year  conditional
on the child having received a basic health assessment.   The  measure  will
commence on 1 July 2011.
                                 Background

The objective of the Healthy  Start  for  School  measure  is  to  encourage
parents and carers on income support payments to  organise  a  health  check
for their child before the child  starts  school.   The  intention  is  that
children have a basic health check to see  if  they  are  healthy,  fit  and
ready to learn when they start school.

Health checks may  detect  developmental  delays  and  conditions,  such  as
problems affecting hearing and vision, which are problems that make it  more
difficult for children to learn when they start school.  These  checks  will
allow for early identification of health issues and intervention  strategies
before the child starts school.

To this end, this measure would ensure that the payment of the  FTB  Part  A
supplement for a particular child for the income year  in  which  the  child
turns four, would be conditional on the child having such  a  health  check.
The new requirements apply to families where either member of a  couple  has
received income support for any part of the year.

Current legislative framework for payment of the FTB Part A supplement

An individual's rate of FTB is calculated in accordance  with  the  relevant
provisions  in  Schedule  1  to  the  Family  Assistance  Act.    Where   an
individual's  Part  A  rate  is  worked  out  under  Method  1  or  2,   the
individual's maximum rate includes the individual's FTB  Part  A  supplement
under clause 38A of Schedule 1.  The relevant method statements are set  out
in clauses 3 and 25 of Schedule 1.

Clause 38A of Schedule 1 to the Family Assistance Act sets the rate  of  the
FTB Part A supplement.  The amount of an individual's FTB Part A  supplement
is the applicable supplement amount for each FTB child  of  the  individual.
The  applicable  supplement  amount  is  the  FTB  gross  supplement  amount
(currently $726.35) or a percentage of that amount  if  there  is  a  shared
care percentage for the child.

However, section 32A of the Family Assistance Administration  Act  currently
requires  the  Secretary  to  disregard  the  FTB  Part  A   supplement   in
calculating an individual's Part A rate  unless  and  until  the  individual
satisfies  all  relevant  FTB  reconciliation  conditions  (as  set  out  in
section 32B).  When this occurs, the Secretary must review the  individual's
entitlement under section 105 of the Family Assistance  Administration  Act.


The FTB Part A supplement can be included in an individual's  rate  so  long
as any required tax returns are lodged before the end  of  two  years  after
the relevant income year.  If the  FTB  reconciliation  conditions  are  not
satisfied within this timeframe, the FTB Part A supplement cannot be paid.

In broad terms,  the  Healthy  Start  for  School  measure  involves  adding
another condition, the health check requirement, to the payment of  the  FTB
Part A supplement for a particular child for families who have  received  an
income support payment in that year.  The relevant  rules  are  included  in
new section 61A in Part 4 of Division 1 of the Family Assistance Act  (which
sets out the rate rules for FTB).  Consequential and related amendments  are
also  made  to  the  Family  Assistance  Act  and  the   Family   Assistance
Administration Act.

                         Explanation of the changes

Amendments to the Family Assistance Act

Division 1 of Part 4 of the Family Assistance  Act  directs  the  reader  to
Schedule 1 to that Act to calculate an individual's annual rate of  FTB  and
sets out some of the circumstances that  may  affect  or  modify  that  rate
calculation process.

Item 3 inserts new section 61A into Division 1 of Part 4.  New  section  61A
sets out the situations in which the health check requirement applies to  an
individual and how this requirement  affects  payment  of  the  FTB  Part  A
supplement to an individual in respect of a particular FTB child.

There are two situations in which the health check requirement  will  apply.
These are described in new subsections 61A(1) and (2).

New subsection 61A(1) sets out how the new health check requirement  applies
to an individual who is a parent of  an  FTB  child  who  turns  four  in  a
particular income year or who  is  partnered  to  a  parent  of  the  child.
(Under section 27 of the Family  Assistance  Act,  if  two  individuals  are
members of the same couple and  one  or  both  have  a  child  from  another
relationship, then an FTB child of the parent is also an FTB child of  their
partner.  This enables the non-parent  partner  to  be  paid  FTB  for  that
child.)

If an individual has an FTB child who turned four in  an  income  year  and,
for one or more days in that income year, the individual  or  their  partner
is a parent of the FTB child and is receiving a social security  pension,  a
social security benefit, a service pension or an income support  supplement,
then the FTB Part A supplement is not to  be  included  in  calculating  the
individual's Part A rate  for  the  child  for  those  days  unless  certain
conditions relating to the health check requirement are met.  To  this  end,
clause 38A of Schedule 1 to the Family Assistance Act,  which  provides  for
the amount of the FTB Part A supplement  to  be  added  in  working  out  an
individual's maximum Part A rate, is disregarded for the  relevant  days  if
the relevant conditions are not met.

New subsection 61A(2)  deals  with  non-parent  carers  such  as  foster  or
kinship care.  This subsection relates to the situation where an  individual
has an FTB child who turned four in a particular income year  and,  for  one
or more days in that income year on which the child is an FTB child  of  the
individual, neither the individual nor their partner  is  a  parent  of  the
child and the individual or their partner is  receiving  a  social  security
pension, a social security benefit, a service pension or an  income  support
supplement.

If the number of days in the income year that  the  child  is  both  an  FTB
child of the individual, and the individual or their  partner  is  receiving
the relevant social security or veterans' payment, totals at least 182  days
(26 weeks), and if the child is an FTB child of the individual on  the  last
day of that year, then the health check requirement applies in  relation  to
the child and can affect payment  of  the  FTB  Part  A  supplement  to  the
individual for those days.  If the health check requirement is not met,  the
FTB Part A supplement is disregarded in calculating the individual's Part  A
rate for the child for those days.

These conditions  for  non-parent  carers  ensure  that  there  has  been  a
sufficient period of ongoing care by the carer for it to  be  reasonable  to
expect the carer to have  organised  a  health  check  for  the  child.   In
addition, if the child is no longer an FTB child of the non-parent carer  at
the end of the income year in which the child turned four, they  would  have
no continuing legal  responsibility  in  respect  of  the  child  and  would
therefore be unable to play a role in ensuring that the child  undertakes  a
health check within  the  subsequent  two  years  (the  maximum  period  for
meeting the relevant conditions if they apply).  In these circumstances,  it
is unreasonable to withhold the FTB Part A supplement.

In comparison, a parent who has lost care is more likely to have an  ongoing
connection with the child and could be expected to play a role  in  ensuring
that the health check requirement is met.  Therefore, it is appropriate  for
the health check requirement to apply to a parent who ceases  to  have  care
of the child before the end of the income year.

Subsection 3(1) of  the  Family  Assistance  Act  currently  defines  social
security pension,  social  security  benefit,  service  pension  and  income
support supplement by reference to the Social Security Act.

Item 1 makes a consequential  change  to  the  definition  of  receiving  in
subsection 3(1) by inserting a reference to new section 61A  into  paragraph
(b) of the  definition.   Paragraphs  (a)  and  (c)  of  the  definition  of
receiving will also apply without  the  need  for  amendment.   The  general
effect is to  incorporate  the  social  security  concept  of  receiving  in
relation to social security payments and to ensure  that  an  individual  is
taken to be receiving a  social  security  pension  or  benefit  in  certain
circumstances where the pension or benefit is not being paid (such as  where
the application of a compliance period results  in  cessation  of  payment).
This is consistent with the  approach  taken  in  other  provisions  in  the
family assistance law which  refer  to  an  individual  receiving  a  social
security pension, social security benefit,  service  pension  or  an  income
support supplement (for example, in  relation  to  the  application  of  the
income test for FTB Part A).

Item 2 makes a technical correction to the definition of receiving.

New subsection 61A(9) defines parent as including an adoptive parent  and  a
relationship  parent.   A  relationship  parent  is  currently  defined   in
subsection 3(1) of the Family Assistance Act  by  reference  to  the  Social
Security Act.

In the two situations described above where  the  health  check  requirement
applies,  the  FTB  Part A  supplement  is  disregarded  in  the  FTB   rate
calculation process for the relevant days in the income year  in  which  the
FTB child turned four unless two things happen.

The first is that, at any time before the end  of  the  second  income  year
after the one in which the child turned four, the  Secretary  becomes  aware
of information suggesting that:

    . the child meets the health check requirement; or


    .  the  child  is  in  a  class  exempted  from  the  requirement  by  a
      determination of the Minister; or

    . the child is in a class that is taken to have met the requirement by a
      determination of the Minister; or

    . there are special circumstances relating to the  individual  or  their
      partner that make it inappropriate for them to arrange  for  a  health
      check for the child.

The second is that the Secretary is satisfied at any time  (including  after
the two-year timeframe) that one of  these  conditions  is  met  within  the
required two-year timeframe.

These rules enable the health check requirement to be met within two  income
years after the income year in which the relevant  FTB  child  turned  four.
However, they also cover situations where information  suggesting  that  the
health check requirement has  been  met  is  provided  within  the  two-year
timeframe but is not considered until after that time.

While 'special circumstances' is not defined, it is a concept that  is  well
understood due to its  use  in  various  provisions  in  family  assistance,
social security and child support legislation and decisions  by  courts  and
tribunals on its meaning.  In  Re  Beadle  and  Director-General  of  Social
Security (1984), the AAT (Toohey J presiding) said:

      An expression such as 'special circumstances' is by  its  very  nature
      incapable  of  precise  or  exhaustive  definition.   The   qualifying
      adjective  looks  to  circumstances  that  are  unusual,  uncommon  or
      exceptional.  Whether circumstances answer any of  these  descriptions
      must depend upon the context in which  they  occur.   For  it  is  the
      context which allows one to say that the circumstances in one case are
      markedly different from the usual run of cases.  This is  not  to  say
      that the circumstances must be unique but they must have a  particular
      quality of unusualness that permits them to be described as special.

New subsection 61A(3) provides that the health check  requirement  does  not
apply in relation to a child who dies before the end of  the  second  income
year after the income year in which the child turned four.

New subsection 61A(4) provides that  the  health  check  requirement  for  a
child is  that  he  or  she  must  meet  the  requirements  specified  in  a
legislative instrument made by the Minister under new subsection 61A(5)  for
this purpose.

New subsection 61A(6) enables the Minister, by  legislative  instrument,  to
exempt children  included  in  a  specified  class  from  the  health  check
requirement,  while  new  subsection  61A(7)  enables   the   Minister,   by
legislative instrument, to determine that children in a specified class  are
taken to meet the health check requirement.  There are  similar  instrument-
making  powers  relating  to  the  immunisation  requirement  for  maternity
immunisation allowance.

An  example  of  a  situation  in  which  an  exemption  may  be  considered
appropriate is where the  child  has  a  severe  disability  or  a  terminal
illness which would make it unreasonable  to  expect  them  to  undergo  the
required health check.  A child may  be  taken  to  meet  the  health  check
requirement in  certain  circumstances,  for  example,  where  a  comparable
health check has been undertaken in an  overseas  country,  by  a  qualified
health practitioner.

New subsection 61A(8) makes it clear that new section  61A  does  not  limit
the  application  of  current  section  32A   of   the   Family   Assistance
Administration  Act  (which  requires  the  FTB  Part  A  supplement  to  be
disregarded from the FTB rate  calculation  process  unless  and  until  the
relevant FTB reconciliation conditions are satisfied).  This means that,  if
the health check requirement is satisfied in relation to an  individual  and
FTB  child  but  the  individual  does  not   satisfy   the   relevant   FTB
reconciliation conditions, the FTB Part A supplement cannot be  included  in
the individual's rate of FTB.

Conversely, if an individual satisfies  the  FTB  reconciliation  conditions
but has not met the health check  requirement  in  relation  to  a  relevant
child, then the individual's FTB entitlement for the  relevant  income  year
would  still  be  reviewed  under  section  105  of  the  Family  Assistance
Administration Act, but the FTB Part A supplement would be  disregarded  for
the period or periods in the relevant income year  that  the  individual  is
subject to the health check requirement in relation to the  relevant  child.
At this time,  the  relevant  child  could  attract  still  an  FTB  Part  B
supplement, and the FTB Part A supplement  for  any  part  of  the  relevant
income year that  the  health  check  requirement  does  not  apply  to  the
individual because, for example, an income support  payment  was  not  being
received.  If the health check requirement  is  met  at  a  later  time  and
within two years after the end of the income  year  in  which  the  relevant
child turned four, then  the  individual's  FTB  entitlement  can  again  be
reviewed and the FTB Part A supplement for the relevant  child  included  in
the individual's rate of FTB as appropriate for the  relevant  income  year.


      Example
      Mum and Dad have two FTB children, Jan and Tom.  Mum receives  FTB  by
      instalment for the two children.  Jan turns four in  2012-13.   During
      2012-13, Mum receives parenting payment from July to October 2012  and
      then Dad starts receiving disability support pension from March  2013.
      In November 2013, reconciliation for 2012-13 occurs as Mum has met the
      FTB reconciliation conditions and adjusted taxable  income  (ATI)  for
      Mum and Dad is known.  However, Jan has not had a health check at this
      time.  In reviewing Mum's entitlement to FTB for  the  2012-13  income
      year, Mum's rate of FTB would be recalculated  using  actual  ATI  and
      would include the FTB Part A supplement for Tom for the  whole  income
      year and, for Jan, for the period or periods in the income  year  when
      Mum and Dad were not receiving an income  support  payment  (that  is,
      from November 2012 to February 2013).  If Jan has a health check which
      meets  the  requirements  in  the  Minister's   determination   before
      1 July 2015 (within two years after the end  of  the  relevant  income
      year), then Mum's FTB can again be reviewed and her rate  of  FTB  for
      the relevant periods in 2012-13 recalculated to include the FTB Part A
      supplement for Jan.


Item 4 provides that the amendment made by item 3  applies  in  relation  to
the 2011-2012 income year and subsequent income years.

Amendments to the Family Assistance Administration Act

Section  105  of  the  Family  Assistance  Administration  Act  enables  the
Secretary to review certain decisions (as specified in section 104)  on  the
Secretary's own initiative.

Where the Secretary reviews a decision relating to the  payment  of  FTB  by
instalment and makes a favourable decision more  than  52  weeks  after  the
person concerned was given notice of  the  original  decision,  section  107
provides that the date of effect of the review decision  cannot  be  earlier
than the first day of the income year before the income year  in  which  the
review decision was made.  There are exceptions where these date  of  effect
rules do not limit the availability of  arrears  of  FTB.   One  example  is
reconciliation, where the review is undertaken by the Secretary  because  an
assessment of taxable income has been made by the Commissioner for  Taxation
on the basis of a relevant tax return lodged within two years after the  end
of the relevant income year.

Item 6 provides for further exceptions where these date of effect  rules  do
not limit the availability of arrears of FTB.

Under new subsection 107(3A), the  date  of  effect  of  a  review  decision
relating  to  payment  of  FTB  by  instalment  is  not  limited  where  two
conditions are met.  The first condition is that the FTB Part  A  supplement
was disregarded under new section  61A  of  the  Family  Assistance  Act  in
relation to an individual, an FTB child and a day (in  the  income  year  in
which the child turned four).  The second is that the review was  undertaken
because the Secretary had information before the end of  the  second  income
year after the income year in which  the  relevant  FTB  child  turned  four
suggesting that the FTB Part A supplement should not have  been  disregarded
and the Secretary is satisfied that the FTB Part A supplement should not  be
disregarded.

Under new subsection 107(3B), the  date  of  effect  of  a  review  decision
relating to payment of FTB by instalment is not limited where the  FTB  Part
A supplement should not be disregarded because the relevant  FTB  child  has
died within two years after the year in which the child  turned  four  (that
is, the  rule  in  new  subsection  61A(3)  of  the  Family  Assistance  Act
applies).

A person can also seek internal review of a decision under section  109A  of
the  Family  Assistance  Administration  Act.   As  a   general   rule,   an
application for review of a decision other than an  excepted  decision  must
be made no later than 52 weeks after  the  applicant  was  notified  of  the
decision.  An excepted decision includes a decision relating to the  payment
of FTB by instalment (the relevant definition  is  in  subsection  109D(6)).
In addition, there are specified exceptions to the general time limit  rule.


Item 7 provides  for  further  exceptions  to  the  52-week  time  limit  on
applying for internal review.

Under new paragraph 109D(4)(d), an application  for  review  of  a  decision
relating to the payment of FTB (other than  an  excepted  decision)  can  be
made  more  than  52  weeks  after  the  decision  was  notified  where  the
FTB Part A supplement was disregarded, the application is made  because  the
applicant considers that section 61A of the Family Assistance  Act  did  not
prevent the FTB Part A supplement being included in the applicant's rate  of
FTB, and the application is made before the end of the  second  income  year
after the income year in which the relevant FTB child turned four.

Under new paragraph 109D(4)(e), the 52-week  timeframe  for  seeking  review
does not apply if the application for review is made because the FTB Part  A
supplement should not be disregarded because the relevant child died  within
two years after the income year in which the child  turned  four  (that  is,
the rule in new subsection 61A(3) of the Family Assistance Act applies).

Where a person applies for internal review of a decision,  relating  to  the
payment of FTB by instalment, more than 52 weeks after the person  concerned
was given notice of the original decision, and where  the  Secretary  or  an
authorised review officer makes a favourable review  decision,  section 109E
provides that the date of effect of the review decision  cannot  be  earlier
than the first day of the income year before the income year  in  which  the
application was made.  There are specified exceptions to  the  general  date
of effect rule.

Item 8 provides for further exceptions where these date of effect  rules  do
not limit the availability of arrears of FTB.

Under new paragraph 109E(3)(d), the date of  effect  of  a  review  decision
relating to payment of FTB by instalment is not limited where the  FTB  Part
A supplement was disregarded, the application is made because the  applicant
considers that section 61A of the Family Assistance Act did not prevent  the
FTB Part A supplement being included in the applicant's  rate  of  FTB,  and
the application is made before the end of the second income year  after  the
income year in which the relevant FTB child turned four.

Under new paragraph 109E(3)(e), the date of effect of a review  decision  is
not limited if the application for review is made because  the  FTB  Part  A
supplement should not be disregarded because the relevant child died  within
two years after the income year in which the child  turned  four  (that  is,
the rule in new subsection 61A(3) of the Family Assistance Act applies).

           Schedule 3 - Determinations of adjusted taxable income


                                   Summary

This Schedule  introduces  an  election  commitment  from  the  Government's
package, Strengthening Compliance - child  support.   The  measure  modifies
the current rules applicable to the Child Support Registrar  in  determining
a person's adjusted taxable income where a parent's taxable income  has  not
been  formally  assessed.   This  new,   more   accurate,   default   income
arrangement will use a parent's previous taxable income, indexed  by  growth
in wages, instead of a  lower  default  income  (two-thirds  of  Male  Total
Average Weekly Earnings), in cases where they have not lodged a tax return.

                                 Background

The child support income of both parents is used to  calculate  their  child
support assessment for a child support period.   A  parent's  child  support
income is worked out by deducting  specified  amounts  and  allowances  from
their adjusted taxable  income  (ATI)  (section  41  of  the  Child  Support
(Assessment) Act 1989 (Child Support Assessment Act) refers).   A  component
of a parent's ATI is their taxable income for  the  last  relevant  year  of
income, as assessed under the Income Tax Assessment Act 1936 or  the  Income
Tax Assessment Act 1997 (subsection 43(1) of the  Child  Support  Assessment
Act refers).

In situations where a parent has not  lodged  a  tax  return  for  the  last
relevant year of income, current section 58 of the Child Support  Assessment
Act sets out circumstances when the Registrar may determine  the  amount  of
the parent's ATI for the purposes of making a child support assessment.

Currently, where a parent has not lodged a tax return for the  two  previous
years, and the Registrar or the  Commissioner  of  Taxation  does  not  have
information that allows a parent's ATI to be worked out, the  Registrar  may
determine that the parent's ATI is at least  two-thirds  of  the  annualised
Male  Total  Average  Weekly  Earnings  (MTAWE)  figure  for  the   relevant
September quarter.  This can understate a parent's  capacity  to  pay  child
support.  This leads to less money being  transferred  for  the  benefit  of
children.

These amendments replace the current rules for determining  a  parent's  ATI
with new rules that will more  accurately  reflect  a  parent's  income  and
ensure better support for children.  The amendments  are  also  expected  to
provide a greater incentive for parents to lodge their tax returns on time.

The amendments made by this Schedule commence on 1 July 2011.

                         Explanation of the changes

Amendments to the Child Support Assessment Act

Item 1 inserts the term ATI indexation factor into the list  of  definitions
in  subsection  5(1).   This  term  will  have  the  meaning  given  by  new
subsection 58AA(1).

Item 2 adds subsection (5) to the end of  section  5A,  which  provides  the
definition of annualised MTAWE figure.  New subsection  (5)  provides  that,
where the Australian Statistician publishes  a  later  MTAWE  figure  for  a
relevant September quarter, in substitution for  a  MTAWE  figure  that  was
previously published,  the  later  figure  is  to  be  disregarded  for  the
purposes of the Child Support Assessment Act.

Item 3 amends section 55J, which contains a simplified outline  of  Division
7 of the Child  Support  Assessment  Act.   The  change  in  the  simplified
outline reflects a minor change to the trigger for when  the  Registrar  may
determine a parent's ATI under section 58.  That is, it was previously  when
a parent had not lodged a tax return, and it will now be when  the  parent's
taxable income has not been assessed.

Item 4 repeals the heading to Subdivision B of Division  7  of  Part  5  and
substitutes it with a new heading, 'Adjusted taxable  income  determined  by
reference to taxable income etc.'.

Item 5 repeals existing section 58 and replaces  it  with  new  sections  58
and 58AA.

New subsection 58(1) provides that section 58 applies if a parent is  to  be
assessed for child support in  relation  to  a  child  support  period,  and
either:

    . the parent's taxable income for the last relevant year of  income  has
      not been assessed by the Australian Taxation Office; or


    . the Registrar is unable to  ascertain  whether  or  not  the  parent's
      taxable income has been so assessed.

Information or document in the possession of the Registrar etc.

New subsection 58(2) provides a discretion  for  the  Registrar  to  make  a
determination of a parent's ATI based on information or a document  that  is
in the possession of the Registrar or the  Commissioner  of  Taxation.   The
Registrar may exercise this discretion only if an  amount  is  specified  in
that information or document to be the parent's ATI for  the  last  relevant
year of income, or if the information or document allows the amount  of  the
parent's ATI for the last relevant year of income to be worked out.

Further, the Registrar must also be satisfied that the specified amount,  or
the amount so worked out, is a reasonable approximation of the parent's  ATI
for that year.  The following are examples of when the Registrar may or  may
not be satisfied that the amount specified or worked  out  is  a  reasonable
approximation of the parent's ATI for the last relevant year of income.

      Example 1:  A parent has not yet lodged their tax return for the  last
      relevant year of income, but has advised the Registrar  of  their  ATI
      for the last relevant year of income.  The Registrar may be  satisfied
      that the amount advised by the parent is  a  reasonable  approximation
      because that amount was similar to the amount of ATI for the  previous
      year, in which a tax assessment  has  been  made.   Where  a  parent's
      taxable income has not been assessed by the Australian Taxation Office
      for a number of years, the Registrar may not be satisfied that the ATI
      as advised is a reasonable approximation of the parent's  actual  ATI.
      In such a case, the Registrar may decide not to determine the parent's
      ATI to be the amount advised by the parent.


      Example 2:  A parent's tax return for a previous year  of  income  may
      show that their ATI comprises only income from salary  from  a  single
      employer.  In such a case, the Registrar may  be  satisfied  that  the
      salary amount recorded on  a  PAYG  payment  summary  provided  by  an
      employer  to  the  Australian  Taxation   Office   is   a   reasonable
      approximation.  However, where a parent's tax return  for  a  previous
      year of income shows that the parent has derived  significant  amounts
      of investment income or foreign  income,  the  Registrar  may  not  be
      satisfied that the salary amount alone contained in the  PAYG  payment
      summary is a reasonable approximation  of  the  parent's  actual  ATI.
      (This is because section 43 provides that the ATI comprises a parent's
      taxable income, foreign income and total net investment loss,  amongst
      other things.)

Parent's taxable income assessed for the previous year of income

New subsection 58(3) provides that, if the parent's taxable income has  been
assessed for the year of income before the last  relevant  year  of  income,
the Registrar may determine the parent's ATI to be the amount worked out  by
multiplying the parent's ATI from the previous year by  the  ATI  indexation
factor.   The  ATI  indexation  factor  is  derived  from   a   formula   in
subsection 58AA(1).

Parent's taxable income assessed for an earlier year of income

New subsection 58(4) provides that, if a parent's  taxable  income  has  not
been assessed for the previous year, but has been assessed  for  an  earlier
year of income, then the Registrar may determine that the parent's  ATI  for
the last relevant year of income is the greater of the following amounts:

    . the amount worked out by multiplying the parent's ATI for the  earlier
      year  of  income  by   the   ATI   indexation   factor   (defined   in
      subsection 58AA(1));


    .   two-thirds   of   the   annualised   MTAWE   figure   (defined    in
      subsection 5A(1)) for the relevant September quarter  in  relation  to
      the child support period.

This rule will ensure that, if a parent's income has not been  assessed  for
two or more consecutive years, their last  known  income,  indexed  in  line
with average wage growth, is used if it is higher  than  two-thirds  of  the
annualised MTAWE figure.  This rule will  remove  the  unintended  incentive
for parents, on higher incomes,  to  benefit  from  a  lower  child  support
assessment based on two-thirds of annualised MTAWE by  failing  to  lodge  a
tax return to have their current income assessed by the Australian  Taxation
Office.

Other circumstances

New subsection 58(5) provides that, if subsections 58(2), (3),  and  (4)  do
not apply in relation to the parent, or if  the  Registrar  decides  not  to
make  a  determination  in  relation  to  the  parent  under  one  of  those
subsections, the Registrar may determine that the parent's ATI is an  amount
that is at least  two-thirds  of  the  annualised  MTAWE  figure.   This  is
intended to cover circumstances such as where a parent has  never  lodged  a
tax return, or where the Registrar is unable to  ascertain  a  person's  tax
file number.

If the ATI determined under section 58 results in the parent being  assessed
based on an income that is higher than their actual income, the  parent  may
choose to lodge their tax return so their assessment  would  be  amended  to
reflect their actual ATI.  However, the new assessment can only take  effect
with  retrospective  effect  in  a  limited   range   of   situations   (see
subsection 58A(2)).

ATI indexation factor

New  subsection  58AA(1)  provides   the   formula   for   calculating   the
ATI indexation factor, as the term is used in subsection  58(3)  and  58(4).
The ATI indexation factor is:

  AWE amount for the September quarter of the last relevant year of income
         AWE amount for the September quarter of the tax return year

This replaces the 'factor' referred to in current  subsection 58(3A),  which
is  described  in  regulation  7A  of   the   Child   Support   (Assessment)
Regulations 1989.  The ATI  indexation  factor,  as  applied  in  subsection
58(3), is a reflection of the growth in average weekly  wages  in  Australia
between the last relevant year of income and the year prior to that.

      Example 1:  This example assumes that the Registrar  was  assessing  a
      parent in relation to the child  support  period  1  January  2011  to
      30 March 2012.  The parent's last relevant year of  income  (that  is,
      2009-10) has not been assessed, but their income for 2008-09 has  been
      assessed.  The 'AWE amount for  the  September  quarter  of  the  last
      relevant year of income' (that is, the AWE amount for August 2009)  is
      $934.70. The 'AWE amount for the September quarter of the  tax  return
      year' (that is, the AWE amount for August 2008) is $897.90.   The  ATI
      indexation    factor     is     therefore     calculated     to     be
      $934.70 ÷ $897.90 = 1.041 (calculated  to  three  decimal  places,  in
      accordance with subsection 58AA(2)).  That is, the 2008-09 ATI  figure
      is indexed by 4.1 per cent to ascertain the parent's ATI for 2009-10.


      Assuming  the  ATI  for  2008-09  is  $50,000,  the  Registrar   would
      determine, under subsection 58(3), the  parent's  ATI  for  the  child
      support period 1 January 2011 to 30 March 2012 to be $50,000 × 1.041 =
      $52,050.

      Example 2:  This example assumes the Registrar was  also  assessing  a
      parent in relation to the child  support  period  1  January  2011  to
      30 March 2012, but that the most recent year  in  which  the  parent's
      income has been assessed is the  2005-06  financial  year.   The  'AWE
      amount for the September quarter of the last relevant year of  income'
      is $934.70 (see above).  The 'AWE amount for the September quarter  of
      the tax return year' (that is, the AWE  amount  for  August  2005)  is
      $805.40.  The ATI indexation factor is  $934.70  ÷  $805.40  =  1.161.
      That is, the ATI figure for 2005-06 would be indexed by 16.1 per  cent
      to ascertain the parent's ATI for 2009-10.  Assuming the ATI for 2005-
      06 was $50,000, the Registrar would determine, under subsection 58(4),
      the parent's ATI for the  child  support  period  1  January  2011  to
      30 March 2012 to be $50,000 × 1.161 = $58,050.

Item 6 repeals section 150C.  Subsection 150C currently  provides  that,  if
the Registrar asks a person for their tax file number, and the  person  does
not comply, section 58 applies to the person as if the request for  the  tax
file number were a request under 58(2)(c) and  the  person  had  refused  to
comply as per paragraph 58(2)(d).   Under  the  amended  section  58,  if  a
parent fails to comply with  a  request  for  their  tax  file  number,  the
Registrar could determine the parent's ATI under  subsection  58(2)  if  the
Registrar had information or  a  document,  or  otherwise  under  subsection
58(5).  The operation of section 150C is  redundant  following  the  changes
made by this Bill.

Item 7 inserts new subsection 155(2A), which  provides  that  the  Secretary
must publish in the Gazette, before the end of each calendar year,  the  AWE
amount for the quarter ending on 30 September of that  year.   This  mirrors
the current requirement for the  Secretary  to  publish  the  MTAWE  figure.
Item 8 amends subsection  155(3)  to  make  it  clear  that  the  instrument
published under subsection 155(2A) is not a  legislative  instrument  within
the meaning of section 5 of the  Legislative  Instruments  Act  2003.   This
provision is merely declaratory of the law,  and  not  an  actual  exemption
from the Legislative Instruments Act 2003.

Application provisions

Item 9 provides that new subsection 5A(5) applies in relation to  the  MTAWE
figure that is published before or  after  the  commencement  of  the  item.
This would not have an adverse effect on anyone.

Item 10 provides that new subsection 58AA(3) applies in relation to  an  AWE
amount that is published before or after  the  commencement  of  this  item.
This would not have an adverse effect on anyone.

Saving provision

Item 11 provides that determinations  made  under  the  current  section  58
before  the  commencement  of  this  item  would  have  effect,  after  that
commencement, as if they had been made under new section  58.   This  saving
provision would aid in the interpretation of other provisions in  the  Child
Support Assessment Act (such as section 58A) that refer to section 58.

     Schedule 4 - Notice of payments of recompense for personal injuries


                                   Summary

The 2010-11  Budget  measure,  Streamline  the  Notification  Processes  for
Compensation  Recipients,  is  introduced  by  this   Schedule.    The   new
provisions require payers of compensation, such as insurance  companies,  to
notify Centrelink of proposed payments  of  compensation.   Centrelink  will
then use this information to determine the social security  entitlements  of
the compensation recipient or their partner.  This will reduce the  risk  of
individuals incurring unnecessary debt to  the  Commonwealth  and  receiving
income support payments to which they or their partner are not entitled.

                                 Background

The social security law provides that people  who  receive  compensation  do
not also receive income support from the Australian Government for the  same
period of time.  The principle is that, if a person is  compensated  for  an
injury, they should use those resources to meet their daily expenses  rather
than rely on taxpayer-funded payments.

Currently, social security recipients  are  required  to  notify  Centrelink
when they or their partner are to receive a compensation payment.   The  new
provisions  will  streamline  the  notification  process  for   compensation
payments to social security recipients or their  partners,  to  ensure  they
receive their correct entitlements.

Organisations  that  pay  compensation,  such  as  insurance  companies   or
statutory authorities, will now need to advise Centrelink directly before  a
compensation payment is made to a  social  security  recipient  or  partner.
The new requirement  applies  to  lump  sum  payments  as  well  as  ongoing
periodic payments.

This change helps ensure  that  the  responsibility  for  the  provision  of
income  for  injured  people  is  not  shifted  from   the   insurance   and
compensation sector to the Commonwealth through the social security  system.


The amendments made by this Schedule commence on the day on which  the  Bill
receives  Royal  Assent,  and  apply  from  whichever  is   the   later   of
1 October 2011 and the Royal Assent date of commencement.

                         Explanation of the changes

The measure seeks to amend the social  security  law  to  make  it  a  legal
requirement that compensation payers (for example, insurance companies)  and
statutory authorities notify Centrelink  before  compensation  payments  are
made to individuals.

Amendments to the Social Security Act

Item 1 amends  subsection  17(1)  of  the  Social  Security  Act  by  adding
recompense to the list of terms defined in section 17.


Item 2 inserts the words 'Division  4  of'  into  subsection  17(6)  of  the
Social Security Act to provide a more precise description  of  the  part  of
the Act affected by that subsection.

Item  3  inserts  new  subsections  17(7),  (7A),  (7B)   and   (7C)   after
subsection 17(6).  New subsection 17(7) inserts a  comprehensive  definition
of the term recompense to ensure that as many types of payment  as  possible
fall within the scope of the definition.   The  definition  covers  payments
made for personal injury in the form of:  a payment of  damages;  a  payment
under  a  Commonwealth,  State  or  Territory   scheme   of   insurance   or
compensation, including a payment under a contract entered into  under  such
a scheme; a payment in settlement of a damages claim or a claim  under  such
an insurance scheme; and any  other  compensation  or  damages  claim.   The
payments can be either lump sum or a series of payments, and made within  or
outside Australia.

New subsection 17(7A) provides that new paragraph 17(7)(d)  does  not  apply
if the recipient had contributed towards the payment through,  for  example,
insurance premiums.

New subsection (7B) provides that a payment for  compensation  for  personal
injury suffered as a result of the commission of an offence  is  not  within
the definition of recompense in the Social Security Act.

New  subsection  (7C)  is  to  avoid  any  doubt  that  the  definition   of
compensation appearing elsewhere in  the  section  does  not  apply  to  new
subsection (7), (7A) or (7B).

Headings in the section are also amended to assist readers.

Item 4 substitutes a new heading for Part 3.14 of the Social Security Act.

Item 5 inserts new subsection  1160(1A)  before  subsection  1160(1),  which
provides for notice  to  be  given  to  the  Secretary  before  payments  of
recompense are made, changed or stopped.

Item 6 inserts new Division 2A -  Notice  of  payment  for  personal  injury
after Division 2 of Part 3.14 of the Social Security Act.

New section 1167A makes provision for notice of payment of recompense  by  a
payer.

New subsection 1167A(1) provides that a notice of payment must  be  made  to
the Secretary, in a form approved by the Secretary, at least 14 days  before
a payment is made, being a lump sum payment of  recompense  for  a  personal
injury; or the first payment of a number of periodic  payments;  or  arrears
of periodic payments.  The note  draws  attention  to  the  consequences  of
failing to provide a notice of a payment.

New subsection 1167A(2) provides for a notice to be provided  for  a  change
of periodic payments at least 14 days before the changed  payment  is  made.
The note draws attention to the consequences of failing  to  provide  notice
of a payment.

New subsection 1167A(3) provides for a notice of final payment  to  be  made
at least 14 days before that payment is made. The note  draws  attention  to
the consequences of failing to provide notice of a payment.

New subsection  1167A(4)  provides  for  an  alternative  operation  of  new
subsections 1167A(1), (2) and (3), in  the  circumstances  outlined  in  the
table, to ensure that the exercise of power is  within  the  limits  of  the
Constitution of  Australia.   New  subsection  1167A(5)  provides  that  new
subsection 1167A(4) does not limit the effect of new  subsections  1167A(1),
(2) and (3).

New subsections 1167A(6) and (7) provide that new  section  1167A  does  not
apply to State insurance within the area of  State  insurance  protected  by
paragraph 51(xiv) of the Constitution.

New section  1167B  provides  for  a  notice  of  the  proposed  payment  of
recompense by an insurer, who is liable under a  contract  of  insurance  to
indemnify a payer, to be made to the Secretary.  New  subsections  1167B(1),
(2)  and  (3)  provide  a  similar  scheme   to   that   provided   in   new
subsections 1167A(1),  (2)  and  (3).   New  subsections  1167B(4)  and  (5)
replicate new subsections 1167A(6) and (7).

New  section   1167C   provides   for   the   content   of   notices.    New
subsection 1167C(1) provides that  the  Secretary  may  approve  a  form  of
notice of a proposed recompense  payment.   The  notices  will  require  the
provision of personal information about the  person  who  has  suffered  the
injury or any person who is acting on behalf of  the  injured  person.   The
personal information required about a person who is acting on behalf of  the
injured person is  not  expected,  in  the  majority  of  cases,  to  be  as
comprehensive as the personal information required from, or in relation  to,
an injured person.  New  subsection  1167C(2)  permits  different  forms  of
notice for different kinds of proposed recompense payment.   New  subsection
1167C(3) provides that forms of notice for  periodic  payments  may  require
information about other periodic payments.

New section 1167D  provides  that  duplicate  notices  of  payment  are  not
required.  If the indemnifying insurer has given notice, then the  payer  is
not required to give notice.  In addition, the reverse applies.

Item 7 inserts new sections 1184EA and 1184EB before section 1184F.

New section 1184EA provides that, if:  a person  fails  to  give  notice  as
required under new section 1167A or 1167B; one or more of  the  compensation
affected payments are made; and the total amount  of  the  payments  exceeds
the amount of compensation affected  payments  which  it  is  reasonable  to
suppose would have been payable if the required notice had been given;  then
there is a debt due to the Commonwealth  by  the  person  required  to  give
notice.  The note to the section provides information  on  the  sections  of
the Social Security Act dealing with debt.

New subsection 1184EB(1) provides that payment of a debt  due  by  a  person
under new section 1184EA also discharges a debt due by another person  under
new section 1184EA in relation to the same compensation  affected  payments.
A debt due by a debtor under new section  1184EA  or  another  person  under
this Division or Part 5.2 of the Social Security  Act  in  relation  to  the
same compensation affected payments  is  also  discharged.   New  subsection
1184EB(2) provides that other payments may provide for the recovery  of  the
full amount of a debt under this Division except in relation to new  section
1184EA.

Item 8 provides for the application of new Division 2A  of  Part  3.14,  and
new  sections  1184EA  and  1184EB,  of  the  Social  Security   Act.    The
application provisions make sure  that  the  new  requirements,  which  will
potentially  have  an  adverse  effect  on  some  customers,  do  not  apply
retrospectively to payments of recompense made before commencement of  these
changes.

Subitem 8(1) provides that the provisions inserted by  this  Schedule  apply
in relation to payments of recompense made on or after  the  commencing  day
('post-commencement payments') irrespective of  whether  the  liability,  or
the decision, to make the payments was incurred or made before, on or  after
the commencing day.

Subitem  8(5)  provides  that  the  commencing   day   is   the   later   of
1 October 2011 or the day this Schedule  commences  (which  is  the  day  of
Royal Assent).

Subitem 8(2) provides that subitems 8(3)  and  (4)  apply  if  one  or  more
periodic payments of recompense for a personal injury are  made  before  the
commencing  day  ('pre-commencement  payments')  and  one  or   more   post-
commencement payments are to be made in relation to the personal injury.

Subitem 8(3) provides that new paragraphs 1167A(1)(b) and 1167B(1)(b)  apply
as if the first of the post-commencement payments is the first payment in  a
number of periodic payments of recompense for the injury.

Subitem 8(4) provides that, if the first of the  post-commencement  payments
is  either:   of  a  different  amount  to  the  amount  of  the  last  pre-
commencement payment that was made before the  commencing  day  (the  'final
pre-commencement payment); or is for a longer or  shorter  period  than  the
period for which the final  pre-commencement  payment  was  made;  then  new
subsections 1167A(2) and  1167B(2)  apply  to  the  first  post-commencement
payment as if the final pre-commencement payment had been the subject  of  a
notice under new Division 2A of Part 3.14 of the Social Security Act.

Item 9 adds the words 'or recompense' to subsection  1184K(1)  so  that  the
Secretary  will  have  the  same  discretion  in  relation  to  payments  of
recompense as is provided in relation payments for compensation.

Items 10 and 11 add new paragraph 1222(1)(baa),  which  will  include  debts
under new section 1184EA in Chapter 5 - Overpayments and  debt  recovery  of
the Social Security Act, and specify those debts  in  the  recovery  methods
table in subsection 1222(2).

Item 12 adds  new  section  1184EA  to  the  overseas  application  list  of
provisions in section 1230B.

Item 13 adds new subsection 1230(3A)  and  provides  that  debts  under  new
section 1184EA are recoverable by legal proceedings or garnishee.

                        Schedule 5 - Other amendments


                                   Summary

This Schedule makes minor clarifications to several  family  assistance  and
child support provisions.  These clarifications do not change  policy.   The
Schedule includes:  clarifying the primary carer  concept  for  baby  bonus;
simplifying the method statement for calculation of an individual's rate  of
family tax benefit (FTB) Part A when their income exceeds the higher  income
free area (known as method 2);  putting  beyond  doubt  the  application  of
mandatory continuous adjustment to a  claimant's  rate  of  fortnightly  FTB
payments where there has  been  a  break  in  entitlement;  maintaining  the
treatment  of  pharmaceutical  allowance  before  the  pension  reforms   by
excluding the tax-exempt pension supplement from  adjusted  taxable  income;
and a number of other technical amendments.

                                 Background

Baby bonus and primary carer

The  Paid  Parental  Leave  (Consequential  Amendments)  Act  2010  included
amendments  to  the  Family  Assistance  Act,  making  it  a  condition   of
eligibility for baby bonus that an individual, or the individual's  partner,
is the primary carer of the child, for whom baby bonus is being claimed,  at
some time during  the  relevant  eligibility  period  (for  example,  for  a
parent, the period of 26 weeks from the child's birth).

Where it is the individual's partner who is the primary carer of  the  child
at the  relevant  time,  and  that  circumstance  would  give  rise  to  the
eligibility of the individual, these amendments clarify that the  individual
and their partner must have been a couple at that  time.   In  other  words,
where the partner was the primary carer of the child at a  prior  time,  but
the individual and their partner were not a couple at that time, becoming  a
couple later will not give rise  to  eligibility  for  baby  bonus  for  the
individual.  In this case, the partner alone is eligible for baby bonus.

A claimant's adjusted taxable income is relevant to  their  eligibility  for
baby bonus.  These amendments clarify  that  the  relevant  income  is  that
relating to the six months commencing  when  the  claimant  both  meets  the
existing eligibility criteria and is the primary carer of the child.

For example, in the case of the birth of a  child,  it  would  generally  be
expected that the parent would become the primary  carer  of  the  child  at
birth, such that the relevant period for calculation  of  their  income  for
eligibility  purposes  would  commence  upon  birth.    However,   in   rare
instances, the date upon which the parent becomes the child's primary  carer
may occur later than the date of birth.  In this case, the period of  income
which is relevant should start upon the date the parent becomes the  child's
primary carer.

A provision made obsolete by the amendments is also removed.

Method statement for FTB Part A method 2

If an individual with an FTB child has adjusted taxable income that  exceeds
the higher income free area (currently $94,316  plus  $3,796  for  each  FTB
child after the first) and the individual or partner  does  not  receive  an
income  support  payment,  the  method   statement   for   calculating   the
individual's FTB Part A rate is set out in clause 25 of Schedule  1  to  the
Family Assistance Act.  This is known as Method 2.

The Method 2 statement is being clarified to make it clear that it  involves
paying the higher of two differently calculated amounts.   The  two  amounts
are:

    . the base rate reduced by an income test that has a higher income  free
      area (currently $94,316 plus $3,796  for  each  FTB  child  after  the
      first) and an income taper of 30 per cent; and


    . the maximum rate reduced by the income  test  and  maintenance  income
      test that applies under Method 1.  The income test has an income  free
      area (currently $45,114) and an income taper of 20 per cent.

This amendment will not affect the FTB Part A rate produced  by  the  method
statement.

To improve further the clarity of the method statement,  the  term  'maximum
rate' currently used at step 1, is replaced  with  the  more  accurate  term
'Method 2 base rate'.

Enabling a past income year entitlement for  rent  assistance  without  also
needing to claim fortnightly instalments when instalments cannot be paid

From 1 July 2010, if an FTB recipient  has  had  an  'FTB  non-lodger  debt'
raised due to failing to lodge required income tax  returns  in  respect  of
three or more financial years, they or their partner are not entitled to  be
paid FTB as fortnightly instalments based on  estimated  income,  until  the
outstanding income tax returns for the relevant years are lodged ('the  non-
lodger provisions').  However, these people are able to claim FTB as a  lump
sum for a previous financial year, and be paid FTB  based  on  their  actual
income.

The current provisions provide that an individual can only be  eligible  for
rent assistance as part of an FTB lump sum claim for  a  previous  financial
year if the individual also claims fortnightly payments of FTB at  the  same
time.  However, as a claim for fortnightly payments cannot be granted to  an
individual who is affected by the non-lodger provisions, it is anomalous  in
these cases to require lodgement of  an  instalment  claim  that  cannot  be
granted, solely to be eligible for rent assistance as part of  an  FTB  lump
sum claim for a previous financial year.

To resolve this anomaly, it is proposed that a person  who  is  affected  by
the non-lodger provisions may be eligible for rent assistance as part of  an
FTB lump sum claim for a previous financial year without  needing  to  lodge
an accompanying instalment  claim.   This  would  avoid  the  administrative
anomaly described above.

Maintaining the scope of tax free pensions or benefits for adjusted  taxable
income since introduction of the pension supplement

Adjusted taxable income for family assistance includes specified  'tax  free
pensions or benefits' such  as  disability  support  pension  or  invalidity
service pension, but excludes specified components  such  as  pharmaceutical
allowance.  The relevant provision is clause 7 of Schedule 3 to  the  Family
Assistance Act.

Under the pension reforms effective from 20 September  2009,  pharmaceutical
allowance for most pensions was replaced  by  the  pension  supplement,  and
other amounts (for example, telephone  allowance,  utilities  allowance  and
'GST supplement') were also rolled into the pension supplement, to which  an
increase was applied.

Pharmaceutical allowance continues for some payments, and will  continue  to
be excluded  from  adjusted  taxable  income  for  family  assistance.   For
example, pharmaceutical allowance continues for disability  support  pension
for a person aged under 21 without a child.

To maintain the treatment of pharmaceutical  allowance  before  the  pension
reforms, the only amount of the  new  pension  supplement  in  a  'tax  free
pension or benefit' that will be included as adjusted  taxable  income  will
be the 'pension supplement basic amount' (the former 'GST supplement').

To achieve this outcome, the amount  of  pension  supplement  that  will  be
excluded as adjusted taxable income is  a  payment  by  way  of  'tax-exempt
pension supplement'.

Adjusted taxable income for child  support  purposes  has  closely  mirrored
income for family assistance purposes  since  1  July  2008.   An  identical
amendment to the definition of tax free pension or benefit is also  made  to
the Child Support Assessment Act.

Mandatory continuous adjustment and a break in entitlement

From 1 July 2009, mandatory continuous adjustment  has  applied  to  provide
for the reduction of a claimant's rate of  FTB  where  there  is  a  revised
estimate  (of  income  or  maintenance  income)  to  assist  in   preventing
overpayments following reconciliation.

The majority of FTB claimants are paid on the basis of estimated income  for
a financial year.  If a claimant revises an estimate  during  the  financial
year, the Family Assistance Office will vary their  FTB  based  on  the  new
income estimate.  The  variation  can  only  apply  prospectively,  and  may
result in an increase or decrease in a claimant's rate  of  fortnightly  FTB
payments.

Where a claimant's income estimate increases during the financial  year  and
this results in a notional overpayment of FTB for the earlier period in  the
financial year because  of  the  revised  estimate,  the  Family  Assistance
Office is able to deduct an extra amount during the later part of  the  year
to help in preventing an overpayment when  the  FTB  reconciliation  occurs.
The deduction, called the daily overpayment rate, is calculated by  dividing
the notional overpayment for the  earlier  period  by  the  number  of  days
remaining in the financial year.  Where the deduction is  greater  than  the
claimant's FTB entitlement before the deduction, the claimant's  entitlement
will be reduced to nil for the remainder of the financial year.

These  amendments  provide  for  mandatory  continuous   adjustment   of   a
claimant's rate of fortnightly FTB payments even  where  there  has  been  a
break in the claimant's entitlement during the  income  year.   Whether  the
claimant subsequently reclaims  either  a  past  period  amount  or  ongoing
instalment payments or both during the same income year,  their  entitlement
may still be adjusted by a daily overpayment rate.

Additionally, no provision was made in the mandatory  continuous  adjustment
provisions  for  the  rounding  of  the  daily  overpayment   rate.    These
amendments provide for such rounding.

The amendments made by this Schedule commence on 1 July 2011.

                         Explanation of the changes

Amendments to the Family Assistance Act

Baby bonus and primary carer

Item 1 amends paragraph 36(2)(ab), which provides for  the  eligibility  for
baby bonus of a parent of a child.  New subparagraph 36(2)(ab)(i) now  deals
with the situation in which  it  is  the  individual  claiming  who  is  the
primary carer of the child within the period of 26  weeks  starting  on  the
day of the child's  birth.   New  subparagraph  (ii)  then  deals  with  the
situation in which it is the partner of the individual claiming who  is  the
primary carer of the child within the period of 26  weeks  starting  on  the
day of the child's birth, and makes it clear that, for this  to  render  the
individual eligible for baby bonus, the individual must be  a  member  of  a
couple with the partner at that time.

Item 3 repeals paragraph 36(3)(c) because this paragraph  is  now  redundant
as the result of the insertion of paragraph 36(3)(cb) by the  Paid  Parental
Leave  (Consequential  Amendments)  Act  2010  on  1  January   2011.    The
requirement in paragraph 36(3)(cb) that the individual, or the  individual's
partner, continue, or be likely to continue, to be the primary carer of  the
child for not less than 26 weeks includes the  requirement  that  the  child
continue in the care of the individual or their partner for  not  less  than
26 weeks.  (Primary carer is defined in subsection 36(8)  and  includes  the
requirement that the individual have care of the child.)

Item  3  additionally  repeals  paragraph  36(3)(b)  and   substitutes   new
paragraphs  36(3)(b)  and  (c).   New  paragraph  36(3)(b)   clarifies   the
requirement, which is either:  that the child was entrusted to the  care  of
the individual within the period of 26 weeks starting  on  the  day  of  the
child's birth; or that the individual is a member of a couple  at  any  time
within the period of 26 weeks starting on the day of the child's  birth  and
that the child is entrusted to the care of the individual's partner at  that
time.  New paragraph 36(3)(c) then  makes  clear  the  timing  of  the  dual
requirements of the individual's partner being  the  primary  carer  of  the
child, and the individual being a member of a couple with  the  partner,  to
the same effect as item 1.

A note to this item alters the heading to subsection 36(3) by adding at  the
end 'or individual's partner'.

Item 5 repeals and substitutes paragraph 36(5)(bc)  for  adoptions,  to  the
same effect as item 1.

Item 2 amends subsection 36(2), which provides for the eligibility for  baby
bonus of a parent of a child.  Paragraph 36(2)(d) requires  that  the  claim
for payment of baby bonus contain an estimate  of  the  individual's  income
and, if the  individual  is  a  member  of  a  couple,  the  income  of  the
individual's partner.  The period for which  the  income  estimate  must  be
provided is currently the period of six months beginning on the day  of  the
child's birth.  However, item 2 omits reference to  the  child's  birth  and
substitutes reference to the first  day  on  which  paragraph (ab)  applies.
Paragraph 36(2)(ab), being substituted by item 1, will refer to the  day  on
which the individual, or the individual's partner, is the primary  carer  of
the child.

Item 4 makes a similar amendment to item 2, in respect of  situations  where
eligibility for baby bonus arises because the child has  been  entrusted  to
the care of an individual.  Item 4  amends  paragraph  36(3)(e)  to  provide
that the relevant period for  which  the  individual  and  the  individual's
partner must estimate their income starts on the first  day  that  paragraph
36(3)(c) (being substituted by item 3) applies -  that  is,  the  first  day
that the individual, or the individual's partner, is the  primary  carer  of
the child.

Item 6 makes a similar amendment to that made  by  item  2,  in  respect  of
situations where eligibility for baby bonus arises because, as part  of  the
process for the adoption of a child by an individual,  the  child  has  been
entrusted to the care of the individual.  Item 6 amends  paragraph  36(5)(d)
to provide that the  relevant  period  for  which  the  individual  and  the
individual's partner must estimate their income starts on the first  day  on
which paragraph (bc) (being substituted by item 5) applies -  that  is,  the
first day that the individual, or the individual's partner, is  the  primary
carer of the child.

Item 7 provides an application provision for items 1 to  6,  providing  that
the amendments apply to claims for payment of baby bonus that  are  made  on
or after the commencement of those items.

Method statement for FTB Part A method 2

Step 3 of the method statement in clause 25 for the method 2 calculation  of
the Part A rate of FTB currently does two things.  First,  it  requires  the
calculation  for  comparison  purposes  of  the  rate  that  would  be   the
individual's income and maintenance tested rate under step 3 of  the  method
statement in clause 3 (known as method 1) if the individual's  Part  A  rate
were to  be  calculated  using  Part  2  (but  disregarding  the  method  of
calculating an  individual's  maintenance  income  ceiling  for  method  1).
Second, it requires the comparison of this rate  with  the  rate  calculated
under step 2 of method 2, known as the 'provisional Part A rate'.   It  then
provides that the individual's Part A rate is the higher of  the  two.   (In
instances where the two rates are the same, the 'provisional  Part  A  rate'
is notionally preferred.)

Item 12 repeals step 3 and substitutes new steps 3 and  4.   This  separates
out the two actions previously performed under step 3  alone,  but  produces
the same outcome.  New step 3 calculates the method 1 rate mentioned  above,
by reference to step 3 of the method 1 rate  calculation.   This  result  is
labelled the 'Method 2 income and maintenance  tested  rate'.   New  step  4
provides for the comparison of this rate with the provisional  Part  A  rate
calculated under steps 1 and 2, and provides  for  the  individual's  Part A
rate to be the higher of the two (or the provisional Part A rate if the  two
rates are the same).

Item 9 is consequential to item 12 above, substituting reference to  step  4
for the existing reference to step 3.

Item 10 substitutes the more accurate label 'Method 2  base  rate'  for  the
current label 'maximum rate' in step 1 of the method statement.  Item 11  is
consequential to item 10, replacing the  current  reference  in  step  2  to
'maximum rate' with the new term 'Method 2 base rate'.

Items 8, 13, 14 and 15  are  consequential  to  item  10.   They  substitute
reference to 'an individual's Method  2  base  rate  under  clause  25'  for
references to the maximum rate under clause 25.

Enabling a past income year entitlement for  rent  assistance  without  also
needing to claim fortnightly instalments when instalments cannot be paid

Item 16 adds a new subclause to  clause  38C  of  Schedule  1  dealing  with
eligibility for rent assistance.  Paragraph  38C(1)(b)  provides  that  rent
assistance may be added in working out an individual's maximum rate  if  the
claim  is  not  a  claim  to  which  subclause  38C(2)  applies.   Paragraph
38C(2)(c) requires a claim for FTB for a past  period  that  occurs  in  the
first or second income year before the one in which the claim is made to  be
accompanied by a claim for FTB by instalment.

Section 32AE of the Family Assistance Administration Act  applies  if  three
variations under  subsection  28(2)  of  that  Act  have  been  made  for  a
claimant.  A variation under subsection 28(2) may result  in  a  debt  under
section 71 of that Act.  The debt, known as a non-lodger debt,  is  for  the
entire amount of FTB  that  the  claimant  received  for  the  'cancellation
income year' for which they or their partner have not lodged a  tax  return.
A cancellation income year is an income year in  which  the  individual  was
previously entitled to family tax benefit for a period, and a  required  tax
return for that year was not lodged by the end of 12 months  after  the  end
of that year.

Subsection 32AE(2) or  (5)  of  the  Family  Assistance  Administration  Act
applies in relation to a cancellation income year if  the  claimant  or  the
claimant's partner was required to lodge  an  income  tax  return  for  that
year, and has not done so, a debt under section 71  arose  as  a  result  of
that cancellation, and part of the debt is outstanding.

New   subclause   38C(3),   inserted   by    item    16,    provides    that
paragraph 38C(2)(c), which  would  otherwise  prevent  the  individual  from
being eligible for rent assistance for the period  in  the  previous  income
year that FTB is being claimed because no instalment  claim  has  also  been
made, does not apply if, at the time the claim for  payment  of  FTB  for  a
past  period  is  made,  subsection  32AE(2)  of   the   Family   Assistance
Administration Act applies in  respect  of  the  individual,  or  subsection
32AE(5) of that Act applies in respect of the  individual's  partner.   That
is, the individual may be eligible for rent assistance for the past  period,
without also needing to make an instalment claim, if such a claim cannot  be
granted due to non-lodgement of tax returns.

Item 17 is an application provision for the  amendments  made  by  item  16,
providing for the amendment to apply in relation to claims  for  payment  of
FTB for a past period that are made on or after  the  commencement  of  that
item.

Maintaining the scope of tax free pensions or benefits for adjusted  taxable
income since introduction of the pension supplement

Item 18 adds two new paragraphs to the end of clause 7 of Schedule 3,  which
defines the term tax free pension or  benefit,  in  order  to  exclude  tax-
exempt pension supplement from being a tax free pension  or  benefit.   This
exclusion will prevent the tax-exempt pension supplement from  forming  part
of an individual's adjusted taxable income.  If the  payment  is  a  payment
under the Social Security Act, new paragraph 7(k)  provides  that  the  term
does not include a tax-exempt pension  supplement  (within  the  meaning  of
subsection 20A(6) of that Act).  If the  payment  is  a  payment  under  the
Veterans' Entitlements Act 1986, new paragraph 7(l) provides that  the  term
does not include a tax-exempt pension  supplement  (within  the  meaning  of
subsection 5GA(5) of that Act).

The references to tax-exempt pension supplement in new paragraphs  7(k)  and
(l) are specified in detail, unlike the existing components referred  to  in
paragraph (j) of clause 7, because they are only  recently  inserted  terms,
and there are many similar terms now used in the  Social  Security  Act  and
Veterans' Entitlements Act 1986 as a result of the pension reforms.

Amendments to the Family Assistance Administration Act

Mandatory continuous adjustment and a break in entitlement

Items  20,  21,  22,  23,  24  and  25  make  the  necessary  amendments  to
section 31E to allow for  the  mandatory  continuous  adjustment  of  a  new
determination of entitlement which is made in an income  year  during  which
the claimant had a prior entitlement.

Paragraph 31E(1)(a) provides that the section applies where a  determination
is in force in an income year under which a claimant is entitled to be  paid
FTB by instalment.  Paragraph  31E(1)(b)  sets  out  additional  alternative
conditions which must be met for the section  to  apply.   Item  20  adds  a
condition to  this  paragraph,  which  applies  if  the  determination  (the
instalment determination mentioned in paragraph 31E(1)(a)) ceases to  be  in
force in the income year and another determination comes into force in  that
income year.  The other determination may be one under  which  the  claimant
is entitled to be paid FTB either  by  instalment,  or  for  a  past  period
falling wholly within that income year.

A note provides that the heading to  section  31E  is  altered  by  omitting
'payable by instalment',  to  reflect  the  broader  scope  of  the  section
resulting from these amendments.

If the section applies, subsection 31E(2) provides a method  statement  that
the Secretary must apply to work out if there is a daily  overpayment  rate.
Critical to the calculation is the identification of the  'applicable  day'.
Item 25 provides that, for the situation of  another  determination  arising
in the same income year as a prior determination, the applicable day is  the
first day in the income year for which  the  claimant's  entitlement  to  be
paid FTB arose under the other (later) determination.

Step 1 of the method statement requires the Secretary to work out the  total
amount of FTB the claimant is or was entitled to be paid during  the  period
beginning at the start of the income year and ending at the end of  the  day
before the applicable day.  In this case, this will  be  the  period  during
which FTB was paid as a result of the prior determination.

Step 2 is then amended by item 21 to require the Secretary to work  out  the
total amount of FTB the claimant would have been entitled to be paid  during
that period if the claimant's rate of FTB were  calculated  using  both  the
estimate of the claimant's adjusted taxable income for the income year,  and
the estimate of the claimant's maintenance income in that income year,  that
were used in determining the claimant's rate of FTB under the other  (later)
determination.

Steps 3, 4 and 5 of the method statement apply  unchanged,  to  compare  the
amount the claimant was entitled to be paid during the previous period  with
the notional entitlement for that period calculated at step 2, to  work  out
any daily overpayment rate.  Where the amount previously paid identified  at
step 1 is greater than the notional entitlement calculated at step  2,  then
the amount of the comparison will be greater than zero, and there will be  a
daily overpayment rate.

Subsection  31E(3)  then  requires  the  Secretary,  if  there  is  a  daily
overpayment rate, to vary the determination so  that  the  claimant's  daily
rate of FTB for the period beginning on the applicable  day  and  ending  on
the last day of the income year is reduced  (but  not  below  nil)  by  that
daily overpayment rate.  Item 23 amends subsection 31E(3) to make  it  clear
that it is the applicable determination which must be varied.  Item 24  then
inserts new subsection 31E(3A) to provide a definition  of  the  'applicable
determination'.   For  situations  where  the  variation  of   an   existing
determination during the income  year  has  triggered  a  daily  overpayment
rate,  the  applicable  determination  will  be  that  determination.    For
situations where another determination has  triggered  a  daily  overpayment
rate, the applicable determination will be the later determination  referred
to in new subparagraph 31E(1)(b)(vii), added by item 20.

Minor technical amendments

Item 19 is a technical amendment to substitute,  in  subsection  10(5),  the
current reference to  subsection  32AE(3)  with  the  correct  reference  to
subsection 32AE(5), and to make clear that  subsection  32AE(2)  applies  in
respect  of  the  claimant,  and  subsection  32AE(5)  in  respect  of   the
claimant's partner.

Items 26 and 27 are similarly technical amendments to make  clear  that  the
references to section 36 and subsection 36A(3) in  paragraph  39(1A)(a)  are
to provisions in the Family Assistance Act.

Paragraph 66(2)(a) of the Family Assistance Administration Act  provides  an
exception to the absolute inalienability of various payments  where  payment
of a person's family assistance to someone else on behalf of the  person  is
to occur, referring  to  subsections  23(4),  56(3)  and  56A(3).   However,
subsection 23(4) no longer exists, (having been repealed by the  Family  and
Community Services  Legislation  Amendment  (Budget  Initiatives  and  Other
Measures) Act 2002 (see item 1 of Schedule 2).  Item 28 omits the  reference
to subsection 23(4).  However,  this  then  results  in  paragraph  66(2)(a)
dealing only with child care benefit-related provisions.  Item 29  makes  it
clear that paragraph 66(2)(a) covers only the payment of child care  benefit
in a different way.  Item 30 then inserts a new  paragraph  after  paragraph
66(2)(cc), to include reference to Division  3  of  Part  8B,  dealing  with
payments to a payment nominee, previously covered by subsection 23(4).

Item 31 repeals section  103,  which  effectively  became  inoperative  when
section 78A and  accompanying  provisions  were  inserted  into  the  Family
Assistance Administration Act.  All powers  of  the  Secretary  set  out  in
section 103 are maintained in section 78A.

Amendments to the Child Support Assessment Act

Item 32 amends the definition of tax  free  pension  or  benefit  for  child
support purposes.  This will match the amendment made at item 18  above  for
family assistance purposes, to maintain the current close alignment  between
these definitions.