Source: https://www.legislation.gov.au/Details/C2009B00105/Explanatory%20Memorandum/Text
Timestamp: 2019-12-07 04:11:31
Document Index: 246176281

Matched Legal Cases: ['art 2', 'art 1', 'art 3', 'art 3', 'art 2', 'art 2', 'art 2', 'art 2', 'art 2', 'art 2', 'art 2', 'art 5', 'art 3', 'art 3', 'art 3', 'art 3', 'art 3', 'art 4', 'art 4', 'art 2', 'art 3', 'art 3', 'art 4', 'art 6', 'art 6', 'art 6', 'art 6', 'art 6', 'art 6', 'art 6', 'art 6', 'art 1', 'art 1', 'art 2', 'art 1', 'art 1', 'art 2', 'art 2', 'art 1', 'art 2', 'art 1', 'art 2', 'art 1', 'art 2', 'art 1', 'art 2']

This bill implements the Government’s commitment to assist low and middle‑income households with expected increases in the cost of living arising from the introduction of the Carbon Pollution Reduction Scheme.
The Government will provide upfront support to low and middle-income households from 2011-12 through a package of direct cash assistance and tax offsets to help in adjusting to a low pollution future.
Low-income households will receive additional support, above indexation, to meet fully the expected increase in the cost of living flowing from the scheme. Middle-income households will receive additional support, above indexation, to help meet the expected increase in the cost of living flowing from the scheme.
Because assistance for the cost of living increase provided through certain payments will be brought forward, subsequent indexation arrangements will be adjusted to avoid duplication.
Total expense – all portfolios
$1,063.9 m
$2,969.4 m
Increases in tax offsets
-$400.0 m
-$1,760.0 m
Table 2 provides a breakdown of the estimated fiscal impact of CPRS revenue and assistance measures over the forward estimates.
Table 3 reconciles the fiscal impact against the CPRS measures included in the 2009-10 Budget and the previous estimates for the net impact of the CPRS package shown in the 2009 Updated Economic and Fiscal Outlook (UEFO).
Clause 1 sets out how the Act is to be cited, that is, as the Carbon Pollution Reduction Scheme Amendment (Household Assistance) Act 2009.
Clause 2 provides that most of the Act commences on 1 July 2011 (or on 1 July 2012 for Part 2 of Schedule 5, dealing with amendments to certain Acts in relation to the 2012-13 and later years of income). However, if the Carbon Pollution Reduction Scheme Act 2009 does not commence on or before 1 July 2011, this Act will not commence at all.
‘Carbon Pollution Reduction Scheme’ means the scheme established by the Carbon Pollution Reduction Scheme Act 2009;
‘Family Assistance Administration Act’ means the A New Tax System (Family Assistance)(Administration) Act 1999;
‘1936 Tax Act’ means the Income Tax Assessment Act 1936;
‘ML Act’ means the Medicare Levy Act 1986;
‘Military Rehabilitation and Compensation Act’ means the Military Rehabilitation and Compensation Act 2004;
‘Social Security Administration Act’ means the Social Security (Administration) Act 1999; and
Schedule 1 – Assistance under the Social Security Act
The Carbon Pollution Reduction Scheme will be introduced with an initial $10 per tonne fixed carbon price in 2011-12 and a flexible carbon price in 2012‑13. This is expected to result in increases in the cost of living of 1.2 per cent in the first two years.
In order to provide assistance with the cost of living impacts of the scheme, the Government will provide upfront support to low and middle-income households from 2011-12 through a package of direct cash assistance and tax offsets to help in adjusting to a low pollution future.
Pensions, income support allowances and family payments will be increased by a total of 2.8 per cent over the first two years of the scheme. This includes a 1 per cent increase from 1 July 2011 and a further 1.8 per cent increase on 1 July 2012, including upfront indexation.
In broad terms, Part 1 of this Schedule introduces increases to social security benefits, allowances, and pensions to compensate recipients of those payments for anticipated increases in the cost of living as a result of the introduction of the Carbon Pollution Reduction Scheme.
Insertion of new Division 8 – Increases related to Carbon Pollution Reduction Scheme
Subdivision A – Introduction
Item 1 inserts a new note 3 at the end of subsection 1192(2). The note directs the reader to the possible adjustments to indexation that may occur under new Subdivisions C and D of new Division 8, which is being inserted by item 2.
Item 2 inserts a new Division 8 into Part 3.16 of the Social Security Act. In broad terms, new Division 8 provides rules for increasing the relevant social security rates by 2.8 per cent over two years. The new Division sets out the increases to payments to assist with anticipated cost of living increases arising out of the Carbon Pollution Reduction Scheme.
New subsection 1206GF(1) provides that the objects of the Division are to increase certain amounts that affect the rate at which payments are made to individuals under the social security law and that the increases are to be provided by way of assistance in respect of expected rises in the cost of living as a result of the implementation of the Carbon Pollution Reduction Scheme. This subsection sets out that the following payments will be increased:
(n) payments of kinds specified under new section 1206GM.
Subsection 1206GF(2) specifies that the second object of the Division is to adjust future indexation of payments to avoid duplicating assistance. The increases provided for in this bill include a bring forward of the anticipated increases to the Consumer Price Index (CPI) that will result from the introduction of the Carbon Pollution Reduction Scheme. To avoid duplication of the amounts brought forward, which would ordinarily flow to payments after the CPI increase occurs, subsequent indexation arrangements are to be adjusted.
Subdivision B – Increases
New section 1206GG applies increases to the rates specified in the table. The table also sets out the rounding base that is to apply for each payment.
New paragraph 1206GG(1)(a) identifies the first set of rates to which the increases will apply. These base amounts are listed in Column 1 of the table (a brief description of the rate is provided in column 2 of that table).
New paragraph 1206GG(1)(b) identifies the second set of rates to which the increases will apply. These amounts will be specified in accordance with new section 1206GN.
A note at the end of new section 1206GG indicates to the reader that the base amounts listed in the table are as indexed or adjusted from time to time under Division 2 of Part 3.16 of the Social Security Act.
New section 1206GH provides for a 1 per cent increase to the base amount of those payments set out in the table in section 1206GG on 1 July 2011. The effect of the section is that, on 1 July 2011, each base amount is replaced with an amount (the replacement amount) that is worked out by first calculating the provisional replacement amount and then applying the rounding rules to that figure.
By virtue of new paragraph 1206GH(a), the provisional replacement amount is calculated by determining a figure that is 1 per cent greater than the base amount.
New paragraph 1206GH(b) needs to be read in conjunction with the rounding bases specified in column 3 of the table in new section 1206GG.
New paragraph 1206GH(b) provides that, if the provisional replacement amount (that is, the amount that has been increased by 1 per cent) is a multiple of the relevant rounding base, then the provisional replacement amount is the replacement amount. That is, the provisional replacement amount will become the new rate. If the provisional replacement amount is not a multiple of the relevant rounding base, then it is rounded up or down to the nearest multiple of the rounding base and the resultant amount is the replacement amount. If the provisional replacement amount is a multiple of half the rounding base, then the provisional replacement amount is rounded up to the nearest multiple of the rounding base.
New section 1206GI provides for a 1.8 per cent increase to the base amount on 1 July 2012. The effect of the section is that, on 1 July 2012, each base amount is replaced with an amount (the replacement amount) that is worked out by first calculating the provisional replacement amount and then applying rounding rules to that figure.
By virtue of new paragraph 1206GI(a), the provisional replacement amount is calculated by determining a figure that is 1.8 per cent greater than the base amount.
New paragraph 1206GI(b) needs to be read in conjunction with the rounding bases specified in column 3 of the table in the new section 1206GG.
New paragraph 1206GI(b) provides that, if the provisional replacement amount (that is, the amount that has been increased by 1.8 per cent) is a multiple of the relevant rounding base, then the provisional replacement amount is the replacement amount. That is, the provisional replacement amount will become the new rate. If the provisional replacement amount is not a multiple of the relevant rounding base, then it is rounded up or down to the nearest multiple of the rounding base and the resultant amount is the replacement amount. If the provisional replacement amount is a multiple of half the rounding base, then the provisional replacement amount is rounded up to the nearest multiple of the rounding base.
Subdivision C – Adjustment of indexation
New section 1206GJ and new section 1206GK provide for adjusted CPI indexation of the amounts that were subject to the increases provided for under new section 1206GH and new section 1206GI.
The relevant social security rates will be increased by a total of 2.8 per cent over the first two years of the scheme. This includes a 1 per cent increase from 1 July 2011 and a further 1.8 per cent increase on 1 July 2012, including upfront indexation.
The 1 per cent increase on 1 July 2011 incorporates a 0.4 per cent component that represents a bring forward of future CPI increases. The 1.8 per cent increase on 1 July 2012 incorporates a 0.8 per cent component that represents a bring-forward of future CPI increases. The 0.4 per cent and the 0.8 per cent figures represent the expected effects on the CPI from the Carbon Pollution Reduction Scheme.
The new subsection 1206GJ(1) provides for special rules around indexation of some amounts on or after 20 March 2012.
By virtue of section 1193 of the Social Security Act, payment rates are indexed in accordance with CPI, as per the table in section 1191, by the application of an ‘indexation factor’.
For youth allowance and Austudy, the indexation factor is applied on 1 January each year. For the other amounts to which the new Subdivision B of Division 8 applies, the indexation factor is applied on 20 March and 20 September each year.
New subsection 1206GJ(1) states that, for the indexation factors that apply after 20 March 2012, the indexation factor is to be reduced by the brought forward indexation amount, but that the indexation factor is not to fall below 1.
New subsection 1206GJ(2) creates a definition of brought forward indexation amount for the purposes of this section. The brought forward indexation amount is 0.004 less any reduction made under this section for a previous indexation day.
A note is inserted at the end of the new subsection 1206GJ(2) to state that, once the brought forward indexation amount equals zero, there is no further reduction of the indexation factor that would ordinarily apply by virtue of section 1193 of the Social Security Act.
An example is also inserted at the end of the new subsection 1206GJ(2) to provide the reader with a clear picture of how the adjustment of the indexation provisions will apply.
New subsection 1206GJ(3) states that this section is only to apply to a person’s rate of payment if that rate of payment was previously affected by new section 1206GH.
The new subsection 1206GK(1) provides for special rules around indexation of some amounts on or after 20 March 2013.
For youth allowance and Austudy, the indexation factor is applied on 1 January each year. For the other amounts to which new Subdivision B of Division 8 applies, the indexation factor is applied on 20 March and 20 September each year.
New subsection 1206GK(1) states that, for the indexation factors that apply after 20 March 2013, the indexation factor is to be reduced by the brought forward indexation amount, but that the indexation factor is not to fall below 1.
New subsection 1206GK(2) creates a definition of brought forward indexation amount for the purposes of this section. The brought forward indexation amount is 0.008 less any reduction made under this section for a previous indexation day.
A note is inserted at the end of the new subsection 1206GK(2) to state that, once the brought forward indexation amount equals zero, there is no further reduction of the indexation factor that would ordinarily apply by virtue of section 1193 of the Social Security Act.
An example is also inserted at the end of the new subsection 1206GK(2) to provide the reader with a clear picture of how the adjustment of the indexation provisions will apply.
New subsection 1206GK(3) states that this section is only to apply to a person’s rate of payment if that rate of payment was previously affected by new section 1206GI.
Subdivision D – Other provisions for increases and adjustments of indexation
Subdivision D states that the Minister may provide for increases of payment rates and adjustments of subsequent indexation factors by way of legislative instrument.
The need for this section arises as a result of forthcoming amendments to the Social Security Act flowing from the Government’s Secure and Sustainable Pension Reform package. Those forthcoming amendments have not been finalised at the time of introduction of this bill and, therefore, capacity has been built into this bill to address these aspects by way of a legislative instrument.
However, in practice, a legislative instrument may never be made. It is proposed instead that a further bill to be introduced as part of the pension reforms make changes to this current bill to reflect the pension reforms.
More specifically, it is proposed that the pension reforms bill provide for increases (arising from the Carbon Pollution Reduction Scheme) to age pension, bereavement allowance, carer payment, disability support pension, widow B pension, and wife pension through payments created by the provisions of the pension reforms bill. As the precise formulation of these provisions is currently unknown, it has not been possible to draft for this current bill the necessary amendments to account for the increases arising from the Carbon Pollution Reduction Scheme.
Amending the provisions of this current bill (as enacted), to remove the legislative instrument provision and insert suitable provisions to allow for the increases and adjustments to pensions, will allow for the drafting of increases and adjustment provisions that appropriately reflect the changes expected under the pension reforms bill.
It is also anticipated that some new payment types will be created by the pension reforms bill and these payment types will need to be increased to account for the anticipated cost of living increases arising out of the Carbon Pollution Reduction Scheme.
The legislative instrument provisions included in this bill will ensure that the Government’s commitments as set out in the White Paper for the Carbon Pollution Reduction Scheme can be implemented irrespective of the outcome of the pension reform measures that are yet to be introduced into the Parliament.
It is proposed that the increases in assistance to recipients of the pension payments listed in new paragraph 1206GL(1)(a) will be by the same percentages as set out in new section 1206GH and section 1206GI.
New paragraph 1206GL(1)(a) provides that the Minister may make a legislative instrument to provide for increases on 1 July 2011 and 1 July 2012, on account of expected changes in the CPI as a result of the Carbon Pollution Reduction Scheme, to rates of the following payments:
(d) disability support pension;
(e) parenting payment;
(g) wife pension;
(h) payments of kinds specified under new section 1206GM.
New paragraph 1206GL(1)(b) provides that the Minister may make a legislative instrument to provide for adjustment of indexation to the abovementioned payments that would ordinarily apply by virtue of section 1191 and section 1193 of the Social Security Act. The adjustment of indexation would reflect the fact that, if an amount is increased under new paragraph 1206GL(1)(a), a portion of that increase will be a ‘bringing forward’ of the anticipated CPI increases. It is anticipated that the adjustment to indexation would be by the same amounts as set out in new section 1206GJ and new section 1206GK.
New subsection 1206GL(2) provides that the legislative instrument made by the Minister pursuant to subsection 1206GI(1) will have effect in accordance with its terms irrespective of any other provision contained in this bill.
New subsection 1206GL(3) provides that the legislative instrument can specify a method for increasing an amount of payment specified in new paragraph 1206GL(1)(a) by reference either to the amount to be increased, or to another amount affecting the rate at which the same or a different kind of payment is made, or both. This covers the possibility of the increases being paid via a particular portion of a payment rather than the payment as a whole.
New subsection 1206GL(4) states that the legislative instrument may provide for adjustment of an amount that affects the rate of a payment (the affected payment) set out in paragraph 1206GL(1)(a), whether or not that amount, or an amount affecting that payment, was increased as a result of paragraph 1206GL(1)(a), provided that the recipient of the affected payment received a payment that was increased by virtue of the power given under paragraph 1206GL(1)(a).
New subsection 1206GL(5) provides that subsection 1206GL(3) and subsection 1206GL(4) are not intended to limit the scope of the legislative instrument to be made by the Minister pursuant to new subsection 1206GL(1).
Subdivision E – Extending scope of this Division
As stated above in relation to Subdivision D, amendments to the Social Security Act affecting pension payments are expected to be introduced to Parliament after the introduction of this bill. The precise effect of the provisions to be contained in the pension reform bill is yet to be finalised and, accordingly, legislative instrument provisions have been included in this bill to ensure the Government’s commitments as set out in the White Paper for the Carbon Pollution Reduction Scheme can be implemented irrespective of the outcome of the pension reform measures that are yet to be introduced.
Accordingly, this Subdivision includes capacity for the Minister to specify, by legislative instrument, that the provisions relating to increases and adjustment of indexation apply to certain payments.
This provision could be used where additional social security payments are subsequently identified that ought to be increased to account for the Carbon Pollution Reduction Scheme (and subsequent indexation adjusted accordingly) and these could be increased directly by the provisions contained in the new section 1206GH and new section 1206GI rather than by a scheme created by legislative instrument.
New subsection 1206GM(1) provides that the Minister may, by legislative instrument, specify further kinds of payments in the Social Security Act to which Division 8 applies.
A note is inserted at the end of new subsection 1206GM(1) that directs the reader to subsection 13(3) of the Legislative Instruments Act 2003 for the rules relating to specification by class.
New subsection 1206GM(2) provides that the Minister may specify the kinds of payments to which this subdivision applies by either or both of the following:
(a) the persons to whom payments are to be made; or
(b) the circumstances in which payments are to be made.
New subsection 1206GM(3) states that subsection 1206GM(2) is not to limit the operation of subsection 1206GM(1).
New section 1206GN states that the Minister may, by legislative instrument, specify that Subdivision B of the new Division 8 applies to a specified amount that affects the rate at which a kind of payment under this Act is made. That is, the Minister may specify that the increases to payments apply to a particular portion of a payment, rather than the payment in its entirety.
A note is inserted at the end of new subsection 1206GN(1) that directs the reader to subsection 13(3) of the Legislative Instruments Act 2003 for the rules relating to specification by class.
A second note is inserted at the end of new subsection 1206GN(1), after the note mentioned above, that states a specified kind of payment could be a kind of payment specified under the new section 1206GM.
New subsection 1206GN(2) states that, if a Minister does specify a payment, or a portion of a payment under the new subsection 1206GN(1), the Minister must also specify the rounding base that is to apply for that specified payment, or portion of payment, for the purposes of the rounding provisions contained in the new section 1206GH and the new section 1206GI.
New subsection 1206GN(3) states that the Minister may specify an amount by reference to the fact that it affects the rate at which a specified kind of payment under the Social Security Act is made to specified persons or in specified circumstances.
New subsection 1206GN(4) states that an instrument made by the Minister under subsection 1206GN(1) may specify that Subdivision B of new Division 8 applies to an amount so far as it affects the rate at which a specified kind of payment under the Social Security Act is made to specified persons or in specified circumstances.
New subsection 1206GN(5) provides that subsection 1206GN(3) and subsection 1206GN(4) are not intended to limit the ability of the Minister to make a legislative instrument pursuant to new subsection 1206GN(1).
New subsection 1206GN(6) provides that the legislative instrument made by the Minister pursuant to subsection 1206GN(1) will have effect in accordance with its terms irrespective of any other provision contained in this bill.
Part 2 – Transitional payment
Part 2 of this Schedule provides for transitional payments to be made to independent adults in low-income households who do not receive sufficient assistance from the other measures set out in this bill.
Two payments will be made to qualifying individuals. The first payment will be available from 1 July 2012 and will be a flat $200 per claimant. The second payment, available from 1 July 2013, will be a flat $550 per claimant.
The first carbon pollution reduction transitional payment will be payable to qualifying individuals from 1 July 2012 and will be assessed with reference to the claimant’s income for the 2011-12 financial year. The second carbon pollution reduction transitional payment will be payable to qualifying individuals from 1 July 2013 and will be assessed with reference to the claimant’s income in the 2012-13 financial year.
In broad terms, Part 2 of this Schedule introduces new transitional payments to be made to individuals who meet residence and income tests, and who can show that they have not received adequate assistance for the estimated cost of living impacts of the Carbon Pollution Reduction Scheme through increases to payments or tax offsets as set out in this bill.
Division 1 – Amendment of the social security law
Item 3 inserts a definition of carbon pollution reduction transitional payment into subsection 23(1) by reference to the provisions of new Part 2.28.
Item 4 inserts new Part 2.28 into Chapter 2 of the Social Security Act.
New Part 2.28 contains the provisions relevant to the carbon pollution reduction transitional payment.
New section 1061ZAAX sets out the availability of the carbon pollution reduction transitional payment. Subsection 1061ZAAX(1) states that the carbon pollution reduction transitional payment will only be available to qualified individuals for the 2011-12 and 2012-13 income years.
Subsection 1061ZAAX(2) states that a person can only receive one carbon pollution reduction transitional payment in respect of each income year.
New paragraph 1061ZAAY(a) provides that a person is qualified for a carbon pollution reduction transitional payment for an income year if they satisfy the income requirements of the new section 1061ZAAZ, the excluded payment requirements set out in new section 1061ZAAZA and the remaining requirements set out in new section 1061ZAAZB.
Paragraph 1061ZAAY(b) requires a person to lodge a claim for the carbon pollution transitional payment. In addition, the new paragraph 1061ZAAY(c) provides that, at the time of lodging the claim for the payment, the individual must: be an Australian resident or a special category visa holder residing in Australia; be in Australia; and not be in a psychiatric institution or in gaol.
New section 1061ZAAZ sets out the income thresholds that will apply for people claiming the carbon pollution transitional payment. Subsection 1061ZAAZ(1) states that a person will satisfy the income requirement where their adjusted taxable income for the relevant income year is less than:
(a) $30,000 for singles without a dependent child;
(b) $45,000 for couples without a dependent child;
(c) $60,000 for singles with a dependent child;
(d) $60,000 for couples with a dependent child;
New subsection 1061ZAAZ(2) defines adjusted taxable income for the purposes of this section as the sum of:
(a) the person’s adjusted taxable income within the meaning of the Family Assistance Act; and
(b) superannuation benefits received in relation to the income year to the extent that they are non-assessable non-exempt income within the meaning of the Income Tax Assessment Act 1997.
New section 1061ZAAZA sets out the excluded payment requirements that must be satisfied for a claimant to qualify for a carbon pollution transitional payment. By virtue of the new subsection 1061ZAAZA(1), a claimant will satisfy this section if there were at least 13 weeks of the relevant income year when:
(a) the claimant was not entitled to family tax benefit; and
(b) the claimant did not receive any of the payments set out in subsection 1061ZAAZA(2); and
(c) the claimant’s partner, if any, was not entitled to family tax benefit; and
(d) the claimant’s partner, if any, did not receive any of the payments set out in subsection 1061ZAAZA(2).
Subsection 1061ZAAZA(2) provides that a person is qualified for a carbon pollution reduction transitional payment if neither the person nor their partner, if any, received any of the following payments for more than 25 weeks in the relevant income year:
(a) an income support payment;
(c) an allowance under ABSTUDY that included living allowance;
(f) a payment of weekly compensation under Part 2 of Chapter 4, or section 233, of the Military Rehabilitation and Compensation Act;
The new section 1061ZAAZB sets out the remaining requirements that must be met for a person to qualify for the carbon pollution transitional payment. To qualify for a carbon pollution transitional payment, a person must, at all times during the year: have been an Australian resident or a special category visa holder living in Australia; have remained in Australia for at least 39 weeks of year; and not have been subject to a newly arrived resident’s waiting period.
Additionally: the claimant must not have been a dependent child of another person for more than 25 weeks of the year; the claimant must not have been in gaol or a psychiatric institution for more than 25 weeks of the year; and no other person must have been entitled to claim family tax benefit for the claimant for more than 25 weeks of the year.
Finally, a claimant who is not a member of a couple must have received:
(a) in 2011-12, a combined amount of less than $150 in additional tax offsets realised from the low income tax offset and dependency tax offsets; or
(b) in 2012-13, a combined amount of less than $280 in additional tax offsets realised from the low income tax offset and dependency tax offsets.
A claimant who is a member of a couple will be eligible for the carbon pollution transitional payment if they and their partner combined:
(a) in respect of the 2011-12 reference year, realised a combined amount of less than $210 in additional tax offsets from the low income tax offset and dependency tax offsets; or
(b) in respect of the 2012-13 reference year, realised a combined amount of less than $385 in additional tax offsets from the low income tax offset and dependency tax offsets.
For the purposes of the above, additional tax offset in respect of the 2011‑12 reference year means:
(a) in respect of the Low Income Tax Offset, the additional $150 in (maximum) tax offset provided for in this Bill as CPRS assistance;
(b) in respect of the Dependency Tax Offsets, the additional $60 in (maximum) tax offset provided for in this Bill as CPRS assistance.
Further, additional tax offset in respect of the 2012-13 reference year means:
(a) in respect of the Low Income Tax Offset, the additional $280 in (maximum) tax offset provided for in the Bill as CPRS assistance;
(b) in respect of the Dependency Tax Offsets, the additional $105 (maximum) tax offset provided for in this Bill as CPRS assistance.
The new section 1061ZAAZC sets out the amount of the carbon pollution reduction transitional payment. For the 2011-12 income year, the amount of the carbon pollution reduction transitional payment is $200 per claimant, and, in the 2012-13 income year, the amount of the payment is $550 per claimant.
Item 5 inserts a new section 1223ABAAC into Part 5.2 of Chapter 5 of the Social Security Act. This new provision sets out when a carbon pollution reduction transitional payment is a debt to the Commonwealth. In broad terms, a debt would only arise where some or all of the payment was incorrectly paid because a relevant individual knowingly made a false or misleading statement or knowingly provided false or misleading information.
Where an individual is paid a carbon pollution reduction transitional payment because of a determination under Part 3 of the Administration Act and that determination is later changed and the reason, or one of the reasons, for the change was that the relevant individual knowingly made a false or misleading statement or knowingly provided false or misleading information, then the carbon pollution reduction transitional payment paid would be a debt. The relevant rules are in new subsection 1223ABAAC(1).
New subsection 1223ABAAC(2) states that, with the exception of section 1224AA of the Social Security Act, other provisions in relation to the raising of debts do not apply to carbon pollution reduction transitional payments.
Item 6 inserts the words ‘carbon pollution reduction transitional payment’ after the words ‘economic security strategy payment’ at the end of paragraph 1231(1AA)(b). This paragraph states that the Secretary is not to deduct any amount from the carbon pollution reduction transitional payment in repayment of an existing debt to the Commonwealth unless the relevant individual has requested that the Secretary do so.
Item 7 inserts a new section 19 into the Social Security Administration Act to state that, if a person and that person’s partner apply for the carbon pollution reduction transitional payment, the two claims may be made together on the one form as approved by the Secretary for the purposes of this section.
Item 8 inserts a new Subdivision FB into Division 1 of Part 3 of the Social Security Administration Act. New section 27B provides that a claim for the carbon pollution reduction transitional payment must be made within the two years following the relevant income year. That is, for the 2011-12 income year, claimants have until 30 June 2014 to make a claim, and, for the 2012-13 income year, claimants have until 30 June 2015 to make a claim for the payment.
Item 9 inserts a new paragraph (k) at the end of subsection 47(1) to include the carbon pollution reduction transitional payment in the definition of lump sum benefit.
Item 10 inserts a new section 47D into the Social Security Administration Act to provide that the carbon pollution reduction transitional payment must be paid to the individual as a single lump sum in such a manner as the Secretary determines
Item 11 repeals the heading to Subdivision DB of Division 5 of Part 3B and substitutes the heading ‘Subdivision DB – Other payments’.
Item 12 inserts new section 123XPE to deal with the deduction of amounts from a person’s carbon pollution reduction transitional payment if the person is subject to the income management regime.
New subsection 123XPE(1) and new subsection 123XPE(2) provide that, if a person is subject to the income management regime and a carbon pollution reduction transitional payment is payable to that person, then the Secretary must deduct the net amount of the carbon pollution reduction transitional payment and credit the person’s income management account and the Income Management Special Account accordingly. (The terms income management account, net amount and Special Account are defined in section 123TC.) The treatment of carbon pollution reduction transitional payments under new subsections 123XPE(1) and 123XPE(2) is consistent with the existing treatment of other lump sum payments under Part 3B of the Social Security Administration Act.
New subsection 123XPE(3) states that the ‘deductible portion’ of the carbon pollution reduction transitional payment is 100 per cent.
The phrase subject to the income management regime is defined in section 123TC of the Social Security Administration Act. A person can be subject to the income management regime because of the operation of any of the following sections contained in Part 3B of the Social Security Administration Act: section 123UB (the Northern Territory scheme of income management); section 123UC (the child protection scheme of income management); section 123UD or 123UE (school enrolment or attendance requirements); section 123UF (the Cape York Welfare Reform trials); section 123UFA (voluntary income management agreements).
Items 13 to 15 make consequential amendments to the table in section 11‑15 and to section 52-10 of the Income Tax Assessment Act 1997, inserting references to the carbon pollution reduction transitional payments. The effect of these amendments is to make the carbon pollution reduction transitional payments exempt from income tax.
Schedule 2 – Assistance to families
This Schedule provides for an increase in certain family tax benefit (FTB) rates on 1 July 2011 and again on 1 July 2012, in addition to usual indexation on those dates.
On 1 July 2011, the per-child maximum standard rates of FTB Part A for children aged under 16, the per-family standard rates of FTB Part B, and the FTB Part A and Part B supplements are increased by 1 per cent. The per‑child base standard rate of FTB Part A for children aged 0-17 and equivalent maximum standard rate for children aged 16 and 17 are increased by 2.7 per cent. The same increase will apply to the rate of FTB for an approved care organisation. The per-child base standard rate and equivalent maximum standard rate for children aged 18‑24 are increased by 2.5 per cent. These percentage increases (1 per cent, 2.7 per cent and 2.5 per cent) are on top of the usual indexation.
On 1 July 2012, these rates are again increased by a gross percentage of 1.8 per cent, 5.2 per cent and 4.9 per cent respectively. This is top of the usual indexation.
As assistance will be provided in part through a bring forward of FTB indexation increases, subsequent FTB indexation arrangements will be adjusted to avoid duplication of assistance.
These percentage increases include a bring forward of the Scheme’s expected increase in the cost of living as well as an ongoing real increase. The 1 July 2011 increases include a bring forward of the Scheme’s estimated cost of living increase of 0.4 per cent for 2011-12, which is accounted for by reducing the 1 July 2012 gross percentage increases by 0.4 per cent (resulting in net percentage increases on 1 July 2012 of 1.4 per cent, 4.8 per cent or 4.5 per cent as relevant). This avoids duplication of CPI increases. The 1 July 2012 net percentage increases include a bring forward of the Scheme’s estimated cost of living increase of 0.8 per cent for 2012-13, which is accounted for by modifying the indexation arrangements for 1 July 2013 and, if necessary, 1 July of subsequent years, again to avoid duplication of CPI increases.
A table summarising the percentage increases to FTB rates is shown below.
The bill also introduces a new FTB combined supplement. This would be a supplementary payment of up to $240 for 2011-2012 and up to $680 for subsequent income years for certain families who receive FTB Part A and FTB Part B. The payment would be available on reconciliation of FTB after the end of the relevant financial year.
Percentage increases to FTB rates
FTB Part A under 16 maximum standard rates, FTB Part B standard rates, and FTB Part A and Part B supplements
FTB Part A under 18 base standard rate and 16‑17 maximum standard rate, and FTB rate for approved care organisation
FTB Part A 18‑24 base standard and maximum standard rates
Total increase (in Year 1)
Gross increase (in Year 2) *
Gross two year total *
* FTB indexation arrangements for 1 July 2012 and 1 July 2013 and, if necessary, 1 July of subsequent years, will be adjusted to avoid duplication of assistance.
As part of the household assistance package of the Carbon Pollution Reduction Scheme, certain FTB rates are increased on 1 July 2011 and again on 1 July 2012, in addition to the usual indexation on those dates.
On 1 July 2011, the per-child maximum standard rates of FTB Part A for children aged under 16, the per-family standard rates of FTB Part B, and the FTB Part A and Part B supplements are increased by 1 per cent. This is the first category of FTB rates to be increased. The affected rates, in Schedule 1 to the Family Assistance Act, are:
the FTB child rate for an FTB child who is under 13 years of age in item 1 of the table in clause 7;
the FTB child rate for an FTB child who has reached 13 but is under 16 years of age in item 2 of the table in clause 7;
standard rates set out in the table in clause 30;
FTB (B) gross supplement amount in clause 31A; and
FTB gross supplement amount in clause 38A.
The 1 per cent increase has two components. The first component will bring forward the Scheme’s estimated cost of living increase of 0.4 per cent for 2011-12 that would normally flow through at a later time under automatic indexation. The second component provides an ongoing real increase of 0.6 per cent.
The per-child base standard rate of FTB Part A for children aged 0-17 and equivalent maximum standard rate for children aged 16-17 are increased by 2.7 per cent on 1 July 2011. This is the second category of FTB rates to be increased. The affected rates, in Schedule 1 to the Family Assistance Act, are:
· the FTB child rate for an FTB child who has reached 16 but is under 18 years of age in item 3 of the table in clause 7; and
· the FTB child rate for an FTB child who has not turned 18 in paragraph 26(2)(a).
The rate of FTB for an approved care organisation (ACO) will similarly increase by 2.7 per cent.
The 2.7 per cent increase includes a bring forward of the 0.4 per cent expected increase in the cost of living and a further ongoing real increase of 2.3 per cent.
The per-child base standard rate and equivalent maximum standard rate for children aged 18-24 are increased by 2.5 per cent on 1 July 2011. This is the third category of FTB rates to be increased. The affected rates, in Schedule 1 to the Family Assistance Act, are:
· the FTB child rate for an FTB child who has reached 18 but is under 25 years of age in item 4 of the table in clause 7; and
· the FTB child rate for an FTB child who has turned 18 in paragraph 26(2)(b).
The 2.5 per cent increase includes a bring forward of the 0.4 per cent expected increase in the cost of living and a further ongoing real increase of 2.1 per cent.
The indexation arrangements for 1 July 2012 are adjusted to take account of the 0.4 per cent brought forward increase on 1 July 2011 (to avoid duplication of CPI indexation), as well as a second round of rate increases. The effect is that on 1 July 2012, the first category of FTB rates are increased by 1.8 per cent less the 0.4 per cent brought forward increase, resulting in a net increase of 1.4 per cent. Similarly, the second category of FTB rates are increased by 5.2 per cent less 0.4 per cent, resulting in a net increase of 4.8 per cent. The third category of FTB rates are increased by 4.9 per cent less 0.4 per cent, resulting in a net increase of 4.5 per cent.
These second increases include a bring forward of the Scheme’s expected increase in the cost of living of 0.8 per cent for 2012-13, as well as an ongoing real increase. As the 0.8 per cent component of the increase brings forward the expected increase under future automatic CPI indexation, the indexation arrangements for 1 July 2013 and, if necessary, 1 July of subsequent years are modified to avoid duplication of CPI indexation increases.
There is also to be a new ‘supplementary’ payment of up to $240 for 2011‑2012 and up to $680 for subsequent income years (paid on reconciliation) for certain families who receive FTB Part A and FTB Part B, where the primary earner’s adjusted taxable income (ATI) exceeds $60,000. This new payment will be called the FTB combined supplement.
Increase certain FTB rates
Item 6 inserts a new Part 4 into Schedule 4 to the Family Assistance Act. New Part 4 provides for increases in the relevant FTB amounts on 1 July 2011 and 1 July 2012 through adjusting indexation arrangements on those days. The increases include an ongoing real increase and a bring forward of an expected future CPI increase. The brought forward estimated cost of living increase is taken into account in subsequent indexation to avoid duplication of CPI indexation increases.
New clause 10 provides for the increases that occur on 1 July 2011.
New subclause 10(1) increases specified amounts by 1 per cent on 1 July 2011. The specified amounts (using the abbreviations provided for in the table in clause 2 of Schedule 4 to the Family Assistance Act) are:
FTB under 13 child rate (A1);
FTB 13-15 child rate (A1);
FTB gross supplement amount (A);
FTB standard rate (B); and
FTB gross supplement amount (B).
The 1 per cent increase is achieved by increasing what would otherwise be the indexation factor for the relevant amount (under clause 5 of Schedule 4) by 0.01.
New subclause 10(2) increases the following amounts by 2.7 per cent on 1 July 2011. These amounts (using the abbreviations provided for in the table in clause 2 of Schedule 4) are:
· FTB 16-24 child rate (A1), to the extent that it applies to item 3 of the table in clause 7 of Schedule 1 (that is, the FTB child rate for a child who has reached 16 but is under 18 years of age);
· FTB child rate (A2), to the extent that it applies to paragraph 26(2)(a) of Schedule 1 (that is, the base FTB child rate for a child who has not turned 18); and
· FTB ACO rate.
The 2.7 per cent increase is achieved by increasing what would otherwise be the indexation factor for the relevant amount on 1 July 2011 (under clause 5) by 0.027.
New subclause 10(3) increases the following amounts by 2.5 per cent on 1 July 2011. These amounts (using the abbreviations provided for in the table in clause 2 of Schedule 4) are:
FTB 16-24 child rate (A1), to the extent that it applies to item 4 of the table in clause 7 of Schedule 1 (that is, the FTB child rate for a child who has reached 18 but is under 25 years of age); and
FTB child rate (A2), to the extent that it applies to paragraph 26(2)(b) of Schedule 1 (that is, the base FTB child rate for a child who has turned 18).
The 2.5 per cent increase is achieved by increasing what would otherwise be the indexation factor for the relevant amount on 1 July 2011 (under clause 5) by 0.025.
In each instance, the increased indexation factor is then used to work out the indexed amount using the method statement in clause 4 of Schedule 4.
Notes at the end of each new subclause indicate to the reader that the increases provided for by new clause 10 include the Scheme’s estimated cost of living increase of 0.4 per cent for 2011‑2012 which has been brought forward. This brought forward increase is then accounted for in new clause 11 (through an adjustment in the indexation factor for 1 July 2012).
New clause 11 provides for the increases that occur on 1 July 2012.
Under new subclause 11(1), the following amounts are increased by 1.4 per cent on 1 July 2012:
· FTB under 13 child rate (A1);
· FTB 13-15 child rate (A1);
· FTB gross supplement amount (A);
· FTB standard rate (B); and
· FTB gross supplement amount (B).
The 1.4 per cent increase is achieved by increasing what would otherwise be the indexation factor for the specified amount (under clause 5 of Schedule 4) by 0.014.
The 1.4 per cent increase represents an increase of 1.8 per cent less 0.4 per cent (brought forward estimated cost of living increase included in the 1 July 2011 rate increase). The 1.4 per cent net increase includes the Scheme’s estimated cost of living increase of 0.8 per cent for 2012‑2013, which has been brought forward. This brought forward increase is then accounted for in new clause 12 (through an adjustment in the indexation factor for 1 July 2013 and, if necessary, 1 July of subsequent years). A note at the end of new subclause 11(1) explains this.
New subclause 11(2) increases the following rates by 4.8 per cent:
This is achieved by increasing what would otherwise be the indexation factor for the relevant amount on 1 July 2012 (under clause 5) by 0.048.
The 4.8 per cent increase represents an increase of 5.2 per cent less 0.4 per cent (brought forward estimated cost of living increase included in the 1 July 2011 rate increase). The 5.2 per cent increase includes the Scheme’s estimated cost of living increase of 0.8 per cent for 2012‑2013 which has been brought forward. This brought forward increase is then accounted for in new clause 12 (through an adjustment in the indexation factor for 1 July 2013 and, if necessary, 1 July of subsequent years). A note at the end of new subclause 11(2) explains this.
New subclause 11(3) increases the following rates by 4.5 per cent:
· FTB 16-24 child rate (A1), to the extent that it applies to item 4 of the table in clause 7 of Schedule 1 (that is, the FTB child rate for a child who has reached 18 but is under 25 years of age); and
· FTB child rate (A2), to the extent that it applies to paragraph 26(2)(b) of Schedule 1 (that is, the base FTB child rate for a child who has turned 18).
This is achieved by increasing what would otherwise be the indexation factor for the relevant amount on 1 July 2012 (under clause 5) by 0.045.
The 4.5 per cent increase represents an increase of 4.9 per cent less 0.4 per cent (brought forward estimated cost of living increase included in the 1 July 2011 rate increase). The 4.9 per cent increase includes the Scheme’s estimated cost of living increase of 0.8 per cent for 2012‑2013 which has been brought forward. This brought forward increase is then accounted for in new clause 12 (through an adjustment in the indexation factor for 1 July 2013 and, if necessary, 1 July of subsequent years). A note at the end of new subclause 11(3) explains this.
New clause 12 provides for the adjustment of the indexation factor for each of the amounts that are increased under new clause 11 on each indexation day on and after 1 July 2013 as necessary. The indexation factor is to be reduced by the brought forward indexation amount (defined in new subclause 12(2)), but not below 1. The ‘brought forward indexation amount’ means 0.008 (representing the brought forward estimated cost of living increase component of the 1 July 2012 increases) less any adjustments made under new clause 12 for a previous indexation day. An example is included at the end of new clause 12 to show how the subsequent adjustment in the indexation factor will work.
Clause 5 of Schedule 4 sets out the rules for working out the indexation factor for an amount. Item 5 makes a consequential amendment to this provision, making it subject to the rules in new clauses 10 to 12.
FTB combined supplement
This Schedule also introduces a new supplementary payment, the FTB combined supplement. An amount of up to $240 would be available for 2011‑2012, payable on reconciliation. An amount of $680 would be available for subsequent income years, again payable on reconciliation.
The FTB combined supplement would be a new and separate component of FTB. An individual’s annual rate of FTB would therefore be worked out by adding together:
· the individual’s Part A rate (calculated under Part 2, Part 3 or Part 3A of Schedule 1 as relevant);
· the individual’s Part B rate (calculated under Part 4 of Schedule 1); and
· the individual’s FTB combined supplement rate (calculated under new Part 6 of Schedule 1).
The rate calculation process set out in clause 1 of Schedule 1 to the Family Assistance Act is amended by item 1 to reflect this.
Item 2 inserts a new Part 6 at the end of Schedule 1 to the Family Assistance Act. New Part 6 contains the eligibility rules for the new FTB combined supplement (new clause 40) and a method statement outlining the calculation process for the new supplement (new clause 41).
Under new clause 40, an FTB combined supplement is to be added to an individual’s annual rate of FTB if three conditions are met. First, the individual must have a Part A rate greater than nil. Second, the individual’s Part B rate must also be greater than nil. The third condition is that the individual’s ATI exceeds $60,000. A note at the end of new clause 40 refers the reader to clause 3 of Schedule 3, which defines an individual’s ATI where the individual is a member of a couple.
Item 4 makes a related amendment to clause 3 of Schedule 3 by adding a new subclause (3) which defines what is meant by an individual’s ATI for the purposes of new Part 6 of Schedule 1 where the individual is a member of a couple. In the context of new Part 6, an individual’s ATI means the higher of the individual’s ATI and their partner’s ATI.
Where the individual is not a member of a couple, the individual’s ATI is relevant for the purposes of new Part 6.
Item 3 makes a technical amendment to the opening words in subclause 3(1) of Schedule 3 to ensure that the general rule in that provision does not apply in relation to new Part 6 of Schedule 1.
New clause 41 in Part 6 of Schedule 1 sets out a method statement for working out the annual amount of an individual’s FTB combined supplement.
The annual amount of an individual’s FTB combined supplement would depend on the individual’s ATI. For each whole $1 above an ATI of $60,000, the amount of the individual’s FTB combined supplement would be increased in 4 cent increments. In relation to 2011‑2012, a maximum amount of $240 would be payable when ATI is $66,000 or more. In 2012-13 and subsequent income years, a maximum amount of $680 would be payable when ATI is $77,000 or more.
This calculation process is reflected in the method statement in clause 41.
Neither the $60,000 income threshold for the FTB combined supplement nor the maximum amount of FTB combined supplement ($240 or $680, as the case may be) would be subject to indexation.
Amendments are also made to various provisions in the Family Assistance Administration Act to ensure that the new FTB combined supplement, like the existing FTB Part A and Part B supplements, is not included in the FTB rate calculation process until reconciliation of FTB at the end of the relevant income year.
Section 32A of the Family Assistance Administration Act ensures that the FTB Part A and Part B supplements are not included in the rate calculation process for FTB (under Schedule 1 to the Family Assistance Act) until the individual concerned has satisfied the relevant FTB reconciliation conditions for the relevant income year. The FTB reconciliation conditions are then set out in sections 32B to 32R.
Item 8 amends subsection 32A(2) to insert a reference to new clause 40 (eligibility for FTB combined supplement) in a new paragraph (ca). The effect is to disregard the new FTB combined supplement in calculating an individual’s rate of FTB until the individual satisfies the relevant FTB reconciliation conditions for the income year (that is, on reconciliation).
A note changes the heading to section 32A to include reference to the new FTB combined supplement.
Section 105A of the Family Assistance Administration Act broadly requires the Secretary to review a determination which, when made or varied, disregarded the FTB supplements, if the individual subsequently satisfies the FTB reconciliation conditions for each same rate benefit period in the relevant income year. The resulting review under section 105 of the Family Assistance Administration Act must take account of the supplements (but other matters can also be considered in the context of the review). Items 9 and 10 amend section 105A so that these rules also apply in relation to the FTB combined supplement.
A note changes the heading to section 105A to include reference to the new FTB combined supplement.
Schedule 3 – Assistance under the Veterans’ Entitlements Act
Maximum rate service pensions, disability pensions and war widow and widower pensions will be increased by 2.8 percent over two years commencing on 1 July 2011. This includes a 1 per cent increase from 1 July 2011 and a further 1.8 per cent increase on 1 July 2012, including upfront indexation.
In broad terms, Part 1 of this Schedule introduces increases to veterans’ entitlements pensions to assist recipients of those payments with the anticipated increases in the cost of living as a result of the introduction of the Carbon Pollution Reduction Scheme.
Item 1 inserts a new Division 5 – Increases related to Carbon Pollution Reduction Scheme – before section 199 of the Veterans’ Entitlements Act. In broad terms, new Division 5 provides rules for increasing the relevant veterans’ entitlements rates by 2.8 per cent over two years.
Division 5 – Increases related to Carbon Pollution Reduction Scheme
New section 198P(1) sets out that the object of the Division is to increase certain amounts that affect the rate at which payments are made to individuals under the Veterans’ Entitlements Act and that increases are to be provided by way of assistance for expected rises in the cost of living as a result of the implementation of the Carbon Pollution Reduction Scheme. This subsection sets out that the following payments will be increased:
(a) disability pensions
(b) war widow and war widower pensions
(c) service pensions and
(d) payments of kinds specified under new section 198W.
Subsection 198P(2) specifies that the second object of the division is to adjust the future indexation of payments in order to avoid duplicating assistance. Part of the increases proposed in this bill bring forward the expected cost of living increases associated with the Scheme which would otherwise flow through into payment rates via the Consumer Price Index (CPI). To avoid duplication of the increases, which would ordinarily flow to payments 12 to 18 months after the CPI increase occurs, subsequent indexation arrangements are to be adjusted.
Subdivision B – Increases in disability pension
New section 198Q provides that subdivision B applies to each amount, that is later referred to as the base amount, of each item in the Table in subsection 27(1). The table in subsection 27(1) sets out rates in respect of an incapacity from a war‑caused injury or a war‑caused disease.
New section 198R provides for a 1 per cent increase to the base amounts referred to in section 198Q on 1 July 2011. The effect of the section is that on 1 July 2011, each base amount is replaced with an amount that is worked out by first calculating the provisional replacement amount and then applying the rounding rules to that figure.
By virtue of new paragraph 198R(a), the provisional replacement amount is calculated by determing a figure that is 1 per cent greater than the base amount.
New paragraph 198Q(b) specifies the rounding rules for the calculation.
New paragraph 198Q(b) provides that if the provisional replacement amount (that is, the amount that has been increased by 1 per cent) is a multiple of the relevant rounding base, then the provisional replacement amount is the replacement amount. That is, the provisional replacement amount will become the new rate. If the provisional replacement amount is not a multiple of the relevant rounding base, then it is rounded up or down to the nearest multiple of the rounding base and the resultant amount is the replacement amount. If the provisional replacement amount is a multiple of half the rounding base then the provisional replacement amount is rounded up to the nearest multiple of the rounding base.
New section 198S provides for a 1.8 per cent increase to the base amount on 1 July 2012. The effect of the section is that, on 1 July 2012, each base amount is replaced with an amount that is worked out by first calculating the provisional replacement amount and then applying rounding rules to that figure.
By virtue of new paragraph 198S(a), the provisional replacement amount is calculated by determining a figure that is 1.8 per cent greater than the base amount.
New paragraph 198SI(b) specifies the rounding rules for the calculation.
New paragraph 198SI(b) provides that, if the provisional replacement amount (that is, the amount that has been increased by 1.8 per cent) is a multiple of the relevant rounding base, then the provisional replacement amount is the amount. That is the provisional replacement amount will become the new rate. If the provisional replacement amount is not a multiple of the relevant rounding base, then it is rounded up or down to the nearest multiple of the rounding base and the resultant amount is the replacement amount. If the provisional replacement amount is a multiple of half the rounding base, then the provisional replacement amount is rounded up to the nearest multiple of the rounding base.
Subdivision C – Adjustment of indexation of disability pension
New section 198T and new section 198U provide for the adjustment of CPI indexation of the amounts that were subject to the increases provided for under new section 198R and new section 198S.
The 1 per cent increase on 1 July 2011 incorporates a 0.4 per cent component that represents a bring forward of future expected CPI increases. The 1.8 per cent increase on 1 July 2012 incorporates a 0.8 per cent component that represents a bring forward of future expected CPI increases. The 0.4 per cent and the 0.8 per cent figures are the estimated rises in the CPI that will result from the introduction of the Carbon Pollution Reduction Scheme in 2011-12 and 2012-13 respectively.
The new subsection 198T(1) provides for special rules around indexation of some amounts on or after 20 March 2012.
By virtue of subsections 198(5) and 198D(5) of the Veterans’ Entitlements Act, payment rates are indexed in accordance with CPI by the application of an ‘indexation factor’.
New subsection 198T(1) states that, for the indexation factors that apply after 20 March 2012, the indexation factor is to be reduced by the brought forward indexation amount, but that the indexation factor is not to fall below 1.
New subsection 198T(2) creates a definition of brought forward indexation amount for the purposes of this section. The brought forward indexation amount is 0.004 less any reduction made under this section for a previous indexation day.
A note is inserted at the end of the new subsection 198T(2) to state that, once the brought forward indexation amount equals zero, there is no further adjustment of the indexation factor.
An example is also inserted at the end of the new subsection 198T to provide the reader with a clear picture of how the adjustment of the indexation provisions will apply.
The new subsection 198U(1) provides for special rules around indexation of some amounts on or after 20 March 2013.
New subsection 198U(1) states that, for the indexation factors that apply after 20 March 2013, the indexation factor is to be reduced by the brought forward indexation amount, but that the indexation factor is not to fall below 1.
New subsection 198U(2) creates a definition of brought forward indexation amount for the purposes of this section. The brought forward indexation amount is 0.008 less any reduction made under this section for a previous indexation day.
A note is inserted at the end of the new subsection 198U(2) to state that, once the brought forward indexation amount equals zero, there is no further adjustment of the indexation factor.
An example is also inserted at the end of the new subsection 198U(2) to provide the reader with a clear picture of how the adjustment of the indexation provisions will apply.
Subdivision D – Other provision for increases and adjustments of indexation
The rationale for the legislative instrument enabling provisions inserted by this Schedule is the same as described above for the equivalent provisions inserted into the social security law by Schedule 1 to this bill.
It is proposed that the increases to pension payments listed in new paragraph 198V(1)(a) will be by the same percentages as set out in new section 198R and section 198S.
New paragraph 198V(1)(a) provides that the Minister may make a legislative instrument to provide for increases on 1 July 2011 and 1 July 2012, on account of expected changes in the CPI as a result of the Carbon Pollution Reduction Scheme, to rates of the following payments:
(i) disability pensions – this relates to pensions, including war widow and widower pensions, payable under Part II or IV other than pensions payable under sections 27 and 30;
(j) war widow and war widower pensions payable under subsection 30(1); and
(k) service pensions payable under Part III.
New paragraph 198V(1)(b) provides that the Minister may make a legislative instrument to provide for adjustment of indexation to the above mentioned payments that would ordinarily apply under the Veterans’ Entitlements Act. The adjustment of indexation would reflect that if an amount is increased under the new paragraph 198V(1)(a) a portion of that increase will be a ‘bringing forward’ of the anticipated CPI increases. It is anticipated that the adjustment to indexation would be by the same amounts as set out in new section 198T and new section 198U.
New subsection 198V(2) provides that the legislative instrument made by the Minister pursuant to subsection 198V(1) will have effect in accordance with its terms irrespective of any other provision contained in this bill.
New subsection 198V(3) provides that the legislative instrument can specify a method for increasing an amount of payment specified in new paragraph 198V(1)(a) by reference to either the amount to be increased, or to another amount affecting the rate at which the same or a different kind of payment is made, or both. This covers the possibility of the increases being paid via a particular portion of a payment rather than the payment as a whole.
New subsection 198V(4) states that the legislative instrument may provide for adjustment of an amount that affects the rate of a payment (the affected payment) set out in paragraph 198V(1)(a), whether or not that amount, or an amount affecting that payment, was increased as a result of paragraph 198V(1)(a), provided that the recipient of the affected payment received a payment that was increased by virtue of the power given under paragraph 198V(1)(a).
New subsection 198V(5) provides that subsection 198V(3) and subsection 198V(4) are not intended to limit the scope of the legislative instrument to be made by the Minister pursuant to new subsection 198V(1).
New subsection 198W(1) provides that the Minister may, by legislative instrument, specify the kinds of payments in the Veterans’ Entitlements Act to which Division 5 applies.
Again, the rationale for the legislative instrument provision is the same as for the social security amendments described above.
A note is inserted at the end of new subsection 198W(1) that directs the reader to subsection 13(3) of the Legislative Instruments Act 2003 for the rules relating to specification by class.
New subsection 198W(2) provides that the Minister may specify the kinds of payments to which this subdivision applies by either or both of the following:
New subsection 198W(3) states that subsection 1206GM(2) is not to limit the operation of subsection 198W(1).
Division 1 – Amendments whose commencement depends on another Act
Item 2 inserts the heading ‘Division 1 – Saving and transitional provisions’ before section 1987A.
Item 3 inserts the heading ‘Division 2 – Limits on scope of this Act’ before section 197.
Item 4 inserts the heading ‘Division 3 – Indexation and some one-off increases’ before section 198.
Item 5 adds a note at the end of subsection 198(5) advising that on and after 20 March 2013, the factor may be affected by section 198U.
Item 6 adds a note at the end of subsection 198D(5) advising that on and after 20 March 2013, the factor may be affected by section 198U.
Item 7 inserts the heading ‘Division 7 – Provisions about the Commission’ before section 200.
Item 8 inserts the heading ‘Division 8 – International agreements’ before section 203.
Item 9 inserts the heading ‘Division 9 – Overpayments and debts’ before section 205.
Item 10 inserts the heading ‘Division 10 – Offences and evidence’ before section 208.
Item 11 inserts the heading ‘Division 11 – Administration’ before section 212.
Item 12 inserts the heading ‘Division 12 – Regulations’ before section 216.
Division 2 – Amendments whose commencement depends on 2 other Acts
Item 13 inserts the heading, ‘Division 4 – Termination of certain pension’ before section 198N. Section 198N is being inserted by the Veterans’ Affairs Legislation Amendment (Budget Measures) Bill 2009.
Schedule 4 – Assistance under the Military Rehabilitation and Compensation Act
To provide assistance to low and middle-income members and former members of the Australian Defence Force, the maximum rate weekly permanent impairment compensation, weekly compensation for wholly dependant partners and Special Rate Disability Pension will be increased by 2.8 percent over two years commencing on 1 July 2011.
In broad terms, this Schedule introduces increases to Military Rehabilitation and Compensation pensions to assist recipients of certain compensation payments for the expected cost of living increase resulting from the introduction of the Carbon Pollution Reduction Scheme.
The Carbon Pollution Reduction Scheme (CPRS) increases to apply to Special Rate Disability Pension and weekly compensation for wholly dependant partners will occur automatically through increases to special rate pension under section 24 of the Veterans’ Entitlements Act and increases to the rate of war widow and war widower pension under subsection 30(1) of the Veterans’ Entitlements Act respectively.
Item 1 makes a technical amendment to subsection 404(3) by omitting the word ‘The’ and substituting the words ‘Subject to sections 404A and 404C, the’.
Item 2 inserts three new sections at the end of Part 1 of Chapter 11 of the Military Rehabilitation and Compensation Act.
New section 404A provides that, for the indexation year commencing on 1 July 2011 and for the dollar amount mentioned in subsection 74(1), the indexation factor worked out under section 404, for 1 July 2011, is to be increased by 0.01.
A note at the end of new section 404A explains the Carbon Pollution Reduction Scheme’s 1 per cent increase.
New section 404B provides that for the indexation year commencing on 1 July 2012 and for the dollar amount mentioned in subsection 74(1), the indexation factor worked out under section 404, for 1 July 2012, is to be increased by 0.014.
A note at the end of new section 404B explains the Carbon Pollution Reduction Scheme’s 1.4 per cent increase.
New subsection 404C (1) states that, for the dollar amount mentioned in subsection 74(1), the indexation factor, worked out under subsection 404 for each indexation year that commences on or after 1 July 2013 is to be reduced by the brought forward indexation amount, but not below 1.
New subsection 404C(2) specifies that the brought forward indexation amount in relation to an indexation year, means 0.008 less any adjustment made under this section for a previous indexation year.
Schedule 5 – Assistance under the tax law
This Schedule contains amendments to increase various tax offsets.
The low income tax offset will increase to $1,650 for the 2011‑12 income year and to $1,930 for the 2012‑13 income year and later income years. This will increase the taxable income up to which a taxpayer is entitled to an amount of low income tax offset to $71,250 in the 2011‑12 income year and to $78,250 in the 2012‑13 income year and later income years.
The increases in the low income tax offset will increase the income level above which senior Australians eligible for the senior Australians tax offset begin to pay tax. For the 2011‑12 income year, eligible senior Australians will have no tax liability until their income reaches $31,474 for singles and $27,680 for each member of a couple. For the 2012‑13 income year and later income years, eligible senior Australians will have no tax liability until their income reaches $32,948 for singles and $29,547 for each member of a couple.
The increase in the low income tax offset also causes an increase in the Medicare levy low‑income and phase‑in thresholds for taxpayers who are eligible for the senior Australians tax offset. The Medicare levy low‑income threshold for singles will increase to $31,474 and the phase‑in limit to $37,028, for the 2011‑12 income year. For the 2012‑13 income year and later income years, the low income threshold will increase to $32,948 and phase‑in limit will increase to $38,762.
The Medicare levy family low‑income threshold that applies to taxpayers who are eligible for the senior Australians tax offset will increase to $45,000 and the phase‑in limit to $52,942, for the 2011‑12 income year. For the 2012‑13 income year and later income years, the low income threshold will increase to $46,500 and phase‑in limit will increase to $54,706.
For the 2011‑12 income year only, the dependency tax offsets will increase by $60, in addition to the increases that will occur to those offsets due to automatic indexation. For the 2012‑13 income year only, the offsets will increase by $105, in addition to the increase that will occur due to automatic indexation. These increases will apply to the dependent spouse offset, the child‑housekeeper offset, the invalid relative offset, the parent/parent‑in‑law offset and the housekeeper offset only.
On 15 December 2008, the Government released details of its plan to address the long term challenge of climate change in its Carbon Pollution Reduction Scheme: Australia’s Low Pollution Future White Paper. In the White paper, the Government committed to provide a package of cash assistance, tax offsets and other measures to help Australian households maintain their standard of living while moving to a low pollution future.
On 4 May 2009, the Government announced the commencement of the Carbon Pollution Reduction Scheme will be delayed by one year to 1 July 2011, to manage the impacts of the global recession. Further, in the first year of the Scheme the price of permits will be fixed at $10 per tonne of carbon. From 1 July 2012, the Scheme will transition to full market trading of permits.
As a consequence of these changes, variations to the proposed amounts of tax offset and transfer system payments outlined in the White Paper are necessary in order to give effect to the Government’s commitments regarding assistance to low‑ and middle‑income households. Assistance through the tax system will continue to be provided through two mechanisms: increases to the low income tax offset and increases to the dependency tax offsets. However, the increases will now be phased-in over two years – the 2011‑12 income year and 2012‑13 income year.
The low income tax offset provides taxation relief to low income taxpayers under section 159N of the 1936 Tax Act. In 2010‑11, a taxpayer with taxable income of less than $30,000 will be entitled to the maximum amount of $1,500 of low income tax offset. The offset is reduced at the rate of four cents for every dollar that a taxpayer’s taxable income exceeds $30,000. The offset phases out completely by $67,500.
The senior Australians tax offset provides taxation relief to senior Australians of Age Pension age under section 160AAAA of the 1936 Tax Act. When combined with the low income tax offset, the senior Australians tax offset ensures that eligible single taxpayers can have income up to $30,685 in 2010‑11 before their incur an income tax liability. An eligible taxpayer who is a member of a couple can earn up to $26,680 in 2010‑11 without paying income tax.
Medicare levy low‑income thresholds
The Medicare levy (low‑income) threshold for taxpayers eligible for the senior Australians tax offset under section 160AAAA of the 1936 Tax Act ensures that taxpayers in this cohort do not face a Medicare levy liability until they incur an income tax liability. The threshold for eligible single senior Australians is specified in subsection 3(1) of the ML Act.
Senior Australian couples for whom the threshold for single senior Australians is not sufficient to ensure that they incur no Medicare levy liability until they incur an income tax liability (for example, because one partner earns significantly more than the other) are able to access a senior family threshold. The family threshold is specified in subsection 8(7) of the ML Act.
When the taxable income of a taxpayer exceeds the low‑income threshold, the amount of Medicare levy payable by the person phases in at the rate of 10 per cent (subsection 7(2) of the ML Act) until the phase-in threshold is reached – specified in subsection 3(1) of the ML Act. A taxpayer with income above the phase‑in threshold is liable for the full amount of the Medicare levy.
In 2010‑11, the Medicare levy low‑income threshold for a single taxpayer eligible for the senior Australians tax offset will be $30,685 and the phase‑in threshold will be $36,100. The Medicare levy family low‑income threshold for taxpayers eligible for the senior Australians tax offset will be $44,500 and the phase‑in threshold will be $52,353.
Taxation relief is provided to taxpayers who maintain a dependent through various offsets detailed under sections 159J and 159L of the 1936 Tax Act (known collectively as the ‘dependency tax offsets’). To qualify for the offsets, a taxpayer and their dependant must have income below particular thresholds.
A taxpayer cannot claim both the dependent spouse offset and either the housekeeper or child‑housekeeper tax offset in respect of the same year or period of a year. Further, a taxpayer cannot claim both the housekeeper and child‑housekeeper offset in respect of the same period in a year (subsection 159L(3) of the 1936 Tax Act).
In addition, a taxpayer is unable to claim the dependent spouse, housekeeper or child-housekeeper offset for any part of an income year where they or their spouse are eligible for Family Tax Benefit (Part B).
The dependency tax offsets are increased each year by reference to the consumer price index, in accordance with the indexation provisions set out in section 159HA of the 1936 Tax Act.
The dependent spouse offset provides taxation relief to a taxpayer who contributes to the maintenance of a resident spouse (section 159J of the 1936 Tax Act).
The maximum amount of dependent spouse offset for the 2008‑09 income year is $2,159 (subsection 159J(2) of the 1936 Tax Act).
From 1 July 2009, a taxpayer must have adjusted taxable income of less than $150,000 for the income year to be eligible for the offset (subsection 159J(1AB) of the 1936 Tax Act).
The tax offset is reduced by $1 for every $4 by which the dependent spouse’s adjusted taxable income exceeds $282 (subsection 159J(4) of the 1936 Tax Act).
Housekeeper and child-housekeeper offset
The housekeeper offset provides taxation relief to a taxpayer in respect for any person who was wholly engaged in keeping house in Australia for the taxpayer and in caring for particular dependents of the taxpayer (section 159L of the 1936 Tax Act). The child‑housekeeper provides taxation relief to a taxpayer in respect for any child of the taxpayer who was wholly engaged in keeping house for the taxpayer during the income year (section 159J of the 1936 Tax Act).
The maximum amount of housekeeper and child‑housekeeper offset for the 2008‑09 income year is $2,108 (if the taxpayer has a dependent child or student) or $1,759 (in all other cases) (subsection 159L(2) and 159J(2) of the 1936 Tax Act).
From 1 July 2009, the taxpayer and their spouse must have a combined adjusted taxable income of less than $150,000 for the income year to be eligible for the offset (subsection 159L(3B) and 159J(1AC) of the 1936 Tax Act).
The (taxpayer’s) housekeeper (or child-housekeeper) offset is not reduced if the housekeeper (or child-housekeeper) derives income, as long as that income does not prevent the housekeeper (or child-housekeeper) from being wholly engaged in keeping house for the taxpayer.
The invalid relative offset provides taxation relief to a taxpayer who maintains a person aged 16 or more who is a child (including an adopted child, step‑child or ex-nuptial child), brother or sister of the taxpayer and who is in recipient of a Disability Support Pension or a special needs Disability Support Pension (or equivalent rehabilitation allowance) paid under the Social Security Act 1991, or is certified by an appropriate medical officer or medical practitioner as having a continuing inability to work within the meaning of Part 2.3 of the Social Security Act 1991 (section 159J of the 1936 Tax Act).
The maximum amount of invalid relative offset for the 2008‑09 income year is $792 (subsection 159J(2) of the 1936 Tax Act).
From 1 July 2009, the taxpayer and their spouse must have a combined adjusted taxable income of less than $150,000 for the income year to be eligible for the offset (subsection 159J(1AC) of the 1936 Tax Act).
The offset is reduced by $1 for every $4 by which the dependent’s (the invalid relative) adjusted taxable income exceeds $282 (subsection 159J(4) of the 1936 Tax Act).
Parent/parent‑in-law offset
The parent/parent‑in‑law offset provides taxation relief to a taxpayer who maintains either the taxpayer’s or taxpayer’s (legal or de facto) spouse’s parents (but not grandparents) (section 159J of the 1936 Tax Act).
The maximum amount of parent/parent‑in‑law offset for the 2008‑09 income year is $1,583 (subsection 159J(2) of the 1936 Tax Act).
The tax offset is reduced by $1 for every $4 by which the dependent’s (the parent/parent‑in‑law) adjusted taxable income exceeds $282 (subsection 159J(4) of the 1936 Tax Act).
For the 2011‑12 income year, taxpayers will be entitled to an amount of low income tax offset if their taxable income is less than $71,250 [Schedule 5, Part 1, item 3, subsection 159N(1) of the 1936 Tax Act]. The maximum amount of the tax offset will increase from $1,500 to $1,650 per year [Schedule 5, Part 1, item 4, subsection 159N(2) of the 1936 Tax Act].
For the 2012‑13 income year and later income years, taxpayers will be entitled to an amount of low income tax offset if their taxable income is less than $78,250 [Schedule 5, Part 2, item 11, subsection 159N(1) of the 1936 Tax Act]. The maximum amount of the tax offset will increase from $1,650 to $1,930 per year [Schedule 5, Part 2, item 12, subsection 159N(2) of the 1936 Tax Act].
The low income tax offset will continue to phase out at a rate of four cents for each dollar over $30,000.
Changes to Medicare levy thresholds for senior Australians
As a result of the increases in the low income tax offset from $1,500 to $1,930 by the 2012‑13 income year, the income level above which Australians eligible for the senior Australians tax offset begin to pay tax will also increase.
This means that eligible single, senior Australians will have no tax liability until their income reaches $31,474 for the 2011‑12 income year and $32,948 for the 2012‑13 income year and later income years.
To ensure that senior Australians do not pay the Medicare levy until they are liable to pay income tax, the Medicare levy threshold for single seniors will increase from $30,685 to $31,474 for the 2011‑12 income year [Schedule 5, Part 1, item 6, subsection 3(1) (paragraph (a) of the definition of threshold amount, ML Act and to $32,948 for the 2012‑13 income year and later income years [Schedule 5, Part 2, item 14, subsection 3(1) (paragraph (a) of the definition of threshold amount, ML Act].
The phase‑in limit, below which a single taxpayer eligible for the senior Australians tax offset pays less than the full Medicare levy rate, will be raised to $37,028 for the 2011‑12 income year [Schedule 5, Part 1, item 5, subsection 3(1) (paragraph (a) of the definition of phase-in limit , ML Act] and to $38,762 for the 2012‑13 income year and later income years [Schedule 5, Part 2, item 13, subsection 3(1) (paragraph (a) of the definition of phase-in limit, ML Act].
To ensure senior Australian’s in a couple who are eligible for the senior Australians tax offset do not pay the Medicare levy until they are liable to pay income tax, the family threshold will be increased from $44,500 to $45,000 for the 2011‑12 income year [Schedule 5, Part 1, item 7, subsection 8(7) of the ML Act] and to $46,500 for the 2012‑13 income year and later income years. [Schedule 5, Part 2, item 15, subsection 8(7) of the ML Act]
Changes to the dependency tax offsets
For the 2011‑12 income year only, the indexation rule set out in section 159HA will be amended to allow for a $60 uplift in the dependent spouse offset, child‑housekeeper offset, invalid relative offset, parent/parent‑in‑law offset and housekeeper offset, in addition to the increase that will occur to these offsets due to automatic indexation. [Schedule 5, Part 1, item 2, subsection 159HA(1A) of the 1936 Tax Act]
For the 2012‑13 income year only, the indexation rule set out in section 159HA will be amended to allow for a $105 uplift in the dependent spouse offset, child‑housekeeper offset, invalid relative offset, parent/parent‑in‑law offset and housekeeper offset, in addition to the increase that will occur to these offsets due to automatic indexation. [Schedule 5, Part 2, item 10, subsection 159HA(1B) of the 1936 Tax Act]
Notional (dependency) rebates
Usually amendments are required to the following provisions to reflect an increased amount of the dependent spouse tax offset. Assistance provided under the Carbon Pollution Reduction Scheme does not apply to the notional dependency rebates.
The (higher) dependent spouse with child tax offset is notional and has been replaced by Family Tax Benefit (Part B). It is made available for the purposes of calculating, and can only be claimed through, the zone, armed forces and UN forces rebate and for the Medicare levy family income threshold:
· United Nations forces under section 23AB of the 1936 Tax Act;
· zone tax offset under section 79A of the 1936 Tax Act;
· tax offset for defence force members serving overseas under section 79B of the 1936 Tax Act; and
· Medicare levy family income threshold under section 8 of the ML Act.