EXPLANATORY STATEMENT
Issued by the authority of the Minister for Family and Community Services
A New Tax System (Family Assistance) (Administration) Act 1999
Family Assistance Estimate Tolerance (Transition) Determination 2001
Summary
This determination is made under section 102 of the A New Tax System (Family Assistance) (Administration) Act 1999 (the Act). Its purpose is to enable effect to be given to the Government’s decision to allow a $1,000 tolerance for family tax benefit (FTB) and child care benefit (CCB) overpayments because of incorrectly estimated income or shared care in the 2000‑2001 income year. Under the decision, up to $1,000 of an overpayment will be waived to help families make the transition to the new FTB and CCB system, which completed its first year of operation on 30 June 2001.
The Family Assistance Estimate Tolerance (Transition) Act 2001 (the Estimate Tolerance Act) recently amended section 102 of the Act. Section 102 is the family assistance waiver provision that allows debts to be waived if they are included in a class of debts specified by the Minister in a disallowable instrument. The Estimate Tolerance Act provided the enabling capacity for this determination by adapting section 102 to allow for the waiver of parts of debts as well as whole debts and to allow for conditions and/or limitations on the waiver to be specified by the Minister in the determination.
The Estimate Tolerance Act amendments have made it possible for the Government’s tolerance decision to be detailed comprehensively in this determination so that the waiver can be applied to individual families by delegates of the Secretary under section 102.
Explanation of provisions
Class of debts
Section 4 of the determination sets down the class of debts for the purposes of section 102 of the Act.
The $1,000 waiver will apply to the following types of debts, for claims made through Centrelink during 2000‑2001:
- FTB debts, FTB advance debts and CCB debts due to underestimates of adjusted taxable income;
- FTB debts and FTB advance debts due to underestimates of maintenance income;
- FTB debts, FTB advance debts and CCB debts due to underestimates of child income (if an FTB child’s adjusted taxable income exceeds the limit, the child ceases to be an FTB child);
- FTB debts and FTB advance debts due to incorrectly estimated shared care;
- CCB debts due to an incorrect multiple child % (if one child in a family no longer attends a particular kind of care, another child in the family still attending that care should attract a lesser rate).
The debt may have arisen from an incorrect estimate or multiple child % in relation to a person other than the debtor. For example, the debtor’s estimate of adjusted taxable income that gives rise to the debt may have been an estimate of a partner’s adjusted taxable income. Similarly, in the case of an entitlement to FTB or CCB by single payment/in substitution because of the death of another person, it may have been an estimate of the adjusted taxable income of the person who has died.
The debt must have arisen because of an amount paid either during the 2000‑2001 income year or as a result of a claim made during that year (including in relation to conditional eligibility for CCB by fee reduction during that year). That claim rule will include people who did not actually claim, but were taken to have claimed (or to have been conditionally eligible) under the transitional rules on the commencement of the FTB and CCB arrangements. Thus, people who claimed at any time before the end of the 2000‑2001 income year but who were not paid until after the end of that income year will get the benefit of the waiver for those payments that relate to the 2000‑2001 income year. This might apply to people entitled to the ongoing type of payments (ie, FTB by instalment, FTB advance or CCB by fee reduction) or to the lump sum type of payments that may be claimed before the end of the income year to which the entitlement relates (ie, FTB or CCB by single payment/in substitution because of the death of another person or FTB for a past period).
The waiver will apply whether the debt in question arose before the commencement of the Bill or arises after that time. Thus, for example, as debts arise because of underestimates of adjusted taxable income that continue to come to light as a result of people’s tax assessments being finalised, the waiver will continue to apply in relation to payments for the 2000‑2001 income year.
Conditions and limits on waiver
Sections 5 and 6 of the determination lay down the conditions and limits on the Secretary’s power to waive debts, or parts of debts, that are included in the class of debts described in section 4.
The waiver will be subject to the $1,000 ceiling announced by the Government (see discussion on section 6 below). It will also be limited in two other respects. The first is that only that amount of a debt that is attributable to one or more of the elements specified in the dot points above in relation to types of debts for the 2000‑2001 income year is to be waived. Thus, for example, one debt that comprises an element due to underestimated adjusted taxable income and an element due to a completely separate entitlement matter (eg, an FTB child leaving the debtor’s care) will be waived only to the extent of the underestimated adjusted taxable income element.
The second limit on the waiver will be that one debt that includes an element that is wholly or partly due to a person having knowingly made a false statement or false representation will be waived only to the extent of any element of the debt that is not due to the false statement, etc. Thus, the person will still get the benefit of the waiver if there is an element of the debt that is due to, say, underestimated adjusted taxable income, that can be distinguished clearly from the element that is due to the false statement, etc.
The rules for applying the $1,000 ceiling are laid out clearly by section 6. It should be noted that one FTB debt or FTB advance debt may have elements that are attributable to more than one of the elements specified in the dot points above (eg, underestimated adjusted taxable income and shared care). It may also have an element that is attributable to a completely separate entitlement matter. Similarly, one CCB debt may have elements that are attributable to more than one of the elements specified in those dot points (eg, underestimated adjusted taxable income and incorrect multiple child %), and possibly a further element attributable to a separate entitlement matter.
With this in mind, and the fact that the ceiling is applied only to whole debts, or parts of debts, that are attributable to one or more of the elements specified in the dot points and that are not due to a false statement, etc, the principles of the $1,000 ceiling are as set out below.
- One whole FTB debt, FTB advance debt or CCB debt that does not exceed $1,000 will be waived totally.
- $1,000 will be waived of one whole FTB debt, FTB advance debt or CCB debt that does exceed $1,000.
- Any number of separate FTB debts and/or FTB advance debts will be waived to the total extent of $1,000. An FTB debt will be waived before an FTB advance debt if the waiver is being applied to each at the same time.
- Any number of separate CCB debts will be waived to the total extent of $1,000.
- Debts of the same type (the types being FTB debts, FTB advance debts and CCB debts) will be waived in the order in which they arose.
- One debtor may have both a total waiver of one or more FTB debts and/or FTB advance debts of up to $1,000 and a total waiver of one or more CCB debts of up to $1,000.
Repayment of amounts recovered
In a small number of cases, overpayments that will be subject to the $1,000 waiver have already been raised and wholly or partly recovered by Centrelink. Some of these, for example, were shared care overpayments that arose during 2000‑2001, before the Government’s decision was announced. These families will have any outstanding amount of the overpayment waived, up to $1,000. Then, if the amount so waived is less than $1,000, part or all of the recovered amount will be repaid, to give them the full benefit of the tolerance.
As a result of the determination, an estimated $220 million in higher than expected recoveries will be forgone.
The determination commenced on gazettal.