EXPLANATORY STATEMENT
Family Assistance (Present Value of Unpaid Amount
– Interest Rate) Determination 2017
General outline
The Family Assistance (Present Value of Unpaid Amount – Interest Rate)
Determination 2017 (the Determination) is made under subsection 100(6) of the A New Tax System (Family Assistance) (Administration) Act 1999 (the Administration Act).
The purpose of this determination is to specify an annual rate of interest used in calculating the ‘present value’ of the outstanding balance of a debt for the purposes of determining whether the debtor’s offer of part payment may be accepted in full satisfaction of the debt.
The Determination replaces the Family Assistance (Present Value of Unpaid Amount – Interest Rate) Determination 2000.
Background
Section 100 of the Administration Act allows the Secretary to waive certain debts as part of a settlement process with a debtor. A settlement may occur through a civil action, before the Administrative Appeals Tribunal or by an independent agreement between the Secretary and the debtor.
For example, under subsection 100(4), the Secretary may agree to waive part of a debt where a debtor makes an offer in full settlement of the debt and the amount offered is greater than the ‘present value’ of the outstanding balance of the debt. The concept of ‘present value’ recognises that it may be more cost-effective to accept a smaller sum of money rather than pursue a larger sum of money as a series of instalments over a future period.
Subsection 100(6) provides a formula for calculating the ‘present value’ of the outstanding balance of the debt. Part of this formula requires the Minister to specify an annual rate of interest by written determination.
Accordingly, this Determination sets the annual rate of interest at 10 per cent for the period 1 April 2017 to 28 February 2018, and 5% from 1 March 2018. This rate is a reasonable compromise between the competing objectives of protecting the public revenue and the desirability of setting the interest rate at a level that provides an incentive to repay debts early.
Commencement
The Amendment Determination commences on 1 April 2017, which is when the Family Assistance (Present Value of Unpaid Amount – Interest Rate) Determination 2000 ceased. The instrument commences retrospectively, but this does not adversely affect any individual’s rights. The instrument provides the machinery support necessary to allow the Secretary to waive part of a debt where the present value of a debt may be calculated by application of the relevant formula. Supporting such a waiver provides a beneficial outcome.
Consultation
The Department of Human Services were consulted by electronic communication in the making of this Determination, to ensure a coordinated approach.
Regulation Impact Statement
The Amendment Determination does not require a Regulatory Impact Statement. The Amendment Determination is not regulatory in nature, will not impact on business activity and will have no, or minimal, compliance costs or competition impact.
Explanation of the provisions
Section 1 states the name of the Determination.
Section 2 provides for commencement of the Determination.
Section 3 provides the authority for making the Determination.
Section 4 contains a definition to be used for the interpretation of this Determination.
Section 5 specifies the annual interest rate of 10 per cent for the period 1 April 2017 to 28 February 2018 and 5% from 1 March 2018 for the purposes of the definition of ‘interest’ in subsection 100(6) of the Administration Act.
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the
Human Rights (Parliamentary Scrutiny) Act 2011
Family Assistance (Present Value of Unpaid Amount
– Interest Rate) Determination 2017
The Family Assistance (Present Value of Unpaid Amount – Interest Rate)
Determination 2017 (the Determination) is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview of the legislative instrument
The Determination is made under subsection 100(6) of the A New Tax System (Family Assistance) (Administration) Act 1999 (the Administration Act).
The purpose of this determination is to specify an annual rate of interest used in calculating the ‘present value’ of the outstanding balance of a debt for the purposes of determining whether the debtor’s offer of part payment may be accepted in full satisfaction of the debt.
The Determination replaces the Family Assistance (Present Value of Unpaid Amount – Interest Rate) Determination 2000.
Human rights implications
This legislative instrument does not engage any of the applicable rights or freedoms.
Conclusion
This legislative instrument is compatible with human rights as it does not raise any human rights issues.