EXPLANATORY STATEMENT
Issued by the Authority of the Minister for Health and Ageing
Health Insurance Act 1973
Health Insurance (FTB(A) Family) Amendment Determination 2008 (No. 1)
Subsection 8A (1) of the Health Insurance Act 1973 (“the Act”) provides that the Minister for Health and Ageing may, in writing, determine that a registered family is a Family Tax Benefit Part A (FTB(A)) family for the purposes of paragraph (c) of the definition of “FTB(A) family” in subsection 8 (1A) of the Act.
The definition of a “FTB(A) family” is used to assess eligibility for access to the lower threshold of the extended Medicare safety net (EMSN). The Health Insurance (FTB(A) Family) Amendment Determination 2008 (No. 1) (this Determination) amends the Health Insurance (FTB(A) Family) Determination 2004 (the 2004 Determination) to allow a new group of registered families to be considered a “FTB(A) family” for the purposes of the Act, therefore providing these registered families access to the lower threshold of the EMSN.
This Determination ensures that the same EMSN benefits will still apply to some families who would otherwise be affected by changes to the child support scheme.
Background
The EMSN assists families and singles who have high out-of-pocket costs for out-of-hospital Medicare services. Out-of-hospital services include GP and specialist attendances and services provided in private clinics and private emergency departments. Once the relevant annual threshold of the EMSN has been met, Medicare will pay for 80% of any future out-of-pocket costs for out-of-hospital services for the remainder of the calendar year. There are two thresholds for the EMSN: the general extended safety net threshold ($1,058.70 in 2008) for singles, couples and registered families and the lower safety net threshold ($529.30 in 2008) for concession card holders and FTB(A) families.
The current definitions of a FTB(A) family in the Act and the Health Insurance (FTB(A) Family) Determination 2004 requires that at least one member of the family must be eligible to receive a FTB(A) payment greater than nil under the A New Tax System (Family Assistance) Act 1999 (“the Family Assistance Act’).
In 2004, a Ministerial Taskforce was established to review the Child Support Scheme. The Report of the Ministerial Taskforce, ‘In the Best Interests of Children’ was completed in June 2005 and one of the recommendations made was that people who care for their child for less than 35 per cent of the year no longer have access to FTB(A) assistance. This recommendation was accepted by Government and the A New Tax System (Family Assistance) Act 1999 (the Family Assistance Act) was amended accordingly with effect on 1 July 2008 by the Child Support Legislation Amendment (Reform of the Child Support Scheme – New Formula and Other Measures) Act 2006 As a consequence of this amendment, in the absence of this Determination, from 1 July 2008 parents who care for their child less than 35 per cent of the year would no longer be eligible for the lower threshold of the EMSN. However, Recommendation 1.15 of the Report stated: ‘Non-resident parents who have care of a child between 14 per cent and 34 per cent of nights per year should continue to have access to Rent Assistance, the Health Care Card, and the lower threshold of the EMSN if they meet the other eligibility criteria for FTB(A) at the required rate.’ The purpose of this Determination is to ensure that Recommendation 1.15 of this report is implemented in respect of EMSN.
Effect of the Health Insurance (FTB (A) Family) Amendment Determination 2008 (No.1)
This Determination will add to the current definition of a ‘FTB(A) family’ in section 8(1A) of the Act to allow those parents who have care of their child between 14 per cent and less than 35 per cent of nights per year to have access to the lower threshold of the EMSN if they meet the other eligibility criteria for FTB(A) payments (‘notional rate of FTB(A)’).
The time at which this group of FTB(A) families will be eligible for the lower threshold of the EMSN is dependant on the time that they apply to be recognised as a FTB(A) family.
Families that apply at any time within the income year for assessment in respect to the current income year, will be recognised as a FTB(A) family at the time when the CEO of Medicare Australia is notified by Centrelink that the family is eligible for a notional rate of FTB(A) that has a rate greater than nil.
Families that apply for assessment for the previous income year, will be recognised as an FTB(A) family at the start of the safety net year or when the Medicare Australia CEO is notified that the family was eligible for a notional rate of FTB(A) that has a rate greater than nil during that period, whichever time is the later.
The timing of eligibility for the lower threshold of the EMSN for this new group of FTB(A) family and the application of the income testing protocols set out in the Determination mirror the rules that apply to families that receive FTB(A) payments. This ensures equity in the way that the different groups are treated for the purposes of the EMSN.
Families that no longer receive FTB(A) payments, but provide between 14 per cent and less than 35 per cent of the care for their child, can apply to have access to the lower threshold of the EMSN through Centrelink or Family Assistance Offices using the existing FTB(A) application processes. All parents that apply to receive FTB(A) payments will also be assessed for a notional rate of FTB(A) using the one application.
This Determination will not have an impact on business. These changes will be of benefit to certain persons that are no longer eligible for FTB(A) assistance as a result of changes to the Family Assistance Act. Those registered families that have already been recognised as an FTB(A) family between 1 January 2008 and 30 June 2008 (prior to the introduction of the changes to the child support scheme) will retain access to the lower threshold of the EMSN for the remainder of the calendar year.
Details of the amendments to the Determination are set out in the Attachment. A Determination under subsection 8A (1) of the Act is a legislative instrument.
Commencement
This Determination will have retrospective effect from the date that the Determination is registered on the Federal Register of Legislative Instruments (FRLI) to 1 July 2008.
Although the Determination is of retrospective effect, it will not infringe subsection 12(2) of the Legislative Instruments Act 2003 because the determination is beneficial in nature and will not adversely affect the rights of any person or impose liabilities on any person (other than the Commonwealth).
The changes to FTB(A) payments introduced by the Child Support Legislation Amendment (Reform of the Child Support Scheme – New Formula and Other Measures) Act 2006 took effect on 1 July 2008.
The purpose of making this Determination retrospective to 1 July 2008 is to ensure that any families who apply for the ‘notional rate of FTB(A)’ provided for by this Determination for the purpose of EMSN between 1 July 2008 and the date that this Determination is registered on FRLI will not be disadvantaged.
Consultation
The Department of Health and Ageing has held extensive consultations with the Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA) regarding the technical aspects of the Child Support Scheme and the broader reform of Child Support policy.
Centrelink and Medicare Australia have also been consulted regarding the administration and implementation of this change.
The Department of FaHCSIA supports the change and Centrelink and Medicare Australia have made the necessary changes to their systems to support the enactment of the Determination.
ATTACHMENT
DETAILS OF THE Health Insurance (FTB(A) Family) Amendment Determination 2008 (No.1)
1. Name of Determination
Section 1 provides that the title of the Amendment Determination is the Health Insurance (FTB(A) Family) Amendment Determination 2008 (No.1).
2. Commencement
Section 2 provides that the Determination is taken to have commenced on 1 July 2008.
3. Amendment of Health Insurance (FTB(A) Family) Determination 2004
Section 3 provides that Schedule 1 to the Determination amends the Health Insurance (FTB(A) Family) Determination 2004.
Schedule 1 – Amendments
[1] Section 3, after definition of Act
This item inserts in section 3 of the 2004 Determination a definition for ‘adjusted taxable income’ and provides that ‘adjusted taxable income’ has the meaning given by subsection 3(1) of the Family Assistance Act. ‘Family Assistance Act’ is defined in the 2004 Determination to mean the A New Tax System (Family Assistance) Act 1999.
The meaning of ‘adjusted taxable income’ for the purposes of eligibility for family tax benefit assistance is set out in Schedule 3 of the Family Assistance Act. Schedule 3 provides the method for calculating ‘adjusted taxable income’.
[2] Section 3, after definition of instalment amount
This item inserts in section 3 of the 2004 Determination a definition for ‘maintenance income’ and provides that ‘maintenance income’ has the meaning given by subsection 3(1) of the Family Assistance Act.
Subsection 3(1) of the Family Assistance Act provides that ‘maintenance income’ is child maintenance (a payment received for the child’s maintenance from the parent of the FTB child or former partner of the parent of the child, or partner maintenance (a payment received from the parent of the child or former partner of the parent for their own maintenance), or direct child maintenance (a payment received by the FTB child from the parent of the child or the former partner of the parent of the child for the child’s maintenance).
[3] Section 3, after definition of registered family
This item inserts in section 3 of the 2004 Determination a definition for ‘regular care child’ and provides that ‘regular care child’ has the meaning given by subsection 3(1) of the Family Assistance Act. The phrase ‘regular care child’ appears in new sections 9 and 10.
Subsection 3(1) of the Family Assistance Act provides that a ‘regular care child’ is a child who is in the care of an individual between 14 per cent and less than 35 per cent of the year
[4] After section 8
9 Regular care children
New sections 9 and 10 of the Determination provide for those families who are no longer eligible for FTB(A) payments, but who provide between 14 and less than 35 per cent of the care for their child, and meet the other eligibility criteria for FTB(A) payments, to be recognised as a ‘FTB(A) family’ for the purposes of the Act, and so have access to the lower threshold of the EMSN.
The concept of ‘notional rate of family tax benefit’ (‘notional rate of FTB(A)’) is introduced in this Determination to assist in the achievement of the above purpose. New sections 9 and 10 are designed to ‘mirror’ the rules that apply to families that actually receive FTB(A) payments. Section 9 reflects the approach that applies where families choose to receive FTB(A) payments in instalments, or deferred instalments.
Subsection 9(1) defines the family that makes a claim for FTB(A) instalments. Paragraph 9(1)(a) provides that a member of the family must either make a claim for payment of family tax benefit by instalment under paragraph 7(1)(a) of the Family Assistance Administration Act, or, request that a notional rate of family tax benefit be worked out for a day in the safety-net year. Paragraph 9(1)(b) provides that the family must meet the conditions outlined in subsection 9(2).
Subsection 9(2) sets out the conditions that must be met by a family that applied under subsection 9(1). That is, that another member of the family must be a regular care child, and that the family would have been entitled to a FTB(A) payment greater than nil, had the changes to the child support scheme, set out in section 25 of Family Assistance Act, not been in operation. Effectively, an assessment is made in order to work out a ‘notional rate of family tax benefit’.
Subsection 9(3) provides further guidance to assist with working out the notional rate of FTB(A) for the purpose of subsection 9(1).
Paragraph (a) of subsection 9(3) provides that for working out the notional rate of FTB(A) and access to the lower threshold of the EMSN, all parents that provide between 14 per cent and less than 35 per cent of care for a child will be deemed to have a ‘shared care percentage’ of 24 per cent. One of the requirements for FTB(A) eligibility under section 21 of the Family Assistance Act is that the individual’s rate of family tax benefit is greater than nil. This is calculated using an income test. The income cut-out for both actual and notional FTB(A) payments is affected by the percentage of care a parent provides for their child, which is converted into a ‘shared care percentage’. The Family Assistance Act does not include a shared care percentage for parents providing between 14 per cent and less than 35 per cent of care. Applying a fixed shared care rate of 24 per cent will align this assessment with child support care percentages and therefore ensure consistency across assessments for Government benefits. It may also reduce conflict between parents about actual levels of care within this care bracket as eligibility for the lower threshold of the EMSN will not be impacted.
Paragraph (b) of subsection 9(3) assists with the assessment of notional rate of FTB(A) by deeming the ‘regular care child’ to be a ‘FTB child’.
Paragraph (c) of subsection 9(3) provides that the FTB Part A supplement (a lump sum payment paid to FTB(A) recipients subsequent to reconciliation at the end of the income year) is not included in working out the notional rate of FTB(A), consistent with the operation for actual FTB(A) recipients.
Paragraph (d) of subsection 9(3) provides that if the information regarding the individual’s adjusted taxable income is not available then subsection 9(4) applies. Subsection 9(4) provides that the individual may provide an estimate of adjusted taxable income for the purposes of working out the rate of notional FTB(A), if the Centrelink Chief Executive Officer (CEO) considers that estimate to be reasonable.
Paragraph (e) of subsection 9(3) provides that if the amount of maintenance income is not available for working out the amount of notional FTB(A) that the Centrelink CEO may estimate the amount of maintenance income.
Subsection 9(5) specifies that the family is eligible for the lower threshold of the EMSN at the time set out in subsection 9(6) if the family’s notional rate of FTB(A) is greater than nil.
Subsection 9(6) specifies, as required by subsection 8A(2) of the Act, that the time after which a family that satisfies subsection 9(1), is a FTB(A) family is the first time in the safety net year the Centrelink CEO notifies the Medicare Australia CEO that the family has a notional rate of FTB(A) greater than nil.
10 Regular care children – past periods
Section 10 reflects the approach that applies where families choose to receive FTB(A) payments in a lump sum for a past period. For example, as a lump sum for the previous financial year, or as a lump sum through the Australian Taxation Office via a tax return. A family that chooses this method essentially defers their access to the lower threshold of EMSN until the start of the next safety net year – these choices affect the timing of access to the lower threshold of EMSN
Subsection 10(1) defines the family that makes a claim for FTB(A) for a past period. Paragraph 10(1)(a) provides that a member of the family must either make a claim for payment of family tax benefit for a past period under paragraph 7(1)(b) of the Family Assistance Administration Act (being a claim for the past period falling within the last income year before the start of the safety net year), or, request that a notional rate of family tax benefit be worked out for a day in the last income year ending before the start of the safety-net year.
Paragraph 10(1)(b) provides that conditions outlined in subsection 10(2) must apply for at least one day in the last income year ending before the start of the safety net year.
Subsection 10(2) sets out the conditions that must be met by a family that applied under subsection 10 (1). That is, that another member of the family must be a regular care child, and that the family would have been entitled to a FTB(A) payment greater than nil, had the changes to the child support scheme, set out in section 25 of Family Assistance Act not been in operation. Effectively, an assessment is made in order to work out a ‘notional rate of family tax benefit’.
Subsections 10(3), (4) and (5) provide further guidance to assist with working out the notional rate of FTB(A) for the purpose of subsection 10(1). The 24 per cent shared care rate is also applied for past period FTB(A) claimants. Paragraph (c) of subsection 10(3) provides that the FTB Part A supplement is not to be included in working out the notional rate of FTB(A) if the reconciliation conditions under the Family Assistance Act have not been met at the time of the assessment. This is consistent with the operation for actual FTB(A) recipients. Paragraph (d) of subsection 10(3) provides that if the information regarding the individual’s adjusted taxable income is not available then subsection 10(6) applies. Subsection 10(6) provides that the individual may provide an estimate of adjusted taxable income for the purposes of working out the rate of notional FTB(A), if the Centrelink CEO considers that estimate to be reasonable.
Paragraph (e) of subsection 9(3) provides that if the amount of maintenance income is not available for working out the amount of notional FTB(A) that the Centrelink CEO may estimate the amount of maintenance income.
Subsection 10(4) and 10(5) together provide that the FTB Part A supplement is be included in working out the notional rate of FTB(A) if the family meets the reconciliation conditions under the Family Assistance Administration Act. This is the same arrangement that applies to actual FTB(A) recipients.
Subsections 10(7) and 10(8) specify, as required by subsection 8A(2) of the Act, that the time after which a family that satisfies subsection 10(1) is a FTB(A) family is the later of the start of the safety net year, or, when the Centrelink CEO notifies the Medicare Australia CEO that the family has a notional rate of FTB(A) greater than nil.