Christian Porter (Pearce, Liberal Party, Minister for Social Services) Share this | Link to this | Hansard source

I move:

That this bill be now read a second time.

The bill introduces the 2015-16 Mid-Year Economic and Fiscal Outlook measure previously announced, being the Commonwealth parental leave payments—consistent treatment for income support assessment.

This measure will amend the social security and veterans' entitlements legislation to ensure Commonwealth parental leave payments under the Paid Parental Leave Act 2010are included in the income test for Commonwealth income support payments.

The bill, in so doing, removes an anomaly in the current arrangements so that government provided parental leave payments will be treated in exactly the same way as employer provided parental leave payments when determining eligibility for income support payments.

Currently, recipients of the government funded parental leave pay (PLP) and dad and partner pay (DAPP) can receive the full rate of an income support payment at the same time as parental leave pay or dad and partner pay.

This situation arose because, when government funded paid parental leave was first introduced, the non-taxable baby bonus was valued at $5,294 such that a family could potentially be better off receiving both the baby bonus and an additional income support payment rather than receiving paid parental leave.

To ensure that the level of financial assistance available to those choosing paid parental leave was worth more than the financial assistance provided to those who chose the baby bonus, paid parental leave was at that point in time excluded from being counted as income for income support payments.

One of the objectives of paid parental leave is to encourage workforce participation, and its value relative to welfare type payments is important.

When the PPL scheme was introduced, the baby bonus existed as an alternative payment for those not eligible for PPL—that is, families with a mother not in the paid workforce—and those who were eligible for PPL but might choose the baby bonus instead.

PPL is taxable and at the time it was introduced was worth $10,260 in total, whereas the baby bonus was untaxable and at the time worth $5,294.

Since PPL is taxable income it can also reduce the amount of family tax benefit part A a family receives and families are precluded from receiving family tax benefit part B during the PPL period.

These interactions with other payments and the tax systems mean that a family may have been better off at the time choosing the baby bonus instead of PPL when they were also eligible for PPL.

In order to make this less likely, the decision at the time was taken that PLP and DAPP would not count as income for income support payments. As the baby bonus has subsequently been abolished and the newborn supplement has been introduced, along with the increase in the PLP rate which is now worth $11,826 over 18 weeks, the original rationale for the exclusion no longer exists.

As previously mentioned, under existing arrangements, payments made under the government funded PPL scheme do not count as income for determining the eligibility and the rate of income support payable to a person.

What this means in practice is that a person can be receiving a government funded parental leave payment of $1,314 per fortnight and at the same time receiving the maximum rate of an income support payment, being $731.20 per fortnight for parenting payment single or $472.60 per fortnight for parenting payment partnered.

If the $1,314 per fortnight was earned income from employment or paid leave from an employer it would reduce the parenting payment single from $731.20 to $280.24 and reduce the parenting payment partnered amount from $472.60 to nil.

It is estimated that approximately 5,000 families will receive a reduced rate of income support payment and 6,000 will no longer be eligible to receive income support during the relevant period—just as families who receive the same amount of PPL from their employer would also not be eligible to receive income support.

The proposed changes will make it fairer for all working mothers, and provide a consistent level of government support. This measure does level the playing field amongst income support recipients by treating all types of income in the same fashion, irrespective of the source of that income.

I commend the bill to the House.

Debate adjourned.