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.

In conjunction with the Family Assistance Legislation Amendment (Jobs for Families Child Care Package) Bill 2016, the Social Services Legislation Amendment (Family Payments Structural Reform and Participation Measures) Bill 2016, introduces a package of reforms that will help Australia support families while encouraging parents' participation in the workforce.

The jobs for families childcare packages funded by this bill introduce major reforms that will provide greater choice for almost one million families by delivering a simpler, more affordable, more flexible and more accessible child care system.

The government tasked, previously, the Productivity Commission to undertake an inquiry into child care and early childhood learning. The inquiry was the largest review of child care since the 1990s and the commission did an excellent job drawing together a wide range of inputs from families, from service providers, from early childhood education professionals, from businesses and from other experts to identify the challenges and potential ways forward.

The commission found what many parents already know to be true, that being that the current childcare system in operation today is unnecessarily complex, inflationary and fails to target support where it can have the most substantial impact on supporting parents to be in jobs, especially mothers.

The government is fully commitment to the jobs for families package, however more than $3 billion in additional funding must be paid for, and the measures in this bill are the government's way of making provision for that payment. The refusal of members opposite to support the passage of the measures in this bill, if that were to pass, in the previous parliament left the government with no choice but to defer the implementation of the main measures of the jobs for families package from July 2017 to July 2018. However, if the savings needed to fund the child care package are passed by parliament–that is, the savings contained in this bill–then the government will implement the jobs for families package as soon as possible.

The government's new childcare package and reforms to the family payments system supports parents as they balance work and family responsibilities, while protecting those most vulnerable, and continuing to ensure a high-quality learning experience in our childcare centres.

While the family payments structural reforms in this bill will pay for the Jobs for Families Child Care Package, they will also simplify the family tax benefit system and provide more money on a fortnightly basis to those families who need it the most.

The government, under the terms of this bill, would be increasing the fortnightly payment rates of family tax benefit part A by $10.08 for each child in a family aged up to 19. This is worth an extra $6,000 over the lifetime of a child. What this means is that around 1.2 million lower income families (including income support families) who receive family tax benefit part A for around 2.2 million children–will now receive higher fortnightly payments from 1 July 2018. The increase in their fortnightly payments will help families better manage their day-to-day and week-to-week budgets by providing them with timely, regularised assistance when they need it the most.

We will also provide an additional $7.48 per fortnight for under 18 year old youth allowance recipients who are living at home, bringing the payments to the same standard rate as a family tax benefit part Achild aged between 13 and 19.

Aligning these two rates of payment, is in itself a much needed part of the reform process to simplify payments where possible. These reforms will avoid confusion for families, and make sure there are no perverse incentives for them to change payments. Just as workforce participation is the key to growing wealth, educational attainment is the key to getting a job. The government understands this and increasing the fortnightly rates of these payments will encourage children to stay in school. This is fundamental to giving children the best start in life so that they become productive, contributing members of the Australian society.

Importantly this alignment reform will also flow on to people who are on a disability support under the age of 18, special benefit and Abstudy. These changes will cost around $1.2 billion over the forward estimates.

These changes are also based squarely on the McClure reform recommendations; they simplify the system, they make it easier for parents and their older children to navigate the system in order to get the assistance appropriate to their circumstances.

This bill will also provide for the phase-out of both the family tax benefit part A end-of-year supplement and the family tax benefit part Bend-of-year supplement.

The part Asupplement, paid at the end of the entitlement year, would reduce to $602.25 a year in 2016-17, and then reduce to $302.95 a year from 2017-18. The part B supplement would reduce to $302.95 a year in 2016-17 and to $153.30 a year in 2017-18. At which point, both supplements would then be withdrawn from 1 July 2018.

The family tax benefit supplements were announced in 2004 (when there was a budget surplus of over $13 billion) in response to high levels of reconciliation debt experienced by the family tax benefit population. This debt was often due to families not being able to accurately predict changes in income or changes in circumstances such as a return to work. The phasing out of the family tax benefit supplements recognises that the government's investment in service delivery reform such as the Single Touch Payroll system, which will provide real-time verification of families' income, will improve the accuracy of income reporting and significantly reduce the need for supplements to off-set potential debts.

Even without the improvements in service delivery like single touch payroll, the family tax benefit supplements were designed to reduce debts that 75 per cent of families just do not accumulate. It is also important to note just how poorly targeted the supplements are. It is common for families on income support and low incomes to receive the exact same amount in supplements as families on much higher incomes.

Phasing out of end-of-year supplements will save $6.3 billion over the forward estimates. This is a sensible reform. It is reform which aligns payments with their intended purpose, it improves targeting and it saves the government money on family tax benefits. It is absolutely necessary in order to fund the jobs for familiespackage, which fundamentally will reform the childcare system.

While we understand families will not necessarily be enthusiastic about losing supplements, replacing a poorly targeted end-of-year payment with increased fortnightly payments and a simpler, fairer and more accessible childcare system will, in the long run, provide increased support for Australian families to meet day-to-day living expenses and will increase workforce participation.

Crucially, the changes are consistent again with the reform recommendations of the McClure review to reduce the number of supplements in the system. McClure emphasised that there are far too many payments and supplements. There are some 20 main payment types, and prior to the coalition coming to government there were 55 different additional supplements and bonuses on top of those 20 main payment types. The government has now reduced unnecessary supplements through the removal of the seniors supplement and the low-income supplement. This measure will further reduce the amount of supplements in the system (as will the associated reform measures in child care).

The bill will introduce a new rate structure for family tax benefit part B, and make other amendments to the rules for part B, from 1 July 2017. Firstly, the standard rate—this is for the family tax benefit part B—will increase by $1,000.10 per year for families with a youngest child aged under one. The new maximum standard rate of family tax benefit B for a family with a youngest child aged under one will increase from $4,055 to $5,055 per annum—a fortnightly increase of around $38. This recognises that families with newborn children have a higher need to stay at home to care for and bond with their child.

The bill retains the current maximum standard rates for just under one million families who have a youngest child aged between one and 13. Families with a youngest child aged between one and five will continue to be eligible for a maximum standard rate of $4,055. During the early childhood years, parents often need to stay at home, or balance work and caring responsibilities.

The maximum standard rate of family tax benefit part B will continue to be reduced to $2,832 when a youngest child turns five and enters compulsory education and primary carers have a greater capacity to move into the workforce or increase their workforce participation.

A new family tax benefit part B rate of up to $1,000.10 per year will then be made available for single parents under the age of 60 with a youngest child aged between 13 and 16. Eligibility for single parent families under the age of 60 will cease from the start of the calendar year their youngest child turns 17.

Single parents aged at least 60 years of age and grandparents and great-grandparents will continue to access family tax benefit B at the current rate until the end of the calendar year their youngest child turns 18.

The government recognises that grandparent carers and single parents who are 60 and over take on a large responsibility when caring for children but also are somewhat less likely to be working and are more likely to be retired. That is why they are exempt from these reforms. The government also acknowledges the unique role that these individuals play in society in raising children in circumstances that none of us would necessarily count as ideal.

For families with older children, family tax benefit part B will be better targeted by encouraging parents with reduced care requirements to move into the workforce or increase their workforce participation.

These reforms are a critical part of efforts to enhance the long-term sustainability of the social security system. This is a government which places fairness and equity at the centre of our social security system. That is why we are taking proactive steps to ensure that the system is sustainable and affordable now and for future generations.

As a share of GDP, government spending on family assistance in Australia has tripled from 0.9 per cent in 1980 to 2.7 per cent in 2012 and higher than the average for OECD countries.

The number of families who receive a family tax benefit has declined over time, down from 1.72 million in 2010-11 to 1.62 million in 2014-15. Yet despite this decline in the number of recipients, the cost continues to rise with expenditure increasing by almost $2 billion over the last five financial years for which full data is available, up from $18 billion in 2010-11 to $19.8 billion in 2014-15.

This year we will spend in excess of $20 billion on family tax benefit part A and B. This represents the second biggest item of expenditure in the social services portfolio and the fourth largest in the Commonwealth budget. Crucially, the 2015 Intergenerational report identified that the number of people of traditional working age—that is, 16 to 64 years old—for every person aged 65 and over has fallen from 7.3 people in 1974-75 to an estimated 4.5 people today. By 2054-55, this is projected to nearly halve again to only 2.7 people. This means that while expenditure has grown over time, the number of taxpayers funding the family tax benefit system has declined and is predicted to continue to decline well into the future.

This bill, in tandem with the Jobs for Families Child Care Package, will improve the sustainability of the family payments system, ensuring we can achieve three important goals:

1. continue to assist families in raising their children over the long term;

2. enable and encourage greater workforce participation; and

3. continue a deservedly needed process of simplifying our social security system.

These measures are sensible, they are practical and they are aimed at ensuring the sustainability of our system, and, ultimately, they guarantee that payments are targeted to those most in need.

The government considers that together the family payments reform and the Jobs for Families Child Care Package represent reasonable and necessary changes that will improve incentives for families to participate in employment, while delivering appropriate support when needed, both now and into the future.

The family payment reform and Jobs for Families Childcare Package have been longstanding government policy. Both pieces of legislation have already been examined by their respective Senate committees. Earlier this year, the Senate Education and Employment Legislation Committee investigated key components of the Jobs for Families Child Care Package and the community affairs legislation committee investigated the family payment reforms outlined in the Social Services Legislation Amendment (Family Payments Structural Reform and Participation Measures) Bill 2016.

The family payments reform and Jobs for Families Child Care Package were presented to, and supported by, the Australian people at the last election and I would encourage the parliament to support these proposals in the best interests of Australian families and the long-term sustainability of our welfare system. I commend the bill to the House.

Debate adjourned.