David Leyonhjelm (NSW, Liberal Democratic Party) Share this | Hansard source

I move:

That this bill be now read a second time.

I seek leave to table the explanatory memorandum relating to the bill and have the second reading speech incorporated in Hansard.

Leave granted.

The speech read as follows—

The Family Tax Benefit (Tighter Income Test) Bill 2014 will, if enacted, reduce payments of Family Tax Benefit Part A payments for days on and after 1 July 2015.

This will reduce government spending by more than $800 million by June 2018, with spending cuts to continue in subsequent years. Such a reduction of government spending improves the Budget position, improves the sustainability of social security, and reduces the long term taxation burden.

The reduction in government spending will include a reduction in departmental costs, reflecting lower processing costs for the Department of Human Services as fewer families would be in receipt of Family Tax Benefit Part A.

The Bill reduces Family Tax Benefit Part A payments for around 15 per cent of recipient families, while preserving payments for families with the least income.

The Bill only changes one number in the law—it sets the 'higher income free area' to zero.

Families with no income and families in receipt of certain income support payments are unaffected by this change. For other families, their Family Tax Benefit Part A will continue to be reduced by 20 per cent of any family income over the (current) $50,151 threshold. However, this reduction will not stop when the base rate is reached. Instead, the reduction will continue until the payment reaches zero.

No family with an income below $50,151 will be affected.

For families with incomes between $50,151 and $66,084, adverse impacts can only arise for those in receipt of substantial child maintenance payments. This is the case because, under current law, the Family Tax Benefit Part A payments for such families can be reduced to the base rate, irrespective of income levels. As such, once incomes exceed $50,151 and the income test commences, it will be possible, under this Bill, for the Family Tax Benefit Part A payment to fall below the base rate. The Parliamentary Budget Office estimate that 5,530 families may fall into this category.

For other families, adverse impacts can only arise for families with incomes in excess of $66,084. The majority of families who will incur an adverse impact will be families with incomes over $90,000.

Tax-welfare-churn is where people pay tax then get some of it back in welfare payments, only after the bureaucracy takes its cut, and only after taxpayers expend considerable effort to apply for the welfare payments on offer. Only through spending cuts such as those proposed in this Bill will tax-welfare-churn fall.

I commend the Bill to the Senate.

I seek leave to continue my remarks later.

Leave granted; debate adjourned.