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2002-2003
THE
PARLIAMENT OF THE COMMONWEALTH OF
AUSTRALIA
HOUSE OF
REPRESENTATIVES
FAMILY
ASSISTANCE LEGISLATION AMENDMENT
(EXTENSION
OF TIME LIMITS) BILL
2003
EXPLANATORY
MEMORANDUM
(Circulated
by authority of the Minister for Family
and
Community Services,
Senator the Hon Amanda
Vanstone)
FAMILY ASSISTANCE LEGISLATION
AMENDMENT
(EXTENSION OF TIME LIMITS) BILL
2003
This Bill amends the A New Tax System (Family
Assistance) (Administration) Act 1999 as follows:
- The time limits for making past period (lump sum) claims for family tax benefit (FTB) and child care benefit are extended by 12 months.
- The time frame for payment of top-ups of FTB as a result of income reconciliation will be extended from one to two years after the end of the income year to which the payments relate.
- The time frames relating to the exchange, use and
destruction of tax file number data for income reconciliation purposes is
extended from two to three years, in keeping with the extended time frames for
claiming and top-ups.
The Bill also makes
consequential amendments to the Income Tax Assessment Act 1997 to enable
families who use the services of a recognised tax adviser to make past period
claims from 1 July 2003 to 30 June 2004 to continue to be able to claim the
adviser’s fee as a tax
deduction.
Administered costs of the measures
in this Bill are estimated at:
$45.1m in
2003-2004;
$45.2m in
2004-2005;
$45.4m in 2005-2006;
and
$45.6m in 2006-2007.
FAMILY ASSISTANCE LEGISLATION AMENDMENT
(EXTENSION OF TIME LIMITS) BILL
2003
Clause 1 sets out how the Act is to be cited, that
is, the Family Assistance Legislation Amendment (Extension of Time Limits)
Act 2003.
Clause 2 provides that the
Act commences on the day on which it receives the Royal
Assent.
Clause 3 provides that each Act
that is specified in a Schedule is amended or repealed as set out in that
Schedule and that any other Schedule item has effect according to its
terms.
Schedule 1 – Extension of time
limits relating to family tax benefit and child care
benefit
Part 1 – Amendment of the
A New Tax System (Family Assistance) (Administration) Act
1999
Part 1 contains three measures:
A. Time limits for past period claims for family tax benefit (FTB) and child care benefit (CCB) are extended.
B. The time frame for payment of top-ups of FTB as a result of income reconciliation will be extended from one to two years after the end of the income year to which the payments relate.
C. A consequential change is made to extend the time
frames relating to the exchange, use and destruction of tax file number date for
income reconciliation purposes.
The only way a person can become entitled to be paid
FTB is by making an “effective”
claim.
Subsection 10(2) of the A New Tax
System (Family Assistance) (Administration) Act 1999 (the Family Assistance
Administration Act) provides that a claim for FTB for a past period is not
effective if the claim relates to a particular income year and the claim is made
after the end of the following income
year.
Item 1 amends subsection 10(2) to
allow individuals an additional 12 months in which to make a past period claim.
A past period claim would be ineffective under amended subsection 10(2) if the
claim relates to a particular income year and is made after the end of two
income years after that particular income
year.
Item 6(1) provides that the
amendments made by item 1 will apply to past period claims for FTB for
the 2001-2002 income year and later income years.
A similar time limit applies in relation to past
period claims for CCB by an individual for care provided by an approved child
care service. Subsection 49J(2) of the Family Assistance Administration
Act provides that such a claim is not effective if, among other things, the
claim relates to a particular income year and is made after the end of the
following income year.
Item 3 amends
subsection 49J(2) to allow individuals an additional 12 months in which to make
a past period claim for CCB for care provided by an approved child care service.
A past period claim would be ineffective under the amended subsection 49J(2) if
the claim relates to a particular income year and is made after the end of two
income years after that particular income
year.
Item 6(2) provides that the
amendments made by item 3 will apply to past period claims for CCB for
the 2001-2002 income year and later income years.
B. Extend time limit for payment of top-ups of FTB
Section 28 of the Family Assistance Administration Act
requires the Secretary to vary a determination under section 16 (that a claimant
is entitled to be paid FTB by instalment) or section 17 (that a claimant is
entitled to be paid FTB for a past period) in certain
circumstances.
In broad terms, subsection 28(1)
applies where a person is entitled to be paid FTB by instalment or for a past
period in respect of a particular income year and the person (and the
person’s partner if applicable) have not lodged their tax returns by the
end of the following income year. Where this happens, the Secretary is required
to vary the instalment or past period determination so that it has the effect
that the person was not entitled to FTB for that particular income year. The
variation occurs under subsection 28(2).
By way
of example, if a person was paid FTB by instalment in respect of the 2001-2002
income year and has not lodged the relevant tax returns by 30 June 2003,
then the person ceases to be entitled to FTB for
2001-2002.
Subsection 28(3) currently requires
the Secretary to undo the determination of “no entitlement” where
the relevant tax returns are subsequently lodged and an assessment of taxable
income is made by the Commissioner of Taxation. However, the effect of the
undoing is that the person is entitled to the lesser of the amount of FTB
actually received and the amount to which the person is entitled after income
reconciliation. There is no capacity in the current subsection 28(3) to pay a
top-up of FTB.
Item 2 recasts subsection
28(3) so as to enable top-ups of FTB to be paid where the relevant tax returns
are not lodged on time (in accordance with the requirements of subsection 28(1))
but are lodged within the following 12 months period. Where this happens,
the person is entitled to their full entitlement of FTB. This extended time
frame and the capacity to pay top-ups is provided for in new paragraph
28(3)(c).
If the relevant tax returns are not
lodged within the extended time frame, then new paragraph 28(3)(d) would apply
with the effect that the person is entitled to the lesser of the amount of FTB
actually received and the amount to which the person is entitled after income
reconciliation. This is the current rule in subsection
28(3).
New subsection 28(3) would work in the
following manner. A person is paid FTB by instalment in 2001-2002. The person
does not lodge their tax return by 30 June 2003. Subsections 28(1) and (2)
would apply with the effect that the person ceases to be entitled to FTB for the
2001-2002 income year.
If the person
subsequently lodges their tax return by 30 June 2004, the Commissioner of
Taxation makes an assessment of the person’s taxable income and the
Secretary decides that the person is entitled to FTB for the 2001-2002 income
year, then the “no entitlement” determination would be again varied
with the effect that the person is entitled to the full amount of their FTB
entitlement. If the person over-estimated their income for the 2001-2002 income
year, then the person would be entitled to a
top-up.
If the person lodges their tax return
after 30 June 2004, the equivalent of the current rules would apply and the
person would not be entitled to a
top-up.
Item 6(2) provides that the
amendment made by item 2 applies to a variation under section 28 that
relates to the 2001-2002 income year and later income years. In effect, this
means that a top-up will be available in respect of the 2001-2002 income year
for customers who lodge the relevant tax returns by 30 June
2004.
In broad terms, section 154A of the Family Assistance
Administration Act provides authority for the exchange of tax file number (TFN)
data between the Secretary and the Commissioner of Taxation for the purpose of
income reconciliation. At the end of each income year, families paid on an
estimate of their adjusted taxable income and required to lodge income tax
returns have their actual income, as assessed by the Commissioner of Taxation,
reconciled with the income they estimated. The purpose of reconciliation is to
ensure that correct family assistance entitlements have been paid for a
particular income year. As the Australian Taxation Office (ATO) uses TFNs as
the unique identifier for its customers, using TFNs is the most reliable and
timely means by which to reconcile the ATO's income details with family
assistance payment details.
Under these
disclosure rules in section 154A, the Secretary may provide the Commissioner of
Taxation with a TFN for the purpose of being informed of an individual’s
taxable income. In return, subsection 154A(3) provides that the Commissioner of
Taxation may provide the Secretary with particulars of the individual’s
taxable income, together with the individual’s TFN, if the Commissioner
determines the taxable income before the end of two years after the end of the
relevant income year.
Importantly, subsection
154A(4) requires the Commissioner to destroy the Commissioner’s TFN record
in respect of a particular income year two years after the end of that income
year.
Because the time frames for past period
claims and payment of top-ups are being extended by 12 months, items 4 and 5
also extend the time frames set in subsections 154A(3) and (4) by 12
months.
Item 4 amends subsection 154A(3)
to enable the Commissioner of Taxation to provide the Secretary with an
individual’s income details and TFN if the Commissioner determines taxable
income before the end of three (instead of two) years after the end of the
relevant income year.
It follows that TFN data
held by the Commissioner should then be destroyed three (instead of two) years
after the end of the relevant income year. Item 5 provides for this to
happen.
Item 6(4) provides that the
amendment made by item 4 applies to a determination of taxable income by
the Commissioner of Taxation made on or after 1 July 2003. This enables the
Commissioner to provide the Secretary with income details and TFNs relating to
the 2001-2002 income year up to
30 June 2005.
Item 6(5)
provides that the amendment made by item 5 applies to TFNs provided
in respect of the 2001-2002 income year and later years. In effect this means
that a TFN provided under section 154A of the Family Assistance Administration
Act in respect of the 2001-2002 income year will need to be destroyed by the
Commissioner of Taxation by 30 June 2005.
Part 2 – Amendment of the Income
Tax Assessment Act 1997
Part 2 amends the Income Tax Assessment Act
1997 (the Tax Act) to enable families who use the services of a recognised
tax adviser to make FTB past period claims for the 2001-2002 income year made
from 1 July 2003 to 30 June 2004, to continue to be able to claim the
adviser’s fee as a tax deduction.
Currently, FTB past period claims for the
2001-2002 income year made after 30 June 2003 are ineffective and therefore
automatically rejected by the ATO
systems.
Because the extended time frames for
top-ups and past period claims will be effective for the 2001-2002 income year,
a transitional administrative arrangement will be introduced for families who
claimed, or intend to claim, their 2001-2002 FTB entitlement as a lump sum
through the tax system after 30 June 2003. As changes to the ATO systems
cannot be made retrospectively, these families will be advised to make their
claim directly through Centrelink.
Under
section 25-7 of the Tax Act, if a recognised tax adviser provides advice in
relation to a claim for FTB and the claim is lodged with an officer of the ATO,
the fee for that advice is deductible. However, advice provided in relation to
an FTB claim lodged with Centrelink does not currently attract a
deduction.
Items 7 and 8 ensure that
families who use the services of a recognised tax adviser to make lump-sum
claims for the 2001-2002 income year made from 1 July 2003 to 30 June 2004,
continue to be able to claim the adviser’s fee as a tax
deduction.
Item 7 amends paragraph
25-7(b) to remove the condition for the claim to be lodged with an officer of
the ATO with respect to lump sum claims that relate to the 2001-2002 income
year.
Item 8 adds a new paragraph to
address the treatment of tax advisers’ fees for lump sum claims that
relate to the 2001-2002 income year.
New
subparagraph 25-7(c)(i) ensures that claims made on or before
30 June 2003 are lodged with an officer of the ATO for the
adviser’s fee to be tax deductible.
New
subparagraph 25-7(c)(ii) allows the adviser’s fee to be tax deductible for
claims lodged between 1 July 2003 and 30 June 2004 with an officer of
Centrelink.
Item 9 provides that the
amendments made to the Tax Act by this Part will apply to past period (lump sum)
claims for FTB for the 2001-2002 income year made during the 2003-2004 income
year.