Recent changes to Paid Parental Leave, Family Tax Benefit and other entitlements

The recent passage of the Social Services and Other Legislation Amendment Bill has given rise to changes across a range of entitlements. Due to the delayed passage of the bill however, several amendments will take effect from a later date than initially proposed. We run through the various changes below and what they mean for you.

Paid Parental Leave

The Paid Parental Leave has generated much debate in the business community.  This is perhaps why the government has decided to ease the administrative burden on businesses by removing the requirement for employers to provide government-funded parental leave pay to their eligible long-term employees.

From July 1, 2014 (initially March 1, 2014), the Department of Human Services will directly pay employees their parental leave, unless you as an employer opt in to provide parental leave pay to employees and an employee agrees for their employer to pay them.

Pension Bonus Scheme

From July 1, 2014 (initially March 1, 2014), registrations will close for the soon-to-be phased out Pension Bonus Scheme.

The tax-free lump sum incentive was introduced in 1998 for eligible older Australians who deferred claiming their Age Pension and instead remained in the workforce. People who are already registered for the scheme will not be affected by the change.  Those who are eligible however have been urged to lodge their applications for the scheme before the closure date.

The Pension Bonus Scheme will be replaced by a Work Bonus for age pensioners.

There are a few subtle differences between the Pension Bonus Scheme and the new Work Bonus. Under the scheme, an individual could accrue their 960 hours of paid work a year by being self-employed whereas income earned as a self-employed person, sole trader or from a partnership does not qualify for the Work Bonus. Additionally, the maximum accrual period for the scheme is five years whereas the Work Bonus can continue for as long as an individual continues to work after reaching Age Pension age. Ultimately, both schemes have their advantages and whether an individual or couple is better off using the Work Bonus depends entirely on their circumstances.

Family Tax Benefit Part A

From May 1, 2014 (initially January 1, 2014), young people aged 16 to 17 years who have completed their Year 12 or an equivalent qualification will no longer qualify for Family Tax Benefit Part A.

Payments will cease at the end of the calendar year when the child completes schooling. Individuals who no longer qualify may instead be eligible for the Youth Allowance.

Exemptions will continue to apply for children who cannot work or study due to physical, psychiatric, intellectual or learning disability.

End of indexation for certain entitlements

From the time the bill becomes law, indexation pauses will be implemented for certain higher income limits until June 30, 2017. This means:

  • income limit, the parental leave pay as well as the dad and partner pay adjusted taxable income limits of $150,000 or less in a financial year, and the higher income free area for Family Tax Benefit Part A, will stay the same
  • the annual end-of-year family tax benefit supplements will remain at current levels
  • the annual child care rebate limit will be maintained at $7,500 for three years. As a result, an individual will be able to receive up to the maximum amount of $7,500 per child per financial year for out-of-pocket childcare costs for those three years.

Age pension – increase in period of Australian residency

From July 1, 2014 (initially January 1, 2014), age pensioners will be required to have been Australian residents for 35 years during their working life – from age 16 to age pension age – to receive their full means-tested pension after a 26 weeks absence from Australia. This is a change from the current requirement of 25 years.

It is important to note that pensioners who are living overseas immediately before July 1, 2014 will continue to be paid under the current 25-year rule, unless they return to Australia for longer than 26 weeks and leave again, in which the new rules will start to apply to their pension calculation.

Pensioners will also be paid for pensions calculated based on their own Australian working life residence, rather than their partner’s. Again, pensioners who are living overseas before July 1, 2014 are exempt from this change unless they are eligible for a higher pension rate under the new rules.

Changes to the rules for receiving payment overseas

From July 1, 2014, the length of time families can be temporarily overseas and continue to receive family and parental payments will reduce from three years to 56 weeks (slightly over a year). Eligibility for payments will remain for up to three years where individuals of the Australian Defence Force or Australian Federal Police are deployed overseas.

Special interest charge for certain study allowances

From July 1, 2014 (initially January 1, 2014), a special interest charge will apply to certain debts related to Austudy payments, fares allowance to help cover the costs of travelling between your permanent home and your place of study, youth allowance payments to full-time students and apprentices, and ABSTUDY living allowance payments. The interest charge will only be applied where the debtor does not have or is not honouring an acceptable repayment arrangement.

Consult this office to find out more about any of these changes and how you may be affected.