Media Release by The Hon Jenny Macklin MP

Simpler and Fairer Family Payments

Improvements will be made to the Baby Bonus and Family Tax Benefit (FTB) under a simpler and fairer family payments system.

The Australian Government is committed to a child-centred approach to family policy and is taking responsible decisions to ensure a responsive and targeted social and income support system.

The Baby Bonus will be better targeted to families most in need with the introduction of a family means test of $150,000 a year from 1 January 2009. The means test will be based on the family’s income in the six months following birth on a pro rata annual basis equivalent to $75,000 over that six month period.

This new means test will ensure that family assistance is directed to those working families who need it most. Around 16,000 high income parents will no longer receive the Baby Bonus each year due to the new means test. Almost 280,000 children will continue to benefit from the payments each year.

For all eligible births after 1 January 2009, the Baby Bonus will be paid in 13 fortnightly instalments of around $385.

The new instalment system means parents will have the cash they need to pay the bills as they come in.

The Baby Bonus will increase to $5000 on 1 July 2008, and will be indexed annually on the first of July each year.

The age restriction on the Baby Bonus for adoptive parents will also be lifted. This fairer system will enable adoptive parents to receive extra support to help with the costs of adopting a child and treats all new parents in the same way.

Better targeting of family assistance will also see FTB Part B targeted to families whose primary income earner earns $150,000 or less a year. This income limit will affect around 40,000 high income families.

Related dependency offsets – Dependent Spouse, Housekeeper, Child Housekeeper, Parent/Parent-in-law and Invalid Relative tax offsets – delivered through the tax system will also be targeted to those on $150,000 or less a year.

The Australian Government is committed to supporting working families. These are generous means testing limits for single income families, and again will ensure that family assistance is better targeted to those most in need.

A number of administrative improvements will be made to simplify the system for families.

From 1 July 2009 FTB will only be delivered through Centrelink and Medicare, removing claims through the Australian Taxation Office to reduce administrative duplication and ensure greater consistency. Currently seven per cent of all FTB claims are made through the Tax Office. The choice of payment by fortnightly instalment or annual lump sum will remain through Centrelink and Medicare.

Families receiving FTB will also see an improvement to the family income estimation model that will more quickly update the level of FTB if there is a change in family income. This will reduce overpayments and resulting debts.

From 1 July 2009 changes will be made to the definitions of income for family assistance purposes to include net financial investment losses and certain salary sacrifice superannuation contributions. This means a more equitable and realistic definition of income on which to determine eligibility for payments.