Media Release by Senator the Hon Kay Patterson

Families receive record assistance and get to keep more of each dollar they earn

More families are receiving maximum levels of assistance and families are able to keep more of each dollar they earn, the Minister for Family and Community Services, Senator Kay Patterson, said today.

Under the previous Labor government people faced very high effective marginal tax rates. They got to keep only about 14 cents of an extra dollar earned. Under the Howard Government they get to keep about 39 cents – nearly three times the amount – of an extra dollar earned.

Senator Patterson rejected claims by the Labor Party that Australian families were not being rewarded for work because their means-tested family payments were withdrawn when their income rose.

The Howard Government has reduced Labor’s high effective marginal tax rates for households receiving family payments. Under Labor, many families lost 85.5 cents in the dollar. Under this Government, the effective marginal tax rate has been reduced by 28% to 61.5 cents in the dollar.

As an example, a family with a combined income of $52,000 and three children (aged 13,15 and 17), would face an approximate effective marginal tax rate of 60% (not an effective marginal tax rate of 78% as suggested in the article in a national newspaper today).

This effective marginal tax rate would fall to 31.5% when the family income reaches $53,216.

Senator Patterson said: “It is incorrect to claim that Australian families face higher taxes than others. Australian families who receive income support or the Family Tax Benefit (FTB) pay the same taxes as others.

“However, they have higher effective marginal tax rates because they are replacing welfare dollars with dollars they earn themselves.

“This is fair and reasonable because our generous means-tested welfare system targets assistance to those who need it and only those who benefit from this assistance face higher effective marginal tax rates as their private income rises.

“Under this Government we have made the income-testing arrangements for family payments more generous with more families receiving maximum levels of assistance and families able to keep more of each dollar they earn.

“Not only have we delivered record assistance for families, this Government has provided opportunities for families to work and earn more through good economic management.

“We have achieved the lowest unemployment rate in 22 years, created 1.3 million new jobs and seen real incomes boosted by 10% since we were elected. This is a long way from the days of Labor when unemployment reached crisis levels. ‘In the recession we had to have’ there were nearly one million Australians unemployed.”

Under the Howard Government:

  • More money has been provided to working families. For example, a two-parent family on average weekly earnings with three children now receives almost four times the amount of assistance than under the previous Labor government.
  • Top-up payments are given to 530,000 families who overestimated their incomes under the Family Tax Benefit rules. Families get an average top up of $885. Under Labor, top-up payments were not available.
  • Families receive around $6000 a year on average in Family Tax Benefits and Government spending on family assistance has increased by about $2 billion a year since the introduction of the new tax system.

Senator Patterson said Opposition family and community services spokesman Wayne is wrong to claim that families have been denied family payments because Budget estimates differed from the actual expenditure on the program.

“No family eligible for the Family Tax Benefit have been denied payments because of changes in Budget estimates of the cost of the program,” she said.

“No one has lost their entitlement to FTB simply because of a change in the Budget estimate.

“There has been no clawback of entitlement from families as has been claimed by the Labor Party.

“Families get their entitlement based on their family income and the age and number of their children.

“The FTB program is uncapped and its payment to families has nothing to do with Budget estimates. If families meet the income test they are eligible for payment regardless of any Budget estimation of the program.

“Mr Swan is well aware this is the case, however, he continues to peddle misinformation and mislead the public.”