Responsible Economic Management - Better targeting and delivery of Baby Bonus 

Key elements

A new family income test will apply to the Baby Bonus, limiting eligibility to families with an adjusted taxable income equivalent to $150,000 or less a year. This will be calculated based on earnings in the six months following the birth of a child or an adopted child entering a parent's care. It will be applied pro rata on an annual basis, so that the amount is equivalent to $75,000 in the six months after birth. Around 16,000 families each year will not be eligible for the Baby Bonus due to the means test. An estimated 280,000 children will continue to benefit from the payment.

All families will be paid their Baby Bonus in 13 fortnightly instalments, paid from the date of claim. This will avoid the potential for misuse of lump sum payments, and will provide ongoing support to help with the costs of a new child.

Indexation of the Baby Bonus will now occur annually on 1 July, in line with other family payments.

Eligibility for the Baby Bonus will be extended to parents who adopt children under 16 years of age (currently less than two years of age). Increasing the upper age limit of the Baby Bonus for adoptive children will assist parents with the cost of adopting a child and recognise that, as with a newborn child, an adoptive parent may need to spend time out of the workforce to welcome and settle their child. This policy change also recognises that a significant number of adopted children are aged over two years when they enter the care of their adoptive parents.

Background

The Baby Bonus is currently a non-means tested, lump sum payment of $4,258 made on the birth or adoption of a child. For adopted children, Baby Bonus is only paid to parents who adopt a child younger than two years of age. The Baby Bonus is currently paid in 13 fortnightly instalments to all parents under 18 years of age and to those subject to income management. A social worker who identifies a parent aged over 18 years as being at risk because of addiction or other vulnerabilities can recommend that Centrelink pay the Baby Bonus in instalments rather than as a lump sum. In period July 2007 to March 2008 only 760 were paid in this way indicating limited success in the take up of this option. The Baby Bonus has previously been indexed twice a year in March and September, rather than on 1 July as applies to most other forms of family assistance.

Implementation

The new family income limit, instalment payments and increased age limit on adoptions will apply from 1 January 2009. Indexation of the Baby Bonus will occur once annually following the increase to $5,000 on 1 July 2008.

Total Government Funding

Overall, these measures will reduce government expenditure by $354.5 million over four years.
Content Updated: 1 June 2012