Reform of family payments — Family Tax Benefit Part A (FTB-A) – Removing the link to pension indexation 

Key Elements

Consistent with indexation of other family assistance payment rates, from 1 July 2009, maximum rates of Family Tax Benefit Part A for children under 16 years will be indexed by movements in the Consumer Price Index (CPI) only, instead of linked to Male Total Average Weekly Earnings through the combined couple rate of pension.

Background

Family Tax Benefit Part A is paid on a per child basis to help families with the costs of raising children. Payment is based on a family’s adjusted taxable income in the financial year.

The annual maximum rates of FTB Part A for children aged under 16 consist of two components:

  1. A fortnightly rate that is either CPI-indexed or benchmarked to the combined pensioner couple rate whichever is the higher; and 
  2. The CPI-indexed FTB Part A supplement, paid at the end of the financial year.

The benchmark for the 0-12 year old rate is set at 16.6 per cent of the combined pensioner couple rate. The corresponding benchmark for the 13-15 year old rate is 21.6 per cent. These benchmarks will cease to apply from 1 July 2009.

Annual indexation of the rates will occur in line with movements in the CPI.

Implementation

This measure will be implemented on 1 July 2009. In 2009-10 the foregone increase will be around $0.35 a week for each child 12 and under; and $0.49 a week for each child aged 13 to 15.

Total Government Funding

This measure is estimated to save $1 billion over four years.

Content Updated: 1 June 2012