The higher income thresholds of family payments will remain at current levels for three years.
The higher income free area of Family Tax Benefit (FTB) Part A – currently $94,316 plus an additional $3,796 for each FTB child after the first – will be maintained at its current level for three years. The income limit at which FTB Part A is no longer paid varies for each family and depends on the number and age of each child.
The FTB Part B primary earner income limit will remain at $150,000 for three years.
The Baby Bonus will continue to be payable to eligible families with a family adjusted taxable income of $75,000 or less in the six months following the birth or adoption of a child (equivalent to $150,000 per annum) until 1 July 2012.
FTB Part A
The measure will affect families receiving FTB Part A where combined annual adjusted taxable income exceeds the higher income threshold. Pausing the higher income free area will see some families have their level of payment reduced, and others will lose eligibility altogether.
The income limit at which FTB Part A is no longer paid varies for each family and depends on the number and age of each child. For example this means the income limit for a family with two children under 18 will remain around $112,000 until 2012.
Some families losing entitlement to FTB Part A may also in time become ineligible for other benefits, such as the Education Tax Refund, the Medicare Teen Dental Plan and the Medicare Safety Net Concession.
The lower income threshold, currently $42,559, will continue to be indexed in line with movements in the Consumer Price Index (CPI), ensuring that entitlement for families on lower incomes is maintained. Rates of payment will also continue to be indexed annually.
FTB Part B
Families will no longer be eligible for FTB Part B if the main earner’s income (or a sole parent’s income) exceeds the $150,000 income limit during the next three years.
The lower income earner threshold (currently $4,526 per annum) and FTB Part B rates of payment will continue to be indexed each year for movements in the CPI.
The $75,000 family income limit in the six months after birth or adoption will be maintained at its current level until 30 June 2012.
FTB Part A
FTB 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.
Families with lower incomes are eligible for the maximum rate of FTB Part A. Families on medium incomes are eligible to receive the base rate of payment until their income reaches the higher income free area. Beyond this income level, payment is reduced by 30 cents in the dollar. The income point above which FTB Part A is no longer payable depends on the number and age of FTB children.
Currently, 1.9 million families receive FTB Part A. Families paid by fortnightly instalment receive on average $6,000 per annum in FTB Part A (not including the end of year supplement).
FTB Part B
FTB Part B provides extra assistance for families with one main income and is paid on a per family basis. Eligibility is subject to the primary earner income limit of $150,000 per annum. The rate of payment is based on the age of the youngest child in the family and is assessed on the income of the family’s lower income earner.
Single parent families earning $150,000 or less per annum automatically qualify for the maximum rate of FTB Part B.
The Baby Bonus is paid to eligible families following the birth or adoption of a child. It can be paid to either the natural parent, adoptive parent or a long-term foster carer.
The Baby Bonus is currently a $5,000 flat-rate payment, paid in 13 fortnightly instalments of around $385 to eligible claimants. The rate of payment will be adjusted for movements in the CPI on 1 July each year.
The introduction of Paid Parental Leave on 1 January 2011 will reduce the number of families receiving Baby Bonus, and so the number affected by this measure.
This measure will be implemented on 1 July 2009. Annual indexation of the upper income thresholds will recommence on 1 July 2012.
Total Government Funding
These reforms are expected to save approximately $1.4 billion over four years.