Revised Family Tax Benefit measures to fund $3.5 billion child care investment

Joint Media Release with:

The Hon. Scott Morrison MP, Treasurer

Senator the Hon. Simon Birmingham, Minister for Education and Training

The Turnbull Government will restructure Family Tax Benefit (FTB) payments to give better targeted assistance to families, encourage workforce participation and fund the Government’s $3.5 billion Jobs for Families package.

The Government today introduced legislation in the Parliament that amends 2014 Budget FTB measures. This follows extensive negotiation within government and the Senate crossbench on the measures, which are necessary to pay for the Jobs for Families child care package.

Treasurer, Scott Morrison said: “I thank my Parliamentary colleagues, including National Party Members and Senators and crossbench Senators for working constructively with the government on the FTB measures which will help fund the billions in extra child care assistance for Australian families the government announced earlier this year.

“The Turnbull Government is committed to protecting taxpayers by responsibly funding our spending commitments. We are ensuring that additional funding measures are offset by responsible savings,” Mr Morrison said.

Minister for Social Services, Christian Porter, said the Government is committed to helping Australian families in a generous but sustainable welfare system.

“These reforms will give families greater on-going day-to-day financial assistance and will help ensure children get the best possible start in life,” Mr Porter said.

These measures will replace the unlegislated 2014-15 FTB measures including maintaining FTB rates, limiting FTB-B to children under six years of age and maintaining eligibility thresholds.

The new measures will provide FTB-B to families with children under the age of 13, encouraging workforce participation for parents with children in high school.

Single parents and grandparents with children over the age of 13 will receive an FTB-B payment of $1,000 a year.

From July 2016, all eligible families with a youngest child under one year will receive an extra $1,000 a year through an increase to their FTB-B standard rate.

In addition, from 1 July 2018, for families with a child aged up to 19 years, the maximum rate of FTB-A will be increased by about $10 per fortnight.

“Significantly, we’re also increasing the fortnightly rates of Youth Allowance and Disability Support Pension so they’re aligned with the new FTB-A rate,” Mr Porter said.

“This is an important step towards simplifying and harmonising our complicated welfare system.”

As part of the reforms, the Government will phase-out the end of year FTB supplements. Mr Porter said the end-of-year supplements were introduced in 2004 substantially as a mechanism to help families manage FTB overpayments (because of underestimation of income).

“The great majority of FTB recipients are never overpaid or are overpaid a small amount and this is an issue that will be substantially addressed by technical changes scheduled for 2018-19,” Mr Porter said.

The money saved by phasing out the supplements will be redirected to increasing fortnightly payments and providing more affordable child care.

Minister for Education and Training, Simon Birmingham, said: “We are investing almost $40 billion in child care over the next four years, including an extra $3.5 billion into the Jobs for Families package, to make child care simpler, more flexible, and more accessible.

“As a result of the new child care package, families using child care services from July 2017, on incomes of between $65,000 and $170,000, will be on average of $30 a week better off.”

Senator Birmingham described increased access to child care as an important productivity measure that will boost workforce participation.

“By better supporting parents who want to work or work more hours, Jobs for Families will encourage an estimated 240,000 families to increase their involvement in paid work, including almost 38,000 jobless families.

“Our Government’s new child care package supports parents as they balance work and family responsibilities, whilst protecting those most vulnerable, and continuing to ensure high-quality early learning,” Mr Birmingham said.

Mr Porter said: “We believe our new package of reforms strikes the right balance between equity and sustainability.”

Cameos

The following cameos represent the fortnightly cash impact that will result from both the child care and FTB reforms (excluding FTB supplement changes):

Cameo 1

  • Suminda is a single mum with a three-year-old son, Sanjay. Suminda works two days a week and sends Sanjay to long day care on these days. Suminda earns $34,000 a year
  • Suminda will be around $38 a fortnight better off in 2018–19 when the Families Package is fully implemented

Cameo 2

  • Janine is a single mum who earns $68,000 a year. Janine has full-time care of her seven-year-old son Charlie. Janine works four days a week and sends Charlie to after school care on these days
  • After the new Families Package is fully implemented in 2018–19, Janine will be better off by around $40 each fortnight

Cameo 3

  • Will and Paula have just had a new baby, Aimee, who is now 3 months old. Their eldest, Lisa, is two years old. Paula stays home with the children while Will earns $51,000 a year
  • In 2018–19, Will and Paula will be around $60 better off a fortnight under the new Families Package

Cameo 4

  • Jodie and Darren have a three-year-old daughter Maddie. Darren works full time and earns $85,000 a year, while Jodie works three days a week and earns $51,000. Maddie attends the local long day care centre on the days Jodie works
  • Jodie and Darren will be around $43 better off a fortnight in 2018–19