The Budget includes three measures providing higher levels of assistance to families and individuals receiving income support and family assistance payments as part of the Government's 'spreading the benefits of the boom' package:
- a new 'Schoolkids Bonus' cash payment, replacing the existing Education Tax Refund
- an increase in the rates of payment for Family Tax Benefit Part A (FTB-A) and
- a new 'Supplementary Allowance' providing a small cash payment to certain income support recipients – particularly Newstart, Youth Allowance and Parenting Payment recipients.
The Treasurer stated in his speech that these measures are intended to help low and middle income families 'make ends meet and get ahead'. They come on top of the lump sum and supplement payments that will be made to the same group as part of the carbon price household assistance package—the first of which will begin to be paid in May 2012.
The Schoolkids Bonus will provide eligible families with an annual amount of $410 for each child in primary school and $820 for each child in high school. Eligible families are those who qualify for FTB‑A and young people in school receiving Youth Allowance or other qualifying income support payments on the two days when qualification for the Bonus is determined (1 January and 30 June each year). The new Schoolkids Bonus will be paid in two instalments each year, in January and July, from 2013.
As a transitional measure, the Government intends to pay the 2011–12 Education Tax Refund in full in June 2012 for all eligible families. This transitional measure, referred to as an 'ETR payment', will be paid directly to families who receive the qualifying benefits for children attending school so that these families do not have to make a claim for the Education Tax Refund in their tax return. The Government has claimed that up to one million families have not claimed their full entitlement or have not claimed any amount under the existing system. This system requires families to keep receipts of school education-related expenses and claim up to 50 per cent of these expenses at the end of the financial year (up to a maximum refund of $397 for each primary school child and $794 for each secondary school child).
While the stated rationale of the new payment is to help families pay for costs related to schooling (such as uniforms or music lessons), the decoupling of the payment from a claim based on actual costs incurred by families removes any direct connection between the benefit and schooling. The Schoolkids Bonus and ETR payment will essentially be direct payments to families considered to require extra financial assistance because they have school-aged children. The measure will cost an additional $2.1 billion over five years, on top of the $4.3 billion previously allocated for the Education Tax Refund over this period.
Family Tax Benefit Part A increases
The Budget proposes to raise the maximum rate of FTB-A by $300 a year for families with one child and by $600 a year for families with two or more children. The base rate of FTB-A will also be increased by $100 a year for families with one child and by $200 a year for families with two or more children. Different payment rates apply depending on parents' income and the number of children in their care. Current maximum rates for FTB-A are $5018.75 per year for each child aged under 13 or $6307.20 per year for children aged 13–19 who are attending school. The current base rate for those aged under 18 years and those aged 18–19 who are attending school is $2098.75 per year.
The measure, to begin 1 July 2013, will provide a significant boost to the 1.1 million families who receive FTB-A above the base rate and the 460 000 families who receive FTB-A at the base rate and will cost $1.8 billion over the forward estimates.
The increase in the rates of FTB-A in this Budget goes against the trend in recent budgets to find savings through cuts to family assistance payments including a freeze on the indexation of the higher income free area of FTB-A (the limit at which families will be paid the base rate of FTB-A), introduced in the 2009–10 Budget and extended in the 2011–12 Budget. This pause on the indexation of the higher income free area for six years, combined with the removal of the link between FTB-A indexation and pension indexation in 2009–10, have produced savings to the Budget far beyond the expenditure on the proposed increases to the maximum and base rates of FTB-A.
New supplementary allowance for job-seekers and parents
From March 2013, recipients of Newstart Allowance, Youth Allowance, Parenting Payment (Partnered), Parenting Payment (Single), Austudy, and a number of other income support payments will be eligible for a tax-free payment of $210 per year for a single person or $175 per year for a partnered person or a person with dependent children. Those eligible will receive the payment in instalments: half the payment in March and the other half in September of each year. Payment recipients who receive more than the base rate of the Pension Supplement (for which some Parenting Payment recipients are eligible) will not be able to receive the new supplementary allowance.
At around $4 extra a week, the new Supplementary Allowance falls far short of the campaign from welfare groups and the Greens for a $50 a week increase in allowance payments. This campaign has grown amidst widespread concern at the adequacy of the current Newstart Allowance payment levels. Calls for an increase have come from across the political spectrum, from both business and community groups, and was a recommendation of the Henry Review.
The new Schoolkids Bonus, ETR payment and increases in FTB-A rates are of financial benefit to eligible families and come on top of other significant measures to take effect this year such as the raising of the tax-free threshold and the Clean Energy Advance lump sum payments. While the extent of cost of living pressures faced by these families is debateable, the new changes will offer real assistance to the 1.5 million households expected to benefit. The Opposition has condemned the Schoolkids Bonus measure arguing that it 'takes a properly targeted educational expenditure … and then changes that into something that is simply a handout', and argued that the issuing of the ETR payment in this financial year is an 'accounting trick'.
The new Supplementary Allowance, on top of the forthcoming Clean Energy Supplement and lump sum payment will not address the issues many have raised around the adequacy of benefits for job-seekers and, arguably, this Budget does not attempt to deal with any of the identified structural problems within the welfare system. The increasing gap between allowance and pension payment rates caused by different indexation methods is one example—the single rate of Newstart Allowance is currently $489.70 per fortnight while the single rate of Disability Support Pension is $695.30. The Henry Review estimated that by 2040, if the current arrangements remain in place, a single pensioner would be paid twice as much as a single unemployed person. In 1980, the unemployment benefit was 89 per cent of the pension rate. The proposed measure is welcome but does little to address the kind of issues identified by the Henry Review in regards to the adequacy, complexity and incoherence of the welfare system.
. J Macklin (Minister for Families, Community Services and Indigenous Affairs), Schoolkids Bonus, media release, 8 May 2012, viewed 9 May 2012.
. These rates include the FTB-A supplement ($726.35 per child) which is paid after the end of the financial year.
. The 2011–12 Budget saw an increase in the rates of FTB-A paid for children aged 16–19 to make them the same as for 13–15 year olds. This removed an anomaly in the rates of FTB-A and was part of a move to make FTB the main benefit for school aged children, as opposed to Youth Allowance.
. 'Recommendation 83', Australia's Future Tax System Review (K Henry, chair), Report on Australia's future tax system, Commonwealth of Australia, 2010, viewed 9 May 2012.
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