Family payments

Budget Review 2017–18 Index

Michael Klapdor

In Budget 2017–18, the Government announced that it would no longer proceed with a wide range of Family Tax Benefit (FTB) savings measures that it has been unable to legislate and the relevant Bills have since been removed from the notice paper. Instead, it proposed a more modest change to the Family Tax Benefit Part A (FTB-A) income test that will reduce payments for some higher-income families. The Government has also announced an extension of the No Jab, No Pay measure from the 2015–16 Budget. This measure will reduce fortnightly payments of FTB-A for those families who do not meet the immunisation requirements.

The two new measures will require legislation.

Dropped measures

Since the 2014–15 Budget, the Coalition Government has attempted to pass a wide range of savings measures affecting the FTB program but it has been unable to win support in the Senate for all of these. Some measures have passed, however, including:

  • the tightening of the Family Tax Benefit Part B (FTB-B) income test
  • closing FTB-B to couple families with children aged 13 years or older
  • closing the FTB-A end of year supplement to families with income over $80,000 per annum
  • indexation pauses (so that income test thresholds and some payment rates do not increase in line with inflation)
  • reductions in the level of assistance provided to large families and
  • closing off the Energy Supplement payment to new FTB recipients.

The 2017–18 Budget confirms that the Government will not proceed with any of its previously announced but unlegislated FTB measures, including:

  • the phase out of the FTB-A and FTB-B end of year supplements—which was estimated to save $4.7 billion over the forward estimates
  • the increase in fortnightly rates of FTB-A (as well as some related youth payment rates)—which was estimated to cost $2.4 billion (intended to partly offset the supplement phase-out) and
  • reduction in FTB-B rates for single parents with a youngest child aged 13–17 and removal of FTB-B for single parent families from 1 January in the calendar year their youngest child turns 17 (with some older parents and grandparent/great-grandparent carers exempt)—which was estimated to save $787.9 million over the forward estimates.[1]

FTB-A income test change

This measure will amend one of the FTB-A income tests from 1 July 2018 for estimated savings of $415.4 million over five years.[2] FTB-A rates are calculated based on the number of dependent children in the family, the age of the children and the family’s adjusted taxable income. The rate calculation process is complex and uses maximum and minimum payment rates, multiple income thresholds and different rates of withdrawal. The budget measure does little to reduce the complexity of the income test but will see a reduction in payment rates for some higher income families.

In calculating FTB-A entitlements, two different income tests are generally applied with the one that provides the highest rate being used. The first test (Method 1) reduces the maximum rate of FTB-A by 20 cents for each dollar of adjusted taxable income above $51,903. The maximum fortnightly rate is currently $182.84 for each child aged 0–12 years and $237.86 for each eligible teenager. The second test (Method 2) reduces the base rate of FTB-A by 30 cents for each dollar above $94,316. The fortnightly base rate is $58.66 per fortnight.[3]

The methods are applied in the following way:

  • families with income equal to, or below $51,903 receive the maximum rate of FTB-A
  • families whose income falls in the range of $51,903–$94,316 receive either their reduced rate worked out under Method 1 or the base rate of FTB-A, whichever is higher
  • families with income over $94,316 receive the rate worked out under Method 1 or Method 2, whichever is higher.

The budget measure will see the Method 1 rate adjusted, so that that the 20 cent reduction of the maximum rate will apply for each dollar of income between $51,903 and $94,316, but each dollar of income over $94,316 (if any) will reduce the individual’s rate by 30 cents. Families will still receive the higher of the rates worked out using Method 1 and Method 2.

Under the current income test design, families with income over $94,316 who have their rate determined using Method 1 are generally those with three or more children. As such, it will likely be larger families affected by the proposed measure. For example, currently, a family with annual income of $108,000 with three children aged 12, 13 and 15 would be entitled to around $5,950 in FTB-A. Under the proposed measure, the family would receive around $4,582 (a loss of around $1,368).

The Government estimates that 24,900 families will lose access to FTB-A and 71,800 will see a reduction in their payment rates as a result of the measure.[4] Media reports suggest that the average household income for those who will lose eligibility for FTB-A is $125,490, and for those who will see a reduction it is $107,622.[5] As the measures only affect higher income earners, they are unlikely to be as controversial as the dropped measures—the impact of which was spread across all FTB-A recipients.

No Jab, No Pay

The Government will extend its No Jab, No Pay measure from the 2015–16 Budget to reduce the fortnightly payment rates of FTB-A recipients whose children do not meet immunisation requirements. The 2015–16 measure removed an exemption for those who submitted a conscientious objection to immunisation. It also extended immunisation requirements for these payments to children of all ages (not just those aged under seven years) and was part of a package of measures aimed at boosting rates of immunisation.[6] The requirements are for children to be immunised in line with vaccination schedules in order for their parents/carers to be eligible for the FTB-A end-of-year supplement or any child care fee assistance payments.[7] Exemptions are granted only in special circumstances.

The new measure will see $28 withheld from a FTB-A recipient’s fortnightly rate for each child who does not meet the immunisation requirements. It is unclear whether the withheld amount will be paid if the child later meets the immunisation requirements or if there will be exemptions where circumstances prevent a child from meeting the requirements.

The $28 reduction will also apply to FTB-A recipients who receive an income support payment (such as a pension or allowance), or whose partner receives an income support payment, and who do not meet the Healthy Start for School (HSS) requirements. The HSS requirements are for a health check to be carried out in the financial year the payment recipient’s child turns four (or the financial year after they turn four) for the recipient to be eligible for the FTB-A end-of-year supplement.[8]

The Government has claimed that its policy has increased immunisation rates. The period from December 2015 to March 2017 saw the immunisation rate for one year olds increase by 1.35 percentage points to 93.63 per cent; for two year olds by 1.75 percentage points to 90.06 per cent; and for five year olds by 0.73 percentage points to 93.32 per cent.[9] However, some health researchers have questioned the effectiveness of using financial penalties to boost vaccination rates, particularly when many of those who reject vaccination come from higher-income groups, and many of those who fail to meet immunisation requirements do so because of reasons such as difficulties in accessing health services.[10]

The Government expects savings of $15.0 million over four years from the measure which suggests that only a relatively small number of people will be affected by the new payment reductions.



[1].          Explanatory Memorandum, Social Services Legislation Amendment (Omnibus Savings and Child Care Reform) Bill 2017, p. 6 and  Explanatory Memorandum, Social Services Legislation Amendment (Family Payments Structural Reform and Participation Measures) Bill 2016, p. 2.

[2].          The budget figures in this brief have taken from the following document unless otherwise sourced: Australian Government, Budget measures: budget paper no. 2: 2017–18, 2017.

[3].          Families with income under $80,000 per annum are eligible for the FTB-A supplement of $726.35 per child. It is included in the rate calculation process but not paid until the end of the financial year.

[4].          Department of Social Services (DSS), Welfare—other measures: 2017 Budget, Factsheet, DSS, Canberra, 2017, p. 1.

[5].          R Morton, ‘Big family welfare cut down to size’, The Australian, 10 May 2017.

[6].          M Klapdor and A Grove, ‘”No Jab No Pay” and other immunisation measures’Budget review 2015–16, Research paper series, 2014–15, Parliamentary Library, Canberra, 2015, pp. 85–86.

[7].          DSS, ‘2.1.3 Immunisation & health check requirements’, Guide to social security law, DSS website, last reviewed 20 March 2017.

[8].          DSS, ‘2.1.3 Immunisation & health check requirements’, op. cit.

[9].          C Porter (Minister for Social Services) and G Hunt (Minister for Health), Further strengthening No Jab, No Pay, media release, 1 May 2017.

[10].       J Leask and M Danchin, ‘Imposing penalties for vaccine rejection requires strong scrutiny’, Journal of Paediatrics and Child Health, 53(5), 6 February 2017, pp. 439–444.

 

All online articles accessed May 2017. 

For copyright reasons some linked items are only available to members of Parliament.


© Commonwealth of Australia

Creative commons logo

Creative Commons

With the exception of the Commonwealth Coat of Arms, and to the extent that copyright subsists in a third party, this publication, its logo and front page design are licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Australia licence.

In essence, you are free to copy and communicate this work in its current form for all non-commercial purposes, as long as you attribute the work to the author and abide by the other licence terms. The work cannot be adapted or modified in any way. Content from this publication should be attributed in the following way: Author(s), Title of publication, Series Name and No, Publisher, Date.

To the extent that copyright subsists in third party quotes it remains with the original owner and permission may be required to reuse the material.

Inquiries regarding the licence and any use of the publication are welcome to webmanager@aph.gov.au.

This work has been prepared to support the work of the Australian Parliament using information available at the time of production. The views expressed do not reflect an official position of the Parliamentary Library, nor do they constitute professional legal opinion.

Any concerns or complaints should be directed to the Parliamentary Librarian. Parliamentary Library staff are available to discuss the contents of publications with Senators and Members and their staff. To access this service, clients may contact the author or the Library‘s Central Enquiry Point for referral.  

Top