How the Coalition Government’s budget will affect child-care related payments and family tax benefits (FTB part A and B).

Summary: this budget (like Labor’s previous record) hurts young children. It is bad news for families that do their own child care work and for single income families.

  1. Childcare funding: single parents will now get zero funding for parent-care as they will no longer receive FTB part B once their youngest turns six years of age. On the other hand, day-care funding was in fact increased. (Meanwhile, the child care rebates for daycare remain non-means-tested!).
  2. Birthcare funding: Abbott's Paid Parental Leave scheme (from 1 July 2015) - a birth payment, which promotes stranger care between pregnancies - like Labor's current 'minimum wage' PPL, is not means tested. Add to this, the fact that the non-discriminatory Baby Bonus was phased out under Labor in March 2014.

Note: it is important to distinguish funding directly aimed at newborn or ongoing child-care (childcare rebates, PPL) and Family Tax Benefit payments aimed at addressing the inbuilt unfairness in the income tax (PAYG) system that disregards how many family members are dependent on that income, and disregards how many tax free thresholds a family is able to claim.

THE CHANGES

The biggest changes include cutting Family Tax Benefit Part B (FTB part B), which will be cut for families when their youngest child turns six. Currently about 60 per cent of families with children under the age of 16 receive the payment, and the changes will save the Government $1.9 billion over five years. 

The upper income limit of the primary earner for FTB part B stops has been reduced from $150,000 to $100,000.

All Family Tax Benefit payments will be frozen and remain at current rates for two years, saving the Government $2.6 billion over four years.

From July next year, the Large Family Supplement will be limited to families with four or more children.

But there will be a new payment for single parents receiving the full FTB-A, with $750pa for each child between six and 12 years of age. (This is to placate this parents, mostly mothers, who will be forced into paid work having lost FTB part B for children over 6 years.)

Current payments and eligibility for the Child Care Rebate and Child Care Benefit will continue UNCHANGED.  But Occasional Care funding, which provides funding for emergency or late notice care, is restored, with $12.6 million available. The current paid parental leave scheme (Labor’s) is not means tested giving a taxable $11,500 handout for new mothers that have met the ‘paid work’ test.  Abbott’s proposed PPL scheme will give between $16,500 and $50,000 handouts plus 9.25% super for new mothers who met the ‘paid work’ test, and this payment is not means tested either.

What is going on here?

What we are seeing is a gradual progression of the state take-over of child care for 0-5 year old children.  Enormous subsidies to promote paid ‘stranger’ or ‘day’ care have been left uncut, and occasional care funding increased.  Payments given directly to parents to choose how they wish to arrange child care have been slashed to almost zero.  Meanwhile, birth-related payments have gotten worse too.  Howard’s baby bonus was non-discriminatory allowing parents to choose how to use the funding. Labor scrapped it and the Coalition have not restored it. 

Instead the Coalition plan on making Labor’s PPL scheme even worse by adding another level of unfair discrimination by attaching the cash handout to the actual real wages of the mother.  Once again, this enormous unearned cash bonus is NOT means tested. The likelihood of a mother meeting the paid work test for child number three (or more) is well below 30% based on data obtained from the Department of Social Services study published in 2013.

PPL schemes and subsidised for daycare only bolster a dual income home and a lifestyle that generally only supports one to two children. Therefore, single income homes that have three or more children end up subsidising dual-income families.  This has serious consequences for the nation's birth rate (1.9) which is well below replacement level (2.1).

Forecast

This budget will drive down the birth rate which has been below replacement level for 38 years. 

More and more families will be lured away from mother-care in the home (tax contributing cohort) to the very lavishly subsidised day-care facilities (thus becoming part of the tax consuming cohort).  Additionally, mothers will scramble for part-time work in an attempt to meet the ‘paid work’ test in the hope of obtaining a cool $11,500 to $50,000 cash when the next baby arrives. 

This shift of lifestyle towards the subsidy pool will blowout the budget year on year and will entrench the “age of entitlement” for a certain class of families: those that do not care for their 0-5 year old children between ~9am and ~5pm due to irresistible financial incentives.

Note: the third child was already highly at-risk from abortion according to pregnancy counsellors.

Note: most women who work part-time (because they already have a young child) to meet the minimum 330 hours in 10 months work test to obtain the $11,500 Paid Parental Leave Payment will not pay a scrap of income tax on that income/wage as they enjoy a $18,000 tax free threshold.

Note: PPL is taxable income, but not means tested.