The strategy To make the most of the new family benefits.
The ones announced in last week's Budget?
That's them. In what looks very like a pre-election bribe, the Government announced several changes to family benefits. As well as lifting the main family tax benefit by $600 per child a year (with an immediate payment to be made for the current financial year), it will lift the income tests for one family benefit, reduce the rate at which both family benefits cut out, and introduce a $3000 lump sum maternity payment for families that have a child after June 30 (rising to $5000 over the next four years).
How will the new benefits work?
The first $600 payment will be paid to all families receiving or eligible for a Part A Family Tax Benefit or Youth Allowance this year. The Government says the money will be paid by June 30. If you are receiving the benefit through the Family Assistance Office, the benefit should be paid automatically. If you claim through the tax system, Centrelink says the Government will work out your entitlement from past tax returns.
From July 1 on, new thresholds and payment levels will apply. The maximum payment for each child under 13 under the Part A benefit will rise to $4001.80 while the maximum payment for 13 to 15 year-olds will be $4914.30. (These payments will also be indexed at the end of the financial year.) The base rate for each child under 18 will be $1695.
Andrew Lowe, the manager for technical services at ING, says to get the maximum payment, your family income can't exceed $31,755. If your family's income is greater than that, but less than $82,052 plus $3285 for each dependent child after the first, you will get the maximum payment minus 20 cents for each dollar earned over $31,755. Once your entitlement is reduced to the base rate, this is the amount paid.
The current taper or phase out rate is 30 cents in the dollar - which means many families will now get a larger entitlement. For example, the Government says a family with two children under 13 can earn $47,133 before hitting the base rate. From July 1, that will rise to $54,823.
If your family's income is more than $82,052 plus $3283 per dependent child, your entitlement is the base rate minus 20 cents for each dollar earned over the threshold. This means a family with two children will now be able to earn $96,637 before losing the benefit entirely, compared with $92,637 now.
That's horribly complicated. Is there an easy way of working it out?
The Australian Taxation Office has an online calculator at www.ato.gov.au. It will presumably be updated in the new financial year.
Dare I ask how the other family benefit works?
This one, known as the Part B benefit, is simpler as it only relies on the income of the secondary earner and is targeted at families where one partner stays at home or does a small amount of part-time work. The maximum payments for this benefit haven't changed - they will stay at $2920 a year for each child under five, and $2036.70 for children up to 15 or full-time students aged 16 to 18 (although these amounts will also be indexed). But from
July 1, the maximum benefit will be paid to families where the secondary earner earns less than $4000 (compared with $1825 now) and will be reduced by 20 cents for each dollar earned above this (compared with 30 cents now). The Government says this means families where the youngest child is under five will be able to get some benefit where the secondary earner earns up
to $18,600, and $14,183.50 where the second child is aged five to 18.
How do I claim these benefits?
Both the family tax benefits can be claimed through the Family Assistance Office (which can organise fortnightly payments) or as a lump sum through your tax return. The Government hasn't yet released details on how to claim the maternity payment. It's nice to get your money now, but Peter Haggstrom, the head of technical services with Deutsche Asset Management, says the problems being seen with the Government trying to reclaim overpayments demonstrates one of the inherent dangers of the system. It's not always easy to estimate your income in advance and any overpayment must be given back. He says if you can afford it, it's often simpler to claim the benefits as a lump sum at the end of the year.
