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This is not advice. Items herein are general comments only and do not constitute or convey advice per se. The information contained in these articles is for guidance only and should not be relied upon without obtaining professional advice having regard to your direct circumstances.


Changes to Family Tax Benefits

Does your brood qualify?

The strategy: To understand the changes to Family Tax Benefits (FTB) and other family related benefits.

Which changes are those? You've probably heard that the Government announced in last month's budget that it plans to means-test Family Tax Benefit Part B and other handouts such as the baby bonus. FTB Part A is currently means-tested on the family's income; Part B is only assessed against the lower earner's income. So a couple who may not be eligible for Part A because they jointly earn too much may be eligible for Part B if one partner earns the bulk of that income.

This year, the Family Assistance Office says families will lose any Part B payment when the lower earner's income reaches $22,302 if their youngest child is under five and $17,356 if their youngest dependent child is five to 18. To get the maximum Part B payment the lower earner's income must be less than $4380. So this benefit has been of most help to single-income families - and sole parents who receive the maximum payment.

From July 1, Part B will be paid to families only where the principal earner's income is $150,000 or less a year, regardless of what the other partner earns. Sole parents will also lose Part B if their income exceeds $150,000. Families whose principal earner earns less than $150,000 will still be assessed against the lower-earner's income.

Didn't I read they're changing what's included in my income as well? The income definitions are being expanded but the good news is that this won't happen until July 1, 2009, so you've got another year to plan. From that date, the definition of income for all family assistance purposes will be expanded to include net financial investment losses (basically losses made from gearing into shares or managed funds) along with salary-sacrifice super contributions. This will make it harder for families to structure their investment strategies so that they're eligible for family benefits.

The Government has also said that you won't be able to claim your Part B benefit through the tax system from July 1, 2009. Less than 10 per cent of families claim the benefit in their tax returns. Once this measure comes in, everyone will have to choose from a fortnightly or annual lump sum through Centrelink or Medicare.

What other benefits will be affected? A similar means test also will apply to related dependency offsets, such as the dependent spouse, housekeeper, child housekeeper, parent or parent-in-law and invalid relative tax offsets to ensure that families who lose Part B will not become eligible for these tax breaks.

And, as the pre-budget headlines indicated, a means test will also apply to the baby bonus. As proposed by the previous government, this bonus is being lifted to $5000 from July 1 but a means test will apply from January 1. Eligibility for the bonus will be restricted to families with adjusted taxable income of $75,000 or less in the six months after the birth of the baby.

From January, the baby bonus will be paid in fortnightly instalments, rather than as a one-off lump sum, it will be indexed on July 1 each year and eligibility will be extended to parents who adopt children under 16 (currently under two). The extended income definitions also will apply to these benefits from July 1, 2009.

Have there been any changes to FTB Part A? The new income definitions will apply to all forms of family assistance but otherwise Part A remains unchanged. Your payment level and eligibility still will depend on your family's income, how many children you have and how old they are.

The Sydney Morning Herald


Annette Sampson
June 4, 2008


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