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A Mum's Guide to the Federal Budget


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#1 daviesjv

Posted 15 May 2008 - 10:10 AM

Hi everyone,

I can tell, as I am typing the heading, what a popular blog this is going to be! (not!!). And I’m sure by now that you have all read reams of federal budget information – I just thought that I would add my two cents worth as well, with a slant for EB readers on the main things that may (or may not) be in it for them.

PARENT SPECIFIC THINGS:

• Baby Bonus: The good thing is that the amount paid will go up on 1 July, from $4,258 to $5,000. The bad thing is that it will be means tested from 1 January 09. Most of the papers have reported that it won’t be available to families earning over $150,000, but in actual fact the measure is that it won’t be paid to families with an adjusted taxable income of $75,000 or more in the six month period after the baby’s birth – slightly different. It’s also going to be paid in 13 fortnightly instalments rather than a lump sum.

• Family Tax Benefit B: Another big change; FTB B will only be paid to families where the primary earner has an adjusted taxable income of $150,000 or less (previously the primary earner’s income wasn’t taken into account).

• Also, from 1 July 09 the FTB will only be paid and claimed through medicare & centrelink, not via the tax system.

• Education Tax Refund: from 1 July a 50% education tax refund will be introduced, limited to $375 for primary school children and $750 per secondary school child. It will be available to parents who receive FTB A or whose children receive a youth allowance.

• Child care Tax Benefit: Big change as well; the child care tax rebate will increase from 30% to 50%, and out of pocket expenses claimable will increase from %4,354 to $7,500 per child. Also, it will be paid quarterly.

• For those of you receiving (or paying) child support, there will be changes to the definition of “income” (income will also now include money salary sacrificed into superannuation).

OTHER THINGS:

• Medicare levy surcharge income threshold will increase to $100,000 for singles and $150,00 for couples.

• Income tax scales have changed – you can check the new ones out on the tax office website; www.ato.gov.au. As an example, someone on an income of $40,000 could expect to pay around $1,050 less tax next year. Someone on an income of $100,000 could expect to pay $1,100 less tax. Someone on an income of $20,000 could expect to pay $450 less tax (comparing tax paid to this year).

• Same-sex couples will be given more equality of treatment on a range of things including tax, superannuation, social security and so forth.

There were other budget measure, but these are probably the main ones that may affect you. Overall, lower income earners are generally better off after the budget changes.

That's the consensus from the experts anyway. But what do you think? Post your comments on how the budget is going to affect you, for better or worse.

And have a great week!

Cheers,

Justine

The author, Justine Davies, is a member of the Financial Planning Association. She is the author of  HOW TO AFFORD A BABY, published in June 2007 by ABC Books: http://shop.abc.net.au/browse/product.asp?productid=164101

This information is correct at time of writing.  It is general advice only and has not been tailored to your personal circumstances.  Please seek personal financial advice prior to acting on this information.

#2 Bluie

Posted 15 May 2008 - 10:41 AM

Thank you!

Much easier to understand now.

#3 purplebilby

Posted 15 May 2008 - 11:58 AM

great to hear a breakdown of it all - it's confusing hearing lots of people interviewed about it, and they all seem to say something different.

like about teh $75,000 part.
yesterday i heard
- one person say it was the six months BEFORE baby arrived
- one perso say it was the six month period AFTER baby arrived (therefore a high earning woman who stayed home with baby, would not miss out on it if she was on leave the six months after she had the bub)
- and i heard one other variation too
heard so much - it's all confused now

so i appreciate your nice clear synopsis.

I do think the Baby Bonus paid in instalments, will make it harder for families to do big decisions, e.g buy a washing machine - which is much easier to do with a lump sum.

#4 snuffles

Posted 15 May 2008 - 01:08 PM

Thanks, that helps.  original.gif

#5 daviesjv

Posted 15 May 2008 - 07:03 PM

Ooh, purplebilby, you worried me with your before/after comment - I had to go back and check my notes to make sure I got it right! It is the six months after bub arrives, so for those who may be close to the $75,000 limit, it could be worth doing your sums carefully before deciding when to start your maternity leave. After all, if you earn $74,000 you will get the bonus; if you earn $76,000 you won't. So for some families it could make sense to start maternity leave a few weeks earlier than planned, if you are close to that magic number ...

#6 shadon

Posted 16 May 2008 - 08:17 AM

Just thought I'd add this little pearl   ohmy.gif

Straight from the Budget Papers

2008-09 Budget

QUOTE
Families currently using approved care have the hourly rate of Child Care Benefit reduced over certain income ranges down to a minimum rate of Child Care Benefit. This measure will have the effect of reducing the minimum rate of Child Care Benefit to zero. As a result families with higher incomes (over $110,000 per annum) will no longer receive any Child Care Benefit. However, this measure is being introduced at the same time as the Child Care Tax Rebate is being increased from 30 per cent to 50 per cent and this change to the Child Care Tax Rebate will give families significantly more assistance than will be removed via the abolition of the minimum rate of Child Care Benefit.

This measure will not affect Child Care Benefit for registered care.

Edited by shadon, 16 May 2008 - 08:18 AM.


#7 raysofsunshine

Posted 16 May 2008 - 11:06 AM

Very helpful and clear - thanks for that.

As the PP mentioned I think the other important note is the CCB will be means tested.

Leesa

#8 Mel_Mac

Posted 16 May 2008 - 04:19 PM

Techinally the CCB has always been means tested to a degree.  If you earn over a certain amount currently, you are only eligible for the minimum. Which in my state is .53c per hour.  For one child in CC the hours we have our son, this equates to a total of $211 per year.  Considering the tax rebate has increased by over $1,000 we are still better off even if the CCB is gone all together.

Can I seek some clarity on the BB.  Am I correct in reading that you are only ineligible if your income exceeds $75k after tax after 6 months of the birth of the baby?  In which case is this combined family income, or sole carers income?

Thanks for the points affecting mothers/families.  Very helpful.

Edited by Mel_Mac, 16 May 2008 - 04:20 PM.


#9 Charmzy

Posted 16 May 2008 - 06:32 PM

thanks for that, I didnt know all the things you've mentioned such as wasnt aware of the education tax refund

original.gif

#10 daviesjv

Posted 16 May 2008 - 07:28 PM

Hey Mel-mac,

To answer your query regarding eligibility for the Baby bonus - the $75,000 in the six months after the birth of your baby is based on your family income (so you and your parter's income added together. It's based on your BEFORE tax income, not your after tax income, and it's based on your "adjusted taxable income", not just your before tax income.

"Adjusted taxable income" (ATI) has been expanded courtesy of the budget. The family assistance website defines ATI as:

"An individual's ATI is:
the sum of the following amounts for that year:
taxable income, and
the value of any adjusted fringe benefits, and
target foreign income, and
net rental property loss, and
tax free pension or benefit,
less 100% of the individual's deductible child maintenance expenditure"

They haven't yet updated it: it also now includes salary sacrifice into superannuation and other net financial investment losses.

So as you can see there could be a lot more to it than simply your gross income!

My advice to anyone expecting after the changes take place is to make an appointment to see a family assistance officer well before your due date and sit down with them and go through your family income situation in detail, to determine whether or not you are likely to be eligible.

According to the family assistance website, they estimate that around 16,000 families per year will not be eligible, and around 280,000 children will continue to benefit. I really didn't think our annual birthrate was quite that high, so I'm not sure how they are estimating those figures.

Their website is a handy reference for family-related budget changes - check it out on www.fahcsia.gov.au - (click on the "Budget 2008/09" icon).

Cheers,

Justine

#11 Mel_Mac

Posted 16 May 2008 - 11:02 PM

Thanks Justine original.gif  You are a wealth of knowledge   blush.gif

#12 Cushla

Posted 20 May 2008 - 10:12 AM

QUOTE
• Family Tax Benefit B: Another big change; FTB B will only be paid to families where the primary earner has an adjusted taxable income of $150,000 or less (previously the primary earner’s income wasn’t taken into account).


Does anyone know when this change to FTB B is going to take effect? i.e. 1 January 09 or 1 June 09?

Thanks.

Edited by Cushla, 20 May 2008 - 10:13 AM.


#13 daviesjv

Posted 20 May 2008 - 10:21 AM

Hi Cushla,

The FTB B change will take place on 1 July 2008 (next month).

Cheers,
Justine

#14 lindyloo03

Posted 20 May 2008 - 10:46 AM

Thank you!

Is exactly what I was looking for, It all broken down into what i can understand.

I am sure I will benefit from the changes in some way.

Linda

#15 Mist

Posted 20 May 2008 - 11:19 AM

Hi
Still confused on one part - do the fortnightly payments start as of July or as of January? I understand the means testing and whatever starts in January but sitll unsure when the lump sum ends and the fortnighly payments begin.
Just curious as Im due in October...Thanks in advance...

#16 daviesjv

Posted 20 May 2008 - 11:25 AM

Hi Mist,

"The new family income limit, instalment payments and increased age limit on adoptions will apply from 1 January 2009."

According to the family assistance website (quoted above), the instalment payment provision also takes effect from 1 January 2009, so as you are due in October you should still receive a lump sum (hooray!).  

Justine

#17 mum@work

Posted 20 May 2008 - 11:33 AM

The means testing of the minimum child care benefit is actually not as bad as it sounds.  If you go to the family assistance site, it has a fact sheet on it.  Basically if you have 1 child and earn over $110000 you will get less than what is now the minimum rate of 16.74%.  It goes down until your income reaches $126 000.  The income levels are higher depending on how many kids you have.

The superannuation (salary packaged) being considered income is also intersting.  The budget papers actually say 'certain salary packaged super', but don't elaborate.  Hopefully they will still let you package a certain level, otherwise there's no real incentive to put money into super (which is what they want us to do).

#18 Cushla

Posted 20 May 2008 - 01:58 PM

daviesjv - Thanks original.gif

#19 eamber

Posted 22 May 2008 - 09:35 AM

Nice advice davies about starting maternity leave earlier to qualify.

Good to see you are still able to get lump sum even if having baby after Jan 2009

#20 newmumsept07

Posted 22 May 2008 - 08:47 PM

We have our son being looked after by a friend of ours and we pay her the same as we would a daycare centre. I also have a 10 year old daughter.  

We earn approx $120k combined. At the moment we get FTB because I have been on maternity leave so our usual income stated is much lower this financial year, next financial year it will be back at $120k.

Will I still be eligible for FTB and possible child care benefits of some sort? I never claimed anything before so I am all confused...

Edited by newmumsept07, 22 May 2008 - 08:48 PM.


#21 due15-31october

Posted 23 May 2008 - 06:19 AM

Hi there,

I am also confused.  The new 50% child care rebate - I haven't yet read if it is means tested or not?

BTW, I think $75K, $110K and $150K is WAY too low to consider all 'working families'.  The government seems confused also giving us different $ monetary thresholds for different benefits.  I think they need to go away and re-think the whole thing or at least build in some consistency around the thresholds.  

The biggest disappointment to me is that my husband and I have a combined income in excess of all of the above thresholds, (which as a working family isn't hard to do), we pay taxes just like anyone else (huge amounts of taxes) and if the CC rebate of 50% is means tested, the only thing we will be eligble for is the $5K baby bonus because our baby is due to be born before 01/01/09.

Thanks for letting me get that off my chest!  Look forward to a response on the CC 50% rebate paid quarterly I believe...

Cheers
Leonie

#22 daviesjv

Posted 23 May 2008 - 06:26 AM

Just a quick one to answer the previous query re the CCB. The 50% CCB rebate is not means tested, so you will receive that, and apparently it will be paid quarterly. Good timing (and congratulations and good luck) with your baby !

Cheers,

Justine

Edited by daviesjv, 23 May 2008 - 06:27 AM.


#23 Sassenach

Posted 23 May 2008 - 09:03 AM

QUOTE
and if the CC rebate of 50% is means tested
Ok, there are two rebates when it comes to childcare. The CCB and the CCTR. The CCB is the hourly rebate you get either on a hour by hour basis dirctly off your childcare bill (or if you choose, as a lump sum at the end of the year). The 50% CCTR is a rebate you get, now quarterly, to the value of 50% of your GAP childcare fees - which is actualyl the money your physically pay to your childcare, less any CCB you are eligible for.

CCB is means tested, always has been, though it used to be if you were over the income threshold, you would just be given the bare minimum 16.79% CCB (which was about 50c per hour). Now, it is still means tested, though right down to minimum of 0% .. so those previously getting the min CCB now get no CCB.

Alternately, CCTR is not means tested but it is eligibility tested. That is, anyone can get the quarterly rebate of 50% of their gap childcare fees up to the value of $7,500 per child pa, assuming you meet the eligibilty requirements of the work/study test.

Someone please correct me if I'm wrong!

QUOTE
BTW, I think $75K, $110K and $150K is WAY too low to consider all 'working families'.
I also think this is an intersting point, considering current figures show the 'average' income in Australia to be around $50k. Therefore surely the very lowest of these thresholds (i.e. the $75k one) should be more like $100k for the 'average' family? And then increases up the line for the higher thresholds? By the way, PP, I think the budget has 'on purpose' not included ALL working families. That is, the budget (IMHO) definitely intends to exclude those working families considered (by someone's measure!) high combined incomes ... which at the moment, is considered to be $150k at the upper level. Personally, I also think that is too low, firstly considering my first point about average incomes, and secondly, considering the income levels at which people HAVE to earn to cope with the current exponential increases in the cost of living.

Kylie

Edited for typos!

Edited by Sassenach, 23 May 2008 - 09:13 AM.


#24 .Ally.

Posted 23 May 2008 - 12:24 PM

Hi Mel. There is a thread below but you can prob find more info at the Family Assistance Office (FAO).

http://www.familyassist.gov.au/Internet/FA...stered_care.htm
http://members.essentialbaby.com.au/index....howtopic=533985

It's quite confusing! From my understanding if they register with the FAO you get the minimum which is only $30 p/w but not the Child Care Tax Rebate which is the one you probably want. Let us all know if you work it out.

original.gif Ally

#25 williamsmom

Posted 23 May 2008 - 02:25 PM

HI,
probably a really silly question but a few weeks ago the government were talking about making it easier for mums in the work force adding an extra day or two to their working week.
sorry if I dont make sence but example
I work 2 nights a week now and with that I lose $150 a fortnight of my family payment.so 1 night a week I work for money I already had so.It was better for me to drop to 1 night but it was meant to be changing next tax term ???
any help would be great
kell xx




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