The Gillard government has dumped the baby bonus, one of the Howard government’s signature reforms, and replaced it with a less generous scheme.
Fewer stay-at-home mothers will now qualify for a lump-sum payment on the birth or adoption of a child and those that do qualify will receive thousands of dollars less. The baby bonus will be replaced by a one-off increase in Family Tax Benefit Part A.
Under the bonus, which will be scrapped on March1 next year, stay-at-home mothers in families with incomes of up to $150,000 received a $5000 payment on the birth or adoption of their first child and $3000 for each subsequent baby.
But now $2000 will be paid for the birth or adoption of a first child or each child in multiple births, and $1000 for second or subsequent children. Families will receive an initial payment of $500, the remainder to be paid in seven fortnightly instalments.
The threshold at which families qualify for the baby bonus will drop considerably. Under the new scheme couples earning over $101,000 will not be eligible for a payment for their first baby. The threshold for a second baby will be about $112,000.
The budget papers said the new scheme "more closely reflects the essential costs of having a baby and better targets this assistance now that Australia has a national paid parental leave scheme".
Women who receive the government’s paid parental leave while having a baby are not eligible for either the baby bonus or its replacement.
The budget also made changes to the government’s paid parental scheme. At present women must work for 10 of the previous 13 months to qualify for the government’s paid parental leave. This is known as the work test period. Now parents will be able to count time on government-paid parental scheme where it occurs in the work test period for a subsequent child, just like employer-funded parental leave can be counted now. This change will mean more women will be able to access government paid parental leave when they have another baby.
Mr Swan said the changes would improve the sustainability of the family payments system.
Economist Chris Richardson, from Deloitte Access Economics, said scrapping the baby bonus was good policy.
"We now have policies to support parents that are better because they achieve the same purpose in better ways," he said.
Mr Swan confirmed the government would not proceed with an increase to Family Tax Benefit Part A that would have added up to $600 a year for families with children. The government announced last week that the payment, due to apply from July 1 this year, would be scrapped because of an unexpected shortfall in revenue. This will save the government $2.5billion over the next four years.
The government will freeze the top income thresholds at which families qualify for family payments and supplements for three more years. This will maintain an upper-income test limit of $150,000 for Family Tax Benefit Part B, the dependency tax offsets, the Paid Parental Leave Scheme and Dad and Partner Pay.
Also, from the beginning Family Tax Benefit Part A will only be paid to families up to the end of the calendar year in which their teenager is completing school. Families will have one year, not two years, to lodge their Family Tax Benefit entitlement or Child Care Rebate. Changes to family payments will save almost $2.4 billion.
Read more on Essential Baby: The 2013 Budget for families