A number of changes to Family Tax Benefit Part A and Part B were announced in the 2010 Federal Budget.
However, the changes do not take effect until 2012 and upper income thresholds for Family Tax Benefit and the family income limit for the Baby Bonus will remain at current levels for three financial years.
The impending changes are outlined below:
Family Tax Benefit Part A Higher Income Free Area
The Family Tax Benefit Part A Higher Income Free Area of $94,316 (plus $3,796 for each child after the first) will be maintained at its current level until 30 June 2012.
This will affect families who have an annual adjusted taxable income above the higher income threshold. Families with income above this threshold will have the base rate of Family Tax Benefit Part A reduced by 30 cents in the dollar until entitlement is lost.
Families who lose their Family Tax Benefit Part A payments may subsequently lose eligibility for the Education Tax Refund, Medicare Teen Dental Plan and the lower Medicare Safety Net threshold.
Family Tax Benefit Part B primary earner income threshold
The Family Tax Benefit Part B primary earner income threshold of $150,000 will be maintained at its current level until 30 June 2012.
This will affect families where the primary earner has an annual adjusted taxable income above the income threshold. If a primary earner has income above this threshold, the family will no longer be entitled to Family Tax Benefit Part B.
Baby Bonus family income limitThis will affect families who have a family adjusted taxable income above the income limit. If a family has income above this limit, the family will not be entitled to the Baby Bonus.
The Baby Bonus family income limit of $75,000 in the six months following the birth or adoption of a child (roughly equivalent to $150,000 a year) will be maintained at its current level until 30 June 2012.
From 1 July 2009, Family Tax Benefit Part A maximum rates for 0-15 year olds will be indexed by movements in the consumer price index only. The current benchmarks to the combined pensioner couple rate, which is linked to wages growth, will be removed. This is consistent with indexation of other family assistance payment rates.
Maternity Immunisation Allowance, which is currently indexed twice a year, will be indexed annually on 1 July each year. This will align Maternity Immunisation Allowance with other family assistance payments, such as Family Tax Benefit and the Baby Bonus. The first annual indexation of Maternity Immunisation Allowance will be on 1 July 2010. The most recent indexation was March 2009.
Student Income Support changes
Two changes to Youth Allowance announced in the 2009-2010 Budget will have direct flow-on effects to Family Tax Benefit families with dependent children aged 16 to 24 years.
Youth Allowance Parental Income Test
From 1 January 2010, the Youth Allowance parental income test will be partially aligned with the income test for Family Tax Benefit Part A. This will make the Youth Allowance parental income test more generous and more young people aged 16 to 24 years will be eligible for Youth Allowance, which is paid at a higher rate than Family Tax Benefit Part A.
Youth Allowance age of independence
From 1 January 2010, the Youth Allowance age of independence for full-time students will be lowered from 25 to 22 years in stages over three years.
The age of independence is the age at which a young person receiving Youth Allowance becomes subject to a personal income test only and is no longer subject to a parental income test, in addition to the personal income test. Some Family Tax Benefit Part A children aged 22 to 24 will be better off on Youth Allowance as a result of this change.
Compact with Young Australians
From 1 January 2010, the Australian Government will introduce an education and training requirement for Family Tax Benefit Part A children aged 16 to 20 years who do not already have a Year 12 or equivalent qualification.
A similar requirement will apply for 15 to 20 years olds receiving Youth Allowance.