Family FUNdamentals: Discovering the Tax Benefits for Parents
Oct 13, 2023
Sing it with me… we are family!
Tax time may sound like a snooze-fest, but hold on tight because we're about to reveal a treasure trove of tax benefits designed especially for parents like you. We get it – raising a family can be expensive, but did you know that the Australian tax system has some fantastic perks to give your wallet a break? (it’s about time, we know)
From saving on childcare costs to getting extra support during parental leave, let's dive into the world of Australian tax benefits and make tax time a little less daunting, and a lot more rewarding for your family.
This blog will cover:
- Family Tax Benefit
- Child Care Subsidy
- Paid Parental Leave
Family Tax Benefit (FTB):
Cue the confetti because the Family Tax Benefit is here! This benefit comes in two parts – FTB Part A and FTB Part B – and can put some extra dollars in your pocket to help with the cost of raising your mini-me's.
Family Tax Benefit Part A:
- FTB Part A is a payment provided to help families with the cost of raising children. It is means-tested and based on your family's income and circumstances.
- It is available to eligible parents or carers who have a dependent child or children under the age of 19 (or 21 if the child is in full-time secondary education).
- The payment is usually made fortnightly, directly into the bank account of the person responsible for the day-to-day care of the child.
- The amount of FTB Part A you receive depends on factors such as your family's income, the number of children you have, and their ages.
- There are higher rates for families with younger children and additional supplements for certain circumstances, such as large families or families with children with disabilities.
Family Tax Benefit Part B:
- FTB Part B is an additional payment targeted at single-parent families, non-working partners, or families with one main income earner. It aims to provide extra support to families who may have limited or no workforce participation.
- To be eligible for FTB Part B, you need to meet certain criteria, including having a dependent child under 13 (or 18 if they are a full-time student) and being a single parent or having a partner who meets the income and work-related requirements.
- The payment amount for FTB Part B is also means-tested and dependent on the income of the primary earner in the family.
- FTB Part B is usually paid fortnightly, in addition to any Family Tax Benefit Part A payments you may receive.
- It's important to note that the rates and eligibility criteria for FTB Part A and Part B can change over time. It's recommended to visit the Australian Government's Department of Human Services or the Australian Taxation Office websites for the most up-to-date information and to determine your specific eligibility and entitlements for Family Tax Benefit.
Here are the general requirements to be eligible for Family Tax Benefit (FTB):
(true at date of writing - 2023)
- Child Eligibility: You must have a dependent child or children who are under the age of 19 (or 21 if they are in full-time secondary education).
- Care and Responsibility: Family Tax Benefit can be shared between you and other carers depending on how much care you and another person provide for the child/ren. You can read more about that here.
- Income Test: There is an income test to determine eligibility for FTB Part A and the payment amount. The income thresholds vary based on the number of children in your family. The income test considers both your family's adjusted taxable income and the income of your partner (if applicable).
- Residency: You and your child must meet Australian residency requirements. Generally, you must be an Australian resident, permanent visa holder, or have an eligible visa.
- Immunization: To be eligible for FTB Part A, your child must meet immunization requirements unless they have an approved exemption.
- Lodging a Claim: You need to lodge a claim for Family Tax Benefit with the Australian Government's Department of Human Services. This can typically be done online or through other approved methods.
Family Tax Benefit Part A
The Bennett Family:
The Bennett family consists of Kim and Sam, who are married, and they have two children, Rue (10 years old) and Gia (6 years old). Kim works full-time, earning an annual income of $90,000, while Sam works part-time, earning $30,000 per year.
Based on their income and the ages of their children, the Bennett qualify for the following rates for Family Tax Benefit Part A:
Kim: $186.20 per fortnight
Sam: $186.20 per fortnight
This means that every fortnight, the Bennett family receives a total of $372.40 for Family Tax Benefit Part A. Over the course of the year, their annual benefit from FTB Part A amounts to $9,684.40. This additional financial support helps the Thompsons manage the costs of raising their children.
Family Tax Benefit Part B
The Vaughn Family:
The Vaughn family consists of Jules, a single mother, and her son, Jack, who is 9 years old. Jules works part-time and earns an annual income of $40,000.
As a single parent and the primary caregiver for Jack, Jules is eligible for Family Tax Benefit Part B. The amount she receives for FTB Part B is means-tested and based on her income. Let's assume Jules receives a fortnightly payment of $150 for FTB Part B.
This means that Jules receives an additional $150 per fortnight through Family Tax Benefit Part B, providing her with an annual benefit of $3,900. This extra financial support assists Jules in providing for her child and helps to ease the financial strain of being a single parent.
These examples demonstrate how Family Tax Benefit Part A and Part B can provide valuable financial assistance to families in different situations.
Child Care Subsidy (CCS):
Calling all busy parents juggling work and child care – the Child Care Subsidy is here. It’s never enough, we know, but every bit counts… right? This subsidy helps eligible families cover the costs of approved child care services.
Here are the general requirements to be eligible for the Child Care Subsidy (CCS):
- Age of Child: The child must be 13 years or under and not attending secondary school, unless an exception applies.
- Approved Child Care: The child care service must be an approved child care provider. This includes long day care, family day care, outside school hours care (OSHC), and in-home care.
- Work, Training, or Study: The parent(s) or guardian(s) must be undertaking work, training, study, or other recognized activities. This includes activities such as paid work, self-employment, unpaid work in a family business, studying, training courses, volunteering, or looking for work.
- Immunization: The child must meet immunization requirements, unless an exemption applies.
- Residency and Citizenship: The child and their parent(s) or guardian(s) must meet residency and citizenship requirements. Generally, they must be an Australian resident, permanent visa holder, or have an eligible visa.
- Meeting CCS Activity Test: The amount of subsidy received is based on the family's level of activity, assessed through the CCS Activity Test. The more hours of work, study, or recognized activity undertaken by the parent(s) or guardian(s), the higher the subsidy rate.
- Combined Family Income: There is an income test that determines the percentage of subsidy a family is eligible to receive. The subsidy rate gradually reduces as the family's income increases.
Let's crunch some numbers to see how it can make a real difference:
Example: The Smith family has two children attending an approved child care service. Their total weekly child care fees add up to $500, amounting to $26,000 per year. Based on their annual income of $80,000, they qualify for a Child Care Subsidy percentage of 75%. That means they can receive an estimated subsidy of $19,500 per year! With this support, the Smiths can afford quality child care without putting as much strain on their budget.
Paid Parental Leave (PPL):
Attention all new parents – this one's for you! The Paid Parental Leave scheme is your golden ticket to some much-needed time off work to bond with your little bundle of joy.
Let's see how it can provide both emotional and financial support:
Example: Imagine the Garcia family – Maria, the mother, is employed and plans to take parental leave after the birth of her child. With an average weekly income of $1,000, she is eligible for the Paid Parental Leave scheme. Under this scheme, Maria can receive up to 18 weeks of pay at the National Minimum Wage, which currently amounts to $772.60 per week before tax. That means she could receive a total of $13,906.80 before tax, helping to ease the financial strain during those precious early months of parenthood.
If you are self-employed, it can be a bit of a process to apply and validate income figures, so please speak to your accountant if you need help.
Here are the general requirements to be eligible for Paid Parental Leave (PPL):
- Work Test: You must have worked continuously for at least 10 of the 13 months prior to the birth or adoption of your child, and for at least 330 hours in that 10-month period. The work can be part-time, full-time, casual, or self-employment.
Keeping track of hours worked can help with home office deductions too!
- Income Test: There is an income test to determine eligibility for Paid Parental Leave. The primary claimant's individual adjusted taxable income must be $150,000 or less in the income year before the date of birth or adoption of the child.
- Residency and Citizenship: You must be an Australian resident and meet the citizenship requirements. Generally, you must be an Australian citizen, permanent visa holder, or have an eligible visa.
- Parental Responsibility: You must have the primary responsibility for the care of the newborn or adopted child.
- Not Returning to Work: You must not be working during the period you wish to claim Paid Parental Leave. However, you may be eligible if you are on leave or not receiving any income from employment during that time.
- Claim Timing: It is recommended to lodge your claim for Paid Parental Leave as soon as possible. Claims can be lodged up to 3 months before the expected date of birth or adoption, or within 52 weeks of the birth or adoption if you meet the work test.
Get Those Family Tax Benefits: Make sure you claim all the Family Tax Benefits you're entitled to. Check the rules so you can ensure you're getting the maximum help for your family.
Cash in on the Child Care Subsidy: You can get some serious savings on child care costs! Make sure you're signed up for the Child Care Subsidy. Just give them the right info, and you'll be counting the savings.
Boost Your Spouse's Super: Help your partner's retirement savings and lower your taxes at the same time. It's like hitting two birds with one stone! Consider contributing to their superannuation. Double the benefits!
Generosity Pays Off: If you're feeling generous and making donations, keep a record of them. You could score some tax deductions while supporting causes you care about. It's like giving back and getting something in return. Sweet deal!
Remember, these tips are just friendly pointers, and it's always good to chat with a tax pro to make sure you're getting all the tax-saving goodies that suit your family's situation. By being in the know, you'll be able to keep more money in your pocket and have a little extra to enjoy those family adventures!
Happy tax time, super-parents!
SOURCES | FURTHER READING
Family Tax Benefit
Child Care Subsidy
Paid Parental Leave
Deductions and offsets