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2015-16 Federal Budget – Families

Article By Adam Hurwood | | General News

| Accounting & Tax

The 2015-16 Federal Budget was handed down on 12 May 2015.

One of the key themes of this Budget is increasing support for families. The main measures likely to affect families are outlined below. To ensure you know precisely how you may be affected by one or more of these measures, you should consult your Altitude adviser.

Families Package: Reforms to Child Care System

The Budget contains a package of reforms to child care, details of which are set out below.

Child Care Subsidy

From 2014-15, the Government will provide an additional $3.2 billion over five years to support families with child care needs. This is to help with getting parents back to work, to stay in work, and to undertake education and training or other recognised activities.

From 1 July 2017, a new Child Care Subsidy will be introduced to support families where both parents work. Families meeting the ‘activity test’ with annual incomes up to $60,000 will be eligible for a subsidy of 85% of the actual fee paid, up to an hourly fee cap. The subsidy will taper to 50% for eligible families with annual incomes of $165,000.

No annual cap will apply for families with annual incomes below $180,000. However, the Child Care Subsidy will be capped at $10,000 per child per year for families with incomes of $180,000 or more.

Parents must also do a minimum of eight hours a fortnight of work, study or training to qualify for any child care support.

The income threshold for the maximum subsidy will be indexed by CPI with other income thresholds aligned accordingly. Eligibility will be linked to the new ‘activity test’ to better align receipt of the subsidy with hours of work, study or other recognised activities.

The hourly fee cap in 2017-18 will be set at $11.55 for long day care, $10.70 for family day care, and $10.10 for outside school hours care. The hourly fee caps will also be indexed by CPI.

Also, a new Interim Home Based Carer Subsidy Programme will subsidise care provided by a nanny in a child’s home from 1 January 2016. The pilot programme will extend fee assistance to the parents of approximately 10,000 children. Families selected to participate will be those who are having difficulty accessing child care with sufficient flexibility.

Support for families will be based on the Child Care Subsidy parameters, but with a fee cap of $7.00 per hour per child.

The Child Care Subsidy replaces the Child Care Benefit, Child Care Rebate, and the Jobs Education and Training Child Care Fee Assistance payments that will cease on 30 June 2017.

Immunisation Requirements for Eligibility to Government Payments

From 1 January 2016, children will have to fully meet immunisation requirements (that is be up-to-date with all childhood immunisations) before their families can access subsidised child care payments or the Family Tax Benefit Part A end-of-year supplement.

Exemptions will only apply for medical reasons.

Accessing Parental Leave Pay From Both Employer and Government

From 1 July 2016, individuals will no longer be able to access Government assistance in the form of the existing Parental Leave Pay (PLP) scheme in addition to any employer-provided parental leave entitlements.

Currently, individuals are able to ‘double-dip’ and access Government assistance in the form of PLP as well as any employer-provided parental leave entitlements.

The Government will ensure that all primary carers would have access to parental leave payments that are at least equal to the maximum PLP benefit (currently 18 weeks at the national minimum wage).

This will save the Government $967.7 million over four years through this measure.

End of Family Tax Benefit Part A Large Family Supplement

From 1 July 2016, the Family Tax Benefit (FTB) Part A Large Family Supplement will cease.

Families will continue to receive a ‘per child’ rate of FTB Part A for each eligible child in their family.

Family Tax Benefit Part A Reduced Portability

From 1 January 2016, families will only be able to receive Family Tax Benefit (FTB) Part A for six weeks in a 12-month period while they are overseas.

Currently, FTB Part A recipients who are overseas are able to receive their usual rate of payment for six weeks and then the base rate for a further 50 weeks.

Portability extension and exception provisions which allow longer portability under special circumstances will continue to apply.

Zone Tax Offset to Exclude “Fly-in Fly-out” and “Drive-in Drive-out” Workers

From 1 July 2015, the Zone Tax Offset will exclude ‘fly-in fly-out’ and ‘drive-in drive-out’ (FIFO) workers where their normal residence is not within a ‘zone’. The Zone Tax Offset is a concessional tax offset available to individuals in recognition of the isolation, uncongenial climate, and high cost of living associated with living in identified locations. The specified remote areas of Australia covered by the Zone Tax Offset are comprised of two zones, Zone A and Zone B. In general, Zone A comprises those areas where the factors of isolation, uncongenial climate, and the high cost of living are more pronounced, whilst Zone B comprises less affected areas. The tax offset for ordinary Zone A residents is accordingly higher than the tax offset for ordinary Zone B residents. A special category of zone allowances is available to taxpayers residing in particularly isolated areas (‘special areas’) within either zone.

Eligibility is based on defined geographic zones and residing or working in a specified remote area for more than 183 days in an income year. However, it is estimated around 20% of claimants do not actually live full-time in the zones.

The changes will better target the Zone Tax Offset to taxpayers who have taken up genuine residence within the zones. This will align the Zone Tax Offset with the original policy intent, which was to support genuine residents of zones. For those FIFO workers whose normal residence is in one zone, but who work in a different zone, they will retain the Zone Tax Offset entitlement associated with their normal place of residence.