Youth payments widened in budget, but family tax benefit cuts go ahead

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Joe Hockey makes increased childcare spending a central feature of his budget at an estimated cost of $3.2bn

Joe Hockey said he wants to make the system ‘simpler and ensure childcare is more affordable, accessible and flexible’. Photograph: Dominic Lipinski/PA
Joe Hockey said he wants to make the system ‘simpler and ensure childcare is more affordable, accessible and flexible’. Photograph: Dominic Lipinski/PA
Political correspondent

Last modified on Tue 13 Mar 2018 13.17 EDT

The Abbott government has moved to improve access to youth payments for some families, softening the blow of last year’s controversial changes to family tax benefits that are stalled in the Senate but remain as Coalition policy.

The government has placed increased childcare spending as a central feature of its second budget, delivered on Tuesday evening.

The extra spending – announced in advance on Sunday – is estimated to be $3.2bn over five years and includes an overhaul of the existing complicated system of childcare subsidies from July 2017.

The government has also earmarked $328m extra to provide targeted support for disadvantaged or vulnerable families accessing childcare.

But the government’s cost-of-living pitch was undermined by its determination to push ahead with last year’s proposed changes to family tax benefits that would affect hundreds of thousands of households.

About 573,000 families could stand to lose family tax benefit (FTB) part B, if the government succeeds in passing stalled legislation to stop such payments to families whose youngest child is six years or older, according to evidence provided to Senate estimates committee hearings.

The foregone payments would be up to $105 a fortnight or $3,091.55 a year, raising the government $1.9bn over four years.

The government last year also banked savings of $2.6bn by freezing FTB payment rates for two years, which a committee was told would affect all 1.7m families receiving FTB payments.

Hockey said the government ‘listened and learned’ on unemployment benefits. Link to video Australia confirmed on Tuesday that these FTB changes remained as government policy, but the budget also contained some new measures that would provide more generous means-testing arrangements for youth payments.

The new tweaks – estimated to cost the budget $263m over five years – will provide more support for families with dependent young people who qualify for certain income support payments such as youth allowance, ABSTUDY living allowance and the assistance for isolated children scheme.

From January 2016, families with dependent children receiving income support payments would no longer be subject to the family assets test, prompting 4,100 people to qualify for youth allowance for the first time.

They would also not be subject to the family actual means test, benefiting 6,060 people, officials said. They said a separate change to parental income tests in July 2016 would increase payments to 13,700 families and ensure that 5,800 became eligible for youth allowance.

The budget also revealed a further $42m saving from FTB part A by reducing the amount of time it would be paid to recipients who were outside Australia. Currently, people can receive their usual rate of payment for six weeks and then the base rate for 50 weeks, the budget papers said. But the new measure would prevent families from receiving FTB part A for any more than six weeks in a 12-month period while they were overseas.

The government will axe the additional the FTB A supplement large families, saving the budget $177m over four years.

In his budget speech, the treasurer, Joe Hockey, focused on the extra funding for childcare, saying the government wanted to “make the system simpler and ensure childcare is more affordable, accessible and flexible”.

“A nation that lives as a family must help to strengthen and support all of its families,” he said.

“We want to give parents a choice about work, and by investing this money we are responding to the demands of 165,000 parents who want to work more, but are prevented from doing so by the current costly and complex scheme.”

The prime minister, Tony Abbott, and the social services minister, Scott Morrison, announced the details of the childcare package on Sunday.

The main element is the introduction of a new child care subsidy, which replaces existing multiple payments including the child care benefit and child care rebate.

From July 2017, families that meet an activity test with income 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 down to 50% for families with annual incomes of $165,000. The subsidy will be capped at $10,000 per child per year for families with incomes of $180,000 or above, but there will be no such annual cap for families with income below $180,000.

The impacts will vary depending on family circumstances, so the Department of Human Services is planning to contact families directly “to provide information on current entitlements and how they may change under new arrangements”.

One of the glossy documents accompanying the budget provided some examples of beneficiaries of the childcare package.

A family with two parents and two children could receive $3,700 more in assistance in 2017-18, based on a combined family income of $115,000, the document said. The two children would be attending long day care three days a week.

The government also confirmed on Sunday that it would rein in government-funded paid parental leave entitlements when people were receiving additional benefits from their employers. These changes are estimated to affect 80,000 people.

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