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ACOSS calls for reform of family payments to tackle child poverty: New campaign is launched

23 August 2013

The Australian Council of Social Service today unveiled new modelling detailing a path for making Australia's Family Tax Benefit system fairer - by better targeting payments to families that need support the most and simultaneously reducing poverty.

We've heard very little in this election campaign about poverty and ideas for reforming Australia's complex tax and transfer systems. ACOSS has been arguing for reform of both using the Henry Tax Review as the blueprint," said ACOSS CEO Dr Cassandra Goldie.

"We know there are nearly 600,000 children currently living in poverty in Australia and the recent annual report of the longitudinal study of households (HILDA) showed that it has increased in sole parent familiesby 15% since 2001*. This is simply unacceptable in one of the wealthiest countries in the world.

"Our family payment system performs the vital dual roles of helping prevent child poverty and treating low and middle income families with children fairly by taking account of the costs of raising children in the tax-transfer system. We do not consider assisting low and middle income families with children as ‘middle class welfare'. However, it urgently has to be reformed if it's to prevent even greater levels of poverty.

"The family payment system is in urgent need of repair, having strayed from its primary goals over the past decade and increasingly been used for purposes that are not well targeted, such as the Baby Bonus, the Schoolkids Bonus, and the ‘Part B' payment for single-income couples.

"These two bonuses should be replaced with the savings not to be used to restore the budget bottom line, but instead used to restore the budget bottom line of low and middle income families.

"We want to see the savings from the Baby Bonus rolled into increased Family Tax Benefit A payments for preschool children aged 0 - 4, and the savings from the Schoolkids Bonus put into higher Family Tax Benefit A payments for school age children aged 5-18.

"Under our proposals, modelled by the National Centre for Social and Economic Modelling (NATSEM), around 50% of low income families (about 600,000 thousand families) in the bottom two quintiles would be on average around $1300 a year ( $25 a week) better off.

"Among the bottom 40% of families, three out of four families would receive higher payments. Sole parents, most of whom have low incomes, would particularly benefit with 71% better off.
"This reform, together with our proposed $50 a week increase in Newstart Allowance for single people, would help to offset recent payment cuts for sole parents fully reliant on income support.

"Our modelling using ‘cameos' of low income families with children of different ages shows that half currently fall below the poverty line. We found that three of these families currently below the poverty line (2 sole parent cameos and 1 couple families) would be lifted above the poverty line by the proposed changes.

"We call on the major parties to take the issue of poverty seriously and commit to restructuring the confusing Family Tax Benefits system as part of an anti-poverty plan for our nation.

"In these times of significant economic challenges, and falling revenues, we need to go ‘Back to Basics', with government assistance targeted to those who need it. Our proposals do not complete reform, but they take us in the right direction.

"ACOSS and our members across Australia's community welfare sector look forward to working with all parties and the next government in advancing such reforms," Dr Goldie said.

Media Contact: Fernando de Freitas 0419 626 155

Download report: 'Back to basics: Simplifying Australia's family payments system to reduce poverty and support families'

Have a Heart: Say No to Child Poverty: http://www.facebook.com/Australiahaveaheart.com.au/posts/424765044298653


Summary of NATSEM modelling:

• Half of all low income families in the bottom two quintiles (594,662 families or 50%) would receive increased payments

• Among the bottom 40% of families, three families would receive higher payments for every one that receives lower payments

• Among the top 40%, approximately roughly equal proportions of families would receive higher and lower payments

• The changes particularly benefit low income sole parents with older children and low income couples with younger children

• Among the bottom quintile (those at high risk of poverty) 106,000 sole parents would gain an average of $1,410 a year and 66,000 couples with children would gain an average of $1,179

• Sole parents would particularly benefit - 71% would gain and 14% would receive lower payments, compared to 27% and 21% respectively for couples with children.• Modelling using ‘cameos' of low income families with children of different ages shows that of 16 cameos fully reliant on social security payments half (8) currently fall below the poverty line

• Of these families, 3 (2 of the sole parent cameos and 1 of the couples) would be lifted above the poverty line by the proposed changes

• Overall, incomes of 1,175,000 families (25% of all families) would rise by an average of $1,203 per year

• Incomes of 606,000 families (13%) would fall by an average of $2,316

• Incomes of 2,857,636 families (62%) would be unchanged

 

ACOSS Proposals:

• Replace the Baby Bonus and the School Kids Bonus with increases in the maximum rate of Family Tax Benefit A for preschool and school age children respectively. Current expenditure on the Baby Bonus would go to increase the maximum rate of FTB A for parents of children aged between 0 - 4; and spending on the Schoolkids Bonus would go to increase the maximum rate of FTB A for school age children.

• Replace FTB Part B for sole parents with a Sole Parent Supplement (at a higher rate for parents of older children than the current FTB B) to reflect the higher costs and demands of caring for children as a sole parent.

• Limit FTB Part B for couples with one parent at home caring for children until the youngest child turns 13, and tighten the income test on the primary earner (usually the father) to target this payment to families in greatest need.

• Index family payments to movements in average earnings as well as the CPI.

 

* Correction made on 25 November 2013