The baby bonus has been thrown out with the bath water, as part of Treasurer Wayne Swan’s “sensible, calm and responsible” cuts.
Dumping the baby bonus, first introduced by former Prime Minister John Howard, will save the budget $1.1 billion over five years but the measure does not spell an end to middle class welfare for families.
The budget still provides for a host of measures including $22.1 billion over the next four years in direct child care assistance to families through the Child Care Rebate and Child Care Benefit.
Some of the baby bonus money will flow to new family payment arrangements which will start on March 1, 2014, the same date the baby bonus will end.
From then, families eligible for Family Tax Benefit Part A will receive an additional payment of $2,000 for their first child and $1,000 for subsequent children.
The baby bonus currently cuts out at an earnings threshold of $150,000 but the earnings cut off for FTB Part A is $94,316 so the government’s move effectively limits a proportion of high income earner’s access financial assistance for newborns.
Payment will be made as an initial instalment of $500 and the rest paid in fortnightly payments over a three month period.
Families accessing the government’s Paid Parental Leave scheme, which remains untouched, will not be eligible for the additional payments.
In his budget speech Swan justified abolishing the bonus as a sacrifice which had to be made to enable additional funding to education: “You only get to make the big investments if you are willing to make the savings to fund them.”
Scrapping the baby bonus was first mooted in the Henry Tax Review back in 2010 which recommended that “the baby bonus should be abolished and a small supplementary payment made in its place”.
The Henry Tax Review found the baby bonus provides more assistance than is necessary to cover the costs associated with a new child.
“These new arrangements more closely reflect the essential upfront costs of having a baby and better targets assistance now that Australia has a national Paid Parental Leave scheme,” Jenny Macklin, Minister for Families, said in a statement.
*This article was first published at SmartCompany