NO.089

FIRST CHILD TAX REFUND

The balance between work and family forms a key pillar of the Coalition’s

third term agenda.

While assistance to families has been one of the Government’s key achievements

since being elected, we have even further plans to improve the living standards

of Australian families.

One of the hardest times for families, financially, comes on the birth of

a first child. Typically, a family loses one of its two incomes for a period

of time as the primary carer (usually the mother) gives up, or reduces, her

paid employment to care for her child.

If re-elected, the Coalition Government will introduce a First Child Tax Refund.

This refund will pay back to mothers who leave the workforce after the birth

of their first child, tax paid on their income earned in the year prior to the

birth of the child.

The repayment of the tax would occur over a five year period. For example,

a mother who worked in a job paying $30,000 in the full year before giving birth

would have paid $5,380 in tax. Under the new First Child Tax Refund, this mother

would have her tax refunded at $1,076 per year over a five year period while

she was out of the workforce.

To ensure that low income taxpayers and mothers who were not in the workforce

(and therefore did not pay any tax in the year prior to the birth of their first

child) also benefit from the measure, a minimum annual credit of $500 will be

available.

The annual value of the First Child Tax Refund will reduce proportionately

if mothers subsequently return to work over the five year period.

The refund will be paid up to a maximum of $2,500 per year, or up to $12,500

in total, corresponding to the tax paid on an income of $52,666.

The First Child Tax Refund will be introduced from 1 July 2002 and will apply

to first children born on or after 1 July 2001.

The proposal will apply to the birth of a first child. However, transitional

arrangements will entitle a family to receive the refund for their first child

born on or after 1 July 2001 (notwithstanding that these families may already

have children).

The First Child Tax Refund will be claimed on assessment. It will be provided

in addition to the current family tax benefit payments and will not be counted

as income for the purposes of any government benefit. The rebate will not be

means tested on the husband or partner’s income.

Approximately 245,000 mothers and their families will benefit from the bonus

in the first year, rising in subsequent years to around 900,000 by the fifth

year.

After the transitional arrangements wash through, it is expected that the

scheme will deliver benefits to some 600,000 mothers at any one time.

MELBOURNE

28 October 2001