NO.008

INTRODUCTION OF BABY BONUS LEGISLATION

The Government has today introduced legislation to implement its election commitment

to establish a First Child Tax Refund, or Baby Bonus.

The Baby Bonus recognises that one of the hardest times for families, financially,

follows the birth of a first child. A family could lose one of its two incomes

for a period of time as the mother, or father, gives up or reduces paid employment

to care for the child.

This Government has always believed in supporting Australian families.

The Baby Bonus will provide a tax break of up to $2,500 a year, each year for

a maximum of five years. Mothers who have a child on or after 1 July 2001

are eligible to receive the bonus. This is practical, direct assistance toward

the cost of raising children.

This Government has a strong record of providing for families.

Now, once again, we are delivering. The Baby Bonus allows a mother to average

her income for tax purposes. A mother on a salary of $30,000 in the year before

the birth of her baby pays $5,380 in income tax. If she averaged that $30,000

over the five years when she was out of the workforce with a child, then her

income would be below the tax free threshold and she would pay no tax at all.

The Baby Bonus effectively allows her to average her income and claim back

the tax of $5,380 she has paid in five annual instalments of $1,076 each.

To ensure that mothers on low incomes, including those who were not in the

workforce also benefit from the measure, a minimum annual payment of $500 will

be available for those with taxable incomes of $25,000 or less in the year that

they make their claim. Where the mother returns to work and the father stays

at home, the Baby Bonus will be able to be transferred to the father.

Parents returning to work on a part-time basis will still be able to receive

the Baby Bonus, with a reduction according to the income they earn. For example,

if a parent returns to work and earns one-third of the income they earned before

they had the child, the Baby Bonus will be reduced by one-third.

The Baby Bonus will also be available to parents who adopt a child under 5

years of age on or after 1 July 2001. To ensure that families who already

have a child do not miss out, the Baby Bonus will also be available for the

first child born on or after 1 July 2001 for families which already

have children.

The Baby Bonus can be claimed in tax returns from 1 July 2002, or for those

who do not lodge tax returns, on a separate form that will be available from

the Tax Office.

This is targeted help for hundreds of thousands of families. We expect that

around 245,000 mothers and their families will benefit from the Baby Bonus in

the first year, and that eventually it will deliver benefits to some 600,000

families at any one time.

This is the implementation of a solid policy that only this Government has

the credentials to deliver. The Coalition doesn’t just talk about families and

their needs. It delivers.

14 March 2002

Contact: Niki Savva

02 6277 7340