You Talk - Baby bonus

Christie asks: My partner and I are planning on starting a family soon and have heard the baby bonus will be abolished. How will this impact us?

Hi Christie,

There’s a lot going on in this space and many things to consider. Importantly:

• the Government has announced the Baby Bonus, which currently provides a tax-free payment of $5,000, will not be abolished until 1 March 2014

• eligible parents will continue to have the choice of receiving the Baby Bonus or Paid Parental Leave (PPL) until that date, and

• the Government estimates more than 85% of families are better off claiming PPL because, even though it’s taxable, the pre-tax benefit is over $10,000.

If you think your child will be born before 1 March 2014, you may want to use the Government’s on-line estimator to see which of these two benefits would provide the best outcome.

If the PPL scheme continues in its current form after 1 March 2014 and you are one of the estimated 85% of Australians who are better off claiming it, then the removal of the Baby Bonus will have no impact on you.

Finally, the Government has proposed that the Baby Bonus will be replaced by an increase in Family Tax Benefit – Part A of $2,000 for the first child born after 1 January 2014 and $1,000 for each subsequent child.

At this stage, the Government has only provided limited information on the proposed changes and the detailed rules will not be known until legislation is introduced and passed.