Has the Howard Government really boosted working families' incomes, asks John Morrissey.Howard Government boosts the working family's income! This unlikely-sounding scenario is true for single-income families with children and earning low take-home wages.
In fact, the $25,000 a year gross wages of a breadwinner with two children and a carer/spouse, is topped up to $34,253 net, as a result of family tax benefits. This is without taking into account any childcare payments received or the many benefits of the health cards available to those on low incomes.
How often have we heard that the Federal Government should do more for families? You would never guess it from the polls or from the media, but the Howard Government is the most family-friendly administration that Australia has ever known.
Most families with children, and on low to average incomes, receive more money back, cash in hand, than they pay in income tax - and rightly so. By rearing children they are performing the single most vital service for the future of Australia.
Complaints aired in
The Australian in 2006 about such bias towards families, as distinct from singles and childless couples, struck no responsive chord among the population at large.
It is an irony that family assistance payments were introduced by the Keating Government and answered some of the requirements of the homemakers' allowance for which the NCC had long campaigned.
However, these benefits were income-tested and woefully small. By contrast, the Howard Government has increased what is now called Family Tax Benefit A and introduced Family Tax Benefit B, which is not affected by the income of the major breadwinner and is weighted towards children under five years, to some extent encouraging one parent to remain a full-time primary carer.
For this the Government has been criticised by feminists and others who believe that mothers of pre-school children should be encouraged to rejoin the paid workforce.
The following scenarios, based on typical family situations, illustrate the effect of current family tax benefits. The payments have been deliberately skewed to assist single-income families on $40,000 pa and below, and even include a lump sum payment of $646 per child, paid at the end of the financial year, as a buffer against the consequences of families inadvertently underestimating their incomes.
• Scenario A:A single-income family on an annual wage of $40,000 has two children under five years old. They pay $6,450 income tax, but receive $4,318 for each child under Family Tax Benefit A and an additional $3,467 per family under Family Tax Benefit B - a total of $12,103 of tax-free extra income.
• Scenario B:A single-income family on an annual wage of $50,000 has two children aged 5-13 years old. They pay $9,450 income tax, but receive $2,318 for each child under Family Tax Benefit A and $2,511 per family under Family Tax Benefit B - a total of $7,147 in tax-free extra income.
• Scenario C:A family where the main breadwinner is on an annual wage of $60,000 and the primary carer earns an annual $8,000 for part-time work. There are two children aged 5-13 years and one under five years. They pay $12,450 and $300 income tax respectively, but receive for these three children a sum of $5,485 under Family Tax Benefit A plus $2,714 under Family Tax Benefit B - a total of $8,199 in tax-free extra income.
It will be noted that these benefits are weighted towards those families in most need and have the effect of equalising outcomes for low and average single-income families.
By reducing Family Tax Benefit A by 20c per child for every dollar of family income earned over $40,000, and reducing Family Tax Benefit B by 20c for every dollar earned by the primary carer over $4,234, the government is targeting single-income families on modest wages.
In fact, the family with three children described in Scenario C would have an income of only $2,417 more per annum if the main breadwinner earned $50,000 than if he earned $40,000. Shades of John Howard the socialist!
The information used to sketch these scenarios is freely available in the publications and on the website of the Australian Government's Family Assistance Office. Benefits listed above are well known to many and probably taken for granted by some recipients, but they should be acknowledged by all as particularly generous support by the Government and the taxpayer to Australian families who need such assistance.
Of course, many Australian families are hurting, some of them as direct and indirect results of federal and state government policies. Other factors which impact on families include the cost of servicing unrealistic mortgages and paying soaring petrol prices.
Nevertheless, any assessment of the Howard Government's legacy to working Australians must start with its very generous family tax benefits regime.
- John Morrissey. This revised article, posted on June 6, 2007, contains corrected figures for the estimated tax-free extra incomes in the three family scenarios above.
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