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Employment Relations

MEDIA RELEASE: MAKING AUSTRALIA’S FAMILY PAYMENTS SYSTEM WORK FOR WOMEN AND CHILDREN

The Brotherhood of St. Laurence 3 mins read

Growing Pains, a new research report from the Brotherhood of St. Laurence (BSL) and the University of Melbourne, has found that the current Family Tax Benefit (FTB) system is not meeting the needs of low-income families, while creating lifelong barriers to women’s economic security in Australia.

Family Tax Benefit (FTB) parts A and B are payments the Federal Government introduced in 2000 to assist eligible families with the costs of caring for children. Paid to the carer of children – predominately women – they play an important role in reducing child poverty in Australia.

Possibly the most complex part of the social security system to understand – even by experts – Family Tax Benefit payments have been tweaked over the past 20 years to a point that they are no longer meeting the needs of the families that rely on them.

For low-income families these payments are a critical lifeline. They contribute over a third of total disposable income for some, keeping parents and children above the poverty line.

When examining the adequacy and complexity of the payments, the Growing Pains report found that:

  • Inadequate payments leave families at risk of poverty. Pauses in the indexation of FTB A and FTB B payments over the past decade have reduced the value of the payment. The benchmarking of FTB A family payments to pension rates, adopted in the 1980s, has also been removed, putting families at risk of financial hardship.
  • Reduced coverage leaves some families missing out. Frequent pauses in the indexation, coupled with adjustments in income thresholds, resulted in payment coverage declining to 46 percent of children aged 0 to 18 benefited from FTB A in 2020-21, a notable decrease from 66 percent in 2000-01.
  • FTB payments entrench gender roles and create a barrier to equity. Women, who comprise the majority of secondary earners in Australian households, are most disadvantaged by the FTB system, with lifelong implications for women’s economic security and gender equity.
  • Complex administration and compliance arrangements create risks. Complex rules have led to high levels of underpayments and debts, causing additional stress for families, with one in five recipients incurring a debt in 2020-21.
  • High Effective Marginal Tax Rates (EMTRs) create a disincentive for paid work. The system's income thresholds mean caregivers (mostly women) moving from unpaid work in the home to paid work can face effective marginal tax rates of up to 80 per cent, making it harder for families to make ends meet.

 

BSL is calling on the Federal Government to take immediate action to improve adequacy and reduce the administrative risks of the current FTB system by reinstating the indexation of FTB in line with pensions, reviewing shared care arrangements and removing the Maintenance Income Test.

The report identifies that broader reform to family assistance payments is also necessary, with further research on the level of family payments required to lift children out of poverty a critical first step. BSL identifies four options for consideration:

  • A single per-child payment that would replace the two-tier system of FTB A and FTB B.
  • A universal per-child payment, which would eliminate the high EMTRs that are generated by the current FTB A and FTB B payments, supporting both work participation and gender equity goals.
  • Child payment eligibility to be based on the individual income of the carer who receives the payment, instead of the joint income of partners.
  • Child payments income to be tested like Parental Leave Pay, ensuring that those with low incomes obtain the maximum benefit.

 

“The system as it stands entrenches outdated gender roles around care and work, discouraging increased workforce participation by secondary earners – particularly those with weaker earning capacity – the majority of whom are women,” says Growing Pains co-author Dr Emily Porter.

“In the current landscape where many employers are actively seeking more workers, implementing simple changes could significantly increase the participation of women in the workforce. This wouldn't just result in a fairer outcome for women seeking employment, but also prove beneficial for the overall economy.”

“We need the Government to urgently recognise and value unpaid care work, while removing work disincentives to adequately support families and children and build women’s economic security over the long term,” Porter said.

Read the full report here.

For media enquiries contact Steph Jones, BSL Communications and Media Manager: 0482 163 395 or steph.jones@bsl.org.au

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