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.