Opinion & Commentary

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Government funding of families a puzzle

Trisha Jha | Newcastle Herald | 08 August 2014

The federal government helps families with the costs of raising children through the family payments system. Every year, some $32billion is spent on programs like the Family Tax Benefits, the Schoolkids Bonus, childcare fee subsidies, parenting payments and paid parental leave.

But are families really well served by this system?

Complexity poses a serious problem. Each program has different sets of eligibility criteria and means testing, so navigating the requirements is a hefty task.

For many families, Parts A and B of Family Tax Benefits (which are payments to assist with the costs of children) overlap. Because both reduce as income increases, any rise in income has a cumulative impact. The Child Care Benefit (which helps families with childcare fees) reduces in a similar way. Then there’s the interplay between these payments and a family’s tax liability.

These complexities render it difficult for families to make decisions about work and the responsibilities of children, because they cannot easily weigh up the best options to suit their specific circumstances.

After having children, it’s incredibly hard for families to work out what the return is on picking up additional shifts at work or increasing the number of days at the office. In most cases, it is the secondary earner – usually, but not always, the mother – who suffers most acutely from the disincentives to work.

Decisions about balancing work and children are fundamentally the prerogative of parents. Each family is best placed to determine what sacrifices they are willing to make – time, money, a particular lifestyle – for the kind of balance they want. 

But government policy should not actively constrain families from making those decisions.

The government has made much of the need to bring the budget back under control and secure the country’s economic future across the medium term by increasing female labour force participation.

These are both sound goals, but the means of realising them is somewhat confused. 

The government needs to decide what the system of family payments is for. Is it to provide children with a basic minimum standard of living? Is it to recognise the social benefits of children? Is it to create incentives to participate in the workforce? These questions have not been answered in a consistent manner for quite some time. 

Then, policy should be reformed accordingly so that it’s simple, predictable and fair. Simplifying family tax benefits and streamlining childcare subsidies are a good starting point.

Reform of the system cannot be piecemeal. Over time, new programs have been added without tackling the structural issues. 

This in part has caused the current complicated state of affairs. Though the Senate seems intent on fighting the government on the Schoolkids Bonus, it’s only one small part of a larger, opaque system that strongly influences the choices families can make. 

It’s tempting to think that the right outcomes can be achieved by trimming some spending here and adding a new program there. But the problems with our family payments are systemic, and so any attempt to fix these problems must be systemic too. 

Trisha Jha is a policy analyst at The Centre for Independent Studies and author of the report Complex Family Payments: What It Costs The Village To Raise A Child.