Growing pains: Family Tax Benefit issues and options for reform

Miranda Stewart, Emily Porter, Dina Bowman and Emily Millane

How can the Family Tax Benefit (FTB) better meet the needs of today’s families?

At a glance

The Australian family payments system needs reform to ensure that it achieves the right balance between providing adequate income support for families with children, properly valuing unpaid care work in the family, gender equity and paid workforce participation. This report looks at the history and present state of FTB, uses cameos to illustrate issues with the current system and offers guidance for future reform.

Dive deeper

Payments to support families with the cost of raising children have existed in some form in Australia for over a century, with payments initially supplementing the family wage, which underpinned the male breadwinner model of work and care. They have changed from a universal structure to one that is more targeted, with increasing generosity for those deemed most in need, while removing the benefits for middle and higher-income families. However, the current Family Tax Benefit (FTB) system is not meeting the needs of today’s families. Declining adequacy, tightened eligibility and an overly complex administrative system have left many children and their carers with inadequate support.

Issues and concerns identified in this study

  • Reduced coverage and adequacy leave families at risk of poverty
  • Complex administration and compliance arrangements create risks
  • Effective marginal tax rates (EMTR) create a disincentive for paid work
  • FTB payments entrench gender roles and create a barrier to equity

Reform options

To foster discussion about the reform of family payments, we offer four potential approaches to reforming the payment structure and income testing of family assistance payments in Australia:

  • Option 1: A single per-child payment that would replace the two-tier system of FTB A and FTB B with a single per-child payment.
  • Option 2: 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.
  • Option 3: Individual tax or taper for child payment based on the individual income of the carer who receives the payment, instead of the joint income of spouses.
  • Option 4: Income test and taper like parental leave pay (PLP), ensuring that those with low incomes obtain the maximum benefit.

Last updated on 4 December 2023