It has been a long time coming, but this week I finally made the time to reacquaint myself with how the Family Tax Benefit really works.
Having spent a good couple of days looking at government and other websites, it is no surprise to me that many parents have found themselves in the unenviable position of having to pay back excess payments.
In recent years there have been so many minor tweaks to the Family Tax Benefit payments and calculations that it is hard to know which numbers and formulae to use.
To confuse matters further, there are even discrepancies between government sites on what the numbers are and how they work. Most of the confusion is simply due to the fact that websites and pages simply haven’t been updated, but sometimes it is hard to tell.
So, what I want share with you in this article are the bare bones facts that are relevant as at today (March 2018).
There may be extra supplements and twists to the calculations that provide you with a better outcome, but what I will discuss here are the core payments.
I will break the article into 4 parts
- What is Family Tax Benefit?
- Who is eligible for Family Tax Benefit Part A?
- How much is Family Benefit Part A?
- How are Family Tax Benefit Part A payments calculated?
Then in next week’s article I will look at Family Tax Benefit Part B
What is Family Tax Benefit?
The FTB is a means-tested fortnightly payment to help families cover the cost of raising children and is broken into two parts:
Family Tax Benefit Part A (FTB A ) is paid on a per child basis. How much FTB A you get is based on your combined family income.
Family Tax Benefit Part B (FTB B) is paid per family and is designed to help single parents or families living on one main income.
The primary income earner’s income determines ‘if’ you are eligible, while the secondary income earner’s income typically determines how much FTB B you are eligible to receive.
Who is eligible for Family Tax Benefit Part A?
You may be eligible for FTB A if you are lucky enough to have one or more of the following:
- A dependent child under the age of 16.
- A dependent child aged between 16 and 20 years old who:-has completed year 12 or an equivalent qualification- is currently undertaking full time education or training in an approved course leading to a year 12 equivalent qualification.-has an acceptable study load, or has been granted exemption from this requirement
- A dependent full-time student aged between 21-24 years old
You will also need to care for the child for at least 35% of the time and as we will discuss in a minute any payments will be calculated based in your combined household income.
How much is Family Tax Benefit Part A?
The maximum rate of Family Tax Benefits are as follows:
Table sourced from the Department of Human Resources – FTB Part A maximum rates
The base rate of FTB part A is $58.66/ft – I will explain what this means in a minute!
Okay so now we know the maximum amount we can receive, let’s look at how the government calculates what you are eligible to receive.
How are Family Tax Benefit Part A payments calculated?
The amount of FTB A you are eligible to receive depends on 3 factors:
- Your household Adjusted Taxable Income (ATI)
- How many darling children you have, and
- How old your children are
Household ATI below $52,706
If your household ATI is below $52,706 then assuming you meet all the other criteria, you will be entitled to receive the maximum rate of FTB A as outlined in the table above.
Household ATI between $52,706 and $94,316
If your household ATI is between $52,706 and $94,316 then then your FTB A payment will reduce by 20 cents for every dollar you earn over $52,706 until your payment reaches the base rate of $58.66.
If you have one child, aged 14 in full time study the maximum FTB A payment you could receive is $237.87 / fortnight ($6938.64 pa) if your household ATI is less than $52,706.
However, if your combined household income is say $70,000 then your FTB A payment will drop by 20 cents for every dollar you earn over $52,706.
The calculation is:
Step # 1 – Subtract $52,706 from your combined household income ($70,000)
$70,000 – $52,706 = $17,294
You are earning $17,294 over the $52,706.
Step # 2 Multiple 17,294 by 20 cents to work out how much your FTB A payment reduces by
($17,294 x 0.20) = $3458.80
Your annual FTB payment will reduce by $3,458.80
Step # 3 Subtract $3,458.80 from the maximum payment $6938.64
$6,938.64 -$3,458.80 = $3,479.84
Your FTB A payment would be $3,479.84 per year or $133.84 / fortnight
Being a bit of a numbers nerd, I put together a spreadsheet using the example above and at just over $79,000 your FTB A payment would hit the base rate of $58.66 / fortnight.
Then from $79,000 to $94,316 income you would stay on the base rate of $58.66 /ft.
Household ATI’s over $94,316
Now this is where it gets a little bit confusing.
Once your income exceeds $94,316 the Government will use two tests to determine your payments. You will the receive whichever is higher of the two tests.
This first test is similar to the test used if you earned between $52,706 and $94,316.
For every dollar you earn above $52,706 your payment will reduce by 20 cents however instead of stopping at the base rate, the taper continues until your payment reaches $0.
If you have 3 teenage children, the maximum payment you could receive would be $20,815.95 pa which is simply 3 x $6,938.65 pa.
However, if you have a household ATI of say $120,000 your payment would reduce by 20 cents for every dollar you earn over $52,706.
$120,000 – $52,706 = $67,294 (this is how many dollars you earn over $52,706)
67,294 x 20 cents = $13,458 (this is how much your payment would reduce by)
$20,815 (maximum payment) – $13,458 (reduction) = $7,356 pa
Under Test #1 with 3 teenage children and a household ATI of $120,000 your potential FTB A payment would be approximately $7,356pa
The second test starts at the base rate of $58.66/ft per child then reduces by 30 cents for each dollar of income you earn over $94,316. This applies until your payment is nil.
Using the same example I used for Test #1.
You have 3 teenage children at school and a household ATI of $120,000.
This test says that at $94,316 your FTB A payment is the base rate $58.66/fortnight per child which for three children is equivalent to $4,575.48
Then for every dollar you earn over $94,316 your payment will reduce by 30 cents.
So if we do the calculations:
$120,000 income – $94,316 = $25,684 (this is how many dollars you earn over $94,316)
25,684 x 30 cents = $7,705 (this is how much your payment would reduce by)
$4,575 (base rate payment 3 kids) – $7,705 (reduction) = -$3,130
Using Test #2 your payment on $120,000 with 3 teenagers would be $0
In fact, using this test the FTB A payment would cut out at approximate $110,000.
Fortunately, as I outlined above the government will apply whichever test is most advantageous to you which in this example would be Test #1.
The chart below from the Department of Human Services shows what income level your FTB A would cut out based on the number and age of your children:
Source – Department of Human Services – Annual Income Limit for FTB A
I hope this makes sense and that from the outline I have provided you have a better idea of how the Family Tax Benefit Part A is calculated. There may as I have said above be additional supplements that you are entitled to, but these are the core calculations.
Two warnings I would give at this stage:
Firstly, if you are looking for more information on the Family Tax Benefit, just make sure the information is up to date as of this financial year. I have found numerous blogs and information sites including official Australian Government sites where the information is 2-3 years out of date.
Secondly, if your household ATI is close to the cut-off thresholds you are better off taking any Family Tax Benefit payments annually and retrospectively, rather than taking the payments fortnightly and risking overpayment.
So to sum it all up
- The FTB is a means-tested fortnightly payment to help families cover the cost of raising children and is broken into two parts: FTB Part A and FTB Part B.
- FTB Part A is paid on a per child basis, how much FTB A you get is based on your combined family income.
- FTB Part B is paid per family and is designed to help single parents or families living on one main income.
- To be eligible for FTB Part A the child needs to be in school or approved full time study and in your care for at least 35% of the time.
- The maximum rate of FTB Part A is $182.84/ft per child for children under 12 years of age.
- The maximum rate of FTB Part A is $237.86/ft per child for children 13-19.
- The Base Rate ATI is $58.66/ft per child
- FTB Part A is means-tested and is based on your household Adjusted Taxable Income (ATI)
- If your household ATI is below $52,706 and you meet at the other criteria you should potentially receive the maximum payment per child.
- If your household ATI is between $52,706 and $94,316 then then your FTB A payment will reduce by 20 cents for every dollar you earn over $52,706 until your payment reaches the base rate of $58.66/ft per child. Once you hit the base rate your payment will be fixed at $58.66/ft until your household ATI exceeds $94,316
- Once your income exceeds $94,316 the government will use two tests to determine your payments. You will the receive whichever is higher of the two tests. The government will apply whichever of these test is most advantageous to you.
– Test # 1 For every dollar you earn above $52,706 your payment will reduce by 20 cents however instead of stopping at the base rate, the taper continues until your payment reaches $0.
– The second test starts at the base rate of $58.66/ft per child then reduces by 30 cents for each dollar of income you earn over $94,316. This applies until your payment is nil.
- This article was written in March 2018 as far as I can tell both the formulae and numbers I have outlined above will be relevant until 1 July 2019.
I hope this article has been useful – as always if you have any questions or comments please do not hesitate to send me an e-mail or leave a comment.
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Keep an eye out for next week’s blog where I will discuss the equally confusing Family Tax Benefit Part B.