The baby bonus will be replaced by increased payments under Family Tax Benfit A.
The government will save $1.1 billion over five years by dumping the Howard government’s baby bonus, in an unexpected hit to so-called middle-class welfare.
The government will phase out the baby bonus from March 1, 2014, and instead increase payments under Family Tax Benefit A. Families will receive $2000 for their first child and $1000 for subsequent children under the changes – far less than the $5000-plus available under the baby bonus.
As previously announced, the government will also abandon an increase to Family Tax Benefit A that had been promised as part of its mining tax package, saving $2.5 billion.
The government has also extended the pausing of indexation of family payments, which will be held at current levels for a further three years. The indexation was originally paused in the 2009-10 budget. This move will save the government $1.2 billion over the forward estimates period to 2015-16.
In a sneaky move, the government will reduce the grace period for claiming lump-sum family tax benefit payments from two years to one, saving $562 million over five years.
The net medical expenses tax offset will be phased out. It provided rebates for out-of-pocket medical expenses, and its abolition will save $963.5 million over the forward estimates.