All rates used are current as at the 22nd of July 2024. These rates change regularly so you should check the most recent amounts on the Services Australia Website.
Introduction
Family Tax Benefit (FTB) in Australia is a government payment designed to help families with the cost of raising children. For those that receive it, it can form a crucial income for the running of the household and ensuring bills are being paid. When separating however this adds further complexity and challenge to the running two households and how children are cared for.
In todays blog I will cover how the Family Tax Benefit payments work, and some key points to note if you are going through a separation or divorce and you either receive the payments, or could receive them.
Family Tax Benefit Payments
It is divided into two parts: Family Tax Benefit Part A and Family Tax Benefit Part B. Each part has distinct eligibility criteria and payment structures.
Family Tax Benefit Part A (FTBA)
Eligibility:
Residency Requirements: The person claiming must be living in Australia and be an Australian citizen, permanent resident, or hold a special category visa.
Care of a Child: The claimant must have care of a dependent child under 19 who is in their care for at least 35% of the time.
Income Test: The combined adjusted taxable income (ATI) of the family must meet certain thresholds. Families earning up to $65,189 receive the maximum rate. The payment decreases as income increases and cuts off entirely at higher income levels, which vary based on the number of children.
Payment Details:
Base Rate: The base rate of payment depends on the age and number of children.
Supplement: An additional annual supplement may be paid after the end of the financial year if income estimates were accurate.
Family Tax Benefit Part B (FTBB)
Eligibility:
Residency Requirements: Similar to Part A, the claimant must be residing in Australia and meet the residency conditions.
Single or Stay-at-home Parent: It is generally for single parents or families with one main income earner.
Child Age Limit: The youngest child must be under 13 years old. If the youngest child is between 13 and 18 years, the claimant must be a single parent or grandparent carer.
Income Test:
Primary Earner: The primary income earner's adjusted taxable income must be $117,194 or less.
Secondary Earner: If there is a secondary earner, they can earn up to $6,789 per year without affecting the payment. The payment reduces by 20 cents for each dollar of income earned above this threshold.
Payment Details:
Amount: The payment rate is higher for families with younger children and single-parent families. It reduces as the secondary earner’s income increases.
Supplement: An additional supplement may be paid at the end of the financial year if the income estimates were correct.
Key Differences Between FTB Part A and Part B
Purpose: FTB Part A is aimed at providing general support for families with children, while FTB Part B is focused on single-income families or those with a stay-at-home parent.
Income Tests: Part A has a family income test affecting eligibility and payment rates. Part B has a primary earner income cap and a secondary earner income test that impacts payment amounts.
Age of Children: Part A covers children up to 19 years old, while Part B typically covers families with a youngest child under 13 years (or up to 18 for single parents).
These benefits are designed to support families in different financial and caregiving situations, ensuring that children receive adequate support regardless of family structure or income level.
How does this impact a Couple going through Separation or Divorce?
The Family Tax Benefits are complex and have so many variables it’s difficult to have a specific impacts, however here are a few key things to look out for in your situation.
Who Cares for the Children (Shared Care)
Even when not members of the same couple can be eligible for FTB, provided that the share of care is between 35% and 65%.
Where possible, the percentage applied to share of care should be determined by either an agreement between parties, or an agreed pattern of care.
Where Centrelink determine this, they will determine the care percentage based on evidence and actual (not agreed) pattern of care. If there is an existing agreement for Child Support it will align with this agreement.
Once a determination has been made to share FTB for a child, eligibility for FTB is continuous for each person, regardless of which person actually has the physical care of the child at any given point in time. This means even if one parent spends a lot more than the agreed time caring for the child/ren the payment remains unless reassessed.
How the payment is split
The FTB payment is split based on the determination above, but a few key notes to this
Where percentage of care is less than 35% person caring for more than 65% of care will receive 100% of the Family Tax Benefit payments.
Where there are 3 or more carers, and one or more is not eligible (less than 35% care) the split is then reallocated between those who have more than 35% of care.
Where the separated couple still live together, and the contribution is fairly equal, the payment will be split 50% each.
The split of care is either agreed upon, or where there is child support, consistant with the Child Support determination.
Where you are already receiving it, how does it change?
In the circumstance where one parent has more than 65% of care (Primary) , one less (Secondary)
The Primary parent could receive the full payment. The Secondary carer would be ineligible.
Where care is split 50% each, Centrelink will split the payment between two parents 50% each.
This payment will need
Remember Centrelink won’t automatically change the payment if they are not made aware of the changes. If one party registered for the payment and has been receiving it into their account, Centrelink will need to be notified to make this change. Where the payment needed to be decreased, this can result in it needing to be paid back.
Importantly, this update cannot be made through self service on your MyGov Login, and must be done via the Families Line (136 150)
Where you are not receiving FTB, how does this change?
In the circumstance where one parent has more than 65% of care (Primary) , one less (Secondary)
Family Tax Benefit A
The Primary carer may now be eligible for this payment or an increase, based on the new circumstances
The secondary carer would not be eligible as they had less that 35% care.
Child Support on FTBA: Child support received can also impact FTBA. Where one party has more than 65% of the care, it’s likely that they would receive child support. You can receive a certain amount of child support without it affecting your FTBA, known as the Maintenance Income Free Area. For a single parent with one child, this amount is $1,960.05 per year. Any child support received above this amount reduces FTBA by $0.50 for every dollar over the threshold.
Family Tax Benefit B
· The Primary carer may now be eligible for this payment or an increase, based on the new circumstances
· The secondary carer would not be eligible as they had less that 35% care.
When should you be considering FTB in the Separation Process?
There is no it depends in this answer. The answer is as soon as you decide to change your situation.
The payments of FTB will impact cash flow of one or both of you once you are separated and as such need to be considered when planning what life looks like post separation and how you allocate your asset pool.
This is an impossible thing to answer broadly given the broad range of situations, however post separation there could be substantial changes to one or both parties situations that require this be looked at. In a similar way to the Family Tax Benefit changes, the above may also be triggers for Child Care Subsidies and Carers Allowance for the Children and it all needs to be addressed together.
In closing
To add to the already difficult process of going through a Separation or Divorce with children, the rules around Family Tax Benefits adds an additional layer of consideration.
Because of the intricacies in this payment (along side other subsidies and payments) it really needs to be looked at on a case by case basis, and should form part of discussions around the separation of assets, child support and future care of the children.
The key is if you are going through a separation or divorce, to look at the likely outcomes of settlement and see how, the changes impact these payments and how that may change the balance of an agreement.
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