The Government announced in the Budget a change to the upper age limits for a young person to qualify as a dependent child for Family Tax Benefit Part A (FTB-A).[1] The upper age limit is to be reduced to 18 years, or where still in secondary school, the end of the year in which they turn 19. The proposed reduction in the FTB-A qualifying age is estimated to realise $360.9 million over four years.[2]
Background
Currently, for a parent/guardian to qualify for FTB-A, they need to have a qualifying FTB-A child. The upper age limit for a FTB-A child is currently age 21 with some up to age 24 years still qualifying (those who were aged 22 prior to 1 January 2012 and are still continuing a qualifying course of full-time education).[3]
FTB-A is an income supplement payment aimed at helping families with the cost of raising children. For details on the FTB-A criteria see the Centreline information page.[4] The upper qualifying age limit had been set at 24 for a long time and was a carryover from the family assistance payments that preceded FTB, which was introduced in 2000. These payments were Child Endowment and then Family Allowance.
Age of independence
The Gillard Government previously adjusted downwards the maximum qualifying age for a young person to qualify as a dependent child for FTB-A from 1 January 2012. [5] The age was lowered from age 24 down to 21 years in order to align it with changes to the age of “independence” for Youth Allowance (YA)(student) recipients. [6] In turn the change to YA had its origins in the Bradley Review of Education.[7]
The YA maximum age of dependence for students has been gradually lowering from age 24 to 21. As at 1 January 2012, a young person is considered independent once they turn 22. This is important in terms of accessing payments. The age of assumed independence for YA job-seekers has been 21 years for some time. For YA, parental means testing and lower rates of assistance apply to dependent YA claimants.[8] Where a young person is ‘independent’, no parental means testing applies and in some cases Rent Assistance can also be paid.
No longer able to access Family Tax Benefit Part A – accessing Youth Allowance
With the lowering of the FTB-A qualifying age, for those young persons who will no longer be able to access FTB-A, their only real alternative assistance will be to access YA. For some on very low personal and family incomes (family income below $46 355), there will be no difference as they are probably already accessing YA instead of FTB-A as it is paid at a higher rate.
The maximum FTB-A rate for a dependent secondary student aged 16–19 years is $214.06 per fortnight (pf) and for a young person aged 18–21 years (not a secondary student) the maximum rate is $70.56pf. For a dependent young person aged 18 or over, the YA maximum rate is $265.00pf.
However, the parental means testing cut-out limits and taper rates for YA are quite a bit tighter than the means testing that applies to FTB-A. There will be some families whose income would have allowed access to FTB-A, but not to YA, and/or the reduced rate of FTB-A would be higher than the reduced rate of YA.[9] So for an 18–21 year old living at home and entitled to the dependent rate ($265.00pf), no YA would be payable where annual parental income exceeded about $80 900 a year.[10] This contrasts the current FTB-A family income limit of $102,870 for an only child, with higher levels applying if there are other dependent children in the family.
Comment
These changes to FTB-A will now make it the primary form of assistance paid for school-aged and younger children and YA will be the primary payment for those who are older or no longer receiving support from their families. However, in lowering the FTB-A age to age 18, there will be some young persons (and their families) who will not be able to access an alternative payment, or the alternative payment will be less. These will be families where the young person is not considered independent and the family is on higher levels of income. The increase in FTB-A payments announced elsewhere in the Budget will exacerbate the loss to these families.
[3]. Section 22, A New Tax System (Family Assistance) Act 1999, viewed 11 May 2012.
[5]. D Daniels, J Garden, L Buckmaster, P Yeend, Family Assistance and Other Legislation Amendment Bill 2011, Bills digest, no. 145, 2010–11, Parliamentary Library, Canberra, viewed 10 May 2012.
[8]. The rate and means testing applied to a YA claimant is determined by whether they are considered to be dependent or independent.
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