With no fanfare whatsoever, the Federal Government has launched yet another cruel attack on working families, directly impacting on their finances in the immediate term. The sneaky move, introduced part way through the financial year, will come into effect on 1 January 2017 and has the direct result of increasing the ‘incomes’ of working families, while offering zero tangible benefits and a guaranteed loss in real disposable income.
In a letter distributed this week, Centrelink has advised working Australian families that the way it calculates assessable income will change.
In just a mere two months, Centrelink “will use 100 per cent of your reportable fringe benefits, instead of the current 51 per cent, to calculate your rate” for Family Tax Benefit Part A and Part B, Child Care Benefit, Stillborn Baby Payment, Parental Leave Pay, and Dad and Partner Pay.
What does this mean?
Quite simply, any person who has negotiated in their salary package fringe benefits which exceed a total taxable value of $2,000 in a given Fringe Benefit Tax Year, will now have that total value included as ‘assessable income’ (instead of half) for the purposes of any family payments.
The astonishing increase, from 51% to 100% is not insignificant.
The increase in ‘assessable income’ (with no corresponding increase in actual income) may well be worth thousands of dollars and has the potential to be devastating to the finances of families who have used a perfectly legal mechanism to maximise their salary package and planned responsibly for their family finances.
This is an obnoxious attack on working families and makes absolutely no sense at all.
It doesn’t affect other couples or singles. The change has only a financial detriment to those who already have dependent children (or who are close to giving birth), and the financial consequences are now practically impossible to avoid.
The Government repeatedly insists that it wants women to return to the workforce after having children, it laments the lack of women in senior roles and leadership positions, it bemoans the burden that ‘non-working parents’ allegedly place on the taxpayer.
Yet here is a striking, crystal clear example of the Government deliberately disincentivizing families from attempting to improve their personal financial situations by negotiating favourable deals with employers to better their career prospects while balancing child-rearing responsibilities.
Parents of young children who have no option but to place their children in care if they return to work, are already faced with a huge cost for the privilege (even after Government rebates and benefits), while every dollar they earn goes against them. For many low income families, there is simply no financial benefit at all for both parents to work until children are of school age.
Yet for those who do manage to juggle young children, child care and work, every pay rise or offered promotion or increase in hours comes with the potential of a disproportionate hit to disposable income and the likelihood of tighter margins in which to meet financial commitments.
Responsible families plan and manage the costs, risks and consequences of raising a family and pursuing a career. Responsible families make decisions based on their outgoings and income and expected tax.
And now, the Government has completely changed the boundaries.
Fringe benefits are not the domain of the uber-rich. Ordinary, working families have access to salary packaging and those who do forego cash in place of a car or other type of benefit. And now those same families are being punished for making sound, sensible financial decisions to improve their personal circumstances.
Introduced part way through the year, the change in how income is assessed will impact the entire 2016-17 financial year at tax time. Any family who has, in good faith, honestly declared their income and either received a benefit or rebate, now runs the very real risk of owing Centrelink thousands of dollars in completely unintentional and unavoidable overpayments. This will particularly hit hard those who are just below a payment threshold, meaning they may owe the Government the entirety of any family tax benefit received throughout the entire financial year.
Of course, the Government cares nothing for the impact on working families. This Government has openly, repeatedly and actively attacked new parents and single parents, and has consistently attempted to find ways to reduce payments to the vulnerable, disadvantaged and unemployed. Yet now, even those parents who obtain paid employment to support their children are being actively punished.
The sneaky changes to reportable fringe benefits represent a new low in this Government’s vendetta against ordinary parents who are simply trying to make ends meet and raise a family. The lack of transparency around the changes demonstrates the contempt this Government holds all working families under.
It seems quite clear that the Government places no value whatsoever on working families and is determined to punish them for having a go.