"The 3 June Senate report on the Paid Parental Leave Bill contains a major error,” Richard Egan, FamilyVoice Australia policy officer, said today.
“The report effectively claims (section 1.85) that most stay-home mums do better on the Baby Bonus and Family Tax Benefit B than paid work mums would do under the Rudd government’s paid parental leave scheme.
"If that were true, you’d wonder why the government is bothering with paid parental leave at all!” Mr Egan said.
“But it is not true. Mums in paid work before the birth of their baby would be thousands of dollars better off under the Rudd scheme than mums who have stayed home to care for older toddlers.
“Close inspection of the examples listed in the report (pp 18, 19) reveals that a key factor – total income tax – has been left out of the analysis,” Richard Egan said.
“The report’s figures take account of tax on Paid Parental Leave payments, but ignore all other tax on income,” Mr Egan said. “We have reworked the examples to include total income tax – and the figures now tell a very different story (see below). A family which receives Paid Parental Leave will be between $4000 and $7000 better off after tax and government assistance are taken into account than a family with the same gross income which receives the Baby Bonus.”
The Senate Community Affairs Committee and its departmental advisers seem to have ignored the fact that double income families enjoy a double tax-free threshold of $12,000. Single income families have just one $6000 tax-free threshold – but Family Tax Benefit B only partly compensates these families for missing out on lower tax rates. So double income families are already ahead, and Paid Parental Leave would increase the gap by an average of $3000.
By ignoring the tax-free threshold difference, the tables on pp 18 and 19 of the report distort the true picture by between $5000 and $8500.
“This is a very big error,” Richard Egan said. “The government is clearly worried by opinion polls showing two thirds of Australians want government-funded paid parental leave to be the same for all mums, whether or not they are paid for the work they do.
“Instead of distorting the evidence and misleading people, the government should remove the ‘work test’ from the Paid Parental Leave Bill so that all mums would qualify,” Richard Egan said. “The party that offers all Australian mums a fair deal will be on an election winner.”
Worked examples below:
EXAMPLE 1: Family income $100,000 second child, born 1 January
At-home mother
Father earns $100,000
Mother has no income
ineligible for PPL
does not work in financial year of birth of child
Baby Bonus: $5,185
Family Tax Benefit Part A: $1,879
Family Tax Benefit Part B: $3,829
TOTAL ASSISTANCE: $10,893
Income tax: $27,500
Total net income after tax and assistance: $84,393
Working mother
Father earns $70,000
Mother earns $30,000
worked full-time until the birth of her second child; eligible for PPL
usual income of $60,000 results in $30,000 earned in financial year of child's birth
Total assistance (net of tax on PPL) =
PPL: $9,788; Tax paid on PPL: $2,725
Family Tax Benefit Part A: $265
Family Tax Benefit Part B: $0
TOTAL (NET) ASSISTANCE:$7,328
Income tax: $19,000 ($16,050 on $70,000 and $2,850 on $30,000)
Total net income after tax and assistance: $89,328
Report claims a family with an at-home mother would be $3,565 better off than a family with a paid work mother.
But on actual net income after tax and assistance, a family with an at-home mother would be $4,925 worse off than a family with paid work mother.
Extent of distortion through use of rubbery figures = $8,490.
EXAMPLE 2: Family income $80,000 second child, born 1 January
At-home mother
Father earns $80,000
Mother has no income
ineligible for PPL
does not work in financial year of birth of child
Baby Bonus: $5,185
Family Tax Benefit Part A: $7,205
Family Tax Benefit Part B: $3,829
TOTAL ASSISTANCE: $16,219
Income tax: $19,200
Total net income after tax and assistance: $77,019
Working mother
Father earns $60,000
Mother earns $20,000
worked full-time until the birth of her second child; eligible for PPL
usual income of $40,000 results in $20,000 earned in financial year of child's birth
PPL: $9,788; Tax paid on PPL: $1,694
Family Tax Benefit Part A: $7,205
Family Tax Benefit Part B: $0
TOTAL (NET) ASSISTANCE: $15,299
Income tax: $14,020 ($12,900 on $60,000 and $1,120 on $20,000)
Total net income after tax and assistance: $81,279
Report claims a family with an at-home mother would be $920 better off than a family with a working mother.
But on actual net income after tax and assistance, a family with an at-home mother is $4,260 worse off than a family with a working mother.
Extent of distortion through use of rubbery figures = $5,180.
EXAMPLE 3: Family income $67,500 first child
At-home mother
Father earns $67,500
Mother has no income
ineligible for PPL
does not work in financial year of birth of child
Baby Bonus: $5,185
Family Tax Benefit Part A: $1,009
Family Tax Benefit Part B: $1,914
TOTAL ASSISTANCE: $8,108
Income tax: $15,262
Total net income after tax and assistance: $60,346
Working mother
Father earns $45,000
Mother earns $22,500
worked full-time until the birth of her second child; eligible for PPL
usual income of $45,000 results in $22,500 earned in financial year of child's birth
PPL: $9,788; Tax paid on PPL: $1,707
Family Tax Benefit Part A: $1,009
Family Tax Benefit Part B: $0
TOTAL (NET) ASSISTANCE: $9,090
Income tax: $9,187 ($7,575 on $45,000 and $1,612 on $22,500)
Total net income after tax and assistance: $67,503
Report claims a family with an at-home mother is just $982 worse off than a family with a working mother.
But on actual net income after tax and assistance, a family with an at-home mother is $7,157 worse off than family with working mother.
Extent of distortion through use of rubbery figures = $6,175.
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Phone: 1300 365 965 (national office)
Website:http://www.fava.org.au/
Categories:
- Government and society
- Family and parenthood
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