Australia could teach us a lesson in family tax credits

It seems bewildering that we look to Australia for other policy models but we rarely ask: "What do they do for children?"

CPAG has just posted a background paper by two Australian experts in social security that suggests we have much learn from their family tax credit design:

OZ JUST DOES IT BETTER: A comparison between Australian and New Zealand family tax credits, written by Dr Ben Spies-Butcher and Dr Adam Stebbing of Macquarie University.

Australia’s family tax credit system is similar to our Working for Families but it is more generous, less complex, far more effective in meeting need and more efficient.

In Australia the main payments are Family Tax Benefit Part A (FTBA) and Part B (FTBB). In New Zealand they are the Family Tax Credit (FTC) and the In-work Tax Credit (IWTC) (collectively called Working for Families).

Neither of these two payments are denied to low-income families in Australia that do not meet paid work criteria.

In Australia the maximum FTBA fortnightly payment for each child under 13 is $208 (AUD). In New Zealand for one child it is $184 (NZD) and only $130 (NZD) for subsequent children.

Families on benefits in Australia are not excluded from the second payment called the FTBB which is worth a fortnightly maximum of $166 (AUD) for a child under 5, which compares to New Zealand where families on low incomes who are on benefits or who do not meet the hours of work required do not get the IWTC of $145 a fortnight.

So a low-income one-child (who for the sake of example is aged under five) family  in Australia can have $394 a fortnight compared to some getting $329 in New Zealand while the poorest get only $184.

The thresholds of income under which the full amount is paid are much higher in Australia and the percentage loss for earning an extra dollar is only 20% until high incomes are reached. (In New Zealand the threshold is low and falling over time.)

And there are a host of other features that make Australia’s scheme much more simple, attractive and effective in meeting poverty objectives.