Tax Tips and Benefits for Young Australian Families
Raising a family is an exciting journey, but it comes with financial responsibilities. The Australian tax system offers a range of benefits, offsets, and deductions designed to support young families. This guide breaks down the key things you need to know to maximize your tax return and ease the financial load.
Key Family Tax Benefits: An Overview
The government provides several payments and benefits to help with the cost of raising children. The two primary systems are managed through Services Australia (Centrelink) and the Australian Taxation Office (ATO).
1. Family Tax Benefit (FTB)
This is a two-part payment to help with the cost of raising children.
- FTB Part A: Paid per child to eligible families. The amount depends on your family's income, the number of children, and their ages.
- FTB Part B: Provides extra support for single-parent families and families with one main income earner. It also depends on income and the age of the youngest child.
2. Parental Leave Pay
Provides up to 18 weeks of pay at the national minimum wage for eligible working parents who are the primary carer of a newborn or newly adopted child.
3. Dad and Partner Pay
Provides up to 2 weeks of pay at the national minimum wage for eligible working dads or partners supporting the primary carer.
Important: You must claim FTB through Services Australia, not your tax return. However, you must lodge your tax return for the ATO to perform the necessary "income reconciliation" to ensure you received the correct amount of FTB for the financial year.
Claiming Dependants: What You Need to Know
While you can't claim your children as "dependants" in the same way as in some other countries, there are related tax offsets:
- Invalid and Invalid Carer Tax Offsets: If you care for a child with a disability, you may be eligible for this offset. The rules are specific, so check the ATO website for eligibility criteria.
Common Deductions for Families
You can claim a tax deduction for expenses directly related to earning your income. For families, common claimable expenses include:
Work-Related Childcare
If you and your partner are working, training, studying, or looking for work, you can claim the cost of childcare that enables you to do so. You must use approved or registered care and can claim 50% of your out-of-pocket expenses up to an annual limit.
Home Office Expenses
If you work from home to care for children, you may be able to claim a portion of your running expenses like electricity, internet, and phone usage. Use the ATO's fixed rate method (67 cents per hour) or the actual cost method.
Self-Education
If you are studying a course directly related to your current job to increase your income, you can claim tuition fees, textbooks, and travel. This cannot be for a course that enables you to get a new job.
Golden Rule:
You must have spent the money yourself (weren't reimbursed), have a record to prove it (receipt), and the expense must directly relate to earning your income.
Planning for the Future: Super and Investments
Spouse Super Contributions
If your spouse (including de facto) earned a low income or nothing at all, you may be eligible for a tax offset of up to $540 if you make a contribution to their superannuation fund.
Government Co-Contributions
If you are a low or middle-income earner and make a personal (after-tax) contribution to your super, the government may match it by up to $500. This is a great way to boost your retirement savings while managing a family budget.
Investment Income
Remember, income from investments held in your child's name (e.g., a savings account) is typically taxed at their lower marginal rate, not yours. There are specific rules around this to avoid income splitting.
End of Financial Year Checklist for Families
1. Lodge Your Tax Return
Ensure both partners lodge their returns. This finalizes your income for the year, which Services Australia uses to balance your Family Tax Benefits.
2. Gather Your Records
Collect receipts for work-related childcare, home office expenses, charity donations, and any investment-related documents.
3. Review Private Health Insurance
Ensure your cover is appropriate for your family to avoid the Medicare Levy Surcharge if your combined income is above the threshold.
4. Consider Super Contributions
Look into making spouse contributions or personal contributions before June 30 to potentially qualify for tax offsets or government co-contributions.
5. Update Details with Services Australia
Inform them of any changes in your income, relationship status, or childcare arrangements.
FAQs for Young Families
Q: Do I need to report my Family Tax Benefit on my tax return?
A: No, you do not report the FTB you received as income. However, you must lodge your tax return so the ATO can share your actual income with Services Australia to reconcile your payments.
Q: Can I claim my kids' school fees?
A: Generally, no. School fees are considered a private expense and are not tax-deductible. The only exception might be if the education is specifically related to your current employment and your employer did not reimburse you.
Q: What happens if we overestimate our income to Services Australia?
A: If you estimated your income would be higher than it turned out to be, you will likely receive a top-up payment for your FTB after you lodge your tax return. This is known as a "supplement."
Q: What happens if we underestimate our income?
A: If your actual income is higher than you estimated, you may have been overpaid FTB throughout the year. This will result in a debt that you will have to repay to Services Australia.
Q: We just had a baby. What's the first thing we should do?
A: Register your newborn with Services Australia to claim your Baby Bonus (if applicable) and to get started with Family Tax Benefits. You can do this through your Medicare online account.
Need Help with Your Family Tax Return?
Our tax experts can help you maximize your family's tax benefits and ensure you're claiming everything you're entitled to.
Contact Us