Becoming a parent leads to a range of new financial commitments and challenges. Spending patterns will change, as will your financial objectives.
Raising a family is likely to increase living expenses and may mean a reduction in your capacity to work and therefore generate an income.
A financial plan and a sound budget are important tools to create security for your family. You may also be eligible for financial assistance from the Government or your employer to help make ends meet.
The Government recognises the challenges for families and provides assistance to parents in a variety of ways.
This assistance may come in the form of paid leave (or a bonus) when a new baby arrives, ongoing payments to help with the cost of raising children, subsidies for childcare and income support for parents who are unable to work.
The form and amount of assistance you are entitled to receive may depend on your circumstances and financial situation.
Paid Parental Leave
If you are working (either as an employee or self-employed) you may be eligible for the Paid Parental Leave scheme when you have or adopt a new child.
The Paid Parental leave can be paid for up to 18 weeks at the National Minimum Wage rate ($606 per week before tax as at 1 September 2012). This provides income to help pay the bills while you take some time off.
To be eligible you will need to be the primary carer of a new born or newly adopted child, be an Australian resident, have received less than $150,000 of adjusted taxable income in the previous financial year, have met the Paid Parental Leave work test prior to the birth or adoption and be on leave.
Eligibility for Paid Parental Leave does not replace any maternity leave entitlements that you are entitled to from your employer. The Paid Parental Leave can be taken before, during or after any paid or unpaid maternity leave, parental leave or other employer funded leave entitlements.
You need to register with the Department of Human Services (Centrelink) to receive the payments but it will generally be paid through your employer as part of the normal pay cycle.
Dad and Partner Pay
This is a new payment that will help new dads take some time off work to care for a new child and support their partner. It starts on 1 January 2013 for babies born or adopted after this date.
If you are eligible, you can receive up to two weeks of paid leave at the National Minimum Wage rate while you are on unpaid leave from your work.
Eligibility criteria are similar to those for Paid Parenting Leave with a work test, an income test and a residency test.
As an alternative to Paid Parenting Leave you could choose to apply for the Baby Bonus.
This provides a total of $5,000 divided into 13 fortnightly instalments. It is paid to eligible families following the birth of a child or adoption of a child under age 16. You must lodge an application within 12 months of the child’s arrival.
A range of criteria needs to be satisfied to qualify for the Baby Bonus. These include:
You cannot receive the Baby Bonus and Paid Parental Leave, unless you have twins or other multiple birth/adoption. If you meet the criteria for both payments, you can choose which one is the better financial decision for your family.
Family Tax Benefit
The Family Tax Benefit is a regular financial payment to help families with the cost of raising children. There are two parts to the Family Tax Benefit.
Part A is paid for each child or student under age 22. You will need to meet eligibility criteria which include having income below certain thresholds as well as child immunisation and other set criteria. You must have care of the child for at least 35% of the time.
Part B provides additional assistance for single parents and families with one main income. Family Tax Benefit Part B is not paid while you are receiving Paid Parental Leave.
Child Care concessions
Child care concessions can help to make child care more affordable.
The Child Care Benefit may be available to help with costs of long day care, family day care, occasional day care, outside school-hours care, vacation care, pre-school, and kindergarten. It may also help cover the cost of child care provided by grandparents, relatives, friends or nannies.
The amount of Child Care Benefit you receive depends on the amount and type of care you use, your family’s income, the number of children you have in care, and whether you meet the ‘work, training, study test’ (or an exemption applies).
The Child Care Rebate is paid in addition to the Child Care Benefit. If you are eligible, you will be reimbursed for 50% of out-of-pocket child care expenses, up to a maximum amount per child per year.
If you are unable to find a job because you are caring for a child you may be eligible for income support through fortnightly payments of Parenting Payment.
You may be eligible to receive Parenting Payment if you:
The parenting payment is income and asset tested, so please seek a personal assessment from Centrelink. Residency requirements also apply.
You may need to participate in certain activities to get the payment, depending on your situation and the age of your youngest child. The activities could include applying for jobs, taking a course, or working part time.
For most employees maternity leave laws (also known as parental leave) are defined by the Government in the National Employment Standards, although some employment awards specify different conditions.
As a general rule, if you have been employed by your current employer for at least 12 months you can take up to 12 months of unpaid leave. You may be able to apply for an additional 12 months.
Some employers may offer more generous terms and conditions or even paid parental leave. This paid leave can be paid in addition to the Government’s Paid Parental Leave. You should check your employment contract or discuss options with your employer.
If you take parental leave you are entitled to return to work into the position you held before starting your leave. If that position no longer exists due to a genuine restructure you should be offered a role with similar status and pay in the company.
Starting or expanding your family is an exciting time, but the financial responsibilities can be stressful if not planned carefully. We encourage you to seek personal advice to ensure you maximise your entitlements and understand the options available to you.
A financial adviser can help you to understand your entitlements and set you on a plan to financial security. Alternatively you can seek advice and support from Human Services (Centrelink). Human Services provides a lot of useful information and calculators on its website at http://www.humanservices.gov.au/