Families will feel the squeeze
Craig and Kristy Nugent with their children, Rori, left, Mason and Marlee. Picture: Ben Crabtree /The West Australian

Stay-at-home mums will be stripped of family benefits under a plan by Tony Abbott to force them back to work.

And every family that receives family tax benefits - about 1.7 million - will have a cut to their payments as the coalition freezes or reduces rates for two years.

Building on Labor's past efforts to wean people off welfare, the Abbott Government will slash spending on family benefits by almost $8.3 billion over five years and effectively make an income of about $100,000 the new cap for handouts.

And in a break with the John Howard era, the Abbott Government is gutting the former prime minister's cherished Family Tax Benefit Part B payment, which was introduced to allow mothers to stay at home and raise children.

But from July next year, families will lose FTB-B when the youngest child turns six, costing them up to $3018 a year. Existing recipients with children aged six or older will be entitled to the payment until 2017.

Low-income single parents affected by the loss of FTB-B will get an extra $750 a year for each child aged between six and 12 to help buffer them.

About 140,000 families - just under 10 per cent of FTB-B recipients - will also lose up to $4171 in payments altogether when the income test for the main breadwinner is slashed from $150,000 to $100,000.

These changes combined save about $3 billion.

Family Tax Benefit Part A recipients will also see their payments reduced.

Payment rates - now worth up to $172.20 a fortnight for each child under 12 and $224 a fortnight for each child aged 13-19 - will be frozen for two years instead of rising in line with inflation. FTB-B payment rates will also be frozen.

For an average family, the freeze means they will miss out on an increase of about $4 a child a fortnight. The move saves the Government $2.6 billion over four years.

The end-of-year FTB supplements - designed to help families avoid a Centrelink debt in the event they underestimate their income - will also be reduced from $726 a child to $600 from July next year. The FTB-B supplement will fall from $354 a family to $300.

In other changes to family payments, the existing pause on indexing the upper income cut-offs that determine eligibility for FTB will be continued for another three years. About 8000 families will lose all their payments as their incomes rise.

And in a sting for 320,000 low-income families, the threshold for the maximum rate of FTB-A will be frozen at $48,837 from July, costing them $263 in 2014-15 and rising to $744 in 2016-17.

All families will also see the base rate payment of FTB-A - worth $55 a child per fortnight - reduced when their income hits $94,316, irrespective of how many children they have. Currently families can earn an extra $3796 for each child after the first without affecting the base rate.

The Large Family Supplement will be limited to families with four or more children from July next year, instead of families with three or more children. It will affect 380,000 families and cost them $313 a year. The clean energy supplement, introduced to compensate households for price rises caused by the introduction of Labor's carbon tax will also be frozen. For a family with two young children and both parents earning a combined $82,562 a year now, they get $5136 in government payments.

By 2016-17, as their income rises in line with average wages to $90,000, they will receive $4222 in payments - $914 less - because of the changes, which also include scrapping the schoolkids bonus. But the Government argues this family's total household income after tax and payments will grow $3768 over that time to $79,228.

Budget papers say assistance for raising families should be limited once children were at school to act as an incentive for parents to re-enter the workforce.

The West Australian

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