Final Report: Detailed Analysis
F3. Family and youth assistance
Family payments should be sufficient to ensure that children have access to a basic acceptable standard of living. The rate of family payments should reflect the direct costs of children in low-income families. Current rates of assistance do not adequately reflect the direct costs of older children, but are more than adequate for very young children and for larger families.
Family payments provide a degree of horizontal equity between taxpayers with and without dependent children. For a given amount of funding, this horizontal equity role must be balanced with the need to ensure vertical equity.
Family payments should also assist parents who are nurturing young children to balance work and family responsibilities. Assistance could continue beyond the early years for single parents and families in specific circumstances, such as parents caring for disabled children and foster care children with higher needs.
The total amount of family assistance should be withdrawn using a single means test based on family income which avoids cumulative withdrawal rates that create unnecessarily high disincentives for working.
Current arrangements for family payments are complex in terms of the number of payments, the design of individual payments and their interaction with the rest of the tax and transfer system.
Family payments should be provided in a simple and transparent form coherent with other parts of the tax and transfer system. A single, simple family payment should be provided to cover the direct costs of children. Because these costs increase as children grow older, assistance should be higher for older children. The payment should be means tested based on family income and should be designed to minimise the impact on workforce incentives.
Family payments should be the main form of assistance for children up to the age of 18 or until the completion of secondary school. Beyond these points, youth payments alone should be available and should be focused on encouraging study, training or workforce engagement. There should be a seamless transition from family payments to youth payments. Youth payments should be the main form of income support from the age of 18 until the age of independence.
The rates of youth payment should reflect the fact that young people generally have lower needs than adults, but should be sufficient to support investment in education, training and other capability-building activities (including combining part-time work and part-time study). Youth payment rates should not favour unemployment over education and training and should reflect the fact that young people in different living arrangements and personal circumstances have different needs. Those living away from home have higher costs than those living at home.
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