Fact check: Did the budget take from working mums and give tax cuts to millionaires?

Updated

The claim

Labor has sought to characterise the 2016-17 federal budget handed down by Treasurer Scott Morrison on May 3, 2016 as inequitable.

On May 7, 2016, Opposition Leader Bill Shorten told the Channel Nine Today show: "This budget, I think, highlights the choice at this election: people on $1 million a year are going to get a $17,000 tax cut, but a working mum with two kids at high school earning $65,000, well, she's going to lose $4,500 plus in payments."

This comparison echoes the almost identical statement Mr Shorten made in his May 5 Budget reply speech.

In that case, he cited the comparison as "one fact that defines this budget", and said the impact on a "working mum" would be higher — "over $4,700 a year worse off".

The verdict

Mr Shorten's statement is misleading.

"This budget" does not change benefits to working mums, nor does it give a significant tax cut to "people on $1 million".

To calculate the loss in payments, he has taken into account the September 2014 abolition of the "schoolkids bonus" (which takes effect this year) and the changes to the family tax benefit for sole parents of children aged 13 and over that were proposed in October 2015 (but did not pass the Senate).

In November 2015, Labor supported a cut to family tax benefit B for couples with children aged 13 and over.

Almost all of the tax cut for higher income earners relates to the automatic expiry of the "temporary budget repair" levy after the 2016-17 financial year.

The expiry of the levy returns the effective tax rate to the level paid under the previous Labor government.

In fact, if either the Government or Labor wanted the levy to continue beyond June 30, 2017, the Parliament would need to pass a law to that effect.

Given the benefit and tax cuts are not in this budget, there is no particular reason to compare only these measures without also considering the impact of other measures announced during this term of government.

Measures such as superannuation tax rises or child care benefit increases could potentially offset some of the other gains or losses.

What is Mr Shorten talking about?

The Labor campaign office provided Fact Check with the basis for Mr Shorten's figures.

The "$17,000 tax cut" for "someone on a million dollars" is in fact $16,715, made up of:

$16,400 reduction in tax paid as a result of the end of the "temporary budget repair levy" brought in by the Abbott government in its first budget in 2014.

$315 less tax as a consequence of the 2016-17 budget decision to increase the 32.5 per cent tax threshold from $80,000 to $87,000.

The figure for a "working mum" is actually based on a "sole parent with income of $65,000 and two children in high school".

Labor says that a person in this category would be worse off by $4,778 a year, with a $525 fortnightly increase in family tax benefit A more than offset by the loss of:

The "schoolkids bonus" ($1,712)

Family tax benefit A and family tax benefit B end of year "supplements" ($1,806)

Part of family tax benefit B as the base payment is reduced to $1,000 ($1,785).

Tax rates for "those on a million"

In relation to the measures for "people on $1 million a year", only the relatively small tax cut of $315 is a measure in this year's budget.

The "temporary budget repair" levy was brought in by the Coalition Government in its first budget in 2014.

The levy became law upon passage of the Tax Laws Amendment (Temporary Budget Repair Levy) Act 2014, which specifies that it only applies for the 2014-15, 2015-16 and 2016-17 financial years.

From July 1, 2017, the effective income tax rate for those earning over $180,000 will automatically go back down to the level in place under the Gillard and Rudd Governments.

If the Government or Labor wanted the levy to remain in place, they would have to pass a law to that effect through both houses of Parliament.

Abolition of schoolkids bonus

None of the welfare payment changes used in Mr Shorten's calculations came out of the 2016-17 budget.

The "schoolkids bonus" is a twice a year payment made to families and school students receiving family tax benefit A or certain other welfare benefits.

The payment was announced by the Gillard government in the 2012-13 budget, replacing a Rudd government initiative that reimbursed some education expenses upon an application being received.

In 2016, each payment is worth up to $215 per primary school student and up to $428 per secondary school student.

The abolition of the "bonus" was announced by the Government in October 2013 alongside the removal of the so-called mining tax.

The repeal legislation, the Minerals Resource Rent Tax Repeal and Other Measures Bill 2014, became law on September 5, 2014, and the payment will be made for the last time in July 2016.

Changes to family tax benefits

The Government announced proposed changes to family tax benefit payments in October 2015, replacing measures announced in the May 2014 budget which had not been legislated.

At the time, Mr Morrison said the changes had been developed by the Government "working with crossbench senators over many, many months to re-engineer the measures that have been put forward in the '14-15 budget".

What is the family tax benefit? Family Tax Benefit Part A (FTB-A): a per-child payment to those with dependent children (up to 19 years of age), paid at a sliding scale dependant on income and number of children. The payment starts to cut out at a family income of $101,872 (for a 1 child family).

a per-child payment to those with dependent children (up to 19 years of age), paid at a sliding scale dependant on income and number of children. The payment starts to cut out at a family income of $101,872 (for a 1 child family). Family Tax Benefit Part B (FTB-B): per-family payment for sole parents and couples (if one parent has a low income or does not have a job), where the primary earner has a taxable income less than $100,000 a year. It is worth up to $2,784 per year.

per-family payment for sole parents and couples (if one parent has a low income or does not have a job), where the primary earner has a taxable income less than $100,000 a year. It is worth up to $2,784 per year. Family Tax Benefit Part A Supplement: a per child supplement of up to $726.35 per child paid after the end of the financial year.

a per child supplement of up to $726.35 per child paid after the end of the financial year. Family Tax Benefit Part B Supplement: a per family supplement of up to $354.05 paid at the end of the financial year.

a per family supplement of up to $354.05 paid at the end of the financial year. The Government says that the supplements "introduced in 2004 substantially as a mechanism to help families manage FTB overpayments (because of underestimation of income)."

The Government's proposal included the following changes:

Couples with a youngest child aged 13 or over will no longer receive FTB-B (which is worth up to $2,784 per year)

FTB-B for single parents (and grandparent guardians) with a youngest child aged 13 or over reduces to $1,000 a year (a reduction of up to $1,784).

FTB-B supplement to be phased out over three years, with the Government claiming the money saved would be "redirected to increasing fortnightly payments and providing more affordable childcare".

Families with a newborn child (youngest child under one year old) receive an extra $1,000/year in FTB-B from July 1, 2016.

Increase to the FTB-A rate by around $10 per fortnight from July 1, 2018.

On November 10, 2015, Labor indicated it would support the abolition of FTB-B for couples with a youngest child over 13, but would oppose the other measures, including the FTB-A and FTB-B increases.

With Labor's support, legislation that makes couples with a youngest child aged 13 and over ineligible for FTB-B passed the Senate on November 30, 2015. This change comes into force on July 1, 2016.

The Government then introduced a bill to bring about its other changes to FTB-A and FTB-B.

It reached the Senate on February 22, 2016, but it was not passed and lapsed when Parliament was prorogued on April 17, 2016.

A spokesman for Minister for Social Services Christian Porter tells Fact Check that the Bill "remains Government policy".

Choice of example

Mr Shorten has chosen an example that supports Labor's political argument.

Mr Shorten uses the case of a "working mum", but omits the reality that Labor only opposes changes to FTB-B for single mums (and dads).

The Government did eliminate FTB-B for couples who only have high school age children, but did so with Labor's help.

And if the "working mum" had younger children, she would not have seen a reduction in the rate of FTB-B, and she might have benefited from the changes to childcare subsidies included in the Government's reform package that changed the family tax benefits.

Given these measures are not in the most recent budget (and in the case of the family tax benefit changes have not come into law), it would be equally valid to consider other measures announced during the term of the Coalition Government.

People "on $1 million a year" will pay higher tax on superannuation contributions as a result of the 2016-17 budget changes and given that the levy was an Abbott government initiative, there has been no significant income tax cut over this term of Government.

Sources

Topics: budget, government-and-politics, welfare, family, children, tax, bill-shorten, alp, australia

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