THE Baby Bonus and Schoolkids bonus should be axed and paid through the family tax benefits system instead, the Australian Council of Social Services says.

Streamlining Australia's "ramshackle and complex system" of family payments should be a top priority in the May budget, according to a pre-budget submission by ACOSS, to be released today.

Families would still receive the money, but it would be paid as an increase to the Family Tax Benefit Part A to ensure it is best targeted at low and middle-income families.

"We do not regard family payments for middle income families as an undesirable form of `middle-class welfare'," the submission says.

"Yet in recent years, the family payment system has strayed from its primary purpose of preventing child poverty and has increasingly been used for purposes that are not well targeted, such as the Baby Bonus and Schoolkids Bonus."

Labor's Schoolkids Bonus, which the Coalition has vowed to scrap if elected, has added additional complexity to an already unwieldy system, according to ACOSS.

At present, the baby bonus is $5000, but will be reduced to $3000 for subsequent births from July 1, 2013.

The Schoolkids bonus is paid out as $410 a year for each primary student ($205 paid in January and $205 paid in July) and $820 a year for each secondary student ($410 paid in January and $410 paid in July).

"If low and middle-income families are struggling with increased child related costs, the best and simplest way for Government to help is simply to increase the maximum rate of Family Tax Benefit A and then to index it properly. Parents could then decide whether to allocate their family payments to school costs or other more pressing needs," ACOSS says.

This would be a cost-neutral reform, according to ACOSS, because the money would still be paid, just in a different way.

The council has also called for the dole to be increased by $50 a week to better reflect the higher cost of living.

Ahead of the May budget, government MPs are urging the Treasurer to boost the Newstart allowance to address backlash from a controversial savings decision last year to push 84,000 single parents on to the dole when their youngest child turns eight.

Increasing the Newstart Allowance by $50 a week would cost $600 million in the coming financial year and $1.5 billion the following year, according to ACOSS.

This could be funded entirely through a crackdown on rich families using private trusts to avoid personal income tax obligations ($1 billion in 2014-15) along with a measure to crackdown on international companies avoiding tax by loading up their Australian entities with debt (saves $600 million in 2013-14 and $700 million in 2014-15).

An increase of $50 a week would bring the Newstart allowance to $296 a week, still about $90 less than the single aged pension.