Baby Bonus

On 14 March 2002, the Federal Government introduced legislation to implement the "Baby Bonus" scheme. The Baby Bonus is designed to assist families following the birth of a first child and offers a tax break of up to $2,500 a year, each year for a maximum of up to 5 years. Where the mother returns to work and the father takes time off work to look after the child, the Baby Bonus is transferable to the father.

Mothers on low incomes (ie, taxable income of $25,000 or less) or out of the work force will be entitled to a minimum annual payment of $500. Mothers returning to work on a part-time basis are able to claim the Baby Bonus on a proportionate basis. For example, if the mother earns 50% of her income prior to giving birth to the child the mother’s claim for the Baby Bonus will be reduced by 50%.

The Baby Bonus legislation allows a mother to average her income over the period she is out of the workforce with a child for up to 5 years. This would mean a mother on a salary of $30,000 per annum prior to the birth of her child who decided to take 5 years off work is entitled to average her $30,000 salary over the 5 years, making her income each year below the tax-free threshold over the 5 year period.