Single parents with part-care of children

Last week was anti-poverty week, and amid all the stories about reductions in the entitlements of single parents and the paucity of the Newstart allowance rate this one caught my eye. Although it didn't deal directly with the issue, the case seems to involve, among other things, a single parent who has part-care of his children.  The comments that follow the article express various levels of support and/or sympathy mixed with the usual "get a job" sentiments.  There are also some questioning the amount of assistance he received, which appears to be just single Newstart allowance - no payments in respect of his children.

Part-care of children brings with it some complicated rules around how much, if any, family assistance can be paid, with similar provisions around child support entitlements or liabilities.  At the extremes, a parent with no care of their child won't receive any child-related assistance, and will generally have to pay child support, whereas a parent with 100% of the care gets all the child-related assistance and will generally receive child support.  As care increases from zero there is a kind-of graduated sharing of family assistance entitlements.  I say "kind-of" because it's not a smooth transition - the family assistance amounts change in a lumpy way over some percentage ranges, not at all over others, and disproportionately in the rest.

A further complication is that adult income support also undergoes changes related to the level of care of the child.

There are many possible combinations of care and payment types but I'll just focus on three as they will illustrate most of the points.

Uh-oh, the kids are getting bigger

This week Parliament passed legislation removing the special arrangements ("grandfathering") for parents getting parenting payment since before 1 July 2006.  I've done a few posts on this already so I won't repeat the details (see here and here if you want the earlier raves on this subject).  The gist of it is that the grandfathered group will now have the same payment arrangements applied to them as everyone who has come on to parenting payment since 1 July 2006.  These arrangements are rather less generous for single parents, who will consequently have significant reductions in their incomes when the change takes effect on 1 January 2013.  (It's of less significance for partnered parents because they have always had lower Newstart allowance-linked payment rates.)

Parents in the income support system, partnered or single, face changes in the total assistance package provided to them when their children reach significant birthday milestones.  Sometimes it's up, sometimes it's down, but the final result is down.  By final result, I mean that eventually the parent is no longer considered to have a dependent child, and a significant age for this purpose is 22 years.  A 22 year old child becomes eligible for Newstart allowance in their own right (subject to the usual rules about being unemployed, etc) and a 22 year old student child gets a youth allowance that is no longer affected by parental income.  If the parent is single then, in the usual case, they will get the single rate of Newstart allowance.

So, under the current arrangements a single parent who still needs income support will typically end up on single Newstart allowance, simply as a consequence of the passage of time.  If we compare the assistance package for a single parent with a newborn to that of a single Newstart recipient the size of the eventual transition that must occur is stark.

Leftovers...

A few days ago I put up a somewhat rambling post covering several topics, but mainly focused on the concept of the net income tax threshold.  I had prepared a few charts for it that I didn't end up using as they didn't quite fit the theme of the post, at least not without wandering off in yet another direction  But waste not, as they say, so I thought I'd pop them up separately with only a few words of explanation.

They are of the same type as Charts 1 to 3 in the earlier post, showing the interaction between transfer payments and income tax (and medicare levy) liability.  However, the charts in today's post show this information as at the election of the 40th Parliament (the second-last Howard government) as well as at 20 September this year (part-way through Parliament 43).  This makes visible the change over that period in three numbers of interest: the maximum transfer package (at zero private income); the income at which a liability for income tax starts; and the net income tax threshold.

As before, all the charts are adjusted for changes in the CPI so that the 2001 results can be directly compared to today's figures.  So without further ado...

Taxing families, or how 1.5 equals 1

Mitt Romney's now infamous comments about how 47% of Americans did or didn't interact with their tax system reminded me of a topic I had intended to cover on this blog - net taxpayers.  That sounds incredibly boring (and I suppose to any sane person it probably should be) but it intrigues me because of what it might be saying about the design of our tax-transfer system.  If you persist to the end of this post you might conclude our system is largely incoherent, or perhaps it's deliberately preferencing some household types, or a heady mix of both.  And you'll find out what I'd like for my birthday.

4 Parliaments - single age pension

It's time for another 4 Parliaments comparison post, where we take a look at how changes in the tax transfer system over the last 4 Parliaments have affected a particular group.  This time it's single age pensioners.  Previous posts on this theme looked at single Newstart allowance (here), single parents (here) and single income couples on Newstart allowance (here).

As with the earlier posts, I'll start with a chart showing the change for all 4 Parliaments and then look at each Parliamentary term in a bit more detail.  So, first up is the comparison chart, which at first glance looks like a black canvass with strands of coloured spaghetti plastered over it.

What choice single-parent students?

Under the ordinary rules applying to parenting payment for single people, eligibility is lost when the youngest child turns 8 years old.  At that point the parent must seek another type of income support payment.  Much recent discussion has focused on single parents who take up Newstart allowance and the resulting reduction in disposable income that occurs as a result of that transition.  (I've done a couple of posts related to that subject, here and here.)

However,  depending on the circumstances of the single parent, a transition to Newstart allowance might not be the only choice.  A good example is single parents who are studying.  While the youngest child is under 8 years old they can study and receive parenting payment.  They also receive an additional payment to assist with or encourage their continued education, the pensioner education supplement (PES).  So what happens when that youngest child has the dreaded 8th birthday?

Calculating new pension rates - step 3 of 3

Pension rates are reset every six months using a 3 step process.  Last week's publication of the Average Weekly Wage figures by the ABS (here) provides the final ingredient for the calculation of the pension rates to apply from 20 September 2012. 
To recap the process so far, the first step was to adjust the rate using the change in the consumer price index (CPI), giving us the CPI rate.  The second was to adjust the rate using the pensioner and beneficiary living cost index (PBLCI), giving us the PBLCI rate.  Each of these steps was discussed in more detail in earlier posts (step one is here and step two is here).

Now we can calculate the rate based on Male Total Average Weekly Earnings (MTAWE).  Whichever of these 3 rates - CPI, PBLCI or MTAWE - is highest becomes the new rate.  The new MTAWE figure is $1285.10 a week, or $2570.20 a fortnight.  The combined couple rate of pension is 41.76% of this, and the single rate of pension is a shade under 2/3 of the combined couple rate.  The rate for single parenting payment (PPS) recipients is 25% of MTAWE.  After the requisite rounding required by the Social Security Act 1991 the resulting MTAWE based rates are as per the table below.