Minimum family tax credit (MFTC) threshold
Summary of proposed amendment
The Bill proposes an adjustment to the minimum family tax credit threshold to align with increases in benefit abatement thresholds. The proposed increase in the MFTC means that single parent families would remain better off in full-time work (defined as 20 hours for sole parents and 30 hours for couples) and are receiving the MFTC, rather than remaining on a benefit.
The proposed amendment would apply from 1 April 2021.
The Bill proposes an increase to the MFTC threshold from $29,432 per year (after tax) to $30,576 per year (after tax). This represents a $22 increase in weekly income. The proposed new MFTC threshold is intended to apply from 1 April 2021.
The MFTC is one of the Working for Families tax credits. Its purpose is to incentivise families with children to move off the benefit and into full-time work. The MFTC achieves this by “topping up” the incomes of working families to an amount that is more than what they could potentially receive on a benefit. When benefit rates and thresholds are increased, the MFTC must also be adjusted to ensure families continue to be better off in full-time work and receiving the MFTC, rather than remaining on the benefit.
From 1 April 2021, the benefit abatement thresholds will increase, allowing beneficiaries to earn a greater amount of additional income before their benefits start to reduce. As a consequence of the increase in benefit abatement thresholds, this Bill would increase the MFTC threshold from 1 April 2021 so that single parent families will remain financially better off in full-time work and receiving the MFTC, rather than remaining on the benefit.