Becoming a parent is one of the most significant milestones in life, bringing both joy and challenges. However, alongside the emotional and practical adjustments, new parents in Australia must also navigate a complex landscape of tax implications. From potential tax breaks and government benefits to new responsibilities, understanding how parenthood affects your taxation before baby-brain sets in is a wise move!

1. Tax Benefits and Government Assistance

When a baby is born, parents in Australia may become eligible for various forms of government assistance aimed at easing the financial burden of raising a child. There are a number of programs and tax benefits that can make a considerable difference to a family’s finances.

Family Tax Benefit (FTB)

The Family Tax Benefit is a government payment designed to help parents with the cost of raising children. The payment is divided into two parts: FTB Part A and FTB Part B.

• FTB Part A: This part is means tested - based on the family’s income and the number of children in the household. You must meet residency requirements, immunisation requirements and care for the child at least 35% of the time. The amount paid to you is calculated annually, but payments are made fortnightly.
• FTB Part B: This part provides additional support to single-income families or families with a large income disparity between parents. It is generally for families where one parent stays at home to care for the children

Parenting Payment

This payment is in addition to FTB and requires you to meet an income and assets test, be the child’s principal carer, and commit to fortnightly reporting on you and/or your partner’s income.

Parental Leave Pay (PLP)

The Australian government offers Parental Leave Pay for eligible parents, providing financial support to those who take time off work to care for a newborn or recently adopted child. As of 2025, eligible parents can receive up to 18 weeks of paid leave at the national minimum wage.

Both fathers and mothers can apply for PLP, but the payment is typically paid to the primary career. The amount and eligibility depend on factors like the individual’s employment history and earnings.

Dad and/or Partner Pay

In addition to PLP, the government offers Dad and Partner Pay, which provides up to two weeks of pay at the national minimum wage to eligible fathers or partners who are caring for a newborn or newly adopted child.

2. Tax Deductions and Claims for Parents

Parents in Australia may also be eligible for certain tax deductions and claims, which can reduce the amount of tax they owe. Understanding these opportunities can be essential for managing the increased costs of raising children.

Childcare Tax Rebate

The Australian government provides a rebate for parents who pay for childcare. The Child Care Subsidy (CCS) is designed to assist with the cost of approved childcare services. The amount you receive is based on your family’s income, the number of hours of care needed, and the type of childcare, and could cover up to 85% of the costs.

While the subsidy itself is not a tax deduction, it can significantly reduce the financial burden of childcare, and parents can claim it through the Family Assistance Office.

Tax Offsets for Parents

Parents may be eligible for certain tax offsets, such as the Dependent (Invalid and Carer) Tax Offset, which is available if parents are supporting a child with a disability. This offset provides a reduction in the amount of tax owed. Parents should check their eligibility each year when submitting their tax returns.

3. Superannuation and Parental Leave

In Australia, superannuation contributions are a key part of planning for retirement. When a parent goes on leave to care for a child, they may miss out on these contributions. However, there are options to ensure that superannuation continues to grow during parental leave.

Superannuation Contributions whilst on Parental Leave

Employers are not required to contribute to superannuation during parental leave unless the employee is receiving paid parental leave from their employer as part of their contract. However, parents can make voluntary contributions to their superannuation while on leave, potentially boosting their savings for retirement. Some parents may also be eligible for government co-contributions if they meet specific income requirements.

Contributions from Family Tax Benefits

While FTB payments are not subject to superannuation contributions, parents can choose to use part of their Family Tax Benefit or other government payments to contribute to their superannuation. These voluntary contributions can be a smart way to build financial security in the long run.

4. Tax Considerations for Single Parents

Single parents in Australia may face unique tax challenges, but they can also access certain tax benefits designed to support single-parent families. These include:

• Higher eligibility for FTB Part B: As mentioned earlier, single-income households or single parents with a lower income will typically qualify for a higher amount of Family Tax Benefit Part B.

• Child Support Payments: Single parents who are receiving child support payments may need to declare these payments when filing their tax return. In general, child support payments are not taxable, but it’s essential to report them accurately.

• Single Parent Tax Offsets: Single parents can also be eligible for various tax offsets that can reduce their taxable income, depending on their personal circumstances.

5. Planning Ahead: Making the Most of Tax Benefits

Understanding the tax implications of parenthood in Australia can significantly ease the financial pressures of raising a child. Parents should:

• Keep records of childcare expenses, including receipts for childcare subsidies, as they may be required when claiming financial support.

• Monitor their income and eligibility for Family Tax Benefits and other government support programs to ensure they receive the maximum available assistance.

• Consult a tax professional to ensure they are maximising available deductions and offsets and to help plan for future expenses, such as schooling or child-related medical costs.

Conclusion

Becoming a parent is an exciting life event, but it also comes with a range of financial responsibilities and opportunities. By understanding the various tax benefits, deductions, and government assistance programs available, parents can manage the financial challenges of raising a child more effectively. While navigating the tax system may seem daunting, the right knowledge and careful planning can make a significant difference in easing the financial load and ensuring the well-being of both parents and children.