Baby Bonus V Maternity Leave

Hi all,

Hoping someone can help. Am currently trying to decide between BB and Mat Leave now that DS2 has arrived. DH and I both have unpredictable incomes (which aren't clear until we do our tax returns), so I'm having to do a lot of guesstimating. I've run a few different scenarios on the online estimator, but I get really different results, even when I change the figures only slightly.

What I'm wondering is whether there is an over-arching principle - for example, if you earn under $20K you'll be better off with BB or if DH earns over $X you'll be better off with Mat Leave. Hope that makes sense!

Thanks in advance xo

do you get mat leave from your work?

I'm only choosing the paid parental leave because im not elidgable to get mat leave from my employer, if i was then i probably would have chosen the bb.

also BB isn't taxed, PPL is. but PPL does work out more money than the BB.

I tried that online estimater, and could never seem to get it to work, every time i just told me what I already knew (like the figures I put in) nothing different. maybe I was doing it wrong?

I am on paid parental leave and I was told if combined income is over $160 000 than you can't get it I might be wrong but thats what I remember. Don't forget paid parental leave is more but if you get baby bonus you also get family tax benefit so it can be the same or even more depending on your DH's income. Ring FAO

Thanks ladies.

Teriae - self employed so my mean employer doesn't give me mat leave! Because Mat Leave is taxed it affects FTB part B (as well as needing to pay tax on it), so therein lies the dilemma!

Me+him+bub we're well under that cutoff. Unfortunately FAO can't really tell me much because I can't provide exact figures :(

I have a feeling (could be wrong!) that if the carbon tax goes through then the tax free threshold is jumping significantly - wonder if this will change who is better off with what?

In theory, yes the PPL is a larger amount than the BB. But, if you earn more (or have earned more in that particular year) then it won't work out that way - as you're finding by the sounds of things.

Have you considered the dates that you will be taking it?

In my case, bubs is due in April. If I claim right away, I will be better off with the BB because I've got 10 months of taxable earnings under my belt which means the PPL will be taxed at a higher rate.

But, if I wait to 1 July to claim the PPL I will be better off with it than the BB because I expect my taxable income to be much lower in in 2012/13 than it will be in 2011/12.

Unfortunately, the only thing that you can use to guide you is the income tax thresholds (which I believe is what the FAO calculators are based on). If you know what you're taxable earnings are going to be for the year that you're claiming in then you can see what tax rate will be applied to the PPL (ie just deduct the 30 cents in the dollar, or whichever rate that applies to you, from the total amount and you will see what you will finish up with.

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Tax rates 2011-12

The following rates for 2011-12 apply from 1 July 2011.

Taxable income = tax paid
0 - $6,000 = Nil
$6,001 - $37,000 = 15c for each $1 over $6,000
$37,001 - $80,000 = $4,650 plus 30c for each $1 over $37,000
$80,001 - $180,000 = $17,550 plus 37c for each $1 over $80,000
$180,001 and over = $54,550 plus 45c for each $1 over $180,000

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As far as I know, your partners income has no bearing on the PPL and it is not means tested. It is only if you are looking at claiming other benefits (like FTB) that you need to consider how the PPL will increase your taxable earnings and how that will affect your other benefits.

Hope this makes sense and helps....

I was better off with the PML as I got all the tax I paid back as I was classed as a low income earner.

Miss E - I was told by my employer and FAO that it is all taxed the same despite what you have previously earned. 15% is what it is, I am a high income earner and am being payed through employer and it is the same as it is through the FAO, that wouldn't be fair if it depended on how much you earned for the entire year, claiming it before July shouldn't make a difference, I got a big back pay of 9 weeks worth of it approx $5000 before tax and it was still only taxed at the low/weekly level. Briggsy's girl will know for sure but I worked full time up until I went on leave and in a high bracket and it hasn't made a difference in the amount of tax taken, my best friend had her baby a few weeks after mine and she is taxed the same as me despite earning less than half of what I did.

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Miss E - I was told by my employer and FAO that it is all taxed the same despite what you have previously earned. 15% is what it is, I am a high income earner and am being payed through employer and it is the same as it is through the FAO, that wouldn't be fair if it depended on how much you earned for the entire year, claiming it before July shouldn't make a difference, I got a big back pay of 9 weeks worth of it approx $5000 before tax and it was still only taxed at the low/weekly level. Briggsy's girl will know for sure but I worked full time up until I went on leave and in a high bracket and it hasn't made a difference in the amount of tax taken, my best friend had her baby a few weeks after mine and she is taxed the same as me despite earning less than half of what I did.

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That may be the case when it is being paid to you, but when you submit your tax return you may find differently. Because your employer is paying it as a 'weekly/fortnightly' payment for a specific pay period they tax it as if that is your normal pay amount. When you submit your tax return and are accessed for the entire year you may find that you have a tax debt and need to pay more tax because your tax rate is more than the 15c in the dollar that you paid. That is why the PPL and BB comparison tool asks for your taxable income, because it does affect how much tax you have to pay on the PPL.

In terms of the dates it does make a difference and it did when I did the calculations on the FAO website. If I claim it in the 2011/12 year I will be in a much higher tax bracket (because of my YTD earnings) than I will be if I claim it in 2012/13, because I only intend to work for the last couple of months of the financial year. I can't remember the specific result, but the difference was significant.

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Miss E - I was told by my employer and FAO that it is all taxed the same despite what you have previously earned. 15% is what it is, I am a high income earner and am being payed through employer and it is the same as it is through the FAO, that wouldn't be fair if it depended on how much you earned for the entire year, claiming it before July shouldn't make a difference, I got a big back pay of 9 weeks worth of it approx $5000 before tax and it was still only taxed at the low/weekly level. Briggsy's girl will know for sure but I worked full time up until I went on leave and in a high bracket and it hasn't made a difference in the amount of tax taken, my best friend had her baby a few weeks after mine and she is taxed the same as me despite earning less than half of what I did.

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your employer is not taxing you correctly if he's not taking into account your annual figure. the whole point of ppl being paid by the employer is to make sure your annual income is taken into account! be aware that there is a chance you may end up with a tax bill at tax time due to the taxation rate your employer is using

there are no hard and fast rules as to which option is better - you really have to work that out yourself - playing with dates for it to be paid, different estimates etc. i worked out for our family bby is better because DH doesn't work - but if he worked, PPL would have potentially been better. no FAO staff will advise you to choose one or the other - simply because they will get a small snippet of the bigger picture. you need to work out what is going to be best using the estimator

i suggest trying several different scenarios and work out what is going to best work for you. if your income is really variable it may be safer to choose one option and stick with it - regardless of what the tax implications are or what you may look at later and say "we should have..." - you can only make the decisions based on the info you have at hand now

Sorry to hijack

BG I've been playing a bit with the online estimator and DH & I are trying to work out if we'd be better off with him taking the ppl (or splitting it so he takes the majority of it) but I can't work out how to get that info in. I get paid mat leave through work so we're trying to work out which is better for us BB or PPL as I earn more than DH. Should I just try to ring up and see of someone can help me over the phone?


Sent from my iPhone using Tapatalk so sorry if I'm confusing you ;)

yeah you'll have to ring and speak to someone - the rules for the father to take PPL are different so you'd have to check eligibility for it

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your employer is not taxing you correctly if he's not taking into account your annual figure. the whole point of ppl being paid by the employer is to make sure your annual income is taken into account! be aware that there is a chance you may end up with a tax bill at tax time due to the taxation rate your employer is using

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Well actually the employee is taxing correctly as per the ATO guidelines. It is up to the Employee to ask for additional tax to be taken out if they are concerned they may owe tax at the end of the year (this applies to anyone dependent on their situation), there is an ATO form for this (Withholding Variation)

Nothing has come through from the ATO advising of any special tax treatment for PPL (I work for a software developer and we are sent advisories on how we need to change the system to cope with ATO changes). By the sounds of it the PPL should be taxed like a bonus. Chances are though once the whole tax year is taken into account, it probably evens out anyway.

I am going to have to revisit my PPL processing instructions to advise the payroll officer to discuss the taxation of PPL.

I had a friend who took BB because she worked 'too much' to earn any significant amount out of PPL. Her and her husband were only in the annual bracket of $70K combined but because she did so many hours per week up until bub was born (may baby), it meant that she was going to get less for the PPL than she would if she took BB. Worked out really stupid for her. So i'd ring up and talk to someone. I think if you work roughly 5-10hours a week normally that PPL works out great and more money for you. If you earn any more or any less you end up not 'qualifying' for the whole amount.

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I had a friend who took BB because she worked 'too much' to earn any significant amount out of PPL. Her and her husband were only in the annual bracket of $70K combined but because she did so many hours per week up until bub was born (may baby), it meant that she was going to get less for the PPL than she would if she took BB. Worked out really stupid for her. So i'd ring up and talk to someone. I think if you work roughly 5-10hours a week normally that PPL works out great and more money for you. If you earn any more or any less you end up not 'qualifying' for the whole amount.

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but the PPL isn't means teasted. its just 4 1/2 ish months on minimal wage isn't it? so your income shouldn't affect it? (unless by the end of the financial year you go up an extra tax bracket)

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but the PPL isn't means teasted. its just 4 1/2 ish months on minimal wage isn't it? so your income shouldn't affect it? (unless by the end of the financial year you go up an extra tax bracket)

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Nope, not means tested and your income doesn't affect the pre-tax full amount, that is the same for everyone. Your income determines how much tax you pay on the full amount. If you have to pay a higher tax rate you could be better off with the BB. That is why the time of year that you take it can affect what works best for you - if you are taking it towards the end of the financial year, chances are your total income will be at a higher level because you have already worked (and earned an income for most of the year). If you are taking it earlier in the financial year and don't intend to return to work until much later in that year or the following year, your earnings for the full year will be lower and as a result the amount of tax you pay of the PPL will be lower.

Thanks so much everyone... glad to see I'm not the only one who is confused! BB is looking much simpler right now!

sorry to upset - but there are some income tests applied to PPL - can't recall exactly off the top of my head, but your previous financial year income needs to be included on application because there is a limit to who it is is paid for.

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sorry to upset - but there are some income tests applied to PPL - can't recall exactly off the top of my head, but your previous financial year income needs to be included on application because there is a limit to who it is is paid for.

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I think I remember reading that, but it was so ridiculously high for us that DH and I would never earn that much in our lives that I ignored it =P

yeah it is probably irrelevant to most average joes like us - but there is an income limit so you need to be aware of it

Sorry to hijack, but BG I was told that the baby bonus is now income tested and the cutoff is a combined $75K pa. Is that right?

no, it's 75k in the six months immediately following the birth of the baby - so if mum is on unpaid mat leave and dad is on less than 150k pa, all good. if mum is on paid mat leave, then they'd have to make sure that dad's income was a bit less kwim?

the income limit for BB is $75k combined in the first 6 months of the baby's birth.

ETA: hehe...just saw BG responded just before me and with much better info :)

Thanks ladies. That's a relief - we've been counting on a bit of extra cash