Paid parental leave may not add up for prospective families.
The announcement was one of several used to soften the multiple blows contained in Tuesdays budget but look behind the rhetoric and you find the Government might not be giving away anything extra - precisely why it could go ahead with it.
In fact, couples wanting to start families were among the budget's biggest losers.
By taking paid parental leave, eligible Australians will forfeit the baby bonus, family tax benefit Part B and the dependent spouse offset. Exclusive modelling for AFR Investor by Strategy Steps puts the average additional benefit at only $1,000 to $2,000 - and shows in some cases it could be to your detriment.
The proposed rate of parental leave is the minimum wage, currently $543.78 a week, for 18 weeks - or $9788 taxed. The baby bonus, which is now spread over 13 fortnights, is $5,000 untaxed. And on top of that comes the allowance and offset.
Take a woman on $70,000 a year and a man on $90,000 who have a baby on day one of a financial year in which the woman will not return to work. Paid parental leave would find them with $11,599, while the baby bonus alternative would net them $12,403. The higher amount is largely due to benefits in the year off work.
The situation changes on lower salaries of $50,000 and $70,000. Here parental leave wins out - this time because of lower tax on the payments - but only by $838. Not all it's cracked up to be, is it? Parental leave will be paid where the primary caregiver has taxable income of $150,000 or less in the financial year before birth; the baby bonus is paid where combined income in the six months after birth is $75,000 or less.
Where you are eligible for both, Louise Biti, director of Strategy Steps, says the decision will come down to incomes, when the baby is born and how long you will be off work.
But a further complication is the impact of any maternity leave offered by your employer. While the federal initiative allows for payments to be made before, during or after this, who actually has faith in today's economic climate that employers will maintain the existing arrangement? They could use the Government's scheme to subsidise their own - or even remove it altogether.
To aid the parental leave decision, an online calculator will accompany its introduction on January 1, 2011.
Meanwhile, in a double whammy for those wanting children, the cost of having them is set to increase.
From January 1, obstetrics and assisted reproductive technology will be removed from the Medicare safety net above which the Government rebates 80 per cent of doctors' bills. This means couples will be up for an extra $550-$800 for deliveries and about $2,000 for each round of IVF. And we have yet to see whether they will also have to pay higher health premiums.
The safety net measure is forecast to save $194 million over four years. Except it's just possible it will unexpectedly cost money. Medical experts predict a surge in multiple births as people seek to increase the IVF success rate, so the system will need to cope with more high-risk deliveries and treat larger numbers of premature babies.
What's more, parents of multiple births receive both paid parental leave and the baby bonus - the only time the new scheme is really a give away. And they richly deserve it!
This story first appeared in AFR Investor.
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