The reforms will support low and middle income families with the cost of raising children
Fewer families will be eligible for family tax benefits and the baby bonus as the Federal Government tries to claw back the amount it hands out to people with children.
From 1 July the upper income threshold for family tax benefits A and B as well as the baby bonus will remain as they are until July 2012.
This means that instead of being annually adjusted the primary earner income threshold for family tax benefit B and the baby bonus will remain at $150,000.
Family tax benefit A varies depending on the number of children in a family, but the income level at which payments cease will remain at about $112,000 for a family with two children under 13.
The changes will save $1.4 billion over four years, money the Government desperately needs as it tries to spend its way out of the recession.
An additional $1 billion will be saved over four years by indexing family tax benefit A by the consumer price index instead of a more generous wage-related index.
The Minister for Family and Community Services, Jenny Macklin, said the changes were designed to "maintain the fundamental characteristics of the family payments system. The reforms will support low and middle income families with the cost of raising children and promote workforce participation and reward for effort."
Australia's family payments systems ranks third in the developed world, according to a report by the OECD. The Government pays 2.2 per cent of GDP to families, compared with an average of 1.3 per cent.
