The 2011 Federal Budget spells the end of the so-called middle-class welfare brought in by the Howard Government. If you earn a comfortable income there will be no more easy handouts. Things will also get tougher as living costs continue to increase and interest rates rise later this year.

The Government has been gradually cutting welfare for middle-income earners since booting the Coalition out of office in 2007. This latest budget is the final nail in the coffin, cutting $2 billion from family payments.

The Government is planning to freeze the top income thresholds to qualify for Family Tax Benefit Part A, Part B, the baby bonus and the paid parental leave scheme for four years. These had been indexed for inflation and rose each year to ensure people continued to receive benefits as their salaries marginally increased.

Many families with a combined salary close to the $150,000 a year cut-off will gradually lose their welfare benefits. Around 40,000 families will be affected this year, and hundreds of thousands in coming years. It’s not just the rich that will suffer. A dual income family of two teachers can earn over $150,000 a year.

Middle-income earners will also be hit by the Flood and Cyclone Reconstruction Levy next financial year. The tax is 0.5 per cent of income over $50,000 and 1 per cent of income exceeding $100,000.

Living expenses will also continue to rise during this time. Higher inflation is here to stay and likely to be at the top end of the Reserve Bank’s 2 to 3 per cent target range. The stronger Australian dollar has helped offset higher grocery, fruit and vegetable, and petrol prices in recent months…but it’s close to its peak.

The Reserve Bank will probably have to raise interest rates at least twice over the next year to keep inflation under control. This will raise home loans repayments for families and put extra stress on household budgets. Many middle-income families borrowed too much in the years before the financial crisis and are no struggling to service massive mortgages and swallow falling property values.

The good news is unemployment will continue to drop over the next two years, with the jobless rate already below 5 per cent. It will be a job seekers market, a great opportunity to look for a better position or push your case for a pay rise.

The Government is trying to encourage more people to join the workforce to relieve the skills shortage. It has abolished the Dependent Spouse Rebate for people under 40, which has been around since the 1930’s. If either you or your partner are a stay-home-parent consider going back to work to boost your family income.

This year’s budget has taken money from middle-income earners and given it to those really in need. Many households will be hit hard by the changes to family payments, but they should consider themselves lucky for receiving generous handouts for so many years.

Middle-income families should be able to get by with a bit of planning. Sit down with your partner and take a hard look at your finances. If you will now miss out on the family tax benefit or baby bonus you have to adjust your budget. Look at ways to reduce your expenses or increase your income to make up for the shortfall.

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+1 #4 2011-05-17 11:56

$150,000 per yr per couple thats $75,000 a yr. I am on DSP and run a start up business from home trying to run a business and put a roof over my head plus pay for medical expenses and the care of my dog, I still manage to survive and have a life all on a measly $17,000.
Given that I dont see why or how anyone earning over $50,000 per yr should be winging about having any tax or welfare benefit cut.

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0 #3 2011-05-17 10:51

Interesting that you say muddles income famomits will get by with some planning. I find it interesting that those on welfare or those on lower incomes will not have to 'plan' as the Government will ensure their living standard doesn't decrease because of poor planning.
Why not tax cuts vice hand outs? Simple a government is more inclined to cut back on handouts than raise income tax when they realise they (the government) has been living above their means.
I do have to say that if we want to reduce middles class welfare, reduce the amount of tax they pay. Foreign aid could still have increased by $2 billion if the decreased income tax liabilities by $2 billion

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0 #2 2011-05-17 10:25

everyone needs to get back to basics....a lot of people have to have the best of everything straight up they can't wait and all gets bought on credit. I am a stay home mum with 2 boys we are only on a low income but that's our choice we just survive and we are all healthy and happy.

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0 #1 2011-05-17 09:43

You forgot to mention how many more people are saving and not spending. Need to keep doing that too. Save up for that new item rather than using credit.

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