From 1 July 2018, a new component of the Working for Families Tax Credits exists. The "Best Start" tax credit is a payment to help families with the costs of a child in the child's first three years and replaces the existing parental tax credit.
The Best Start tax credit is a payment of up to $3,120 a year ($60 a week) per child and is available to all families in the first year of a child's life. For the second and third years, the credit will reduce by 21 cents for every dollar a family earns over $79,000.
To be eligible for the Best Start tax credit, you must be eligible to receive a Working for Families tax credit and you must be the principle caregiver for the dependent child. Furthermore, the dependent child must be younger than three years old and be born on or after 1 July 2018. Children born before 1 July 2018, can be eligible if the child's expected due date was on or after 1 July 2018.
The tax credit is calculated by multiplying the prescribed amount ($3,120) by the number of days eligible for the tax credit in the entitlement period, then dividing that by 365. An example is shown below:
Sarah gives birth to a child on 31 July 2018. She is entitled to the full prescribed amount of $3,120 for the first 12 months of the child's life regardless of her income. However, in the second year of the child's life, Sarah earns $89,000. Her Best Start tax credit must therefore be abated. The amount of her Best Start tax credit for the second year is calculated as follows:
$3,120-($10,000 x 21 cents) = $1,020