Foster care allowances and family scheme income "other payments" category

Section MB 13(2)(kb) of the Income Tax Act 2007

The "other payments" category in the definition of "family scheme income" has been amended so that foster care allowances made under the Children, Young Persons and Their Families Act 1989 are excluded from family scheme income. "Family scheme income" is the definition of income used for Working for Families tax credits. It is also used for some community services card recipients and the parental income test for student allowances.

Background

Caregivers who receive orphans and unsupported child benefits or foster care allowances are not entitled to claim the family tax credit relating to the child for whom the benefit or allowance is received, but are eligible for the in-work tax credit relating to that child. Both benefits and allowances are not subject to income tax.

Foster care allowances from Child, Youth and Family help to reimburse caregivers for the day-to-day costs of fostering a child. These allowances are intended to cover the costs of board, personal items such as clothes and pocket money. The amounts vary according to the child's age and specific special needs. Foster care allowances are made under the Children, Young Persons and Their Families Act 1989.

Orphans and unsupported child benefits from Work and Income, which are similar to the foster care allowances, are made under the Social Security Act 1964.

Key features

Foster care allowances made under section 363 of the Children, Young Persons, and Their Families Act 1989 are excluded from family scheme income under section MB 13(1) (Payments included in family scheme income) by section MB 13(2)(kb).

Excluding foster care allowances from family scheme income is consistent with the treatment of orphans and unsupported child benefits, which are also excluded from the "other payments" category by section MB 13(2)(l).

Application date

The change applies from 1 April 2011.