Are you, or your partner expecting a child? Are you adding more to your brood? Then it's time to get your to-do list in order, with 'managing your finances' at the top.
In the third part of our 3 Life Events that will Change Your Taxes series, we take a look at the hidden expenses of starting a family and circumstances that may impact your income.
Costs to consider when planning for a baby
Talk to any parent, and you’ll find out just how expensive it is growing your family. Not only do you need to buy clothes, bedding, toys, and other essentials in preparation for your baby, you also have to factor in medical costs. These can include doctor and hospital expenses like ultrasounds and check-ups, plus activities like birthing classes.
You also need to weigh up whether you or your partner will have your baby in a public or private hospital. The public system covers most of the costs, and you have fewer out of pocket expenses. With private health, it depends on the type of policy you have and what is covered, so read it very carefully.
A few things that are typical of private health is being able to choose your obstetrician, as well as a dedicated room. You will need to serve out your waiting period on your private health policy (usually 12 months), so if you want to go private, increase your cover early. You also might think you’re covered for pregnancy because you have a top cover, but it's best to double-check.
Being prepared for hidden medical costs will ensure you can spend less time worrying about finances when your baby comes.
Taking leave from work
Parents in Australia are entitled to take time off to spend with their newborn and adjust to the changing way of life. There are several options to consider, including both paid and unpaid leave, but you need to talk to your employer and give them notice before taking it.
There are a few things to note when considering how long you should take leave for;
- You can void Parental Leave Pay (see below) if you return to work before the end of the leave period.
- Returning to work for fewer hours than you did before your bundle of joy arrived will impact your income and overall finances.
- Time off will affect your super, so it may be worth checking if you or your partner can contribute to one another's while either of you takes leave.
Parent Payment Eligibility
If you're worried about how you can manage your finances after you have your baby and take leave, then consider these following payment options from the government;
Parental Leave Pay – a short-term payment to help eligible parents take time off work to care for their newborn. To meet the work test for Paid Parental Leave, you need to have worked at least a day a week for 10 of the 13 months before the birth. This is particularly relevant to consider before considering baby number two!
Dad and Partner Pay – allows eligible dads and partners up to two weeks off work with a newborn child.
Family Tax Benefit (FTB) – a two-part payment option that helps with raising children. It can include a one-off lump sum, as well the Newborn Supplement which is an increase to your FTB for 13 weeks.
Parenting Payment – an income support payment for the main carers of a young child.
You can make a payment claim for some payments as earlier as three months before your baby is due.
The only thing you need to let us know is that you're adding a dependent, so we can add it to your future tax returns. If you need to talk to one of our accountants, contact us here.
If that's too far down the track and you’re only at the commitment part, check out our article on how taxes can change when tying the knot. If you want to learn about how investment properties affect taxes, click here.