TAKING LEAVE

Costs, Timing and Tax

The information on this page is a guide to advice found on publically available websites. It is not professional financial advice.

 

What does it cost to have a baby in their first year? 

This question is relative to how lavish or resourceful you want to be on the subject.

 

The Australian Institute of Family Studies estimate that a first child can cost between $3,000 and $13,000 in the first year.

 

Some people go all out and buy the most expensive of everything that is available and others simply stick to the essentials. For ease, we’ve broken down what these costs may be to essentials and optional extras. Some of these items may switch categories depending on your personal preferences and approach. 

 

The Essentials

  • During pregnancy and for the birth itself there may be costs for doctor and hospital bills, ultrasounds and medical tests, antenatal classes, and maternity clothes for mum. Medicare will cover most of these things however if you have private health insurance there will be out-of-pocket costs including visits to your obstetrician.
  • Nutrition and Food – Even if your baby breastfeeds well in some cases they start to get interested in food as early as 4 months old. If you make your own mushy food it will obviously be cheaper than buying baby food in a jar. Many parents do a combo of both in those initial eating months particularly if you’re learning to juggle child care with work.
  • Nappies – If you go disposable you will be need about 10 nappies a day to start off with and up to 3,000 in the first year. If you go cloth the initial investment is greater but you don’t need to ongoingly buy them. Saying that you will still need washing powder and electricity to wash and dry them.
  • Clothing and Footwear – Babies grow so quickly. One week they will be one size of singlet and the next they’ve gone up size. So, if you’re into expensive clothes be aware they will only be worn for a short period of time.
  • Bottles, formula and breast pump if the baby doesn’t latch on and requires a bottle to be fed. This is an optional extra if you have a happy breastfeeding baby.
  • Childcare – this is an essential if both parents want to return to work within the first year of their baby being born. This is often the most expensive cost for new parents in the modern world so it’s smart to start thinking about your options early. Ideally you want a service provider that has a nurturing environment like home and is close to home or work in location. This is the time to find out what Government child care rebates you are eligible for and weigh up the cost of child care against how much you’re earning.
  • Toys – Essential for a baby’s gross motor skills, toys don’t have to be expensive particularly if you make your own
  • Furniture
    • A cot including mattress, sheets and blanket that considers safety and comfort
    • A pram that’s easy to use and that has storage
    • Car seat – by law in Australia you are required to have a rear-facing baby car seat to travel with a child under 6 months old.
    • High chair – when baby is able to sit upright they will need something to eat from. Dining chairs or stools won’t cut it in the first few years.

 

 

Optional Extras

  • Upgrades and premiums – there’s no doubt a $500 pram with sturdy cross-country wheels is going to be easier to manoeuvre (and more enjoyable to push) than a $10 stroller with hard plastic wheels the size of your palm. You can go to town with baby products. Saying that you can get quality products second hand
  • Furniture
    • Change Table – some may see this as an essential but after about two months of having your baby you realise you can change a nappy in quite a few places – from the bed to the picnic blanket, to the back seat of a car. So long as you have a fresh nappy and wipes you are good to go.
    • Nursing Chair – for those mid night wake ups it’s quite good to have a comfy chair that support with feeding – whether it’s mum breastfeeding or dad bottle feeding. Add a matching foot stool and you may feel more like you’re in bed and nod off

 

 

There may be hidden costs as well

 

Some costs may not be clear before you arrive at the birth

 

  • Unexpected medical bills and unplanned doctor visits if mum or baby are unwell, the birth doesn’t go to plan or you need extra support
  • Utility bills will increase – think more laundry and dishwashing, adjusting the thermostat to ensure baby is kept cool in the summer, warm in the winter.
  • Loss of income, super and/or promotions – this will vary depending on how you work your leave arrangements, what child care path you pursue, employee benefits you can access, and Government support you are eligible for.

 

 

Visiting and talking to the carers will be your best chance of finding the best fit for your child. If possible, try to drop into the centre or facility outside of your appointment time so that you can see how things really work and try to visit at a couple of different times of the day.

 

Planning your leave from a financial perspective

There are a couple of things to help you prepare for the financial changes ahead.

Updating (or creating) your family budget is a good start. If you don’t have one consider how it may help you make better, more informed choices. You want to be in a position where you are spending your money on things that matter most to you and your family. There are a number of online budget planners and apps that can assist with optimising your income. 

 

Next, think about how prepared you are for the change in your income and expenses. When rewriting your family budget plan for any income loss during leave taken, consider the additional expenses you will have with baby joining the family. 

 

Questions that may arise from this are:

  1. Do you have the capacity to build a savings account?
  2. What financial entitlements are you eligible for from the Government and your employer that will substitute some of your salary whilst on leave? Talk to your manager and Services Australia for further clarity.
  3. What Superannuation will you and your partner lose (or continue) if you stop working for a period of time?
  4. What are the longer-term costs to either yours or your partner’s career?
  5. What is the opportunity cost of spending more time with your family versus going back to work within a particular amount of time?

 

Open a bank account for baby expenses only to help you stick to budget – particularly in the first 1-2 years when excitement and peer pressure can get the best of us. No longer are we comparing car engine or muscle power – it’s all about baby buggy gadgets and development milestones!

 

Have a very honest conversation with your partner about what you both want from your careers long term and consider how this will affect your family finances. Conversations about money can be challenging and sometimes emotional but the more clarity we have around where each other is at with it the less likely tensions will arise.

 

Consider what flexible working arrangements would support the family during the first year – for example, instead of taking a large chunk of time off you could break it up over the year and take 1-2 days off work. This goes for both mums and dads.

A financial timeline for new parents

WHEN

WHAT TO CONSIDER

LINKS FOR MORE INFO

1. Pre-birth

Consider and discuss with your partner who will take parental leave. Paid Parental leave is available to (mostly) mums that earn less than $151k in the previous financial year

Government Paid Parental Leave: Eligibility Factors – Who can claim

2. Up to 3 months before birth

Did you know you can apply for paid parental leave 3 months before baby arrives – a good idea to get started!

Apply for Parental Leave

3. Up to 3 months before birth

 

If you are NOT eligible for Paid Parental Leave Payment, you could be eligible for Newborn Upfront Payment and Supplement – find out how much.

Newborn Upfront payment and Newborn Supplement

4. Up to 3 months before birth

 

Family Tax Benefit payments are based on family income – and based on the current financial year. By having a clearer plan of your baby’s year (and how changes in work impact family income) you can estimate family income and work out whether to apply.

Eligible Payments

5. Up to 3 months before birth

If you are eligible for FTB Part A or B, your child is eligible for the Child Dental Benefits Schedule

Child Dental Benefits Schedule

6. Birth

Make sure you register as a Medicare Family – this means you may get help for government help for medical costs sooner (explain how this works!)

Register as a Medicare Family here

7. Any time in first year of baby’s 1st year

Dad and Partner Pay is good for dads who have used all company leave payments, or self-employed who would not be getting income while looking after baby.

Dad and Partner Pay

8. 40 Weeks After birth

If you haven’t claimed Parental Leave Payments, time is running out to use the 12-week block in baby’s first year.

Claiming Parental Leave Timeframes

9. From 1 year pre-birth to 2 years after birth

Depending on where you live and what type of child care you decide to use will determine when you need to enrol your child into childcare. Some families enrol in a centre a year before their baby is born. Others at the time of birth or when they are ready – 1-2 years of age. The type of childcare affects how much Child Care Support you receive. 

How the type of child care affects child care benefit payments

10. From 1 year pre-birth to 2 years after birth

Budgeting for Childcare – Use Starting Blocks to get a plan around how much childcare will cost you when taking account of government help. *Remember that Child Care Support is based on family income – so if your family income is going up, your government help is going down.

Starting Blocks website

Tax implications of taking parental leave

Having a baby means the start of a new financial journey. It’s not just about managing a change in family income, it’s a whole new world of government systems, payments and entitlements. It’s a lot of work at an already busy time.

 

 

Some entitlements are based on family income, and for a new family in the first year of having a baby, this income can be hard to predict.

 

With less income, your family will pay less tax, but might be entitled to payments – some of which are taxable, and some that are not.

 

In any case, being organised and applying for payments early makes sense.

 

As a starting point, it helps to have a basic plan about how much time you and your partner are planning to take off, understanding how much help you can get from your employer and through paid parental leave to try, and work out what your family income will look like in the first year of having a baby. This will help you work out if you are eligible for more help from the government.

 

It’s important to get this right as certain payments are based on your estimate of family income.

 

Paid parental leave is a taxable income. If you claim it through your employer they will with withhold tax at the normal PAYG withholding rates. If you receive the payment from Centrelink because you are self-employed or unemployed the payment will be taxed at a rate of 15%

The pro’s and con’s of taking parental leave from a financial perspective very much depends on your income, whether your company provides paid parental leave and how much other leave you have up your sleave.

 

It’s a tricky balance, and it’s worth the effort to try and plan as much as you can.

 The article “Taking Leave : Costs, timing and tax” was prepared for SMS4dads by Parents at Work 

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Richard’s research revealed possible long-term negative impacts on the children of dads with mental health issues. Fathers’ depressive symptoms in the first year after the birth predicted behaviour problems in their children years later.

“If dads’ mental health has such a dramatic impact then we need to be screening dads for depression, not just mums,” Richard explains.

In response to these limitations, Richard and his team have designed a smart-phone based program that allows mobile connection for new and expectant dads.

Participants receive texts containing information and links, and self-report their mood. If the mood tracker identifies dads as needing extra support, they will be offered a phone call from a counsellor trained in this area.

Following the success of the pilot of the SMS4dads program, Funding was received to enable a National roll-out.

“When dad’s miss antenatal classes or activities, they also miss out on contact and links to other people.  They may never get the chance to say to anyone, look I’m really stressed,” he points out.

“SMS4dads is a way of bringing dads into the health system and keeping them linked in with services and support,” explains Richard.

SMS4dads

Richard Fletcher

Associate Professor, PhD

Richard credits a varied career, a talented and innovative team, and much life experience for affording him the insight needed to address the challenges related to actively engaging dads.

After completing his masters in Medical Science, studying epidemiology, Richard earned his PhD focusing on fathers and attachment.

“Fathers are invisible in many places, and that is endemic. Not because people dislike fathers, but because the system is set up to be focused on mothers.”

Some services and organisations are aware of the need to engage dads, but have been unsuccessful in their attempts.

“When people are challenged about this, they generally want dads involved,” Richard affirms.

“Often, however, they just don’t know how to do it.”

Richard works with health professionals on issues related to fathers, and has delivered many antenatal programs for expectant dads.

He credits his own family with giving him an understanding of the role of fathers needed to make his work relevant.

“I have three daughters and two stepdaughters,”

“My kids would say they taught me just about everything I know and they’d be right. They’ve taught me a lot, and still do.”

Richard’s research revealed possible long-term negative impacts on the children of dads with mental health issues. Fathers’ depressive symptoms in the first year after the birth predicted behaviour problems in their children years later.

“If dads’ mental health has such a dramatic impact then we need to be screening dads for depression, not just mums,” Richard explains.

In response to these limitations, Richard and his team have designed a smart-phone based program that allows mobile connection for new and expectant dads.

Participants receive texts containing information and links, and self-report their mood. If the mood tracker identifies dads as needing extra support, they will be offered a phone call from a counsellor trained in this area.

Following the success of the pilot of the SMS4dads program, Funding was received to enable a National roll-out.

“When dad’s miss antenatal classes or activities, they also miss out on contact and links to other people.  They may never get the chance to say to anyone, look I’m really stressed,” he points out.

“SMS4dads is a way of bringing dads into the health system and keeping them linked in with services and support,” explains Richard.