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  • Peter Francis Fenwick

Tax Relief for Working Families: A child could see the benefits.

Household income tax benefits families
Families form the basis of a good society

In this paper I discuss the significance of the family in the creation of the good society, suggest some simple structural changes to our income tax system to make it easier for young couples to marry, to buy a house and to raise children, and explain how this would benefit us all.

Throughout history, families have been the foundation of good societies. This is the ideal. It is the nature of humankind.

A truism: every child is born to a mother and a father. The child is fortunate indeed if their mother and father are a loving couple who cooperate to create a family - to nurture the child, to provide a home, to provide siblings and a wider family of grandparents, aunts, uncles and cousins.

Men and women have different attributes, different skills and propensities, different desires, different roles to play. Loving couples form a family collaborating to create a life that is better for both of them, and an environment that is conducive to the physical, emotional and intellectual development of the children of their union.

The benefits of the collaboration are not limited to the couple. In good times, the family shares and enjoys the successes of its individual members. In difficult times, the family is the first recourse for personal caring, and emotional and  financial support.

Families mix with other families creating special friendships and enjoying social, religious, sporting, educational and cultural events together. Developing shared values. Bonding the society.

Societal Benefits

Thus the encouragement of family life benefits the whole society. Ideally we should develop policies that will encourage loving couples to marry, to have children and to create a home of their own.  And our policies should help to make those marriages last.

A home of one’s own is most important. It provides emotional, physical and financial security. It is a shared resource that belongs to the whole family and helps keep them together.

Throughout the developed world countries are facing declining birth rates. In many countries it is below the sustainable rate of 2.1 births per woman. (The fertility rate for Australia in 2023 was 1.784 births per woman.) The consequences are a fall in population and an imbalance in age distribution. Economically, a serious problem is looming. There will be insufficient young workers to support an aging citizenry.

Citizens in wealthier societies no longer need to produce lots of children of their own to look after them in their old age. But the welfare state depends on a steady supply of working strangers for this purpose.

In fact, it is natural to want to produce children. Most women want to have babies; and most men and women want to become fathers and mothers. Something is getting in the way. The reasons are multiple and complex, mostly cultural and economic.

Opportunities to change cultural attitudes

Let’s look at the cultural issues.

Civilisations flourish when citizens take a long-term view of life – when they focus on future satisfaction rather than instant gratification. Economists refer to this as having a low time preference.

If most of our citizens have low time preferences, that enables us to create a pleasant, free and affluent society. IWe forego consumption and save for the future, we accumulate capital that can fund investments to make work more productive. We build a prosperous society. 

If we focus on the long-term, we look after relationships and value our reputation. We care for our children, pass on our values to them, and ensure they have a good education. We build a civil society.

The benefits of family life are long-term. You cannot enjoy being grandparents if you never had children in the first place. Sacrifices are required in the short term. Women may have to forego career opportunities when they are pregnant and looking after infants. That is the trade-off of motherhood.

Because modern technology has made working from home more feasible than it used to be new opportunities arise. Women can even operate businesses from home, part-time if necessary. Importantly, we should not denigrate women who chose to be mothers rather than pursue a career. The value of motherhood deserves to be celebrated.

But the bigger picture, and this applies to men as well as women, is that we need to encourage low time preference – more focus on the future and less on instant gratification. Marriage and home ownership are practical expressions of this.


Economic changes through tax reform

What about the economic issues?

Do you ever wonder why the focus of our solutions for social problems seems to be to ask strangers to deal with them and government to fund them?

Or why we spend money and resources addressing problems after the event - an ambulance at the foot of the cliff rather than a fence at the top.

Instead, could we develop policies  to ease the financial burdens on working families?

If we made it economically easier for young couples to marry, to buy a house and to raise children might we produce a more harmonious society? More love, cheerfulness, sunshine. Personal responsibility.

Among the major financial inhibitors to be overcome are:

  • The cost of raising children.

  • The loss of income during pregnancy.

  • The loss of income whilst looking after children, especially in their early years.

  • The difficulty in building capital for a deposit on the family home.

Working Families Tax Reform

My proposal is to make it financially easier for young couples to marry, buy a home and raise children by changes to the income tax system.The idea is to reform the tax system so that it recognises the status of the family.

Such tax reforms would include:

  • A household-based income tax. For the purpose of assessing income tax, the total family income would be divided equally between all family members. A family comprising mother, father and two children on an income of $180,000 would be taxed as four individuals on $45,000.

  • The interest on the mortgage on the family home would be an allowable income tax deduction.

  • Superannuation contributions could be used to buy the family home and to repay the mortgage.

  • For both parents, half of any HECS/HELP debt would be forgiven on the birth of the first child, and the balance on the birth of the second.


Participation in the scheme would be voluntary – a choice for each family. Moreover, it would be instead of, not in addition to, such existing programs as the incredibly obscure Family Tax Benefit.

The loss to revenue would be considerable and would need to be matched by reductions to government spending on other programs. In the process we may well discover lots of ineffective programs and that policies to reduce the levels of personal income tax are desirable anyway.

Let’s enumerate the benefits:

  1. Fairness: The raising of children is a benefit to the whole of society. It is fair to compensate those who are providing this service.

  2. Every young couple will have access to their superannuation and increased disposable income firstly to build a deposit and then to repay a loan. Their bank will assess them as a better risk.

  3. During the latter stages of pregnancy and the early years of a new child’s life, when the mother will need to reduce her paid work, the scheme will ease the financial burden by significantly reducing the tax on the family’s income.

  4. Because the scheme is blind to who the breadwinner is, there will be opportunities for the father to play a greater role in rearing the children. Fathering is important too.

  5. By reducing the financial pressure on working families, the scheme will have social benefits. There will be less stress. Families will be more likely to stay together. Children will be more likely to be raised by their own father and mother.

  6. Young people, raised in a loving family environment, will be more likely to become happy, confident, psychologically well-adjusted adults.

  7. The level of violent juvenile crime will diminish.

  8. The need for many existing welfare schemes designed to help victims of family breakdown and domestic violence will diminish.


Other nations are also addressing the issues discussed here. Hungary, in particular, has implemented a raft of family friendly policies. See Simon Kennedy’s essay “From Budapest with Love: Fixing Fertility”  in the June 2024 edition of Quadrant.


A Fair Go for Working Families

In summary, strong families form the ideal base for good societies and ensure the survival of the society – societies need to reproduce sufficiently to maintain a balanced age distribution.

Moreover, children thrive when they can rely on the love and affection of both their mother and their father. A home provides financial and psychological security for the whole family. The family’s own home is its primary asset. Logically, it should be the initial investment of everyone’s superannuation.

Such a solution is fair as couples who are supporting and nurturing their children deserve financial support from the rest of society.

Tax relief is more cost effective than welfare. It is better to prevent adverse situations than to provide respite after they occur. Also, it disperses control of spending to the individual. Therefore, it does not require regulation to cover all eventualities and it needs fewer staff to administer it.

Now is the time to provide a fair go for working families through structural changes to the tax system. It will benefit the whole society.


A shorter version of this paper was published in News Weekly - edition No. 3168 June 29, 2024. I am indebted to Peter Kelleher for his fine editing of the first draft.


The reference to the ambulance at the foot of the cliff

comes from the poem by Joseph Malins.

The Ambulance Down in the Valley

Joseph Malins (1895)

‘Twas a dangerous cliff, as they freely confessed,

Though to walk near its crest was so pleasant;

But over its terrible edge there had slipped

A duke and full many a peasant.

So the people said something would have to be done,

But their projects did not at all tally;

Some said, “Put a fence ’round the edge of the cliff,”

Some, “An ambulance down in the valley.”

But the cry for the ambulance carried the day,

For it spread through the neighboring city;

A fence may be useful or not, it is true,

But each heart became full of pity

For those who slipped over the dangerous cliff;

And the dwellers in highway and alley

Gave pounds and gave pence, not to put up a fence,

But an ambulance down in the valley.

“For the cliff is all right, if you’re careful,” they said,

“And, if folks even slip and are dropping,

It isn’t the slipping that hurts them so much

As the shock down below when they’re stopping.

”So day after day, as these mishaps occurred,

Quick forth would those rescuers sally

To pick up the victims who fell off the cliff,

With their ambulance down in the valley.

Then an old sage remarked: “It’s a marvel to me

That people give far more attention

To repairing results than to stopping the cause,

When they’d much better aim at prevention.

Let us stop at its source all this mischief,” cried he,“

Come, neighbors and friends, let us rally;

If the cliff we will fence, we might almost dispense

With the ambulance down in the valley.”

“Oh he’s a fanatic,” the others rejoined,“

Dispense with the ambulance? Never!

He’d dispense with all charities, too, if he could;

No! No! We’ll support them forever.

Aren’t we picking up folks just as fast as they fall?

And shall this man dictate to us? Shall he?

Why should people of sense stop to put up a fence,

While the ambulance works in the valley?”

But the sensible few, who are practical too,

Will not bear with such nonsense much longer;

They believe that prevention is better than cure,

And their party will soon be the stronger.

Encourage them then, with your purse, voice, and pen,

And while other philanthropists dally,

They will scorn all pretence, and put up a stout fence

On the cliff that hangs over the valley.

Better guide well the young than reclaim them when old,

For the voice of true wisdom is calling.

“To rescue the fallen is good, but ’tis best

To prevent other people from falling.

”Better close up the source of temptation and crime

Than deliver from dungeon or galley;

Better put a strong fence ’round the top of the cliff

Than an ambulance down in the valley.


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