Australian families are always on the lookout for ways to maximise their tax returns, and the Additional Child Tax Credit is firmly in the spotlight for 2025. With ongoing cost-of-living pressures and new government policy tweaks, understanding how this credit works is more important than ever.
What is the Additional Child Tax Credit?
The Additional Child Tax Credit (ACTC) is designed to help families offset the rising costs of raising children. In 2025, the credit continues to be a refundable tax benefit, meaning eligible families can receive money back even if their tax liability is zero. While Australia’s main family tax benefits are the Family Tax Benefit Part A and Part B, the ACTC operates as a supplement, particularly relevant for low- and middle-income households.
With the 2025 tax year, the federal government has reaffirmed its commitment to supporting families. The ACTC complements existing support by giving a boost to those who may not receive the full benefit of the standard child tax offset due to lower taxable incomes.
- Refundable: Receive a payment even if you owe no tax.
- Targeted: Primarily benefits families who miss out on the full Family Tax Benefit due to income thresholds.
- Indexed: The amount is reviewed annually, and for 2025, it’s indexed in line with inflation and median wage growth.
Eligibility and 2025 Policy Updates
To qualify for the Additional Child Tax Credit in 2025, families must meet a set of criteria, some of which have changed with recent policy updates:
- Residency: At least one parent must be an Australian resident for tax purposes.
- Child Age: Children must be under 18 at the end of the financial year and in the taxpayer’s care for at least half the year.
- Income Test: For 2025, the income threshold for full eligibility has been raised to $62,500 (up from $59,500 in 2024), with a gradual phase-out for families earning up to $90,000.
- Tax Return Filing: You must lodge a tax return and claim the credit via the ATO’s online services or through a registered tax agent.
Example: The Jackson family, with two children aged 7 and 12, has a combined income of $58,000. In 2025, they qualify for the full ACTC, receiving an additional $1,200 per child, totalling $2,400 directly into their account after filing their tax return.
For those already receiving Family Tax Benefit Part A, the ACTC can act as a top-up where the maximum entitlement hasn’t been met due to income or part-year care arrangements. The government’s 2025 budget has allocated an extra $400 million to ensure prompt processing and support for eligible families during tax season.
Maximising the Credit: Practical Tips for Families
Getting the most from the Additional Child Tax Credit means careful planning and understanding how it interacts with other family benefits. Here are several strategies:
- Keep Accurate Records: Maintain documentation of your child’s residency, care arrangements, and any changes in custody throughout the year.
- Review Your Income: If your income fluctuates—such as for freelancers, contractors, or small business owners—consider how timing income or deductions might maximise your eligibility.
- Coordinate with Other Benefits: The ACTC is separate from the Child Care Subsidy and Family Tax Benefit, but receiving these may affect your overall tax position. Use the ATO’s updated 2025 calculator to estimate your combined entitlements.
- Lodge Early: In 2025, families who lodge their tax returns before August 1 are expected to receive ACTC payments faster, thanks to new streamlined ATO processing protocols.
Case in point: When Sarah, a single mother working part-time, found her income dropped below the new $62,500 threshold due to reduced hours, she updated her Centrelink and ATO details. This ensured she received the full ACTC for her two children, helping to cover increased school expenses and utilities.
Looking Ahead: Policy Debates and Family Finances
The Additional Child Tax Credit remains a talking point in Canberra, with policymakers debating whether further increases are needed to address rising living costs. Advocacy groups are pushing for a more generous credit or automatic indexation tied to the cost of child care and education. The 2025-26 Federal Budget is expected to revisit these discussions, so families should stay tuned for potential mid-year adjustments.
For now, the ACTC is a crucial financial lever for many Australian families, especially as prices for food, energy, and school supplies continue to climb. As the government signals ongoing support, staying informed and proactive is the best way to ensure your family receives every dollar it’s entitled to.
