The January instalment of the Schoolkids Bonus currently being paid to eligible Illawarra families may be the last if legislation to end the benefit is passed later this year.
Plans to axe the bonus, introduced by the Labor government in 2012, were blocked in the Senate at the end of last year, but the federal government hopes to get the legislation through the upper house this year.
The government argues the twice-yearly payment is unaffordable because it is funded by the mining tax, which it plans to scrap.
But Member for Throsby Stephen Jones said the move to end the payments showed the government had their priorities wrong.
"The mining tax was designed in a way that it increased revenue when profits were increasing and decreased when profits where decreasing," he said.
"It will always go through a cycle, that's the way it was designed. They've axed the source of the revenue, that was their own decision and it was the wrong decision."
He said the bonus was widely welcomed by the Illawarra community when it was first introduced and that eligible families in the region would be worse off without it, particularly in the post-Christmas period.
The benefit is paid as two instalments to parents on Family Tax Benefit A, totalling $410 a year for primary school children and $820 a year for high school students. It was introduced as a paperwork-free replacement for the education tax refund system to help parents cover the cost of basics such as uniforms, books and stationery.
Thirroul's Therese Barclay said the payments were especially helpful at this time of year to get her two children, Liam, 7, and Alicia, 6, ready for the coming school term.
"This time of year it's great for getting them started, I normally get their school shoes and sports shoes, lunch bags, drink bottles and backpacks," she said.
"Then when they start school we get a list of stuff they need to get, like stationery, painting smocks and all that stuff as well."
Ms Barclay hoped parents would continue to receive some form of assistance with the costs of educating their children if the bonus was scrapped.
Payment of future instalments of the bonus, including in July this year, will depend on whether the legislation is passed by Parliament.