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Australian mums taxed out of full-time work

  • November 03 2020
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Australian mums taxed out of full-time work

By Cameron Micallef
November 03 2020

Working mothers are facing disincentives to work more days due to a tax system that works against them, research has found.

Australian mums taxed out of full-time work

Australian mums taxed out of full-time work

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  • November 03 2020
  • Share

Working mothers are facing disincentives to work more days due to a tax system that works against them, research has found.

Australian mums taxed out of full-time work

During the Tax Institute seminar, modelling from presenter Professor Miranda Stewart, CTA, ANU and UniMelb, showed the impact of our tax system on secondary earners (adults choosing to go to work, in a household where another adult is already employed) in an average family with children. 

As secondary earners increase their days at work and therefore their income, they not only incur more childcare costs, but also lose access to low-income childcare subsidies and other family tax benefits.

This ultimately means that having both parents work full-time makes very little financial sense for most Australian families. 

According to the modelling, a secondary earner on the average female salary of approximately $70,000, would earn $293.82 per day. Taking into account additional factors such as Family Tax Benefits A and B, income tax, Medicare, the cost of childcare and childcare subsidies, this person would make a net gain of $148.41 working one day per week, or just $48.25 per day when working five days a week. 

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Co-presenter Dr Ann Kayis-Kumar of UNSW said: “If you bake in the costs of childcare, the increase in income tax liability and the loss of family benefits, there can be quite perverse, unintended consequences of disincentivising a return to work.”

The Tax Institute’s president, Peter Godber, CTA, said our tax and transfer system should never be a reason why people don’t return to work when they want to. It certainly should not be a barrier to the economic independence and financial stability of Australian women, he noted.

“This is not about actively pushing parents back into the labour force. Rather, it’s about ensuring that our broader tax system is not making it harder for families to improve their financial situation,” Mr Godber said.

Two of the options to address these disincentives for working parents are free, universal childcare and a childcare subsidy boost, which the Grattan Institute has previously estimated would cost the government $5 billion, while boosting the economy by $11 billion.

Australian mums taxed out of full-time work
Australian mums taxed out of full-time work
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About the author

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Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

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