Tax Question - Are single income families being penalised financially?

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                  od810 on 19/10/2021 - 22:10

                  @Bjingo: Any assets will have a market value so it is not easy to write it off and hope it go back up and profit about it. I guess to make it fair we can scrap CGT discount so no double dipping on writing off asset at one point and claim discount in the other time. That will make the tax a lot simpler, just like share trading business.

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                peterpeterpumpkin on 17/10/2021 - 12:16

                @od810: I think most people don't get this, that market value applies to "everything" by default when it comes to taxes. People who have gotten away with these things historically (like transferring a $10,000 car for $100 at Service NSW) consider it a genius workaround that applies to everything, but lower-threshold data matching could ruin the fun any day ala the Centrelink debacle. There are lots of exemptions though.

                Australia's most generous tax exemption may be for main residences, since it simultaneously helps you avoid paying CGT (with a 6 year buffer added on top for the years you rent, that you can even chose where it applies if you have more than one property - yet you get no main residence exemption if you live with your parents and never live in your investment property), you get to avoid stamp duty if you're a first home buyer, it allows you to live in a $3.5 million dollar apartment while receiving the pension, and the capital in property has increased in value well beyond the rate of taxable income.

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              Donaldhump on 16/10/2021 - 06:29

              @Bjingo: For the record you can write losses off income if you trade enough to warrant yourself as a business.

          • 

            Tidy on 17/10/2021 - 22:52

            @Donaldhump: I completely agree with you on the quote:

            if i make 10k, well then here you go ATO have 42.5% of it.
            i lose 10k, well that's tough shit, hold on to that forever until you make some cgt.

            Of course it benefits the government instead of us. If it was the other way around, it would be reversed as soon as a politician realises it

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          Donaldhump on 14/10/2021 - 18:14

          @Bjingo: "I don't understand what you want? would you rather capital losses be lost if you cant use them right away? "

          no, that is a retarded answer

          Or are you saying you want to offset the capital gains losses against completely unrelated income?

          "yes, i have to pay cgt based on this same unrelated income hence the hypocrissy you answer is retarded.

          "Because that for one doesn't make any sense and two just sounds like making tax avoidance easy."

          its not tax avoidance if the hypocrissy didnt exist and losses could be claimed then it would be legislated and thus legal, thus not an avoidance.

          yours answers are quite stupid tbh

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            Bjingo on 14/10/2021 - 19:42

            @Donaldhump:

            "yes, i have to pay cgt based on this same unrelated income hence the hypocrissy you answer is retarded.

            So you want to sell an asset and if you make money after a year get a 50% reduction then pay whatever tax on it. and if you lose money…. you want up to 45% of your money back…….. or should they apply the 50% reduction to the loss too, to avoid you know, "hypocrissy" another question if you end up with a negative amount after the loss has reduced it. Do you want to carry that forward too?

            its not tax avoidance if the hypocrissy didnt exist and losses could be claimed then it would be legislated and thus legal, thus not an avoidance.

            …………………. you know tax avoidance is legal right? You're thinking of tax fraud which is illegal

            Tax avoidance is the legal exploitation of a system in order to pay less tax. For example hiring your spouse as a letter opener so you pay less tax.

            or in your hypothetical cgt loss being deductable scenario. Selling your rental property to your trust at a loss so you can reduce your tax.

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              Donaldhump on 14/10/2021 - 20:35

              @Bjingo: Yes, You simply should have the right to write your loss off straight away against any other income, should you chose, the same way you have to pay cgt.

              I make 300k in income but lose 10k in a share transaction wtf can’t I write it off, if I make 10k gov wants 42.5 % so why doesn’t it work the other way around, it’s hypocrisy.

              If you have no income or chose to carry it forward, then you make the decision to Carry it forward.

              There are ways around it anyway, just trade enough and claim you trading as business operation.

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                od810 on 19/10/2021 - 22:13

                @Donaldhump: If i recall correctly, when you are classified as professional trader i.e trade as business, you can deduct paper loss as well, but you also need declare paper gain?

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  mskeggs on 13/10/2021 - 13:53

  +46

  Your hours are higher than two others combined?
  You aren't being ripped off by the tax man, you're being ripped off by your choice of career that is stealing your time from your family.

  • 

    GG57 on 13/10/2021 - 14:08

    +9

    But, but, but….the bonus

    • 

      techno2000 on 13/10/2021 - 14:18

      +4

      Poor man working more than 15 hours daily. I sympathize.I really do.

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        aboogee on 13/10/2021 - 16:31

        +3

        I digress but if you truly enjoy what you do, you wont feel that bad
        totally opposite from the engineer that does 10hrs week (hey I am an engineer too haha)
        ill be frank - I am a nerd who enjoys solving problems that people just dont get
        so it probably works out for me - i dont have much social life anyway
        for me, it means only spending time with kids on weekends

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          poboy on 13/10/2021 - 20:52

          +9

          @aboogee: If you enjoy solving problems, have you ever looked at your tax paid and wondered how you can reduce it?

          Salary sacrifice? Carry forwards? Spouse super splits?

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            aboogee on 13/10/2021 - 21:51

            @poboy: thats part of what im trying to do here as well
            contributed max to super
            im about to start to contribute to spouse super as well
            what carry forwards? losses?

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              zorodluffy on 14/10/2021 - 20:15

              +1

              @aboogee: i think u can amend ur tax return and contribute up to 5 years in the past and max out ur super concession caps.

              you should look into that

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          PopCounty on 14/10/2021 - 02:17

          @aboogee:

          I am a nerd who enjoys solving problems that people just dont get
          so it probably works out for me

          Good luck with your BAU work 🙂

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          MessyG on 15/10/2021 - 20:40

          @aboogee: You enjoy solving problems more than parenting your kids other than on the weekends? :|

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      Yoo05 on 14/10/2021 - 14:27

      @ GG57
      When you divide your bonus with the extra hours you put in, the after tax amount you take home will be few dollars an hour.

  • 

    peterpaoliello on 15/10/2021 - 13:11

    Normalised capitalism, where people not only sell their lives but gloat over it.

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  plmko on 13/10/2021 - 13:56

  +7

  Well then why doesn't your wife work part time and then you cut back your hours by the exact same income?

  Life's not perfect.

  • 

    keejoonc on 14/10/2021 - 12:32

    +4

    Cut back how? That would mean he would need to change his job which isn't as easy and simple as you make it sound like.
    It's not like he is working at a local woolies where he can tell them he wants to do less hours LOL

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      serpserpserp on 14/10/2021 - 18:56

      +1

      No he could work less hard and just get the standard bonus that banks throw around to any numpty every year.

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  scotty on 13/10/2021 - 13:56

  +59

  Yes, single income family is financially penalised as tax is calculated at individual level, rather than family.

  However having a stay at home mum (or dad) provides lot of other benefits to a young family — some things just can't be measured in dollar terms.

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    IM-Cheap on 14/10/2021 - 09:11

    +1

    Try but he should aim to cut back hours when kids are in school and wife can get back into work. Not good long term when kids only really see a parent on the weekend.

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  Hellfire on 13/10/2021 - 13:59

  +2

  There are family tax benefits that apply to single income families and not double income families so there are benefits both ways.

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    Laurana on 13/10/2021 - 22:45

    This is not the full picture. As those normally apply to either very small payments (family tax b) or single income families were the spouse has passed away.

  • 

    caitsith01 on 14/10/2021 - 14:30

    There really aren't unless you have a relatively low income.

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  PissLUR on 13/10/2021 - 14:00

  +2

  well you earn too much money. ~200K

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    Big Lenny on 13/10/2021 - 15:16

    +4

    and hes still complaining

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    brendanm on 13/10/2021 - 18:47

    +7

    He pays $65k in tax and works a tonne of hours.

    • 

      buckethat on 13/10/2021 - 23:15

      +1

      Sheesh.. 65k taxes..

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    serpserpserp on 14/10/2021 - 18:57

    +2

    According to OZB survey, most people here earn 200k.

    • 

      brendanm on 14/10/2021 - 22:32

      -1

      Ozbargain surveys are only 63% accurate, 78% of the time.

    • 

      mrvaluepack on 15/10/2021 - 07:47

      Thats Whirlpool, not OZB.

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  MS Paint on 13/10/2021 - 14:01

  +10

  Income splitting is available in some countries but unfortunately not here.

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    freefall101 on 13/10/2021 - 16:46

    +8

    I miss Canada, the tax free threshold was shareable between a couple. When my misses was in university I was the sole income earner, tax time was an absolute bonanza as it was ~$10k was knocked off my taxable income, a good $3k back every year just from that alone.

    It does suck that if you have two people, on one $0 and the other on $120k their take home is $88k, but if you have two people on $60k a year their take home is $98k. But that's life, really. The one on 120k probably isn't working double the hours of the two on 60k so even those stuck like that wouldn't change it.

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    [Deactivated] on 13/10/2021 - 16:54

    -3

    You can definitely income split here.

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      MS Paint on 13/10/2021 - 17:06

      +1

      Please explain

• Drakesy on 13/10/2021 - 14:02 Comment score below threshold.
  • 

    JIMB0 on 13/10/2021 - 14:32

    +13

    I think that only works with income from assets, not from wages.

    • Drakesy on 13/10/2021 - 14:40 Comment score below threshold.
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        aboogee on 13/10/2021 - 16:21

        Well again, my point is, I am not earning millions and wanting to avoid paying tax
        In my case, I have chosen to work longer hours for my wife to be able to accompany my kids more
        Why do I have to do all the tax structuring etc (if it does work) just to be equivalent to normal working parents.

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        freefall101 on 13/10/2021 - 16:37

        +11

        They would have been getting it from a distribution from a company that was owned by the trust, not their dad's salary being cut up.

        You can't list The Bloggs Family Trust as an employee and earn a wage, you have to pay Joe Bloggs. In turn he can't stick his wage in a trust and redistribute it, it's already been taxed.

        However The Bloggs Family Trust can own Bloggs Inc where the business earns a tonne of money, and Joe Bloggs rips out $200k a year. He then says $50k was distributed to Jeff Bloggs, Jim Bloggs and Jan Bloggs instead of taxing it all under his own name. So everyone is in a lower tax bracket.

        That's the simplified version anyway. You then have to deal with the ownership structure, calculating how much to pay in dividends, cash flow and such.

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          aboogee on 13/10/2021 - 17:24

          @freefall101: well i think in this case you are saying the bank hires a company as a contractor.
          dad is an underpaid employee in this company

          thats assuming the bank would want to hire a company / hold co
          never looked into this frankly, but many around me are not doing that so i assume there must be a policy or something that prohibits this otherwise everyone would be doing it

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          bmerigan on 13/10/2021 - 23:11

          @freefall101: Excellent work explaining that correctly.

        • 

          connorlo on 14/10/2021 - 10:14

          @freefall101: spot on @freefall101, this is how 'we' have it structured somewhat. Works pretty well.

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          serpserpserp on 14/10/2021 - 18:59

          @freefall101:

          You then have to deal with the ownership structure

          And the costs involved, oh the costs…

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            JIMB0 on 15/10/2021 - 08:45

            @serpserpserp: How much does it cost?

  • 

    enzioFirenze on 13/10/2021 - 14:33

    +6

    this is complex even as a contractor, when you are on PayG, it's not possible as far as I know. Very happy to be corrected though?

  • 

    Seraphin7 on 13/10/2021 - 14:40

    +1

    You're going to come a cropper with this plan unless you can (legally) have the trust earn the income and not you. Watch out for personal services income.

    Once you have earned it (or have been deemed to have earned it), you have to pay tax on it. You have to ensure you have a legal structure that enables the income to come into the trust first before being distributed to you and anyone lese relevant.

  • 

    sagrules on 13/10/2021 - 15:16

    +4

    Are you a business owner? I don't think this can be done as PAYG employee…

  • 

    p1 ama on 13/10/2021 - 15:37

    +2

    This is coming from a single income guy that's looking at spreading his income across his retired parents to minimise tax.

    This is some of the dodgiest shit I've heard in a while…

    • 

      rektrading on 13/10/2021 - 15:42

      -1

      Using a trust is a great way to avoid paying taxes. Anyone that have the means should definitely do it.

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        aboogee on 13/10/2021 - 17:14

        its a way to avoid paying tax on investments, but not wages/salaries

        and i guess there's so much you can get out of such structure right?
        I mean you'd hope that all beneficiaries start paying tax at some point or otherwise you're wealth really isnt growing?

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          rektrading on 13/10/2021 - 18:15

          +1

          @aboogee: The tax system is designed by the minions of the top 1%. Its complex structure is to ensure that cogs stay on the treadwheel while the 1% dine in their ivory tower.

          People can play a better game if they take the time to learn the rules.

      • 

        p1 ama on 13/10/2021 - 17:19

        +1

        Sure, but that's not what we're talking about here, any way of "spreading income to retired parents" is definitely dodgy.

        • 

          rektrading on 13/10/2021 - 17:33

          @p1 ama: It's not dodgy if the trust is set up lawfully.

          • 

            p1 ama on 13/10/2021 - 20:09

            +1

            @rektrading: You can't set up a trust to siphon PAYG income to retired parents, that's the point. Hence, whatever method of doing this is inherently dodgy.

    • 

      serpserpserp on 14/10/2021 - 19:01

      Unless he runs a business earning serious coin the costs involved in doing a trust set up is not worth the money he'll make back out of lower tax.

  • 

    ShoeJunkie on 13/10/2021 - 15:52

    +1

    That assumes a lot. Trust Tax Returns cost a bunch and trusts in general cost a fair bit to maintain. Its why only high income or wealthy individuals utilize it. The tax savings have to outweigh the costs involved. I doubt his income is enough to enable that for him and his family.

    So generally speaking you need income generating assets that can be transferred to the trust that will then redistribute the income to the beneficiaries.

    Also from what I understand, unless you have direct income going to the Trust from the company, you will be taxed as PAYGW as an individual.

    That trust stuff only works if you OWN the bank and are able to transfer the income to the trust.

    Hope that logic makes sense? Most Wealthy individuals use Trusts to protect their assets from Bankruptcy and business risks not for tax minimization.

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  Traveller107 on 13/10/2021 - 14:14

  +6

  Higher income earners always get penalised and pay more tax. It especially hurts if your hourly rate is low but you do a lot of extra hours. You should see how much FIFO workers pay in tax! Most of them get similar hourly rate as city workers but they work almost double the hours than their city counterparts and in harsh conditions only to have massive tax taken out.

  It's quite demotivating for people to work extra hard to get ahead as the tax system pulls them right back.
  It'll annoy you even more if you see how much the bank will lend you on a single 200k income vs double 100k incomes.

  • 

    mskeggs on 13/10/2021 - 14:33

    +14

    Always such a weird complaint.
    Nobody forces people to work long hours for lots of money.
    There are thousands and thousands of lower paid jobs which pay much less tax.

    If anything, the people who don't have the option to choose between high pay/tax and low pay should be the ones with the complaint.

  • 

    aboogee on 13/10/2021 - 17:34

    well it makes sense though
    from a banks perspective, its riskier to lend to 1x200k than 2x100k

    dont see the diversification logic for tax though
    "i will tax you more while you are still alive and wife not working" lol

  • 

    megadeth on 13/10/2021 - 21:39

    +2

    City workers spend 15 unpaid extra hours in commuting which fifo does not do.

    • 

      Jugganautx on 14/10/2021 - 13:56

      +1

      Fifo workers also do not pay for food/accomodation.

      • 

        serpserpserp on 14/10/2021 - 19:02

        +2

        fifo get paid for the commute as well? Nice.

        • 

          twjr on 15/10/2021 - 23:57

          +1

          @serpserpserp: Yep, I travel to and from site in company time.

  • 

    twjr on 16/10/2021 - 00:04

    I work FIFO and do an average of 48 hours per week and earn considerably more than a city based worker on an hourly rate. I'm also not that bothered by the tax I have to pay.

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  Pandaroo on 13/10/2021 - 14:22

  +1

  Username checks out. Obviously two individuals earning $100k each will pay less tax than an individual earning $200k based on the current system.

  You should definitely see an accountant to make sure you take advantage of you partners low tax bracket though (eg. negative geared assets in your name and positive in your partners name for example)

  • 

    aboogee on 13/10/2021 - 16:37

    haha the comment is not aimed at you but to people above

    I know what you're saying - you've got to think far though
    having negatively geared assets in my name means that when i sell, i get a massive hit
    its a trade off between current tax or future tax in my opinion
    I also have a negatively geared asset that recently turned positively geared because of all the rate cuts
    good problem to have

    p/s im sure all the investors on OzB have the same issue above. mind sharing what you guys did to reduce tax?

    • 

      od810 on 14/10/2021 - 23:29

      • Spouse Contribution
      • Max super contribution. I usually do it as personal contribution instead of salary sacrifice, I make a big chunk of super contribution in June.
      • Equity/Managed Fund investment in Wife's name
      • Offset to your non income producing assets.

      Those are the 3 4 easiest thing you can do. And you don't need an accountant, the good one will charge you $200/hour, the crappy one won't be able to handle your tax and gives some really crappy advice. Stick with big ticket items, you don't need to fiddle with couple hundreds here and there.

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  Fredfloresjr on 13/10/2021 - 14:31

  Don't work and let Centrelink do their job. You have to speak to an accountant from Lakemba.

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  Seraphin7 on 13/10/2021 - 14:37

  +13

  I've been arguing for years that families/parents should be treated as a single entity for income tax purposes.

  You are right that a couple earning $100k each will end up better off financially that one when one partner alone earns $200k.

  If you want to maximise flexibility for families, and allow people (especially mothers) to best tailor their approach to work post-children, to me it becomes obvious that this would be one way to improve that situation.

  • 

    mskeggs on 13/10/2021 - 14:42

    +2

    Probably hard to convince single people who would pay the extra tax under that scenario that your choice to have kids and have an adult not work deserves their subsidy.

    Many people don't have maximising flexibility for families as a particularly high priority. I've got sympathy with my single friends who see handouts to families every budget, but never a new program helping singles.

    • 

      Seraphin7 on 13/10/2021 - 14:51

      +2

      Probably hard to convince single people who would pay the extra tax under that scenario that your choice to have kids and have an adult not work deserves their subsidy.

      There are scenarios all over the place, but the totality of the taxation/welfare system is, by definition, one where some people subsidise others. Individual groups (or even just individuals) aren't necessarily that keen on the subsidies that go to various other groups/individuals now, but that's the way it is.

      To me, it just makes sense that the more we can allow individuals/families to tailor their arrangements during the "young family phase" (amongst other phases) the better outcome we get individually and collectively.

      When governments restrict options, it has a tendency to create losses for individuals and groups, and as these restrictions become more and more onerous, only encourages industries designed to get around them … where, you guessed it, those with more money can afford more and more sophisticated mechanisms that mean those with less money end up shouldering more of the burden.

    • 

      serpserpserp on 14/10/2021 - 19:09

      What kind of tax breaks can we give single people?

      • 

        mskeggs on 14/10/2021 - 20:44

        +1

        Subsidised access to dating programs, plastic surgery on Medicare and free partner visa.

        But more seriously, the complaint I hear often is there is a benefit targeted at families, so why can’t they be a family of one!
        Things like $100 vouchers for kids sport or art/music lessons, childcare rebates, family tax benefits, parenting payment and no doubt many I have forgotten.

        The crux of it being when a politician is looking to splash some cash they often target it at families more than everybody. There isn’t really any reason to give $100 vouchers for kids who are already eligible for free school sport/music/art, except it wins votes, probably disproportionately, as mum and dad feel kindly toward the $100 voucher giver, and maybe grandma and grandad.
        If everyone gets a $100 it costs 5 times as much but unlikely to be 5 times as many votes.

        Even though I regularly benefit, I agree. Adults without children have the fewest benefits compared to families and old people.

        • 

          serpserpserp on 14/10/2021 - 21:40

          @mskeggs: I don't disagree with the logic. And yes, politicians look to distribute the least amount of money for the maximum votes. That is why targeting families is more bang for your buck. I know similar people with similar views but it never just stops at family payments. It's "why do old people get x and I don't?" "Why do single parents get this and I don't?" "Why do poor people get this?" It is just the start of the "entitlement train". It's like the covid hand outs in the USA I know plenty of people who complained about it, but they all took up the offer. I know of one rich guy who could have gotten a whole lot but stuck to his values. It's rare in this day to have people think beyond their patch.

          • 

            mskeggs on 14/10/2021 - 22:24

            +1

            @serpserpserp: I do know what you mean, somebody has to pay the bills, and there are many deserving causes.
            I tend to come at it from the point of view of making sure people's needs are met, then trying to make a fair tax impost.
            This does mean I think people who earn more, and have higher wealth, should pay more. I don't miss an extra 1% tax, except in the abstract as part of rising cost of living etc.
            But people I know on low incomes who are much more careful about where their money goes, often don't have all their needs met, and substantially feel a 1% reduction in take home pay.
            I choose my work and could take it easier if I found tax/hours etc. too much, as long as I accept lower pay.

            On the other hand, I don't particularly begrudge people operating within the rules to maximise tax deductions etc. We should have rules that apply to everyone and are enforced evenly. If it is disgusting that global brands milked the government of billions in JobKeeper when it wasn't deserved - well, hold the government to account at the election box (or with a federal ICAC if corrupt), don't expect bleating to sway some foreign multinational.

            I admire people like ex-independent politician Ted Mack who resigned the day before qualifying for a generous taxpayer funded pension (and not because he was facing corruption investigations!), but I wish he could stay and all could be paid a reasonable pension instead.

  • 

    p1 ama on 13/10/2021 - 15:06

    +12

    If you want to maximise flexibility for families, and allow people (especially mothers) to best tailor their approach to work post-children, to me it becomes obvious that this would be one way to improve that situation.

    Except you are precisely wrong. I'm not sure if you actually thought about what you said before saying it.

    The current system much more incentivises mothers to work post-children.

    Imagine the partner earns $200K. If the mother goes back to work and earns, let's say, $100K, then under the current system, she will pay $22,967 in taxes. You can think of this as the additional amount of tax the family has to pay (noting that the partner's tax situation does not change either way).

    Now, imagine that the tax rates were the same, but were calculated on a "per family" basis. The partner's current tax is $60,667 (on the $200K). Now, the mother goes to work and the family's income is $300K. The total family tax will now be $105,667. So the additional tax paid is $45,000.

    Obviously the mother is better off in the current system.

    The issue with treating families as a single entity for income tax purposes is that it actually acts as a disincentive for work. The comparison of a family earning single $200K with one earning dual $100K is irrelevant because I highly doubt anyone is actually choosing between those two options. In all cases, taxing a family unit will lead to higher taxes because additional income earned by either party will be taxed at a higher rate.

    In other words, if you start with total family income $X and you go to $X+Y (by any means, either party can earn the $Y), you will always be better off under our current system.

    • 

      Seraphin7 on 13/10/2021 - 15:11

      +1

      Of course, under the model I am describing you would have "family" tax brackets. Effectively this would be double the "single" tax brackets.

      • 

        p1 ama on 13/10/2021 - 17:38

        +14

        No, you are wrong. No matter how you spin it, there is no way that a family "pooled" tax system will incentivise people to work. Because the mathematics of it is that no matter how you spin it, they will (by definition of calculating the taxes together), be at a higher marginal rate than if the taxes were calculated separately.

        I can see exactly where your logical fallacy is, but let's just consider an example.

        Let's say that we all live in a country with a simple tax code: $0-30K you pay 10% tax, $30-80K, you pay 20% tax, and $80K+ you pay 30% tax, just to keep it simple. The maths is the same regardless of what these numbers are, so just take it as a simplification.

        You have a family with person A and B, where A earns $100K and B is currently not working, but could also earn $80K. Again, simple numbers, feel free to replace with whatever you wish.

        In this system, the current amount of tax paid by A is 30 * 0.1 + 50 * 0.2 + 20 * 0.3 = $19K. So the family's take-home pay is $81K with just A working. If B were also to work, then the tax paid by B is 30 * 0.1 + 50 * 0.2 = $13K, so B would add another $67K to the family income.

        B's decision, therefore, would be "should I go to work or not for $67K?" Make sense right?

        Okay, now let's take your example, tax is calculated as a family. $0-60K you pay 10% tax, $60 - 160K you pay 20%, and $160K + you pay 30% tax. Same situation, with A earning $100K and B potentially (deciding on) earning $80K.

        In this new system, the current tax paid by A is 60 * 0.1 + 40 * 0.2 = $14K (much lower, but that is expected). So the take home is $86K. Now if B were also to go to work, then the family income would be $180K, so the total tax paid by the family will be 60 * 0.1 + 100 * 0.2 + 20 * 0.3 = $32K. Therefore, the total family take home will be $148K.

        B's decision, therefore, would be "should I go to work or not for $62K?" Agree? As you can see, no matter how you cut it, B will always be "adding less" in your system, there is less incentive for B to work.

        If you think about it - how does a system which advantages single income households vs. dual income households incentivise the second person to work? Doesn't that just sound a bit odd to you?

        As I was alluding to in my original post, your logic isn't right. What you are saying is that the second tax system will incentivise B to go to work more, but this is simply not true (in fact, it is mathematically so).

        If your argument were that we should have a tax system where families (as a whole) pay less tax (at the expense of single people, of course), then yes, your argument would make sense. However, that is not the argument you are making.

        The logical fallacy you are making is that you are comparing how much tax the family pays as a whole in the current system vs. your system, not what the "additional income" earned by B in either systems are. In other words, your counterfactual is wrong.

        (FWIW, if I'm coming across as critical, I'm not, it's just that it's clear from your post you've not actually put pen to paper or done any actual analysis on it. More often than not, "spitballing" on policy like this leads to very wrong conclusions. I also happen to have a PhD in tax policy and worked in the area for many years, but that's a different discussion for another time - I'm not saying you should trust me on the merits of my qualifications and experience, but rather, actually do the analysis for yourself).

        • 

          Seraphin7 on 13/10/2021 - 18:28

          +1

          @p1 ama: You will note that my posts were very clearly around maximising flexibility for families … not necessarily incentivising the "primary caregiver" to return to work in any particular way/timeframe/income level.

          What I'm fundamentally trying to achieve is a situation where any family with a total income of $x is treated equally by the taxation system, regardless of whether $x is earned 50/50, 100/0, or any other ratio.

          This then, in my mind, provides greater flexibility for families to best determine what works for them. For some that will be return to work full time, for others part time, for others not at all.

          • 

            p1 ama on 13/10/2021 - 20:07

            +7

            @Seraphin7:

            What I'm fundamentally trying to achieve is a situation where any family with a total income of $x is treated equally by the taxation system, regardless of whether $x is earned 50/50, 100/0, or any other ratio.

            Well now you've switched over to a moral argument, but still one where it seems that you have not thought about.

            If you are saying that a family who earns 2 x $100K should pay the same tax as one who earns 1 x $200K, then this implies (provided that we need to keep the same level of tax revenue) that the family earning 2 x $100K will need to pay more tax to compensate for the lower tax paid by the 1 x $200K family.

            Basically what you are doing is just shifting the tax burden around, and I think in a way that is actually very destructive to society. From a moral point of view, we should be giving a tax break to the family earning 2 x $100K since they are in a much tougher situation than the family earning 1 x $200K where one person gets to bum around at home (provided all else is the same).

            Also, I don't see how this policy can reasonably be implemented without person X who's earning $300K marrying someone who earns nothing and splitting the "benefits".

            How would you define a "family" - what about single parents who are co-parenting? What about people who are polyamorous…etc. Is it just for married couples or also for boyfriend/girlfriend relationships?

            This then, in my mind, provides greater flexibility for families to best determine what works for them. For some that will be return to work full time, for others part time, for others not at all.

            I disagree strongly - no family is sitting there deciding between 2 x $100K vs. 1 x $200K income, so the discussion is basically moot. I've met a lot of people who advocate for this sort of policy, at the end of the day, they usually only do because it benefits them personally.

            Your policy actually does not provide more flexibility at all, it actually provides less because it provides all sorts of incentives for people to stay in dysfunctional relationships, abusive relationships or otherwise.

            FWIW, there are already enough tax deductions and loopholes, the last thing we need is to start making a spouse a tax deduction.

            • 

              Seraphin7 on 14/10/2021 - 08:23

              +1

              @p1 ama:

              Basically what you are doing is just shifting the tax burden around, and I think in a way that is actually very destructive to society. From a moral point of view, we should be giving a tax break to the family earning 2 x $100K since they are in a much tougher situation than the family earning 1 x $200K where one person gets to bum around at home (provided all else is the same).

              Can you advise all those parents who choose to stay at home with their children how they could make better use of their time?

              • 

                NinongSmart on 14/10/2021 - 13:56

                -3

                @Seraphin7:

                Can you advise all those parents who choose to stay at home with their children how they could make better use of their time?

                Send their child to childcare and work like the rest of us?

        • 

          aboogee on 13/10/2021 - 22:11

          @p1 ama: i guess you are right - but what if as a family, you have 2x the lower tax bracket, 2x tax free threshold…
          under this system you are describing, tell me if i misinterpreted but youre saying there is only 1x of the above
          hence when B gets back out to work, the entire income is charged on the marginal tax rate
          it wouldnt be the case if say as a "family" the tax free threshold is 36k…. etc

          im not saying it should be that way - i am not a tax policy expert - just saying is that going to give rise to a fairer outcome

          • 

            p1 ama on 13/10/2021 - 23:09

            +18

            @aboogee: What's fair is a moral question, but I think the current system is perfectly fair.

            You make $200K, you pay tax on that $200K. I make $200K, I pay tax on that $200K. Why should you pay more or less tax because you've chosen to stay single, to marry someone poor, or to marry someone rich?

            The comparison to a 2 x $100K family is irrelevant because that is not your situation, and they are not "earning the same" as you are. A family earning 2 x $100K will also have to pay twice the transportation costs, pay for childcare, pay for XYZ costs that are incurred as part of having to work (e.g. educational expenses).

            On top of that, they are also working (if you're both working full time) twice the number of hours that you are. By all measures, a family with 1 x $200K is already way better off than 2 x $100K, so I just find it a bit disingenuous to cite that somehow things are unfair.

            When you take everything into account, I'd hazard a guess and think you're probably better off than that other family earning 2 x $100K.

            So what's fair?

            • 

              caitsith01 on 14/10/2021 - 14:44

              @p1 ama: There is an unfairness in one partner's income disqualifying you both from almost all subsidies and benefits, while you are not allowed to take advantage of the tax bracket of the other partner.

              E.g. with my partner at home looking after the kids, I earn all of the income and as a result get belted with all of the tax.

              However, because of MY income, my partner is also disqualified from the childcare rebate (actually a shitload of money), Family Tax A/B, Medicare rebates, etc.

              So the government is happy to 'share' my income when it comes to screwing us out of any possible subsidy or rebate, but then not happy to 'share' my income when it comes to assessing what we (as a household) should be taxed.

              • 

                p1 ama on 14/10/2021 - 14:59

                @caitsith01:

                E.g. with my partner at home looking after the kids, I earn all of the income and as a result get belted with all of the tax.

                The fact that your partner is at home is irrelevant - you are "belted" with the same amount of tax whether you are single, married, divorced, have kids, have no kids…etc.

                However, because of MY income, my partner is also disqualified from the childcare rebate (actually a shitload of money), Family Tax A/B, Medicare rebates, etc.

                Yes, because those are family programs for which you have joint responsibilities. Your job is not.

                For example, looking after kids (and the responsibility henceforth) are borne by both parents. If this is difficult to understand, forget you and your partner. Just think of it as your kid not receiving the childcare rebate because your kid has high earning parents (which parent is high earning is irrelevant).

                Your family situation has bearing on the costs of childrearing and hence, this is completely reasonable.

                So the government is happy to 'share' my income when it comes to screwing us out of any possible subsidy or rebate, but then not happy to 'share' my income when it comes to assessing what we (as a household) should be taxed.

                I just find the notion of someone who has the luxury of half their family not working complaining about not getting government benefits is a bit ridiculous. Spare us the sob story, if you're genuinely struggling and need the benefits, then perhaps your partner should go out and work before asking taxpayers for help.

                Sure, question my morals, but out of all the people in society we need to help, those staying at home as a lifestyle choice should be pretty low down the totem pole. I'm sure the families struggling to make ends meet with two full time incomes would love to swap places with you.

                • 

                  caitsith01 on 14/10/2021 - 16:06

                  -4

                  @p1 ama: Frankly, you just sound like you have a chip on your shoulder.

                  As I've posted in another comment, I have no issue with how much tax I pay, I actually favour reasonable tax and good government services. I have a huge issue with how many people seem to dodge paying their fair share though, whether due to the way they structure their income or because the government in its wisdom gives massive tax advantages to very specific groups (specifically, lower middle class families with kids and two incomes).

                  There's also a strong philosophical argument for not removing government services/benefits from people who earn more. It creates a sense of egalitarianism. E.g. it royally pisses me off that I pay significant amounts of tax and then I get punished for that with an additional surcharge for Medicare. Likewise I strongly feel that childcare should be subsidised equally in much the same way that public schools are. I can understand why some people who start earning more also start feeling like they shouldn't have to subsidise others. It's much healthier for society if those who pay more tax also enjoy equal access to the public services that they are funding.

                  • 

                    p1 ama on 14/10/2021 - 16:14

                    @caitsith01:

                    Frankly, you just sound like you have a chip on your shoulder.

                    Well yes, I do, I'm from a dual income family where my partner and I both work extremely hard, both work full time and genuinely put a lot of effort into making things work. It can be really tough. You know what? If I could bum around at home and retire, I'd love to do that. But I can't because I'm not in a privileged position to do so. Recognise this.

                    Nothing grinds my gears more than people from single income families who don't see and/or understand their privilege. Many of these people are practically having their entire lifestyles subsidised and they very rarely understand that, in today's society, it is an absolute luxury to not be able to work.

                    FWIW, I'm not complaining about my own situation because both my partner and I happen to earn very reasonable salaries, but I empathise a lot with families who are in our situation and just struggling to make ends meet. For many, having leisure time, staying at home, or time off, is a luxury, so it always seems a bit rich when people in such a position of luxury are suggesting that we cut their taxes at the expense of those working harder without the same luxuries.

                    I have a huge issue with how many people seem to dodge paying their fair share though, whether due to the way they structure their income or because the government in its wisdom gives massive tax advantages to very specific groups (specifically, lower middle class families with kids and two incomes).

                    Well these are two separate issues. The former, I completely agree. The latter, I agree with how the government targets the tax advantages.

                    If anyone is deserving of tax advantages, it is quite literally lower middle class families with kids and two incomes.

                    There's also a strong philosophical argument for not removing government services/benefits from people who earn more. It creates a sense of egalitarianism.

                    This sounds odd to me - the entire point of government services and benefits is redistributive in nature.

                    E.g. it royally pisses me off that I pay significant amounts of tax and then I get punished for that with an additional surcharge for Medicare.

                    Good, if you can afford to subsidise your partner staying home, you can afford to pay more tax.

                    Likewise I strongly feel that childcare should be subsidised equally in much the same way that public schools are.

                    Agreed.

                    I can understand why some people who start earning more also start feeling like they shouldn't have to subsidise others. It's much healthier for society if those who pay more tax also enjoy equal access to the public services that they are funding.

                    Agreed as well. However, there's a gulf between access to shared services and asking for more free stuff.

                    • 

                      caitsith01 on 14/10/2021 - 17:57

                      @p1 ama: It sounds to me like your whole view of these issues is coloured by the perception that anyone who has one partner staying home some or all of the time has it incredibly good. There are many, many reasons why people might be in this situation which are not the ones you seem to imagine. There are also single income families where the person earning the single income has to work extremely hard indeed.

                      That's really my complaint, there are 'one size fits all' policies that seem to inadvertently make the same assumptions you do without much of a basis.

                      • 

                        p1 ama on 14/10/2021 - 18:28

                        @caitsith01:

                        It sounds to me like your whole view of these issues is coloured by the perception that anyone who has one partner staying home some or all of the time has it incredibly good.

                        I never said that they have it "incredibly good", but they have it good enough that they can afford to stay home.

                        There are many, many reasons why people might be in this situation which are not the ones you seem to imagine.

                        For example? (Aside from genuine reasons why one cannot work because we already have programs to deal with those cases, e.g. disability pensions…etc.)

                        There are also single income families where the person earning the single income has to work extremely hard indeed.

                        Maybe they wouldn't have to work so hard if their partner also worked…

                        That's really my complaint, there are 'one size fits all' policies that seem to inadvertently make the same assumptions you do without much of a basis.

                        I agree, but at the end of the day, all policies are "one size fits all" because you cannot account for every single oddball situation that people are in. Hence, you have a broader universal policy and then specific policies which addresses the special cases.

    • 

      njastar on 13/10/2021 - 16:17

      I think if it's a new family-based tax income structure it would be the total income combined, then the tax calculated as if two people were earning the same amount adding up to that number.

      In your example, $300K would be split into two units of $150K would be taxed individually. So it would be ~$81K ($40.5K*2) in tax instead of $105,667.

      If you tax them individually it would be $22,967.00 + $60,667.00, which is slightly more than the $81K mentioned.

      • 

        p1 ama on 13/10/2021 - 17:48

        That's not the argument being made - it's not how much tax does a family pay under the current system vs. the proposed system. It is which system incentivises people to work.

        If you tax together, the second person going to work would pay $40.5K tax, whereas with the individual system, they would only pay $23K.

        Which one is more incentivising? Going to work and paying $40.5K more tax or only $23K more?

        • 

          aboogee on 13/10/2021 - 22:26

          @p1 ama: should it be measured by amount of tax paid? or incremental take home pay?
          it probably depends on how you think about it (and maybe to some extent what do you value in life?)
          many may complain about the tax that they pay
          to be clear im not complaining about the amount of tax. I am just saying i personally feel dad earning 200k vs dad and mum earning 200k combined should give rise to the same tax outcome.
          for me, i am happy to pay more tax - if i can afford it (putting aside how to minimise tax for now)
          I just care about the take home pay
          in this case, my take home pay is lesser as a single working parent vs a family with 2 incomes

    • 

      aboogee on 13/10/2021 - 16:58

      this is perfect - thanks
      as they always put it, "how should we think about it"
      learned something new today

• 

  purplelady on 13/10/2021 - 14:59

  +4

  All this time I thought single people are the ones getting penalized :/

• 

  tsunamisurfer on 13/10/2021 - 15:42

  I would have thought a fair tax system would look at combined income for a family and apply the tax bracket accordingly?

  No we do not as long as we have progressive taxation.

  It should be a flat percentage, with a smaller tax free threshold so that the lower rungs of society contribute.

  Have a look at this disgusting statistic.

  https://www.ato.gov.au/About-ATO/Research-and-statistics/In-…

  If we rank our 100 people by their taxable incomes:

  people with the top three taxable incomes paid 30% of all net tax
  the next six paid 18% of all net tax
  the next 30 paid 40% of all net tax
  the next 36 paid 12% of all net tax
  the last 25 didn't pay any tax.

  The top 9% of society bear almost half the tax burden (48%), where as the bottom 61% of society contribute only 12%.

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