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Stephanie Peatling and Yuko Narushima
June 5, 2009

AUSTRALIA has a sexist tax system that in effect forces higher taxes on working mothers to pay for tax breaks given to the top earners, research suggests.

Modelling by the economist Patricia Apps shows women earning low and middle wages are paying the most tax per dollar of income earned because of the complicated interaction between income tax and family payments.

“This new income tax system has shifted the overall burden of taxation towards two-income families on low and average wages and to working married mothers,” Professor Apps said.

“If a father of a family with two young children is on $40,000 and the mother goes out to work and earns around $20,000, she can lose over 40 per cent of her income in taxes and lost benefits.”

The professor of public economics of the University of Sydney will meet the head of the Treasury, Ken Henry, today to discuss her modelling.

Professor Apps said the tax and payments system was so discriminatory that “the puzzle is why so many women work”.

Mortgage repayments and wanting to maintain skills were the two reasons most often given when she interviewed women.

Professor Apps’s modelling shows the combination of the income tax rates with the low income tax offset, family payments and the Medicare levy places a high tax burden on mothers who work part time.

For example, a woman working part time and earning $14,001 to $22,995 pays 56.5 cents tax for every dollar she earns, or 8.5 cents per dollar less than the top marginal rate of 45 cents.

This applies to the tens of thousands of families similar to those the Federal Government likes to use as its average family – a policeman married to a nurse or teacher with two children.

Professor Apps’s work was commissioned by the National Foundation of Australian Women. She says the Government should make family payments universal and tax high-income earners at a higher rate.

Josie Byrne, a nurse, works three days a week to make the difference between a “mince and sausage” diet and going out once a month. She earns barely more than the cost of child care for her two children. Her income of $50,000 is about half of that of her husband but she pays a higher rate of tax. “It’s another deterrent for women to work,” she said.


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