Tax Question - Are single income families being penalised financially?

Hi all,
Just trying to gauge everyone's experience before deciding to go to a tax accountant
We are a family of 4 (2 kids). Wife is not working to look after kids. I am the only one working presently
Had a casual chat with wife's friend a few weeks ago. They are family of 3 (1 child). Difference is, they're both working parents.
We went into discussion around tax and income and what we found out was that despite their combined income being less than mine, my take home pay is lesser than them.
ie they are both ~$80-100k income each whereas I am on ~$200k.
We had a laugh initially but thinking about it, their work hours are significantly lower than mine. I work for a bank and needless to say, the extremely long hours, probably longer than them both combined to be frank to get a good bonus.
Am I missing something here when it comes to tax return? I dont mind going to a tax accountant if this is a complex matter, but with my limited knowledge i thought my tax return would be pretty straight forward too as there arent any complex holding structures etc.
I would have thought a fair tax system would look at combined income for a family and apply the tax bracket accordingly?
Thanks!

EDIT
Thanks guys for all the responses - I guess my key takeaway is there are ways to optimise our tax positions so we will look into this.

But just to play back a few scenarios that really struck me and got me thinking

Sc1: Person 1 works 8 hours, gets $100k, pays fair share of tax
Sc2: Person 2 works 16hours, gets $200k, pays more (but fair share) tax. Absolutely silly some would put. Thats not our way of living they say, so you deserve to pay more tax. I get it that this is the same worldwide.
Sc3: Person 1 and 2 gets married, Person 1 takes a career break after having kids. Well mate, you are working too hard, get your partner to start working again to get better tax treatment. At the same time, you go get a lower paying job if you dont want to pay tax (huh what?)
Sc4: Person 3 and 4 are also married, earning the same as Person 2. Oh come on OP, person 3 and 4 are hardworking so they deserve better tax treatment than Person 1 and 2! Get on with life.
Sc5: Person 2 asks if he was missing anything in tax return. Didnt make sense (to him) that dual earner earning the same income as single earner is paying less tax. Oh OP, you are such an entitled, selfish person, who cant comprehend that you are asking for a better tax treatment putting others at risk of subsidising your partners living. Its your fault for working 16hrs and you deserve to pay more tax. Your partner is not working so your family deserves worse tax treatment. Dont get those that work normal hours to pay for your partners time at home watching TV.
Sc6: Person 2 asks, what happens hypothetically if Person 1 is no longer able to work. Does that change the argument? No one gave an answer. This is not the scenario for Person 1/2, but there are families like that in Australia.

Comments

  • +3

    I think the Australian Tax system has a lot of issues with it and frankly i think people in general are taxed far too much as in there is too much tax being spent frivolously or used up in corruption by the government.

    But Are we really saying the single income earner who earns more than the 2 income family and gets the option to have one partner stay at home and be a full time caregiver to the kids is the victim in all this scenario. I know what i would rather be in, I would love to be in a single income family where one partner can stay home with the kids as frankly and generally the kids definitely benefit and get a better growing up experience if they have one parent stay at home.

    And if the single income earner isnt happy with the current situation and prefers the lower paid dual income family situation, surely they have the choice to move to that type of situation themselves. I am sure if you asked the dual income family, they would rather move to a situation where 1 person can earn more than what they both earn together and hence have one of them stay home with the kids. Or both work and make even more. One family has a choice in all this and the other not so much…

    • +1

      thanks - i think thats a valid point too
      obviously, the grass is greener on the other side, is the problem for me

      • Yeah, and I can understand why at times its frustrating when you work out the maths for the tax etc. but i think there are too many areas where people can get frustrated if they sit down and try to work out their situation vs other situations. For example people without kids may wonder how come people with kids get all these tax breaks and tax exemptions etc which are partially being paid with their tax as well.

        At the end of the day, its probably best to be happy that you are in a scenario where a lot of people would like to be in which is to have a choice on who works and whether you want to have 2 incomes or 1 and 1 stay at home parent. A lot of people just dont have that choice. Most of my friends who have that choice, have usually chosen to have 1 stay at home parent if not indefinitely then at least for the first several years of the kids lives.

  • One thing I find ridiculous when I was working casually or contract was that I got a bigger weekly payment and the tax office uses annual tax rates implying that I am earning the big amount all year but ignores that there are many weeks I have to go by without any or low income. I am convinced that the ATO works against my and many people in my situation's interest.

    • +1

      wouldn't you get this back when you do your tax return?

    • +3

      I understand this situation would suck but it will equal out when you lodge your annual tax return.

    • Total misconception. You are taxed at the end of financial year.

      If you paid more tax through out the financial year as PAYG, then you get refund during tax return. If you paid less tax as PAYG, then you would have to still pay additional tax at the end of financial year.

      PAYG is established to reduce tax burden at the time of tax lodgement.

  • It's his the world works. Yes financially you are better off with 2 workers due to each having available the tax free threshold and a progressive tax system.

  • Yes

    That being said our tax system is broken but no one has the balls to fix it.

  • +1

    Imagine if you were single. What an unfair world would that be - financially.

    • +1

      Add to that, single AND not a real estate investor or have rich parents.

      • +1

        Also if you live in Sydney or Melbourne too, that would suck.

    • +1

      Why is that?
      I agree we should tax the rich more
      I think most people would agree with that
      Is a single income earner of 200k feeding a family richer than 2x100k feeding a family? thats my question
      Im not comparing single earner in family vs single
      OK i concede you can argue that that's preferential treatment given to people with family…
      But i argue a single earning 200k is much wealthier than a family income of 200k

      Again i dont have an answer - so please spare me from the "entitled" label as per comments above.

      • The system is already very much in favour and gives preferential treatment to those with children.
        A 2014 report found that 48 per cent of Australia’s 12.2 million “income units” pay no net tax.
        Any tax they do contribute is offset by the welfare pensions, family tax benefits or childcare rebates they receive.
        So there is a new thing for you to go after, those on dual incomes who also hit the right amounts to be tax neutral due to benefits paid.

        I get that you're above the 180k threshold that probably makes you mostly ineligible (if not fully ineligible).
        A single earning 200k might be more wealthy but that's their choice, as is yours to have children and be the sole income to the household.
        It seems singles are always fair game for their life choices but parents aren't.

        How do you know the single high income person (no children) isn't supporting parents? It's the continual view that single people have nothing else in their lives and are just stashing buckets of cash away and shouldn't expect any of the breaks that the government throws around for families.

        • +1

          this is again a valid point - i find this very acceptable
          these are points i havent considered

          • @legendary-noob: All good, just throwing other situations out there where the tax system doesn't quite balance for other segments of the community.
            We're not short of them, that's before we even address how the money is often wastefully spent by people who will get new budgets and more money to waste next year.

      • 'Im not comparing single earner in family vs single'
        You are not reflecting on things from a single's perspective.
        The tax system is not seeing things from your perspective..
        You think the grass is greener on the other side…do you consider the yellow grass too?

        Anyways, at least you've been learning something since your post. Honestly, you work in banking. If you wanted a casual discussion (don't ask them to do your taxes, just tell them you're trying to understand taxes and how people lower it. And maybe ask them why people need tax accountants when other people do their own taxes), I'm sure you know someone from work or a friend with a background in accounting (even just uni studies, not actual profession), you can have a high level chat with them before you decide to see a tax accountant. I'm sure they will be more patient than the replies you've been getting on ozbargain.

  • We have created a family trust. The wife is paid as admin staff under an award rate and a salary. She gets super it all gets deducted from the main trust income.

    It's all bean counter legit and certified. She actually does most of the admin work in the business which helps.

    • You might want to speak with your 'bean counter' about whether your arrangement complies with the PSI rules. For certain types of work, you cannot use a trust to reduce taxable income by paying your partner even if they actually do the work in question:

      https://www.ato.gov.au/Business/Personal-services-income/

      • It complies with PSI rules because it's a service entity.

        • +2

          That doesn't matter. You can't just magic into existence a 'service' entity to get around the rules. What matters is how the primary income of the business is generated. E.g. if you are a doctor you can't set up a service entity and then pay your spouse 'admin' through that structure to minimise tax under the PSI rule.

          Indeed, that's the precise scenario the rules are intended to shut down.

          • @caitsith01: Our risk zone is Green in the ATO decision matrix and we pay people plenty of money to ensure compliance. I'd be pretty confident in being audit-proof.

            Edit: In addition just because it's a service entity doesn't mean it's for the purposes of tax avoidance. It's a legitimate way to manage a business. And it's done every day all day. Some people break the rules or bend them but we definitely don't.

            PCG 2021/D2 if you're curious.

            https://www.ato.gov.au/law/view/document?DocID=DPC/PCG2021D2...

            If you ask me who they really should be focusing on it's A) cryptocurrency B) multinational corporations. These are the scourge of the earth.

            • @meowsers: Not sure if I agree, but interesting
              I assume you own a business?
              I have not heard a PAYG employee done that

              • +1

                @legendary-noob: PAYG you're already paying your tax through your employer. Very limited in the form of deductions etc.

                I think ultimately it's a matter of doing what is reasonable and not twisting yourself into a pretzel trying to bend the rules. Ie: sham contractor arrangements, ludicrous schemes like this do no one any favours.

                Essentially pay the tax you are required to pay but not more.

                The ATO is ruthless and you have to be ruthless in return (but legal).

                Like I said before the multinationals play jump rope with this stuff every day and it's pretty frustrating.

            • @meowsers:

              If you ask me who they really should be focusing on it's A) cryptocurrency B) multinational corporations. These are the scourge of the earth.

              You're exploiting the tax codes to pay less tax just like multinational corporations are…

              Don't act like you're morally green.

              • +1

                @p1 ama: The late Kerry Packer famously said, "I don't know anybody that doesn't minimise their tax … Of course I'm minimising my tax. If anybody in this country doesn't minimise their tax they want their head read. As a government I can tell you you're not spending it that well that we should be paying extra".

                • @meowsers: I also minimise my own taxes. Difference is I'm not pretending like I'm better than anybody else.

                  • @p1 ama: Yeah, well everyone can't be the same. Australia suffers from a bit too much tall poppy syndrome.

          • @caitsith01: Precisely. You know your stuff.

          • @caitsith01: Wasn't psi set up to stop the it guys from back in y2k days?

        • Interesting.

          Would you mind sharing how that is done?
          I tried to convince my bean counter that it should be that way (i.e. a pty as a service entity), but being a registered accountant, she said that her professional opinion is that they look at the psi being earned by the person and the 80/20 rule.

          • +1

            @aussie bargain: You need to find a specialist tax consultant. These are people who used to work for the ATO and/or the Big4. You will have to pay. But these people are essentially the people that accountants go to for advice. If it can be done legally, and ethically they can do it.

            • @meowsers: Thank you.

              When you see your bean counter, can you please ask him if he takes a Melbourne client or can recommend someone who does?

              Good accountants are gems and i have been trying for years to find those that can really make things legit with the best outcome.

              Happy for you to DM me the contact.

              :)

  • +5

    You definitely do get penalised if you are a single income family, unfortunately. Basically if you each earned half the amount rather than one of you earning the whole amount you would get the benefit of both partners' tax free and lower-tax brackets.

    So ignoring many other variables, if you each earned $100k this year you would pay $23k in tax each, so $46k in total. Whereas if one of you earns $200k and one earns $0 you would pay $61k in total. This discrepancy gets worse the more you earn up to double the bottom end of the top tax bracket.

    I think this is an unreasonable situation when the other partner can't work, or can't work as much, due to having younger children. That person is still performing valuable work for the family and the country, but the family suffers a tax hit. The solution would be that while you have dependent children you are entitled to pool your income for tax purposes.

    Even more annoying is that this hammers anyone with a salaried job or certain classes of job where you can only operate as a sole trader, while people in other lines of work are able to stuff all their income into a family trust or company and then use distributions or dividends to take advantage of other family member's tax position. There should be no discrimination arising from the way in which you earn your income IMHO.

    • +2

      i hope you are not from banking - because I am and people are calling me entitled.
      You are here to prove that there are people outside banking who agree with me
      I am not arguing that tax reforms must happen to steer things in my favour.
      I am just offering, in fact, asking for a view if this is indeed the case for people under certain circumstances
      If it is, I happily accept it

      I didnt know some Australians have become so resentful to the "rich" that asking question is a taboo
      I am not even rich pfft…

      • +10

        I actually have no problem with the amount of tax I pay. The problem I have is that so many people manage to avoid/minimise tax that it sometimes feels like I'm the only sucker in Australia paying a significant amount. I would be completely happy if every household that brought home the equivalent of my income paid the same amount of tax that I do. What pisses me off is my neighbours driving around in a $200k Merc while paying much less tax due to shady trust arrangements while I pay for their healthcare, childcare, nuclear submarines, etc.

        • Imagine how much tax that google/apple didn't pay for the phone in your pocket.

          Tax minimisation is legal. Tax avoidance is not.

          The fact that you can tax deduct the very same people who can save you money is icing on the cake.

          The rich get richer.

          • @meowsers: Yeah look, no-one is more in favour of large companies actually paying tax than me.

      • +2

        Can we all please have a respectful moment of silence for all the battlers on $200k a year and who aren't even rich.
        :p

  • How much do you save not having a partner and kids tho? 😛

    On a serious not. Have you looked into tax reducing benefits like investment properties and negative gearing etc?

  • +8

    It is even worse for single people. Just as much tax but no family benefits, no income splitting, higher tax to pay for other people's kids and schooling and family benefits. Higher membership for everything as family memberships are usually only slightly higher than individual memberships. On top of that single people have to compete for a home against dual incomes (mostly). The list goes on and on but the system is set up for breeders.

    • Exactly this! In the meanwhile OP thinks he should be entitled to pay less tax cos he has a family!?

      • +2

        lol… fine
        i will pay my share of tax
        but i want some form of family benefit when you compare my family against, in my scenario, the family with dual income and my take home pay is lesser
        ie - i pay more tax, i get less benefit. my hours are more than them both combined.
        richkid, get your points right - i am no wealthier than a family dual income getting the same income before tax
        if you believe in taxation in wealth distribution then in this example its not getting the right outcome
        if you dont, then yeah i dont know what is tax for then

        • if you believe in taxation in wealth distribution then in this example its not getting the right outcome

          Your responses are literally just "me me me me me me me me".

          You seem completely incapable of understanding the different ways you are better off than others, and that you are basically asking taxpayers to subsidise your partner staying at home.

          Think of it this way. You earn $200K, you pay a certain amount of tax. You get married and the day later, you pay less tax. Who exactly will pick up the tab? That's right - the rest of the taxpayers who are now subsidising your partner to stay at home.

          You obviously have made the choices you have because it works out best for you.

          If it doesn't, guess what - get a job that pays $100K where you don't have to work so hard, or even work part time, your partner gets a job that pays $100K and you can rub it in your partner's friends' faces the next time you see them that you pay the same tax they do now.

          • @p1 ama: whatever
            i feel pointless trying to explain my position to you guys anymore
            i never compared singles vs family. i was comparing family vs family.
            as you can see from other responses, its not a silly question
            i guess you guys have just been fortunate enough to not be in such position
            lacking any empathy (as most bankers are) means you (ex-banker) just see things from your point of view
            if you're gonna jump at me for not seeing this from your shoes, go back earlier
            where i acknowledged your points and they were valid

            • @legendary-noob:

              whatever

              Don't like it when people don't agree with you? ;)

              i feel pointless trying to explain my position to you guys anymore

              Well clearly you already have a preconceived answer, so why ask the question if you're not willing to change your mind.

              i never compared singles vs family. i was comparing family vs family.

              It doesn't matter, at the end of the day, the situation I am describing above is still a real situation.

              You earn $200K today, you marry someone unemployed, you pay less tax tomorrow. Who picks up the slack?

              Can you answer that? If not, then you're just complaining and you don't have any serious policy proposal.

              as you can see from other responses, its not a silly question

              Where did I ever say it was a silly question?

              i guess you guys have just been fortunate enough to not be in such position

              I wish I was fortunate enough to lounge around at home whilst my partner makes $200K p.a.

              lacking any empathy (as most bankers are) means you (ex-banker) just see things from your point of view

              I have a lot of empathy for the other family earning 2 x $100K salaries that you're complaining about. Just because I don't agree with your point of view does not mean I'm not empathetic.

              • @p1 ama: i dont mean to say i cant change my mind
                im saying i cant fully agree with you

                just coming back to the slack question that you feel so rightly about

                lets say i never married my wife
                i pay 60k tax while earning 200k.
                she gets on the dole getting i dont know how much

                i marry her
                she loses benefit of how much dole i dont know
                i still pay my 60k tax?
                am i not picking up the slack?

                im not berating the family of 2x100k
                i just feel that as a family unit, our efforts are the same but the outcome is less optimal

                but i respectfully accept that you said its a choice me and my wife made to have one single income
                and frankly again, if it was such a silly concept then countries which allow split income (as others have put it) must be pretty dumb

    • +2

      I don't plan to have kids but I have no problems with the system set up this way. Apartments go for 400-600k while houses 600-800k, it makes sense, if you're a single person maybe you shouldn't be living in a whole house and an apartment will be fine. Parenting is HARD and if they were to be financially penalised for it as well, fewer and fewer people will do it. We need children, I don't want them so I'm happy to chip in for others to make it easier unless you want a fertility problem. If you're earning enough to be complaining about high tax brackets AND single, then I'm sure you're doing just fine.

      • You make a few false assumptions here. First, in an overpopulated world we dont need more children. Secondly, who says Im living in a house? Thirdly, parents arent penalised, they are given a handout every week by society, and lastly, how do you know Im doing just fine. How do you know that Im not living with my parents as I cant afford to live anywhere else? I think you might need to consider removing your head from whereever it currently resides.

        • You make a few false assumptions here. First, in an overpopulated world we dont need more children.

          Overpopulated is debatable. Secondly, the only reason you can say that is because we can pinch people from other countries to try and address job shortages. But nevertheless, you don't want to end up with a situation like Japan.

          So what's your solution, stop having children and grab as many children from other countries as we can? Adoption?

          Thirdly, parents arent penalised, they are given a handout every week by society

          I never said they were, you're saying unless you have children, your tax money doesn't go as far which is true and perfectly fine.

          How do you know that Im not living with my parents as I cant afford to live anywhere else

          If you're going to bring up over population and say we don't need more children, then I'm going to say if you can live with your parents, why do you need to move out? Climate change is another issue and the more densely we live, the better.

          I think you might need to consider removing your head from whereever it currently resides

          I'm addressing your comment about families getting more from the government than singles. There's nothing wrong with that. Go put your effort into loop holes the rich use to avoid paying tax or paying a less % than you. Not those who have families. Sure, paying for other people's children may not seem fair but the situation where having families are not supported will be worse off. Or go and have children yourself if you're that salty.

          • @DisabledUser262693: Thanks for your response, oh person who intends to pop out a few and suck on the teat of the government

            • @footscrayvic: Even though I explicitly said I don't plan on having kids….alright mate. Besides, I still think someone is financially worse off having kids regardless of the current government support so I don't know how much sucking there is.

      • How dare a single person want their own garden

        • The problem is when everyone wants their own garden and there's millions and billions of us when suburban living is really costly in terms of climate change. Big dense, green cities are really the way to go. So if you want one all to yourself then you're just gonna have to pay for it just as much as if two, three or four were going to share it, I don't see the problem there.

    • Thats not right, unless you plan not to have kids.
      Otherwise its a timing thing, you will get your turn when you have kids and other single people pay tax for schooling and family benefits for your kids.
      This is the concept of wealth distribution.
      What memberships? Discretionary ones? Tax is not discretionary though
      And in my example - we dont get family benefit. our single income has to compete for homes against dual incomes

      Not sure if you guys get my point
      In this pure comparison, 2 families of single earner vs dual earners
      Family income exceeds family benefit threshold so no benefit
      The take home pays are different despite gross income being the same
      The single earner is not wealthier than the dual earner
      As simple as that

      Actually, not my scenario but throw in an interesting mix
      Say single parent (hence single income) earning 200k vs working parents (2 x 100k)
      Its the same outcome
      I dont know if there is any tax relief (i wont even call that benefit)

      • To be honest, I think people on dual 100k would rather opt for one earning 200k, even if it costs them. But childcare alone will set you back 20k ish from what I hear and having someone at home to look after the kids full time can be really invaluable. My dad barely made 50k a year and my parents still opted for the one parent at home.

        The take home pays are different despite gross income being the same
        The single earner is not wealthier than the dual earner

        This is just the progressive tax system though. Nothing to do with families right?
        At the same time, you're not being charged more for having more people in your family go to school or use the healthcare system are you? Single people could easily argue they're helping pay for your kids and we're being punished. So if you want a tax system for families, then it only makes sense that there is a better tax system for singles but then you're probably going to be taxed more anyways if this was the case.

        Just to be clear, I'm not gonna pull the 'you decided to have kids so you should pay more' card but rather you chose to be a single income family. Just get your wife to earn 18k and you'll get that tax-free threshold back. I'm fine with society supporting families at a slight cost to single people since it's better than whats Japan or China is going through but once you ask for family tax considerations, then surely I could ask for single tax considerations.

  • Having an income makes you penalised financially. Only by being on handouts do you "beat the system", tho in a rather useless type of win.
    But you're right. The tax system isn't fair or just in many places.

  • +1

    Just another Australian government scam.

    We have a fertility rate problem and you penalise people staying at home to have children. Okay OP makes $200k single income. But just look at those who are making $60k each. The consequence of losing the second income and getting no offsets has a big impact on finances (not even including cost of housing etc).

    Government actually need to think of those on average / median incomes. But then those in government is scamming for votes. Rich people go offshore. High income earners are basically prison labour.

  • +1

    With all due respect for your long hours, having had 100s of dealings with banks my emphathy is rather limited.

    Imagine if banks would be limited to actual banking then perhaps the world would not be as flooded with printed money as the situation is unfolding.

    But a true family breadwinner, married with both using the same surname quickly wonders why so many folks out there are getting away with pretending to be single or worse even split a perfectly happy marriage just because it is financially such an advantage. I know couples who sleep in the same bed but had purchased a dual key unit with seperate house numbers just to pretend to be single. On paper they claim to be single and get away with it!

    • +1

      oh mate,
      banks… its irrelvant here mate.. i included that detail because of the long hours
      lets pretend someone, who sits next to you at work, is in the same industry as you and in the same situation as me
      would you have sympathy then?

  • +2

    one hidden cost for working parents are childcare… from age 0.5 to 16 you will need it, in big cities they charge for like $100 a day per kid ?

    if that working parents have to pay full child care everyday (2 kids) - that's will be a huge sum - have you calculated that ?

    • +2

      one hidden cost for working parents are childcare… from age 0.5 to 16 you will need it

      Imagine being 16 and needing childcare

    • Could be around 20-30k from what I hear, suddenly the difference becomes very small

    • It’s massively subsidised and not means tested if you earn less than 360k and have 2 kids in care! It’s maybe $50 a day!!!

  • OP: wait until you meet a couple that are earning 150k each. It is just a land of jet skis and 80k AMGs for them.

    • +1

      not really - we are one of those couples and have none of those - have 4 kayaks though.

  • Just sharing my experience as I am in a similar situation and have asked 2 different accountants about this.

    Basically, if you are paid as an employee, there is no chance and you just have to suck up the tax. Some tips to minimise your tax:
    - Passive income in partner's name (franking credits etc)
    - Super contribution to partner
    - Super contribution to your account

    If you are a contractor, then you can consider doing a pty ltd and @meowsers have provided the most straight forward suggestion. A caveat that I have looked into: 80/20 rule from the ATO on PSI/PSB determination.

    I actually saw 2 different accountants and discussed the pty ltd structure (as it is the most tax efficient) and I got 2 completely different answers. One was like "No can't do". The other was "Off course you can". Similar to what @meowsers has suggested, the latter was confident that it is a completely legit and legal tax minimisation strategy.

    • A caveat that I have looked into: 80/20 rule from the ATO on PSI/PSB determination

      Just because it is legal, it does not mean ATO cannot apply anti-avoidance rule. 80/20 is generally rule for legit business structure but not for funneling income to avoid paying tax. Individual circumstances and the nature of business still play a role.

  • +1

    As others have pointed out - it's easy to have one perspective thinking along the 'family' sense - because you have to support 'dependents'.

    Of course - I'm sure it's extremely difficult to raise children as a single parent, and yes - unfortunately a single parent earning $100K pays more tax than 2x $50K parents.
    Unfortunately, in the naive macro-economic sense -> 2x people working will always contribute more than 1x person working (irrespective of pay).

    If you had 3+ carers for a child in the same household (and you can -> grandparents still working + parents still working living in the same house), are we then financially penalising the single parent & 2x parent households? (I know of people who are in this situation BTW - think outside western culture of 2 parents 2 kids in a house)

    And why are we so focused on a household? A lot of 2x parent + kid households have grandparents who are still working who will help them out in any financial difficulties as well - if 2 generations of a family owns 2 houses in sydney -> aren't they financially better than 2 generations only living in 1 home in Sydney?

    At some point you just have to keep the base tax rules simple - noting that early high school leavers can be earning incomes & you should never be obligated to pay for an accountant to do your tax.

  • +1

    I was in the same boat, me earning 170k and my wife staying at home.
    I would advise you to see a proper tax consultant and set up an ABN (assuming you're a contractor).
    It is actually a good time to start an ABN, with gov handing out lots of free money and tax cuts to small business during this pandemic.
    As you know single income families are penalised in this country, don't be a single income family then.
    There is no permanent fix planned for this tax system, you need to come up with a workaround.

    • Why does everyone think that setting up ABN is a magic solution, it is not.

  • Anyway OP we need people on the higher brackets to pay for you know who with a special mention to those that you support on triple + your income paying 0 taxes legally .

  • If OP is not happy with the Australian tax system, maybe he should consider moving to a different country where it pays more to be a single income earner with a stay at home partner and kids.

    • +1

      im not even unhappy
      im just asking if i missed anything in my return because it didnt sound right to me

  • Yep, and when working all those hours and the pressure that comes with it leads to divorce, because of the perceived financial and power inequity and is considered the primary carer she'll get the kids, house and car, a solid chunk of child support, half your super and the single parenting pension straight away. And you'll get to keep paying the same amount of tax, have to hit the reset button on life and pay all the child support out of your post tax income.

    What a country

  • +2

    In America they allow you to lodge jointly, and pay tax jointly. In effect this is better for a 2 parent household with one parent working.

    In Australia that's not the case. I think it is about encouraging both parents to work.

    However if you earned 99k instead of 200k you would also get about 5k in family tax benefit (which isn't taxable) and pay much less tax as a % so yes in a way the tax system isn't set up in a very beneficial way for you.

    You're still doing good, but working 80 hours or whatever is not very healthy. Personally I would not pay that kind of price for a high income.

  • Have a similar situation - wife works a lot less and earns a lot less. One way to take advantage of is to put assets in her name only: shares, investment property etc. Any income or capital gains generated from assets in your name will be taxed at much higher marginal rate.

  • +1

    Hi legendary-noob, first off agree with numerous comments others have made.

    1) Yes, get a tax accountant, at that income level it's worth it
    2) yes max out super, think you said you done it already
    3) yes hire your spouse, make use of her tax free threshold
    4) yes put investments in her name.

    However other things I noticed were you saying you had a look at emptying your offset account to get max negative gearing benefit, and concluding it was silly.

    I'd say if you can get good yielding investments, say above 5%, then it's definitely worth it. It might your tax situation 'worse' in that you'd pay more tax, but you'd increase your take home. As a bonus you could do it in your spouse's name too!

    Happy to chat if you want on how to do this, please feel free to PM me.

  • +1

    Nope. You just need to learn how to play the game.

    Get a good accountant and financial consultant who is happy to chat about rigging things up.

    They'll tell you things like:

    At $200k the government should be paying you for your investments while you price the younger generation out of home ownership.

    Salary sacrifice some shares that get paid straight to a trust that pays your wife exactly $18,000

    Contribute $10k into your wifes super yearly.

    Have your wife indefinitely look for work on paper.

    • Do the last 3 actually work or are they things you think work?

      • They're actual things if you set them up right.

        Last one is a trick to get heavily subsidised childcare.

        • Darn. Better look harder then!

  • +4

    This is how "they" win, because instead of talking about this: https://www.michaelwest.com.au/revealed-australias-top-40-ta... we are talking about 200k vs 100k incomes and a few thousands difference.

    You do not like paying high taxes???? great … get these companies to pay and try NOT to get it from 2 people earning 100k.

  • +1

    its a choice to not work at all if able, whereas those on two incomes can not choose to be paid more so they don't have to work.

  • I reckon the system is pretty rubbish for families, there is a real lack of support due to the overly harsh means testing.

    The supports aren't brought in line with the actually costs of raising a family.

    Government is more happy to shell cash to people coming here to leech off the system then support its own people.

  • Wait until you start comparing psi income vs fake bs companies and the tax benefit of taking a ladder to work, cash jobs etc.

    It is all bs.

  • +2

    There will not be a system where everyone is happy.

    Right now you’re complaining that single income families are penalised

    If the system changed to favour single income families, now people will scream that unmarried taxpayers are unfairly penalised

  • Hire your wife as an assistant that is a necessary expense for you to do your job, then write off her salary. Probably best to see an accountant to get things set up, but has definitely been done many times.

  • OP, go work for the ATO if you can come up with a better taxation system.

    • lol - i can tell u im not smart and wont be able to do a good job
      so why stuff up normal ppls life

  • Your question is very valid OP, and I agree, it's not right, and single income families are getting a raw deal.

    Sorry that so many people in this chat have been hostile for some reason… my guess would be they're butthurt guys in their early 20s on like 50K a year not seeing your bigger picture.

  • Some people I know literally only have a ladder on their vehicles or a heavy bag in the back so they can claim the "bulky items" tax credit for vehicles.

    Trust me. The ATO might be good, but they aren't that good.

    Cashies from tradies etc etc. The list goes on.

  • Another perspective - rather than thinking of it as single income families being penalised are your friends (and wife) being incentivised to work by being offered a tax free threshold?

    I don't consider not being eligible for an incentive that doesn't apply to you (your wife's tax free threshold) to be the same as a penalty. I realise that financially it looks the same to your family.

    In your preferred scenario where a couple can have a collective tax free threshold, your wife's tax free threshold isn't buying the government your wife's workforce participation. Presumably they weigh up such considerations and have decided that no / less tax income from people not earning much is worth it to keep them linked to employment.

    • +1

      Nor does the government then value the partners work in raising well balanced productive children.

      • -1

        It's actually agnostic on that. A couple both working part time across different days are making the same net contribution to raising their children as OP's wife is by taking on that role while he works full time. That couple would both get the benefit of the tax free threshold though as well as having their children cared for full time by their parents.

        This isn't penalising having parents looking after their children it's just not incentivising OPs workforce participation at double everyone else's rate. OP and his wife have decided that this arrangement works better for their family which is valid but doesn't entitle them to a benefit designed to incentivise his wife being in the workforce like in the scenario where a couple both work part time.

        • +3

          But how can you call that agnostic?

          Why does it matter within the couple who is working. 40 hours with 1 person working adds just as much productivity as 2 working 20 hours each but in one scenario the tax take is significantly higher.

          • +1

            @mdavant: Exactly. This is why the system is unfair.
            How can 1x 40 hours be worth less than 2x 20 hours? It’s is a disgrace.

          • @mdavant: The distinction isn’t total productivity but total number of people connected to the workforce.
            The government has set a value on that and offered a tax free threshold accordingly.

            • @LX: I wonder if this taxation rort results in highly skilled people limiting hours.

              Now I understand how some lucky people who can set up sham companies can use trusts etc to income split but a lot of professionals cannot.

              Lthe tax system is a shambles and the inability of psi or wage earners to income split while sham companies and trusts can shows that it isn't about number of people connected to the workforce.

              It is about screwing the middle over

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