Tax Question - Are single income families being penalised financially?

legendary-noob on 13/10/2021 - 13:28
Last edited 17/10/2021 - 03:19

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.

Financial

Comments

  • Dack Smith on 15/10/2021 - 20:28

    Hoooweee…. you’re on $200 grand?

    Do you pay much tax?

    • legendary-noob on 16/10/2021 - 22:52
      +1

      let me put it this way
      I happily pay my share of tax - whatever that is
      I am just asking why do I pay more tax than others when I am not wealthier
      As simple as that

      • Miss B on 17/10/2021 - 02:22

        You don't. You pay the same tax as other people with the same taxable income. Wealth doesn't come into it.

        • leiiv on 18/10/2021 - 00:18

          Yes, technically. But that is not what he meant.
          A lot of people pay more tax than some much wealthier billionaires. That is by design..

  • catbug on 15/10/2021 - 21:01
    -1

    I think it's fair tbh, it is both of your choices and circumstances.

    The other family 'win' by having 2 tax-free thresholds, your family 'wins' by your children getting more face time with your wife and can reap the psychological benefits (https://www.apa.org/news/press/releases/2004/03/parental-sup…). If you're so bothered by it you should re-evaluate your situation where both you and your wife work. It's never going to be 'fair'. Just my 2 cents :) count your blessings and if you're unhappy make a change, but I don't think it's a tax system problem or the other family having an advantage.

    • legendary-noob on 16/10/2021 - 17:48
      +1

      yeah i get it ppl have different opinions
      again, probably not going to look for a job that pays less even if my wife starts working
      in which case, per comments above, her earning doesnt get taxed at my highest tax rate
      so rather than saying its not fair right now, better framed as not being optimised

      • leiiv on 18/10/2021 - 00:22

        Sorry I don't follow your logic. You don't look for a job that pays less. You look for a job that pays more per hour, but you work less hours. So do your wife. That way both of you get to spend more time with children while optimising the tax..

  • spk-chelsea on 16/10/2021 - 09:46

    Totally with you mate. Exactly same position. Even with a handsome salary, barely saving anything. Daycare itself takes a huge chunk of salary.

    • buckethat on 16/10/2021 - 22:21

      Not a parent, so I'm curious if you dont mind.

      How much does child care cost for you? And how many children?

      • spk-chelsea on 16/10/2021 - 23:10
        +2

        We get 50% rebate. So, $55 per day. We send 3 days a week. 2 kids. So, $1320 per month. Double income families get better rebates.

        We can’t be expected to keep the kids at home all the time as we want them to have the social interaction.

        • Laurana on 17/10/2021 - 12:58

          If it makes you feel better our day care fee is $145/day. So with a 50% rebate it would be $72.50.

  • MND on 17/10/2021 - 01:20

    see how far you are from the tax bracket then if you are close to the lower part of the tax bracket, then salary sacrifice something, see if you can salary sacrifice additional super payment, lease a car perhaps.

  • GourmetFoodie on 17/10/2021 - 07:59
    -1

    In short - yes, single income families are penalised. It is a disgrace because raising kids should be valued as a job but it’s not. Double income families get a free ride in comparison - and childcare pretty much paid for.

    At the end of the day though, I’m glad a shitty childcare centre is not raising my kids and my kids grow up in a calm relatively stress free environment. Some things money can’t buy.

    • Slippery Fish on 17/10/2021 - 08:12
      +3

      You choose to make the kids, you choose to have a parent at home, doesn't sound like anyone did this to you.

      • GourmetFoodie on 18/10/2021 - 07:37

        I’m happy to pay tax but not more than my fair share. This thread has proven single income earning families are blatantly discriminated against by this government.

        • Slippery Fish on 18/10/2021 - 08:05

          Lol not really. It's a system worked on p a Ying tax on what YOU earn. Your not being crueled by the government, your paying as per rules set up in a system that can't accommodate every circumstance…

          Reduce your taxable income, work less, do what ever but your not picked on…

          He'll you come work disability support and child safety for half the money at more hours and I'll do your job. I won't complain about the tax.

  • GMT on 17/10/2021 - 08:16
    +2

    I am in this situation and I think tax rates should apply to the family income.

    I am working long hours with two jobs, while my wife is unable to work after having a recurrence of Chronic Fatigue Syndrome 5 years ago.

    We aren't eligible for any means tested benefits, or NDIS etc, so I just earn heaps and get taxed heaps.

    Imagine if I could essentially hand half of that income to my wife on paper.

    • leiiv on 17/10/2021 - 18:41

      If your employer is sympathetic, they can employ your wife on paper and let you do her job.

    • GourmetFoodie on 18/10/2021 - 07:38

      I feel for you mate. CFS is awful.

      • GMT on 20/10/2021 - 22:15
        +1

        Thanks, yeah it's no fun, trying to make the best of things though. Could be far worse.

  • Wills2g on 17/10/2021 - 16:24

    Paying more tax is a privilege. At 27, and earning close to 500k per year, I have absolutely no complaints paying more tax.

    In terms of additional super payments, its only worth it below 250k, because thereafter you will need to pay div293 on top. But you wont see that money for decades - who knows whether the current super system will still be in place by then.

    The more effort you put in to think about how to save a penny here and there, is less energy you put into development, and obtaining the skills to get a pay rise. I’m assuming that youre still relatively young and lots of growth to come. Tax minimisation is only for those who have reached their peak imo

    • GourmetFoodie on 18/10/2021 - 07:42

      Dude your comment makes zero financial sense. Who on earth wouldn’t want to minimise their tax?especially given the feds waste our money on BS all the time. As Kerry Packer would say “you need your head read!”

      • Wills2g on 18/10/2021 - 12:55

        Depends how much effort you put into it, you have to earn more to pay more tax. My priority is to grow my salary rather than spending heaps of time trying to minimise tax. Increasing income is always gna be more than what you can do with deductions.

        Like i said its just my opinion..

    • spurf on 18/10/2021 - 08:21

      Div293 means you end up paying 30% rather than 15% contribution tax which will leave you with a reasonable deduction off the top marginal tax rate. Having a fixed deduction of 15% off your marginal tax rate rather than a flat 15% world make the system more equitable and will hopefully be legislated at some point. Earnings are still taxed at the same concessional rate as everyone else. Topping up your super contributors to use up the 27.5K cap on your income and at your age is a no brainer.

      • Wills2g on 18/10/2021 - 12:56

        Alternatively I look at it as a 15% tax saving for cash I cant use for another 30 years. Whereas cash in hand means I can use it for property etc

        I try to do as little super as I can. Who knows, it might bite me in the ass later on haha

    • legendary-noob on 18/10/2021 - 10:00

      i actually agree with everything you said to be frank
      and hence all these hours that I have putting in extra to get to your position
      i didnt end up publishing but exactly your point - at 500k im more than happy to pay 200k tax and not having to worry about saving the pennies

      but im not, far from it in fact, and i kinda feel the tax is somewhat generous to people in the lower income bracket, unfair with high income earners, but then after certain point you just dont give a f because your time goes into increasing your income and not saving your expense.
      good on you mate making 500k at 27 is really an achievement. when i was 27 i was probably getting 20% only. break through to ~200k happened in last 2yrs after i started a new job and putting in crazy hours to prove my worth

      out of curiousity, what do you do? doctor?

      • Wills2g on 18/10/2021 - 12:59
        +1

        Yeah, I use to be terrible and a nervous wreck speaking to large audiences but I knew I couldnt get into higher positions without those skills. Theyre probably the most important skills tbh.

        I do cyber security, so my position rn is significantly attributed to luck - being in a new field with not many true SMEs and companies willing to fork out more for those roles

  • kevmi on 02/11/2021 - 14:15
    +1

    Just my 2 cents to this whole story. If you have a $200k income and working your ass off for it, you should REALLY start considering ways to make money work for you rather than keep working for money.
    In my case, each brand new built investment property gives me a 10-15k in depreciation, which is an on-paper-loss (literally a tax benefit for investors in new property) and also gives me positive cashflow (if you know where and what to buy).
    Tax is unfair by design and is there to make sure that the middle class stays in that middle class so that they could look after those that are disadvantaged or simply unwilling to work.

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