Taxing times

Posted by Jenni Colwill on 30 March 2009 | 1 Comments

I know, I am about to go on about taxation again - but it is really important. Patricia Apps has been trying to get the message across for some time that women are being discriminated against under the current system, but because the subject is so complex most people, including me, haven't really understood how.

I was grappling with the subject again over the last few days as I put together our new webpages on the subject. In desperation, I turned to my maths teacher friend to try to clarify the problem - and voila! - it worked.

Check out the graph below. It tells the story pretty clearly.

What has happened is that real tax rates are different to the numbers on the tax charts we all see.

We all know that tax is supposed to get higher as you earn more money, don't we? Well, it doesn't work like that.

There is this thing called LITO. According to Professor Apps, LITO was introduced as a way of helping low income taxpayers, but it hasn't worked well. She even refers to it as a naive notion.

So, when you take LITO into account, the tax scale is no longer a gentle, rational progressive set of numbers.

For example, for the 2008-9 financial year, real tax rates jump from below 30 cents in the dollar if you earn between $0-$34,000, then up to 34 cents in the dollar if you earn between $34,001-$60,000, then back down to 30 cents in the dollar if you earn between $60,001 - $80,000. The numbers get even worse in the 2010-11 financial year.

So the income earned at the higher end of the scale attracts less tax than income earned in the middle of the scale.

Doesn't make sense, does it? Unless you realise, of course, that the majority of people in the middle are women. Yep, that's right. Women are being dudded by the tax office, and we are just lying down and taking it.

Not only that, but when you read our Women and Tax page you will see that women have actually made the tax pie bigger by increasing their participation in the workforce.

But there isn't much benefit in it for us, is there? I mean, the government hasn't even made a commitment to paid maternity leave, has it?

As I said, Australian women are being dudded by the tax system, and it is time we made a bit of noise about it.

Give us your comments, and we'll add them to the noise we intend to make in our submission to the tax review.