Prime Minister Scott Morrison’s Federal Government may presume the covid19 saga will help ease the Coalition across the line at the next federal election, however, he has no policies that would really make a lasting difference to Australian families in 2021 and beyond – definitely none relating to split income tax.
Covid19 has taught us that families need flexibility to balance paid work and unpaid family work, and that for some paid work from home is possible, and often more productive.
Yet income tax and child-support policies still fail to recognise what family life is really like. They fail to treat the family as a genuine economic unit, in which parents work as a team to balance the paid and unpaid labour, including child-minding, home maintenance, cooking and parenting generally.
It is ironic that family law, around the dissolution of family, treats the whole family as one economic unit to be split up, yet, during normal family life, the Tax Office treats families as mere individuals. It is time we treated the family as one unit for tax purposes, including elderly relatives receiving care.
A new social contract would reunite a somewhat divided Australia that suffers from a rural versus city divide, able-bodied workers versus the frail, sick and elderly, and a divide between families involved in the more volatile retail, tourism and farming sectors, versus those in the more stable services like education, health and government sectors.
In this complex environment, a more neutral, flexible and fair family-funding and income-tax model could help reset and revive family life.
A new social contract would require the Federal Government to separate itself from its love affair with the childcare industry, which it directly subsidises and which has the Government’s ear in all critical moments of lobbying.
Critically, the new social contract must be directed to Australian families themselves, not to businesses. It should encourage families to be as independent as possible from government, to protect families from the excesses of employer demands, and to support families in the often thankless task of raising the next generation.
The most critical reform would be in PAYG income tax, which at present does not account for how many dependents rely on that income.
Second, birth and childcare payments are inequitable and geared heavily towards the interests of employers rather than of parents. A reset would require more generous direct funding to parents.
Feminist politicians for decades have effectively created childcare funding arrangements that penalise the under or unemployed, meaning that parent-care of young children and larger families suffer from a compounding disadvantage compared with the stably employed cohort.
The most generous model of family-based income tax would be to total up all income and distribute it among all family members. Many OECD countries have some limited form of this. The tables below show two examples of the most generous family-income tax models.
How much more income your family would keep if income tax was calculated after evenly distributing income to all family members.
Two examples: Two parents, and one child
|Current income tax payable||$31,317|
|Income saved for family||$17,941|
|Current income tax||$21,744|
|*Family-based income tax||$12,616|
|Income saved for family||$9,128|
* Calculated by totalling all family income, and distributing income evenly among all dependents (in this case three) then calculating income tax in the normal way using 2020-2021 income tax tables.
The key reason income tax needs reform is because the current model breaks a critical principle of taxation. The government is treating two very different situations as though they are the same. A family of four living on a single income of $100,000 should be taxed differently to a single person enjoying $100,000 for himself. The current model is unjust and unnecessarily makes families dependent on government assistance.
Australia has one of the most hostile income-tax settings for a single-income family in the world, forcing many families to find two incomes despite the competing needs of young children.
A case of study (2020) of two families with identical number and aged children, and total income, revealed that the dual-income family using childcare subsidy cost the government $30,000 more in one year, than the single-income family that did not use childcare.
Australia’s birth rate is currently around 1.7, well below the replacement level, yet previous polls revealed our expectations as young adults averaged to 2.3 children.
There is shrinking and limited funding to assist a parent to care for his or her own children, the most popular choice.
There is growing, generous funding to outsource care of children, yet this does not match what parents actually want.
Australia has not had a replacement birth rate since around 1976: that is, in over 45 years.
The aged-care sector is struggling and many elderly persons would prefer to stay near family and receive at-home care.
Our well-used – perhaps over-used – higher education sector needs a funding rethink from the point of view of young Australian women and the common good. How do we expect to replace ourselves with 2.1 births per woman, if a young female student leaves a professional course laden with mountains of debt that may take ten to 20 years to pay off?
Do we believe that women aged between 25 and 35 will feel sufficiently confident to marry, save for a house deposit, have a baby or three and hold down a career too?
Surely, the sacrifice of lost income, delayed career options and new expenses to raise a child deserve some reward?
Why not offer women government-paid super for the unpaid child-rearing years? And add on discounts or fee waivers for the university debt itself. And why not offer young families discounted mortgages or co-payments if they have three or more children?
Prohibit professional bodies from unfairly penalising women who temporarily leave professions to raise their young children, and incentivise those seeking to re-enter the profession later.
It seems lost on policymakers that the average life expectancy of Australian women is now 84 years. Yet the fertile years stop not long after 40 years of age. We should have policies that recognise that many women who have raised their youngest into school age are often ready or compelled to re-enter the paid workforce either part or full time.
A 2009 study from Britain, with a large sample size of over 4,500, offers clear insight into parents’ preferences on balancing parenting, paid work and other unpaid home tasks.
The study shows that only one in ten mothers would prefer to always be in paid work, and not have to mind baby/toddler for those early years.
Meanwhile, six in ten desired flexibility – a bit of both.
Another three in ten would prefer to be full-time carers for that part of family life when nappies and park plays and kindergarten trips are part of the daily routine.
Further, if the partner is employed, and the couple have two children under 5 years, only 1 per cent of women polled believed the mother should be in some paid work.
The survey’s conclusion is that women want to be with their kids in the early years, many are seeking flexibility, and a very few women wish to prioritise paid work over caring for their pre-school children (see the survey infographic to the right).
It will take a rare visionary leader indeed, one who is willing to take risks, to reset the Australian Government’s commitment to families. However, if it is done well, it would put Australia on the trajectory towards a more hopeful, equitable and happier future.
Of course, the premise is that children are not ultimately a “private matter” or a “lifestyle choice” but a critical component to the common good of Australia.
I would argue that whichever party promises to implement a truly game-changing, fair, family-funding and tax policy will garner the most swing votes at the next federal election.
The Australian Family Association is campaigning for #FairFamilyFunding seeking such reforms. Join the campaign by signing the petition, sharing your views and donating to the cause. Go to www.ncc.org.au and click on “Campaigns”.