Treasurer Peter Costello has described as a “statistical quirk” figures showing more Australians are losing over half their extra earnings in tax.
A study by AMP and the National Centre of Social and Economic Modelling (NATSEM) this week examined how much extra income people lose through reduced welfare or higher tax when their earnings hit a certain level.
The NATSEM report found that when seven per cent of Australians earn extra income, they hand back more than half of it to the government.
It said the interplay of tax and welfare meant that around 910,000 working-age Australians were losing more than 50 cents in every extra dollar earned.
Of this group, around two-thirds of these people are couples with dependent children, while the rest are single parents, childless couples and single people.
Mr Costello today said the result was “a total statistical quirk”.
“Because more parents are receiving family allowances, you can say more parents are subject to the phase out, but if they weren’t receiving it in the first place they wouldn’t be receiving the phase out,” he told Sky News.
“And in fact the only reason there are more people subject to the phase out is because more people are receiving it.
“That is more people have increased incomes and it shows the ability to pluck a dark cloud out of a silver lining really to say that just because more people are receiving more help more people are subject to the phase out as well.”
Labor has used the study to accuse the government of punishing Australians who work hard, saying there is no incentive for workers to do overtime under the government’s complicated tax and welfare system.
The report said that overall, one in five single parents are facing the work disincentive and one in seven couples with children.