The Hidden Math That Makes Some Aussies Poorer Despite Working Longer Hours

It may seem counterintuitive, but working longer hours can make you less money, the e61 Institute says.

A pile of bills in Brisbane, Australia, on Oct. 30, 2013. AAP Image/Dan Peled

News Analysis

Not so long ago, working harder was thought to guarantee you were better off.

So generations of Australians were raised with advice from their parents to “work hard, save hard,” and watch their wealth grow.

But, as federal Treasury (pdf) says, “As the world has become more complex, so has Australian tax law. We now have more than 14,000 pages of tax law dealing with countless specific scenarios.”

In some cases, working extra hours now for some people actually means losing income due to the extra taxes it attracts, and the benefits that get withdrawn.

A pedestrian moves past the Reserve Bank of Australia (RBA) building in Sydney, Australia on Feb. 18, 2025. Lisa Maree Williams/Getty Images

If you want to try and understand it all, you could buy three volumes of tax law for $395.00 (maybe add in the fourth volume on superannuation to ensure you understand that as well).

Or you could use the e61 Institute’s new interactive tool, which calculates Australian workers’ tax rates and welfare payments if they work an extra hour, earn an extra dollar, or even enter the workforce in the first place.

It uses a measure called the Effective Marginal Tax Rate (EMTR), which is simply the amount of tax you pay on your income minus any benefits you might receive. For most working families, that could mean the difference between falling into the Family Tax Benefit (FTB) Part A or B.

Users of the calculator can model different scenarios by entering someone’s hours worked, hourly wage, and other details, such as whether they have children.

A man works on a construction site building new apartments in Melbourne, Australia on April 4, 2023. William West/AFP via Getty Images

“Our calculator highlights how the Australian tax-transfer system can create disincentives for people to work, particularly for single parents with dependent children,” said e61 Institute Research Manager Matt Nolan, in a statement.

“A major feature of our calculator is that we can identify ‘notches’ where someone’s income goes down despite them working more. It then explains why this is the case. We hope this will be a useful tool for policymakers and the general public to better understand the incentives created by our tax and transfer system.”

The Epoch Times decided to explore the effect of taxes and benefits on the incentive to work for several hypothetical Australians.

Warning: It can get a bit technical.

The Single Parent

In the first example, a single parent of two children, both aged under 10, earning $40 an hour and paying median rent in regional New South Wales ($610) is better off working 32 hours a week, with an effective marginal tax rate (EMTR) of 0.59 than 35 hours when the EMTR jumps to 1.03.

That means they lose 103 percent of the income earned from the additional hour of work due to taxes paid and benefits withdrawn.

The sweet spot seems to be working between 36 and 38 hours, where the tax rate drops to 0.52. Working an additional hour bumps the EMTR to 1.42.

e61 explains that this is likely due to the person crossing the income threshold for the Family Tax Benefit Part A end-of-year supplement. As such, they lose the entire payment of $938.05 per year for each eligible child.

From around eight hours a week to around 32 hours a week, this person loses 60 cents of every dollar they earn due to receiving less of the Parenting Payment (Single) and paying more income tax.

Also notable is the steep disincentive for someone in this situation working less than 10 hours a week to take on additional work, as the EMTR rises very quickly from nothing to 40 percent by six hours, 60 percent by 10 hours, and 72 percent at 19 hours.

The Backbench MP

In contrast, someone on $211,972—the base salary paid to a backbench federal MP who votes on taxation bills—faces no disincentive to earn more, perhaps getting appointed as an undersecretary or even a second job (though this is rare).

Our hypothetical MP isn’t paying rent, but has three children aged 16, 11, and 7. Their partner reports no income.

There are two points at which someone on a salary faces a high EMTR—at $80,000, they lose 333 percent of the additional $1,000 earned to taxes paid and benefits withdrawn, which is the first spike on the graph. This is likely due to their crossing the income threshold for the FTB A end-of-year supplement and losing the entire $938.05 payment for each eligible child.

Then there’s another spike in the EMTR at $121,000, which means they lose 459 percent of the additional $1,000, likely due to having crossed the income threshold for FTB B.

From there on, it’s plain sailing, with our MP’s salary subject to an EMTR of 47 percent—lower than that of our sole parent working 40 hours a week.

The Average Worker

But what about those outside the extremes?

According to the Australian Bureau of Statistics (ABS), the average weekly ordinary time earnings for an adult working full-time is $1,973.70 a week, or $102,632.40 a year. For the purposes of this calculation, we’ve assumed they have two children, aged 14 and 11, and their partner doesn’t work.

Apart from the spike at $80,000 due to the loss of FTB A, there’s no disincentive to earning more all the way up to the average.

Not quite as lucky are those on the median wage, which the ABS puts at $1,396 per week or $72,592. A promotion or pay increase taking them over the $80,000 mark is less of a windfall and more of a kick in the hip pocket.

The Young Single

All of the above examples are people with children. For young, childless professionals, ineligible for Family Tax Benefits, the picture is quite different.

The most common weekly income for Australians in their early 20s was recently reported as being between $500 and $999, with 42.4 percent falling into this category.

With no children, a HECS debt at the national average of $27,000, and paying Sydney’s average rent of $776, a young single is at no risk of heading into an EMTR of over 100 percent at any time while they’re heading to the top of that earning range.

But there are bumps along the way. Going from $16,000 to $18,000 sees a jump from 64 to 79 percent. But at $29,000, the EMTR begins a steep fall, down to 67 percent at $30,000.

Getting a raise to $40,000 isn’t quite the good news it might first seem, as the EMTR at that point is 83 percent, before plummeting to just 23 percent on $43,000 to $45,000 before rising again to 33 percent when the single person reaches $52,000. At that point, the young single’s net income is $44,790 a year. They pay $7,208 in taxes and receive nothing in benefits.

Anyone planning on asking for a raise or more hours—or fortunate enough to be offered—can check the effect it will have on their take-home pay on the e61 calculator site.