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The Women’s Economic Equality Taskforce says that legislative change, including reforming the tax and transfer system, could unlock $128 billion lost each year to gender inequality.
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Eliminate tax gender bias and liberate $128bn, taskforce urges
25 October 2023
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11 minute read
A tax system that eliminates “negative gender biases” could unlock $128 billion lost annually to inequality, a government taskforce says.
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The Women’s Economic Equality Taskforce said the government should review the country’s taxation and transfer systems with a “gender lens” as part of its 10-year plan released Monday.
Taskforce chair Sam Mostyn made seven recommendations for changes to care, work, education, the tax and transfer system and government processes.
“We have arrived at a moment of consequence where a genuine commitment to respecting women, and valuing and nurturing their economic contribution by removing systemic barriers, is vital,” Ms Mostyn said.
The taskforce follows the Albanese government’s election promise to prioritise issues facing women in the economy, including addressing the gender pay gap.
The report recommended a suite of tax policy reforms to achieve better equality, including abolishing the tests for child maintenance income and child care subsidies, introducing a carers’ tax offset and superannuation on paid parental leave.
It said unequal childcare duties in a society that undervalued feminised work worsened labour market inequalities, finding that women spent 30 hours a week on unpaid care and housework compared to men who spent 22 hours a week.
“Australian women still face deep and broad-ranging gender inequality and continue to shoulder a disproportionate burden of unpaid labour across all spheres of life,” Ms Mostyn said.
“From being caregivers, nurturers and educators to taking on professional roles and community leadership – women’s essential contributions are often undervalued and unpaid, perpetuating economic inequality.”
The first five years of parenthood reduced women’s earnings by 55 per cent but the so-called “motherhood penalty” could be addressed by introducing a carers’ income tax offset, the report said.
The offset would be credited against any income tax payable upon return to work after caring responsibilities. While it would not be gender-specific, it would be most beneficial to women, as primary caregivers, and also provide an incentive for men to take on more caring responsibilities.
Women also faced effective marginal tax rates (EMTRs) on work income that were higher than personal income marginal tax rates, due to the tax system’s interactions with the transfer and welfare system.
“EMTRs show how additional income interacts with policies like progressive personal income tax rates and the decrease in government benefits like the Medicare levy and reduced family and welfare benefits,” the report said.
“The taxation and transfer systems [should be reviewed] with a gender lens to identify negative gender biases and examine options to address the high effective marginal tax rates experienced by women.”
Divorced mothers were also more likely than divorced fathers to experience financial stress. The report said the government should remove the child support maintenance income test for the calculation of the family tax benefit paid to separated parents to prevent child support from being used as a tool of financial abuse.
It also recommended investment in policies and programs to recognise the value of care work, including legislating the payment of superannuation on all forms of paid parental leave to address a superannuation gap of approximately 23 per cent between men and women at retirement age.
“At 60-64 years old, the average man has approximately $181,000 in superannuation, while the average woman has $139,000,” the report said.
Finally, the report suggested scrapping the childcare subsidy activity test as an immediate first step towards universal access to early childhood education. The report estimated removing the activity test would increase participation by between 9,840 and 81,680 women.
Finance Minister Katy Gallagher commended the taskforce’s “practical advice” to address the systemic barriers faced by women.
“The government will consider these recommendations alongside the analysis and policy directions of the Employment White Paper as we continue to develop a national strategy to achieve gender equality that will be released in 2024.”
But Ms Gallagher declined to specify whether the review’s shorter-term recommendations would be adopted as part of the government’s next budget in May.
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