Low earners losing half of pay rises to bracket creep
Economists warn bracket creep will consume 56% of after-inflation pay rises for workers earning $45,000 over the next decade.
A worker earning $45,000 will lose more than half their real pay rise to tax over the next ten years, prominent Australian economists have warned. Workers earning $45,000 will see their tax rate climb from 10.8% to 15.9%, pushing them into the 30% tax bracket despite earning no more in real terms.
Higher earners face an even steeper hit: those on $190,000 will lose 65% of their after-inflation income gains as they enter the 45% top tax rate. Bracket creep happens when paychecks rise but tax thresholds don't adjust for inflation, so workers climb into higher brackets without actually getting richer.
Economists Michael Brennan, Greg Kaplan and Richard Holden say previous governments more than offset bracket creep with tax cuts, but mounting spending on aged care, disability and health services means the budget can no longer afford that strategy.
They're calling for broader tax reform instead.
- 5.1 percentage points
- Tax rate increase for $45k earners
- 56%
- Pay rise lost to tax
- $45,000 earners
- Workers affected
- 65%
- Higher earner loss
Why it mattersYour pay rise becomes smaller in your pocket each year, even though your salary appears to climb, a hidden tax that erodes household budgets across Australia.
AustraliaEvery Australian worker earning between $45,000 and $190,000 will see their take-home pay shrink relative to their nominal wage rise, reshaping household budgets and retirement planning over the next decade.
Corroborated byThe Sydney Morning Herald
✓ Claims checked against the source. checked 6 h ago
