John Humphreys, Chief Economist at the Australian Taxpayers’ Alliance, recently highlighted significant flaws in Australia’s tax and welfare system that trap families in poverty cycles. In a post on X, he stated, “This should be a scandal.”
Humphreys illustrated the issue with a clear example: a renting family of four with a single income earner making $45,000 per year would receive a total net income—factoring in welfare benefits, Family Tax Benefit (FTB), rent assistance, and other supplements—of just under $76,000.
If this family sought to increase their income to $67,000 through promotions or additional work, their net income would remain unchanged at approximately $76,000. As Humphreys pointed out, “The family gets no benefit from the extra work.”
Similarly, a family earning $104,000 would have a net income of roughly $92,000. If they raised their income to $127,000, their net income would still be around $92,000, leaving them in the same financial position. “Once again, the family gets no benefit from the extra work!” he noted.
Humphreys criticized the complexity of the tax and welfare system, saying, “Most journalists don’t understand the problem,” which contributes to a lack of media coverage and public awareness. This obscurity results in no voter backlash, no lobbying campaigns, and ultimately, no political incentive to reform the system.
He asserts that Australia desperately needs political leadership to simplify and address these issues. “Families are being caught in poverty traps,” he emphasized. “Doing more work can sometimes lead to falling net incomes.”
In the lead-up to the federal election, the Australian Taxpayers’ Alliance will be releasing a series of policy proposals to improve Australia’s tax and welfare system. They have already outlined costed and affordable ideas for family tax cuts, ending the hidden bracket-creep tax increase, and removing income tax on low-income earners.
Their latest proposal aims to eliminate the poverty traps described by ensuring that all welfare benefits are tapered.
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For a renting family of four with one primary income earner, there is very little incentive to earn more money. Sometimes the situation gets absurd.
— John Humphreys (@johnhumphreys99) March 17, 2025
With an earned income of $45k they would be living on a net income (including welfare, FTB, rent assistance & supplements) of just…
