KPMG’s analysis looks at issues of gender inequality in the workplace, applying our own concept of a Workforce Disincentive Rate (WDR) to gauge the true cost of mothers and primary carers returning to work – even with assistance.
Over the last six years, KPMG Australia has reported on the benefits to the Australian economy and to personal and family wellbeing of closing the gap between male and female workforce participation.
After updating previous analysis performed of workforce disincentives rates within the tax and transfer system, the findings show that without further policy action, some mothers and primary carers will continue to face a strong disincentive to work more, even under the Productivity Commission’s recommended model.
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Workforce Disincentive Rate
To quantify workforce disincentives, KPMG developed the concept of a Workforce Disincentive Rate (WDR), which reflects how much income from an additional day of working is lost in additional taxes, reduced benefits and childcare costs. The WDR is the percentage of income from taking on an extra day’s work that a person loses to income tax and Medicare levy, withdrawn family tax benefit and reduced child care subsidy.
In KPMG’s October 2018 report, The cost of coming back, we estimated that the Childcare Subsidy (CCS), introduced in 2018, created WDRs in the range of 75-120 percent. A WDR exceeding 100 percent indicates that the household loses money from the primary carer working an additional day. Few would regard this as a reasonable or fair outcome.
Welcome changes to the CCS over the past three years have helped alleviate the worst of the WDRs. However, the 2024 report finds that it remains the case that the WDRs, which remain as high as 75 percent, continue to act as a deterrent to working additional hours.
KPMG has also estimated WDRs under the Productivity Commission's recommended reforms. KPMG has found that, while the proposals would result in some improvement, WDRs of up to 67 percent remain.
The report found that one of the key contributors to high WDRs for lower income households was the loss of the Family Tax Benefit (Part A) Supplement, applicable to families earning less than $80,000 per year. The report recommends the government investigate tapering the loss of the benefit as additional income is earned by working additional hours so that these families do not face a 'cliff' from losing the supplement.
This report considers the status of KPMG recommendations from previous reports, including measures which have already been adopted by the federal government, and areas for future reform. One of the proposals for future reform is to cap WDRs to an individual's marginal rate plus 20 percent.
Achieving a better deal for working mothers
KPMG's 2018 report, The cost of coming back: Achieving a better deal for working mothers (PDF 1.1MB), shows that it can cost some professionally qualified working mums almost $30 a day in tax, lost payments and out-of-pocket childcare expenses if they increase their working days from three to four per week.
The report urges a national rethink of the notion of equity. The interplay of the tax and transfer systems is clearly aggravating the negative consequences of social biases against women. It is time to start rethinking equity with an increased focus on gender.
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We look forward to continuing to contribute to the gender equity debate in Australia given it is a critical lever to drive productivity and economic growth and look forward to working with all levels of governments on implementing measures that drive gender equity reform.
Gender Equity series
Read more of KPMG Australia's insights and thought leadership on diversity and gender equity.
- Towards gender equity in retirement: SGC in PPL/carer payment
- Recognition for unpaid caring work: Towards gender equality
- Budgeting for gender equity
- Addressing the gender superannuation gap
- Parental equality and unpaid work reforms
- A better system of Paid Parental Leave
- The Child Care Subsidy: Increasing support for caregivers
- A new deal for women pensioners who rent
- Achieving a better deal for working mothers
- Ending workforce discrimination against women
- Further investment in the child care subsidy
