Action area: Financial incentives

The Government is committed to assisting women and their families to make well informed choices about work. Women’s economic participation has a positive effect on economic growth which is good for all Australians.

Australians who work will also interact with the tax system. Australia has a progressive personal income tax system. That is, people with higher taxable incomes pay more tax as a proportion of their income than people on lower incomes. This reflects the belief that people who have more money should contribute more, so the Government can provide the services that Australians expect, such as health care, education and family payments.

Personal income taxes are only part of the story — Australia is well known for its targeted transfer system (or government payments to individuals and families). Progressive income taxes and targeted government payments work together to produce fairer outcomes — as a person’s income increases, they pay more tax and may receive lower government payments.

Women’s decisions about whether or not to work, or how much to work, play out differently for every individual and family.

The financial benefits of working are affected by specific circumstances such as salary, the number and age of children in the family, use of child care and eligibility for government payments. While the combination of paying more tax and/or receiving lower government payments (effective marginal tax rates or EMTRs[1]) is one of the factors in these decisions, there are many others.

Data from the Australian Bureau of Statistics shows that women are influenced by factors such as caring for their children, flexible work arrangements and access to child care to a greater extent than the potential loss of government payments in their decisions about whether or not to work.

Women’s decisions are also affected by their own and others’ values and priorities, broader social expectations and the level of unpaid work that they undertake.

Women’s incentives to join/increase participation in the workforce.
Source: 6239.0 - Barriers and Incentives to Labour Force Participation, Australia, July 2014 to June 2015.

Women’s incentives to join/increase participation in the workforce. % of women who said the following factors were important to their choices about work: Work a set number of hours on set days, 69. Vary start finish/times, 61.2. Ability to work part-time hours, 70.6. Ability to work school hours, 40.5. Ability to work more hours with the same employer, 58.2. Ability to do some or all work from home, 32.1. Access and facilities for any medical conditions, 35. Getting help with job search activities, 33.2. Getting a job that matches skills and experience, 61.6. Getting support for training or study to improve your skills, 57.8. Access to a mentor or someone to support you in the workplace, 54. Be able to maintain most of any welfare benefits or allowances, 39.8. Ability to make extra contributions to superannuation, 42.3. Access to childcare places, 68.2. Financial assistance with childcare costs, 63.5. Access to residential or aged care, 46.9. Access to inhome respite care or a Community support worker, 50.9. Access to public transport, 15.

Where are we?

The Government is focused on ensuring that there are financial incentives for women to return to the workforce, particularly after having children.  

The Government is ensuring women are aware of the long-term benefits of working, including maintaining connections with a workplace and their qualifications, and adding to retirement savings after taking a break from work to care for children.

The National Financial Literacy Strategy supports women to build an accurate picture of the financial implications of commencing or returning to work, working more hours, getting a pay rise and how income tax and government payments adjust with these changes. The Strategy also highlights how work improves retirement income long term.

Workforce participation and self-reliance are central to improving long-term wellbeing. The Government is committed to ensuring that all Australians who have the capacity to work do so, rather than being reliant on welfare. The Government is creating a clearer, more coherent set of mutual obligation requirements for working age welfare recipients and increasing support for them to get a job.

The Government is making a $263 million investment in the successful ParentsNext pre-employment program which will help more parents of young children, who may be at risk of long-term welfare dependency, to plan and prepare for employment by the time their children start school. From 1 July 2018, ParentsNext will assist around 68,000 parents each year nationally — around 96 per cent of participants are expected to be women.

Unemployed Australians, particularly those 50 years and over, will benefit from increased services and resources to help them find work and move off welfare. There will also be greater incentives for employers to offer work experience opportunities.

The Government is investing over $100 million to assist mature age people, including women, to identify new labour market opportunities and reskill. This comprises the $98 million Career Transition Assistance Program and a $9.6 million investment to expand and enhance the National Work Experience Programme.

Key actions 2017-18

  • Implement the Government’s  new child care system including through the investment of $37 billion on child care support to ease the cost of living pressures for families balancing work and parenting responsibilities.
  • Strengthen the National Financial Literacy Strategy to improve the scope and depth of financial literacy resources for women to understand the long-term benefits of working and maintaining a connection with the workforce. ASIC has received $16 million in additional funding for this and other initiatives under the Strategy.
  • Implement reforms to welfare payments that better assist recipients to participate in the labour force, prevent lengthy absences from the labour market and reinforce self-reliance through work.
  • Undertake a gender analysis of employment services to both improve current service delivery where this is possible within existing program parameters, as well as inform the design of employment services 2020 where there is significant potential to improve service delivery to women.
  • Fund pre-employment projects via the new Launch into Work program which will provide training, mentoring and work experience to assist women to become work ready.
  • Invest, from 1 July 2018, $263 million to expand the ParentsNext program. Each year, this expansion will assist around 68,000 parents of young children, who may be at risk of long-term welfare dependency, to plan and prepare for employment by the time their children are at school.
  • Implement a new $98 million, Career Transition Assistance Program that will deliver a short, intensive course for mature age people looking for work to prepare for new career paths and opportunities.
  • Expand the National Work Experience Programme, which will offer older Australians more opportunities to upskill, as well as the Pathway to Work pilots, a series of industry-based pilots that will be established in selected growth industries and/or large infrastructure projects.
  • Continue to implement the Priority Investment Approach, which aims to improve lifetime wellbeing through increasing people’s capacity to live independently of welfare and address the risk of intergenerational welfare dependence. The Try Test and Learn Fund has been established ($96 million over 4 years) to test innovative policy approaches that create a path out of the welfare system. The initial priority groups include young parents and young carers; with these groups having a disproportionately high number of young women.
  1. An EMTR refers to the proportion of each additional dollar of income that is paid in tax or offset by the withdrawal of transfer payments (such as a welfare or family benefit). EMTRs—while a structural feature of Australia’s tax and transfer system—are highly variable and calculating an individual’s EMTR is dependent on their specific circumstances. EMTRs help us understand whether or not there are immediate financial incentives to work, or work more, but it is important to note that EMTRs don’t apply to a person’s whole income.