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I whipped out a calculator and crunched some numbers on this.

The base rate for Supported Living Payment is $368 per week, for a single, childless person. That's $19,000 per year. So people permanently unable to work full-time, for medical reasons, are already paying tax on a portion of their benefit at the second tax rate.

That's before you add on an accommodation supplement and other add-ons that lift this towards a vaguely livable income.

(2/?)

A single parent with 2 children, paying rent in Area 1, might receive a Supported Living Payment before tax of about $900 per week. That's all taxable income and about $600 of it is taxed at the second tax rate of 17.5%.

Which means they're trying to rent a family home, cover utility bills, and feed 3 people for about $750. All while dealing with a permanent disability serious enough to stop them from ever getting a job.

(3/?)

Things are even worse for that same solo parent if their medical condition isn't permanent, but is still stopping them working full-time. For a start their base rate for Jobseeker Support is about $65 a week lower. So they're trying to provide for themselves and their children on about $700 a week.

If they are well enough to find a few hours of paid work a week, that might help. But if they have a student loan they have another tax to pay, in the form of compulsory loan repayments.

(4/?)

The threshold where compulsory student loan repayments kick in - $28,828 for the 2024 tax year - has also failed to keep up with inflation. That solo parent, struggling on $700 per week in the hand - barely enough to cover rent in some areas - gets about $44,000 per year before tax.

We don't have to repay student loans out of benefits. But any secondary income - already getting taxed at 17.5% - gets a 12% student loan tax tacked on. An effective tax rate of about 30%.

(5/?)

If they're lucky enough to get paid for 6 hours of work every week, all year, at the Living Wage ($26 per hour), that's roughly $8000 a year. Pushing their annual income to $52,000. So $4000 of that income is pushed into the third tax bracket. Their effective tax rate on that income, including student loan tax, is 42%.

Any week in which they work more than 6 hours at Living Wage, WINZ takes 33% of it off their benefit. The effective tax rate for those extra hours is 75%.

(6/?)

The first and second thresholds need to raised, probably to the current level of the second and third respectively, which means pushing the third up as well. To balance this out, we probably need a fourth threshold - maybe $250,000 - where income higher than that is taxed at something like 45-50%. So the net result would be roughly the same amount of tax collected. But with the tax burden shifted from those on the bottom of the income pyramid, to those getting paid more than $5000 a week.

(8/?)