The maximum rate of Newstart allowance
(NSA) has been the subject of much debate recently, but it’s not the only
contentious aspect of that payment.
Another commonly raised issue is the effective marginal tax rates (EMTR)
faced by NSA recipients (and those on payments with related income tests, such
as partnered parenting payment) who have some private income, particularly
earnings. In truth, in most cases the
EMTRs are actually quite a bit lower than they used to be – NSA once had an
income test with a 100% withdrawal rate, whereas the highest taper these days
is 60%. There are, however, some
persistent problem areas and one of these lies at the tail end of the income
test for couples. There, EMTRs remain
stubbornly high and the reasons underlying this raise interesting issues
involving differences in the fundamental basis of assessment between the tax
system and the transfer system, and also the flow on effects of tinkering in
different parts of the system.
