Something that has perplexed me about so many people jumping on the bandwagon of working class hero Duncan Storrar is the idea that families earning over $80,000 a year have it much easier. Duncan talked about a milkshake or a coffee meaning not much to people in these income tax brackets compared to him on the minimum wage. But in the rush to praise Duncan for highlighting the plight of the working poor, an assumption has been made that people who earn a higher income aren’t also the working poor.
Let’s look at an example of a family with two children (the same as Duncan) earning $120,000 per year where both partners earn $60,000 each working full time. The tax on a $60,000 annual income is $12,147. Both partners will need to pay this so from the $120,000 deduct $24,294 straight away. If you work in a job where you are not required to wear a uniform and have minimal work related expenses this would be the approximate amount of tax collected by the Tax Office.
Now our fictional family has an annual income of $95,706. If both children are in child-care you will get a 50% discount for the first $7500 of care per child. The average cost of child-care per child is $100 per day. Let’s say after holidays are taken of 4 weeks per year that you are left with 48 weeks a year where children are in care 5 days a week. That means $1,000 a week for both children, or an annual cost of $48,000 for child care. Deduct the Child Care rebate of $7,500 per child plus Child Care Benefit of $180 per week for both children leaving an annual bill of $24,360
Our example family has $71,346 left in the kitty. Now lets look at average mortgage or rental rates. The average monthly mortgage according to the Australian Bureau of Statistics (ABS) in Australia is $1,800 or around $21,600 per year. When calculating the average rent I’ve popped our fictional family in Geelong where Duncan lives. They would be expecting to pay an average of $350 per week or $18,200. So if they own their home they have $49,746 left after mortgage payments and if they rent they are doing a bit better and have $53,146 left.
ABS figures put average grocery bills for couples with children at $224 per week or around $11,648 per annum and weekly transport costs at $220 per week or $11,440 per annum. Health expenses at $66 per week or $3,432 per annum, clothing and footwear at $53 per week or $2756 per annum and domestic power and fuel bill of around $43 per week or $2236 per annum.
By now the mortgaged family has $18,234 left and the renting family has $21,634. Without factoring in costs for rates, water bills, telephone bills, the odd family outing, Christmas and Birthday presents, our mortgaged family has $350 per week left to cover these things, and our renting family have $416 per week left over to cover other expenses.
It is worth pointing out again that our fictional family are living in Geelong in this scenario with the average rent of $350 per week, but lets pop them in Penrith, NSW and that same family would be paying average rent of $400 per week so end up in about the same position as a mortgaged family in the scenario above. If on the other hand they are renting in Sydney, god help them. They are paying an average of $530 per week in rent leaving just $9,360 per annum or $180 per week to pay for presents for the kids, telephone bills and perhaps a rare take away meal.
Is it any wonder people feel like they are going backwards? I have no doubt Duncan is doing it tough, and I want to see his children get the same chances at education, healthcare and a fair go as anyone else’s. There are a lot of people going backwards in Australia, including people in Small Business, which makes Duncan’s comments that rich people don’t notice tax breaks frustrating. Duncan made an excellent point, but in the process he made an assumption that those working full time, on higher wages, aren’t doing it just as tough as he is. With higher costs of living you have to wonder if a certain income really makes families middle class, or just the working poor and working class getting by.
For those who have levelled the accusation that my opinion makes me an out of touch, entitled mummy blogger, you can see my response here.
* The fictional family in this scenario have children who are not yet of schooling age and require daycare. Once children are in school it is presumed family financial situations improve, even with after school care costs,assuming children are not educated in the private school system.
#This article has been updated to include Child Care Benefits reducing the originally stated cost of child care and updating the total weekly amounts left over to pay for other bills, and entertainment.
Sources: Australian Bureau of Statistics Australian Social Trends April 2013. realestate.com.au, Australia Tax Office Comprehensive Tax Calculator. Human Services Family Assistance Child Care Estimator.