Australia Tax Disincentives: Why Higher Salaries Can Leave Professionals Worse Off
- Future Accounting
- 2 days ago
- 3 min read
Written by: Melissa Cunliffe (CA)
Understanding Australia tax disincentives and your true take home pay
The hidden cost of earning more
Recently, one of our clients came to us with a simple question:
“If I ask for a pay rise, what will it actually mean for my take-home pay?”
She currently earns $135,000 a year and was considering asking for a significant increase. She knew her skills were in demand, but she wanted to understand how much of that extra income she’d actually keep. So, we crunched the numbers to show the real impact of Australia’s tax disincentives.
Annual salary | Approx. weekly take-home pay | Extra per week vs. $135K |
$135,000 | $1,941 | — |
$180,000 | $2,366 | +$425 |
$190,000 | $2,586 | +$645 |
$200,000 | $2,007 | +$66 |
Between $190,000 and $200,000, that extra $10,000 in salary only delivered $66 more per week after tax, than what she was already earning on a salary of $135,000 per year.
She was stunned and understandably so. After factoring in higher marginal tax rates, the Medicare levy, and the loss of offsets, her hard work would barely make a difference to her bank balance.
That’s the reality of Australia’s tax disincentives: they make many high-performing professionals feel like there’s no point striving for more.
How Australia’s tax disincentives punish ambition
This isn’t an isolated case. Across Australia, professionals are running into the same problem - as their income rises, their effective tax rate climbs even faster.
The result? A growing sense of frustration and fatigue. People are putting in longer hours, taking on bigger roles, and carrying more responsibility, yet their financial reward barely grows.
These are not the ultra-wealthy; they’re everyday Australians with mortgages, school fees, and rising living costs. When the system punishes effort, it’s not just unfair — it’s a brake on productivity and ambition.
The combination of bracket creep, levies, and lost offsets is the perfect storm of Australia’s tax disincentives, and it’s holding many professionals back from achieving their potential.
A better way - reward effort, not penalise it
If Australia wants to encourage innovation, productivity, and growth, it’s time for a shift in thinking. Instead of penalising income, we should be rewarding effort, saving, and investment.
Imagine a tax system that focuses on spending rather than earning — where discretionary and luxury consumption are taxed more heavily, while work and contribution are celebrated.
By rethinking the structure of our system, we could remove the barriers that Australia’s tax disincentives create and inspire more people to strive, invest, and succeed.
Take control of your financial future
Our client ultimately decided she was better off asking for $190,000 - taking the extra $645 a week and using it to pay down her mortgage and invest for the future. It was a strategic decision based on clear financial insight, not emotion.
At Future Accounting Group, we help clients make those kinds of smart, informed choices every day. Whether it’s managing salary packaging, planning investments, or reducing tax obligations, we’ll help you make the most of your income and your opportunities.
Don’t let Australia’s tax disincentives limit your success. Book a consultation with Future Accounting Group today to find out how you can keep more of what you earn and build a stronger financial future.
Disclaimer
This article does not constitute financial advice and is for general information only. It does not take into account any individual’s personal objectives, situation or needs, and is not intended as professional advice. Any similarity to an individual’s personal circumstances and the examples provided in this article is purely coincidental. Any person acting upon such information without receiving specific advice, does so entirely at their own risk.
Authorisation under an Australian Financial Services Licence (AFSL) is not required in the provision of this article and the author plus Future Accounting Group Pty Ltd is not acting in its capacity as an Australian Financial Services Licence holder
Liability limited by a scheme approved under professional standards legislation.
