paul nicolaou

ONE of the ongoing impacts of the Covid-19 pandemic is the shortage of workers across many industries.

Some changed careers, others left their jobs for a lifestyle change and overseas workers continue to resist coming here due to fears of more lockdowns and long delays for visa application process.

This has resulted in historically low unemployment rates that are proving a major impediment to economic recovery and the government must implement measures to quickly bridge the labour gap for at least the next 12 months.

Businesses in Sydney especially are suffering crippling staff short-ages, compounded by a drop in overseas students, backpackers and foreign workers, and will continue to do so for some time to come.  While record numbers of Australians now have a full-time job, rising inflation and interest rates means a growing number of people are struggling to make ends meet and there is only so much belt-tightening they can do. An obvious way to deal with the rising cost of living is to work a second job, however the current tax system disincentivises this option. To make working on weeknights or weekends worthwhile financially and thus incentivise workers to do so, the Federal Government could institute a tax offset to people choosing to take
on a part-time job in addition to their full-time position.

Currently, when an individual takes on a second job, the
additional income often pushes the person’s total taxable income into a higher tax bracket, meaning the
additional income will be taxed at
a higher rate. The higher marginal tax rate diminishes the person’s
disposable income from the
second job, essentially creating a disincentive for people to do so.

Instead of being taxed at the higher rate of your combined full-time and part-time earnings, the government could offer a tax rebate on your second job and tax it at a flat rate of say 15 per cent instead of upwards of 30 per cent.  

There would be relatively little impact on government tax revenue under this proposed temporary measure, as collecting less tax on the second job than currently would apply is better than collecting no tax if those work hours remained unfilled as they are now. 

More Australians would take up the opportunity to help balance their household budgets during this period of high inflation and interest rate increases if the Federal
Government made it worthwhile to do so by not taking most of any extra income they earn in tax.

We need to act now with
temporary measures like a tax
rebate on a second job for the next 12 months, as well as allowing
pensioners to earn more income without it reducing their pension.

It makes a lot more sense to
employ everyone available in the current workforce pool through these tax measures while we await the overseas immigration panacea.

Paul Nicolaou is Executive Director of Business Sydney