Inflation is rising at its fastest pace in decades, and it is putting a strain on household budgets. The median full-time worker would be $2,000 better off today if there had been no bracket creep over the past decade.
Bracket creep is the automatic increase in income tax that occurs when inflation pushes people into higher tax brackets. This is because tax brackets are not indexed to inflation, so the amount of income that is taxed at each rate stays the same.
As a result, inflation effectively raises taxes on workers, even though the government has not raised tax rates. This stealth tax hike is taking money out of workers’ pockets.
The Albanese government has said that it will return bracket creep to taxpayers, but it is unclear when this will happen. In the meantime, workers are feeling the pinch of inflation and are seeing their pay packets shrink.
The government needs to take action to address inflation and protect workers from this stealth tax hike. But in the meantime, there are some things you can do to make sure you’re not losing money to inflation.
- Negotiate a raise with your employer.
- Look for ways to save money on your expenses.
- Invest in assets that will appreciate in value over time.
Take action today to protect your financial future or reach out to speak with one of the Inspired Money Team to investigate other ways to ensure you minimise your losses due to bracket creep issues.
The information provided in this blog is for general educational and informational purposes only. It should not be taken as professional financial or tax advice. We recommend consulting with a licensed financial advisor or tax professional before making any decisions related to your finances or taxes. We do not guarantee the accuracy, completeness, suitability, or validity of any information in this blog, and we will not be liable for any errors, omissions, or damages arising from its use.
This article was written by Conrad Francis, Founding Director and Money Coach with Inspired Money.