Most people assume dual income families are better off. Two incomes are better than one, aren’t they? The answer is not always.

Around two-thirds of families have both parents in the workforce. When you take into account higher taxes, lower family benefits, child care costs, transport and the rest, the price of both parents going to work may offset the benefits.

The last thing I want to do is discourage people from entering or staying in the workforce. The truth is it’s not all about the money, many parents choose to return to work for other reasons like stimulation or the chance to socialise.  However, it’s important you sit down and work out how much it’s costing for you both to earn an income… and whether it’s worth it financially.

Tax and Family Payments

The real cost of two incomes can be much more than your regular tax rate. Our means tested family tax benefit system hits second income earners, which are usually women, when they go to work.

Sydney University Professor, Patricia Apps, says changes to tax rates and income tests for family payments have shifted the tax burden from high-income earners to dual income families on low and average wages. Professor Apps has submitted a paper on behalf of the National Foundation for Australian Women to the current review of the tax system. It includes the following example based on the 2009 financial year.

A working mother has two children under 13, one of which is under 5, and a husband earning $40,000. By the time she’s earning $23,000 she’s losing over 40 per cent of her income. The main reason? Family Tax Benefit Part A and Part B start to cut out, plus she’s paying income tax and the Medicare Levy.

Meanwhile, a two-child family with a single income earner can earn up to $54,000 a year before they start paying any tax at all.

Child care

Child care of up to $100 a day may seem ok when you’re comparing it to your gross income, but that’s not what you take home. Work out how much you’ve got left after you loose money to the taxman and pay for transport. How do you fare after that?

Remember to take government help into account. You may be eligible for the Child Care Benefit, a payment to help cover the cost of childcare. The amount you receive will depend on your income and whether your kids are in an approved or registered childcare centre, but it could be as much as $173.50 a week for a child in approved care.

The quarterly Child Care Tax Rebate is not means tested. If you’re working and using approved childcare the government will meet 50 per cent of your out-of-pocket expenses, up to a maximum rebate of $7,500 per child each year. That effectively halves the cost of childcare for a lot of families.

Transport

Add up how much you spend on getting to and from work. Include all tickets, taxis, parking costs, tolls, petrol and car maintenance. It’s not cheap. A two-week train ticket form suburban Sydney to the CBD can cost close to $90.

Look at ways you can cut back on transport. Car pool with colleagues who live in your area, consider cycling if you’re not too far from work, or ask your boss if you can work from home some days.

Convenience

How much do you spend on coffee and lunches at work? This is one area where you can cut back if you try.  Grab a free coffee from home or the work kitchen instead of your $3.50 latte and take a packed lunch to work.

Also beware of how much you’re spending on ready-made foods, home delivery, and school lunch orders because work cuts into your preparation time at home.

Keeping up appearances

Think about how much spend each year on clothes for work and other expenses like dry cleaning. Some companies have strict corporate dress codes that require suits, collared shirts, ties and stockings. Other companies may provide you with a uniform at no cost to you, which they even launder. The amount you spend depends on your profession and employer.

What’s your total?

Add up all your work related expenses. How much money do you actually make after you’ve covered tax and your other costs? If it’s a negative number you need to make changes. If you’re only breaking even or making a little bit of money it’s up to you to decide whether it’s worth it.