TAXPL031 Strategies to avoid income tax bracket creep in a rising wage environment (637 words)

Congratulations on your pay rise! Commiserations on your resulting higher tax bracket. Find useful information here on how to avoid the consequences of income tax bracket creep so that you can actually feel the benefit of your salary increase.

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You earn more money; you pay more tax. So far, so fair.

But what’s not so fair happens when your wage rise bumps your earnings into a higher tax bracket, even though your pay increase may only be in line with inflation. This is known as ‘bracket creep’, and the combination of inflation and a higher tax rate can mean you have less purchasing power than before your pay rise.

However, you can avoid bracket creep by putting your earnings to work in a way that means they won’t be consumed by tax. Here’s how: