Out of 38 countries around the world, Australia is one of the highest payroll tax countries. Now experts have called for reforms.
Australians face some of the highest taxes in the world, which means they take in less money on their paychecks, the latest report from the Organization for Economic Co-operation and Development (OECD) has revealed.
It showed that Australia ranked fourth among the highest-taxed countries in the developed world, just behind Denmark, Iceland and Belgium.
On average, Australians were hit with a 23.2% tax on their wages, well above the average of 14.9% across the 38 OECD countries.
In comparison, Japanese citizens were taxed at a rate of 7.8%, the British rate was 14.3%, the United States took 17.2% from wages, while New Zealand was taxed at 19 .4%.
Director of the Australian National University’s Tax and Transfer Policy Institute, Bob Breunig, said there was a growing wealth disparity and that “effort taxes” needed to be reduced.
“We have a very inefficient stamp duty regime and a very heavy burden on economic activity through corporate and personal tax. At the same time, we have this growing wealth disparity, which we don’t do nothing to tax,” he said. The Australian.
New federal treasurer Jim Chalmers has signaled that he is working with states and territories on tax reform, with ideas such as swapping stamp duties for property taxes.
Professor Breunig said a federal property tax would be a good opportunity to reform the tax system.
“I would put it as a Covid reimbursement measure because I think it has no negative effects on productivity,” he said.
“You could tell people, ‘Any property tax you pay, you can deduct that from wages and salaries’, so that wouldn’t change the tax burden on fighters, but you would be taxing people who have wealth and don’t work. not. “
According to H&R Block’s director of tax communications, Mark Chapman, the change in government could also have an impact on household finances.
The so-called “third stage” tax cuts have already been legislated under the previous government, meaning they already have the green light to go ahead, unless the ALP brings an unexpected change.
To refresh your memory, the tax cuts will see the marginal tax rate of 32.5% reduced to 30% to make a large tax bracket between $45,000 and $200,000 from July 1, 2024, while the 37% tax bracket will be completely eliminated.
Mr Chapman said higher income earners would be the big winners.
“It will be particularly effective for high-income earners, with gains of $1,125 per year for one person on $90,000, rising to $9,075 per year for one person on $200,000 or more,” he said. declared.
But the removal of the Low and Middle Income Tax Compensation (LMITO) has also already been confirmed, meaning those currently receiving it “will notice what is effectively a tax increase when they submit their tax returns. 2023,” Mr. Chapman said.
However, it is important to note that the LMITO is still in place for 2022 returns.
“That could represent an increase of up to $1,500 for those who qualify for the full LMITO,” Mr. Chapman said.
– with Alexis Carey