Australian workers have been hit by the biggest tax increases in the world’s richest countries after Labor allowed key cost-of-living tax cuts to expire.
Australia’s average tax rate increased by 7.6 per cent in 2023 and was the largest increase among the 38 countries in the Organization for Economic Co-operation and Development (OECD).
The tax increase caused the average full-time Australian taxpayer without children, who earned $99,565, to hand over $24,792 to the government in income taxes.
Personal income taxes now account for 45 per cent of Australian government revenue, and record immigration means more working-age people are paying taxes.
The OECD found that Australians are now, overall, the fourth highest taxed population among all its members.
Australian workers have been hit by the rich world’s biggest tax rises following the end of relief for low and middle income earners under Labor’s watch (pictured, Queen Street Mall in Brisbane).
The heavy tax burden came after the end of the low- and middle-income tax offset in June 2022, which provided relief of up to $1,500 to 10 million workers earning up to $126,000.
OECD Secretary-General Mathias Cormann was Liberal finance minister in Malcolm Turnbull’s government when the low- and middle-income tax offset debuted in 2018.
In his final budget, former Liberal Treasurer Josh Frydenberg announced a one-time cost-of-living relief of $420 in March 2022, on top of the existing tax offset of $1,080 for low and middle incomes.
But the full $1,500 compensation expired in June 2022, shortly after former Prime Minister Scott Morrison lost the election to Labor leader Anthony Albanese.
Treasurer Jim Chalmers refused to extend Coalition compensation which was due to expire over inflation fears, and this was before the consumer price index hit a 32-year high of 7.8 per cent.
Australia’s 7.6 per cent increase in the personal income tax burden in 2023 was much larger than New Zealand’s 4.5 per cent under former Labor Prime Minister Jacinda Ardern’s government and was even larger than Luxembourg’s 5 percent increase.
The Australian government is particularly reliant on taxing workers: new data from the Australian Bureau of Statistics this week reveals that $278.39 billion was collected from personal income taxes.
This represented 45 per cent of the Commonwealth’s $618.227 billion in revenue for 2022-23.
The Paris-based OECD revealed on Thursday night that Australia’s average tax rate rose 7.6 per cent in 2023 during a cost of living crisis (pictured Gold Coast plasterer Suraya Kastelein ).
With 24.9 per cent of gross wages going to income tax, Australia was only behind Denmark (36 per cent), Iceland (27.3 per cent) and Belgium (26 per cent), and well ahead the OECD average of only 15.4 percent.
The revised stage three tax cuts in July 2024 will bring the first significant tax relief in two years for struggling Australians.
But until then, tax agent H&R Block has revealed the little-known items that can be claimed in taxes, from a dog to a caravan.
Claim a dog or caravan on the tax
Mark Chapman, director of tax communications for H&R Block, said a farmer who uses a dog to herd sheep and a business that needs security could claim the animal as a tax deduction.
“In very limited circumstances, you may be able to claim a deduction for your dog, both for the cost of acquiring the animal,” he told WhatsNew2Day Australia.
‘The cost is amortized over several years and also by maintenance costs: food, vet bills.
“The two most common scenarios in which the cost of a dog is tax deductible are agriculture, where an animal could be used to corral sheep, for example, and security, where the cost of a guard dog to patrol business premises could be allowed.”
Someone who has traveled a lot for work could also claim a caravan if it is used as accommodation during work trips.
Mark Chapman, tax communications director at H&R Block, said a farmer who uses a dog to herd sheep and a business that needs security could claim the animal as a tax deduction (pictured, a kelpie working at Langawirra Station at north of Broken Hill).
“A taxpayer who traveled a lot for work decided to buy a caravan to spend the night while working away, rather than paying for a hotel room every night,” Mr Chapman said.
“That was deductible.”
But those who claimed a caravan had to ensure that they did not claim a holiday.
“The deduction will have to be distributed between work use and private use,” he stated.