Australians’ personal income tax burden, already among the highest in the world, grew faster than any other advanced economy last year, as rising brackets fueled record tax collections the Commonwealth.
According to a report released by the Organization for Economic Co-operation and Development (OECD) late Thursday, the average single earner without children paid approximately $24,791 in personal income taxes last year, up 7.6 percent. than 2022 levels.
In comparison, Luxembourg, which recorded the second-largest increase in the average personal tax rate, increased by just five per cent.
With 24.9 percent of gross wages devoted to income taxes, Australia was behind only Denmark (36 percent), Iceland (27.3 percent) and Belgium (26 percent), and well ahead the OECD average of only 15.4 percent.
As high inflation has encouraged workers to seek wage increases to keep up with the rising cost of living, a greater proportion of their salaries have been pushed into higher tax brackets where earnings are taxed at a higher rate. . Economists call this creep.
Australians’ personal income tax burden, already among the highest in the world, grew faster than any other advanced economy last year, as rising brackets fueled record Australian tax collections. the Commonwealth (archive image)
Among the 21 OECD member countries, only four countries, including Australia, do not automatically adjust their tax brackets in line with the inflation rate to neutralize the impact of wage growth.
The OECD report also cited the end of low- and middle-income tax equalization, which further increased income tax collections.
Also known as ‘the lamington’, the Scott Morrison-era compensation provided taxpayers with a lump-sum payment of up to $1,080 after filing their annual tax return with the Australian Taxation Office.
The compensation was expanded in the final Coalition budget before the 2022 election and ultimately expired in mid-2022 when Labor decided not to extend it.
The recent rise in income taxes, which reached a record $304.8 billion last year according to a separate analysis by the Australian Bureau of Statistics, has prompted the government to adjust personal income tax rates by offering more lucrative tax cuts in stage three.
Responding to the figures, a spokesman for Treasurer Jim Chalmers said the pending tax cuts were a better way to combat the creep of brackets than previous setups legislated by the previous Morrison government.
“Under Labor, all Australian taxpayers will get a tax cut from July and, because of our tax cuts, the average tax rate will fall from 25.4 per cent to 23.9 per cent,” they said.
Shadow Treasurer Angus Taylor is pictured left and Treasurer Jim Chalmers is pictured right.
“Under our plan, the average taxpayer will pay less of their income in taxes for at least the next decade.”
The tax reform will come into force from July 1.
However, Dr Chalmers’ counterpart Angus Taylor said the income tax increase had contributed to a “collapse” in Australians’ living standards.
“Working Australians are being crushed by higher prices, higher mortgage payments and higher taxes as a result of Labor’s economic mismanagement,” Mr Taylor said.
‘To add insult to injury, the Albanese Labor government has reneged on every tax promise since the last election – from the Coalition’s stage three tax cuts to supertaxes and even its poorly designed multinational tax crackdown. which burdened Australian businesses and industries. .’
The federal budget is expected to become increasingly reliant on personal income taxes, with their share of the Commonwealth’s overall tax base expected to rise to almost 60 per cent by 2063, up from its current level of 49 per cent. , according to the latest Intergenerational Report.
