I had a brilliant idea for a post. Well, I didn’t, one of my readers did. I had an email from somebody who wondered how much tax they might be stopped here in Australia.
We thought some of you might like to know too.
The above table is for residents only, but of course residency does not mean Australian citizenship. You might be here on a permanent residency, or a temporary residency but either way the above band will apply to you.
As a resident you will also be obliged to contribute 1.5% of your income towards Medicare services. But you can also apply for certain deductions. Additionally, here in Australia, individuals can form trusts. This is a way of reducing your tax liability by spreading it amongst the low earning or non-earning members of your family. Do see an accountant.
The first thing you will need to do upon arrival here is get yourself a Tax File Number (TFN). Without it, you will pay emergency tax. Ouch!
The Australian Government also has income tax calculators which change very year; you can Google – ATO tax calculator – to search for the latest tools available. There are a few radials to complete but most you will want to leave on their default value. There is no need to enter your name.
I would imagine for most, it’s only when you get to the eighth question about whether you have a spouse that you will need to start customising your answers.
I used the form for an example where a married person earned $6,000 a month as the sole income earner. The calculator suggested that net pay would become $4,618. If you refer to the tax bands above, you will see that nil tax was applied to the first $500, then the rest was roughly split at 15% and then 30% tax. It all equates to a tax rate of 23.03% in that example.
Trying to compare that with the UK, for example, I found that somebody earning £3,315 per month would pay £555.07 in income-tax. That equates to a tax rate of just 16.74%.
So therefore the UK ‘s tax is much lower than that of Australia’s! If only it were that simple.
Over in the UK that same person would have paid £312.25 in National Insurance Contributions (NICs). That is to cover pensions and sickness, broadly speaking.
Here in Australia, we have superannuation or “super” as it’s called. (Regular readers will know how much the Australians hate long words, I’m just surprised it’s not called supo). That too covers pensions and sickness, broadly speaking. But the contribution comes entirely from the employer at a minimum rate of 9%. The employee can “top up” his super payments (same as a pension can be topped up in the UK) by selecting a plan from an independent company.
So now who is going to take home the biggest pay packet? After the deduction of the compulsory NICs our UK worker has a take-home pay of £2,447.00 – which is equivalent to $4,429.07. That’s about $188 less than the Australian would take home. But the Australian still has to pay 1.5% contribution towards Medicare. That’ll be another $90 then I guess.
So now which country has the lowest tax rates?
I just don’t know! There is clearly not much in it. So let’s call it a draw shall we?
And here endeth the roughest guide to taxation on the planet.
Update:
For more updated information about tax, please see my post:
Disclaimer:I am not an accountant but I am pretty good at adding up. But adding up in itself is not a qualification. Therefore please take no notice of me whatsoever, and be sure to get proper legal and financial advice before making any decisions that affect your life in any way whatsoever. Does that cover it all?
Hi Bob,
My husband has a job offer of 80.000 dollars, car and superannuation in Sydney with Visa 457. Is there a possibility to calculate what the take-home pay with precision ? Family of 2 adults and 2 children, private health insurance.
Thank you in advance.
Kind regards.
Sabine
Yes, click on the link to the updated post towards the bottom of the above article and on that page you will find another link to an online tax calculator called taxcalc.
Cheers, Bob
Dear Bob,
I would be grateful if you could give us general info on the tax deductions or maybe a link that goes through the calculations process easily (I tried to read the ATO site but it seems it is a complicated thing to read on my own and there are a lot of doors lead to other doors), because I feel it is different than here in my country, like for the single person whose salary (basic salary, all allowances and any rewards given at that specific month) above 1000 will be eligible for the tax deductions as follows:-
An example:-
– If your salary for the 9/2013 is 1200:-
You will pay tax for only the 200 (7% of that amount) and that is 14 JD as a tax.
– If your salary for the 9/2013 is 2500:-
You will pay tax for only the 1500 = 7% of the 1000 plus 14% of the remaining 500 and that is 140 JD as a tax.
And this amount is monthly deducted and you go to the tax department at the beginning of the following year to finish the settlement regarding the taxes.
For Australia I took the average annual salary for the HR advisor (60,000) AUD and I used the tax calculator but for the monthly salary it was around 4000 AUD deducted from 5000 AUD monthly salary… And when I looked at the cost of living I got really confused… thr person will live the remaining 1000 AUD is it right? Or there is something wrong with my understanding? Or I didn’t get it right?
Any idea or explanation is appreciatedJ.
Kind Regards,
Fatima
Hi Fatima
This is a bit of an old post, please check out more up to date information here:
Australia versus the UK; Taxes and Pensions
You seem to have got it the wrong way round if I understand you correctly, it’s more likely to be $5000, $-1000 tax, leaving you $4000 to spend. On the new post there is a link to an Australian tax calculator you can use, you’ll see it in the text of the article.
I have now also added the update link to the foot of the article so others can see it easier.
Cheers, Bob
Hello there! I’m an American looking at moving to Australia with my wife and son. I’ve got a decent job offer where I should expect to be making around $130 – $150K depending on commissions. My question is about tax liability to America while working and earning in Australia… Are there any Americans working in Australia that can speak to this?
All I can tell you Collin is as a Brit who moved here I still had to complete my tax returns for the UK for three years until I finally got them off of my back by telling them I had moved here to Australia permanently, I was a permanent resident, and I had no intention of returning to the UK.
I then had to sign a form agreeing to inform them if and when any certain events happened, and they gave me a list of those certain events. Inheriting money from someone in England, selling shares in England, getting bank interests in England, that sort of thing.
But any money I earned here in Australia I paid tax on here in Australia and did not pay any tax in the UK. I think this is because of an arrangement between Australia and the UK, hopefully something similar happens between America and Australia, but I’ll leave that to someone who is from the USA to, perhaps, pop in here and help you out with an answer.
Hello Bob! Looks like I might be drinking a pint with you in short order! I’ll get back to that…
Since the above post, I’ve consulted with a tax attorney and my CPA and have come to find out that the tax liability back to the USA doesn’t really become an issue until income is in the $175K dollar range ( at least for my situation ).
If anyone is curious to know more, the details are as follows:
1. Most Americans qualify for a $95,000 tax break while living and working in Australia.
2. On top of that there are regional living expense dollars that can be written off as well ($32,500 for where I’ll be living, in Toowoomba).
3. Above that, you get a dollar for dollar tax credit for any taxes paid to the Australian government.
4. There are several other ways to increase your tax write-offs and credits as well.
So…. all in all, you have a pretty decent earning allowance before you’ll ever have to even consider paying taxes back to the USA and even if you break that ceiling the taxes aren’t too bad until you get into the $300K-$400K range.
Now, on to that pint, I’ll be leaving for Brisbane (one way!!! yikes!!) on October 16th and will arrive Friday the 18th. My family will be joining shortly after. We can’t wait.
Thanks for helping me with questions and insight along the way.
Cheers!
Collin
Hi Collin
Don’t you just love the sound of that one way ticket?
Thanks for the info on the USA tax arrangements for those working here in Australia, always very useful to have. Let me know where you will be staying when you arrive in Brisbane, but if you’re actually going straight on to Toowoomba, it might be difficult to have that pint, it’s about an hour and a half’s drive to get there.
Hope it all goes well you and your family.
Cheers
Bob
Hi Darrell ,
I’m no ones financial guru but as far as I know , the only other compulsory deductions are superannuation for wage earners ( sub-contractors for example may be responsible for their own ) and child support payments in the event of parental separation .
The superannuation scheme itself has a degree of flexibility built in , e.g. it may be possible to do what is called “salary sacrifice” where basically the wage earner chooses to pay more than they have to into “Super” and reduces their income tax burden .
As an aside ( but related to Super ) I lost about 18% of my Super during the GFC , it was only afterwards that I found I had choices regarding how my money was invested and could have chosen a Capital Guaranteed option had I been better informed at the time . As I am fond of saying , the best mistakes to learn from are other peoples !
Hi Everyone,
Was wondering if anybody could answer this for me: What exactly are the compulsory deductions from your pay in Australia?
I know income tax is and I can calculate the rate I will pay from the table above, I had also heard about the medicare fee(now I have the rate, thanks Bob!) but is there anything else?
Tony
I’ve been called a lot of things, but so far, not a clobberor. I’m guessing that’s a good thing? I think I know what you’re on about though. Anyway….
The thing is, this blog is about me moving from England to Australia and how that goes for me. In a nutshell, it goes very well. So well that I feel compelled to write about it. And because it’s about me moving from England to Australia, yes, I make lots of comparisons between Australia and England. It’s actually the point of this blog.
But I don’t blame you for saying what you said, in fact I make you right. I don’t really make it clear anywhere that this blog is mainly about what it’s like to move to Australia and in particular, comparing Australia with the UK.
My bad, as we young trendy folk tend to say. Which means sorry.
Cheers
Bob
Bob,
Well done thats a lot of travel in the short time you have been here was it quality travel or quantaty and plenty of gum trees and unsealed roads? ,so you must have been to some of the spots i mention and been called clobberor do you know my sister?clobber no more clues.
Bob i feel your site is quite good but i do think you need to stick to the knitting and explain what is is like in Australia instead of it becoming a Aust V England comparison site i feel it is not needed in my mails i have not compared the two just facts on Australia after living here for 44 quality yrs and has i have seen it unfold for good, bad, or indiferent which poeple do need to understand,.
Regards
Tonyc.
Hi Bob,
We live in Perth Australias boom state just travel a little Bob and see the country and out back towns parks where liquer has been banned or on the fringes of citys i thing you are trying to be politcaley correct,i think sunseeker must have lent you his pink glasses.
Hi Sunseeker with regards to Centrelink have you started to fill in the quarterly form on your financial affairs yet ?you are correct in saying when you earn the handouts reduce,they do it with the pensioners also if your assets increase your pension payments get reduced,but dont worry you will get your pension from the UK when the time arrives no matter what assets you may have.
All the best for the future,work hard,look after your mother,and remember what Henry Ford said when poeple said he was lucky “The harder i worked the luckier i became”in todays terms that could be smarter replacing harder,what line of bizz are you in ?
Regards
Tonyc
Me, travel a bit? Are you kidding? I’ve been on a 4700 km road trip, and I have been to Alice Springs and Uluru, I’ve driven hundreds of kilometres north and south from where I live exploring and I’ve just got back from Adelaide. I’ve already covered five states and I’ll be going to the others as soon as I get time. I’ve only been here “5 minutes”.
And of course, if I wanted to go searching for the rough areas, I’d find them here in Australia. Every country has rough areas. But I think the important point about Australia is that the good areas are very well looked after. Very clean and well presented. Many good areas in England still end up getting trashed.
Sunseeker
I can only throw a little bit of light on it, but here is what I know. When we first got here, we didn’t have any jobs lined up and therefore no income. We took our daughter to nursery school and they charged us something like $50 a day, but at the same time told us we must register with Centrelink and get our Centrelink numbers, otherwise Elizabeth wouldn’t have been able to continue to go.
After we registered with Centrelink the nursery school fees automatically dropped to 1 dollar a day and we started receiving those fortnightly payments you mentioned. It was quite a lot too, as I remember it. Maybe $400 every two weeks. But as we started to earn money, those fortnightly payments reduced and we currently get $23.24.
It’s not a lot, but it’s something. I think everybody who has children gets “something”.
That’s all I know.
Tony
Actually, I don’t know what you’re talking about. Where do you live? Because where I live the parks are refreshingly clean and free of yobbo’s. I know the sort of thing you mean, because I used to live opposite a park in England that sounds like your description.
Maybe I’m just lucky where I live.
There is a certain similarity between the Australian tax system and the UK tax system, and that is the “child tax credits” type scheme. I don’t know what it’s called in Oz.
My brother-in-law earns a decent salary, but because he is under a certain threshold and because they have kids, they receive quite a sizeable tax credit every fortnight, which goes a long way to negating the original tax bill that they had to pay. So I don’t know what the final percentages work out at, but that’s a real help to them apparently.
Maybe Bob can shed some more light on the details of this system.
Cheers, Sunseeker.
Hi Tony,
Well yes, it probably came across a bit like I had rose-tinted specs. And yes, you are right, I did see parts of Caboolture that were decidedly seedy. I suppose I shouldn’t post stuff late at night after a long day of particularly naff and dry financial modelling and minimal sleep!
But I think the difference I am trying to get across from what I have seen and from what my family in Oz have shown me, is how much you get back for your tax and how there does not seem to be a favouring of “Labour” voting areas (traditionally “working class”) over the more “middle class” areas (aside from the retirement issues you have mentioned, which will probably become a lot more important to me in about 25 years)
I think the terms “working” and “middle class” are pretty stupid really and harken back to really old times when the class system was at it’s full strength… it really should be: “Those who refuse to work” and “Those who choose to work and act like responsible citizens” (with varying degrees of wealth in this category).
Basically, we feel (and we are not the only ones) that all the money is spent on those who don’t really give a hoot, whilst our kids have to suffer with no facilities because their parents had the temerity to try and get along in life, work hard and pay taxes. And when I say that our kids have no facilities, I really mean that. If they want to play in a park, we have to drive 3 miles to get to one. If they want to swim in a pool we have to drive them 5 miles into one of the “poorer” areas to do so. Every time they want to do something interesting or exciting, it seems, we have to go out of our way to transport them to one of the “poorer” areas, because that is where the (our) money is spent.
I cite the example of my sister again, they live in the Bellmere suburb of Caboolture, which (according to them) is a pretty middle of the road suburb, pleasant, neither overly poor nor overly rich, but a great deal of trouble seems to have been taken to ensure that there is ample facilities for them. Sure, I agree, there are probably areas where the parks are trashed, but at least everyone seems to have parks and play areas, not just the “poorer” areas. This is certainly a different situation to what we experience here in this part of the UK.
Hope this clarifies my “take” on things!
Cheers, Jules (Sunseeker).
Bob,
Would t be possible to explain to Sunseeker about all the parks,and houses that our taxes pay for hundreds of millions of dollars and have done for ever and a day, every day, and every year, that are provided for a certain group of our community across the country where you cant move for empty beer cans,bottles,houses ripped apart,door ripped of and burnt, dogs,fights i think you may know what i am talking about.
The terms “Middle Class” and and “lower class underprivileged areas” are not a term that we use in this country i would have to think about that one it indeed sounds very English to me. I know Caboolture i think Sunseeker keeps a pair of pink tinted glasses somewhere but each to there own.
Sunseeker i tend to agree with you i think the winter has got to you it was a shocker but we will be there in June in a lovely village in Dorset enjoying ourselves for a break we love it and at 66p to the dollar very affordable.
On last tip if you decide to seek the sun come has a boat person they get paid an allowance twice that of a pensioner.
Have a nice day.
Sunseeker
Thanks for the YouTube link, I haven’t watched it all, but then I know how frightening it’s going to be. I saw a similar documentary about America, called IOUSA, and that was an eye opener too. Yet the UK are in a worse position than the states. In lists looking at national debt compared with GDP, USA are 47th and the UK 22nd.
Frightening indeed!
Australia is 108, for the record.
And yes, of course, Gordon Brown was the stealth tax man.
Hi Gordon,
Thanks for your interesting comment and i totaly agree with you the Australian pension is very generous indeed,when you qualify for it,we dont it is also interesting that the pension bonus scheme was dropped also to poeple that worked after 65 now gone.
Another interesting experiance was that up to the age of 65 your super is not taken into consideration as asset but when you do reach 65 overnight it does become an asset, it was also interesting that when i informed Centerlink they stopped my wifes health card in two days,yes we are fully aware of the perks you mention or so called perks solar,LPG conversions (now defunt) etc and also understand the what happened with the GFC.
It is also amazing when poeple discuss the writes and wrongs in this country they are judged has comparing it with the UK not the case sorry,by the way we got the elec bill today $654.00 and our premier says dont use the aircon it is not needed 42,44,40,Gordon not sure where you live but send us some rain,have a nice day.
asset test failure.
P.s. It was under Labour and Gordon Brown that we had major increases in taxes and stealth taxes.
http://www.telegraph.co.uk/news/uknews/1545948/Brown-heads-for-his-100th-tax-rise.html
Hi Bob,
I don’t know whether you’ve seen this or not, but it was a recent documentary on the box:
https://www.youtube.com/watch?v=7gd6-zfeeaM
Quite frightening and a real eye opener for Brits and the state of the nations finances. I think one of the scariest facts is when they calculate the actual tax rate at something like 60% (adding up all the stealth taxes). You’ll find the comments on the NHS quite illuminating too. It’s not really “the most envied system in the world” as many like to make out.
I know I am going to sound really negative now (which is sad, because I am usually a jolly, positive, optimistic sort of guy, believe it or not) but you are right about the council taxes. Where do they go? Why does our middle class neighbourhood look like some East German ghetto in terms of the level of street maintenance, cleansing, beautification etc.
I tell you, I am really stunned by Caboolture and Bellmere. My sister says that they are not exactly “hoighty toighty” neighbourhoods, but everything looks so nice and well looked after. Is that the council doing it or the local residents?
To give you another example, it seems like any money that is spent here is targeted at the lower-class underprivileged areas. We’ve seen fantastic parks, playgrounds and beautification projects go up in nearby Middlesbrough… and we’ve seen them all (without fail) trashed and vandalised in a very short space of time. Yet in our area, which is seen as “middle class”, there are no parks and no money is being spent on beautification. We have to drive a couple of miles to take our kids to the nearest park so they can get a bit of outdoor play (we only have a small garden which is pretty useless during winter). Thank goodness our kids get so much enjoyment out of reading, as there are not really many options available to them locally.
On the flip side of that, my sister in Caboolture has access to about 5 little parks and playgrounds within walking distance of their house. It really is the way you have shown it in your ebook. It’s not just the area you are living in.
Basically the lesson being taught to us here in the UK is this: Work hard, pay your taxes, try and care for your community and you will get screwed over by the government. Don’t give a damn and voluntarily live your life on welfare and receive continual handouts and “fun things” from the government. Then destroy them, but don’t worry, you will receive more. (I am not criticising people who have genuinely lost their jobs and who are doing everything they can to get back on their own 2 feet).
Maybe I’ve just got too many winter SAD vibes rushing through my veins at the moment with this dire winter we’ve been having but sometimes the sorry state of affairs really gets me down! Do you sense the frustration? ; )
Kind regards, Julian (Sunseeker)
Gordon, good point. The Australian government do offer a lot of subsidies. You could almost call them stealth hand outs. Also, whenever there is a disaster, and Australia has plenty including the current catastrophic floods, they are quick to provide financial assistance from the national disaster fund. I’ve only lived here 3 years, we had five such disasters in just 4 months a while back, see that disasters list here.
Good link too, useful info about asset limits. I seem to recall that when my mother needed help 11 years ago, aged 73, in the UK after working hard all her life and paying taxes, she didn’t qualify because she had assets in excess of £30,000, and that included the value of her home.
Sunseeker
I’ve sort of replied to you in my answers to Tony above. But I just want to add one more thing. You made a good point when you said how clean Caboolture was compared to NE England, well that sort of sums up all UK taxes. What are they for? Because as high as all taxes are in the UK, by comparison to other countries it’s not cleaner or more modern, doesn’t have cheaper petrol, better hospitals, cheaper cigarettes or alcohol, better public transport, or noticeably better schools and education. Maybe overall the NHS is at least free, but at what cost? For most they’d be better paying less tax and stumping up for private medical insurance.
Oh dear. Sorry for the rant.
Hi Tony
Interesting comments and thanks for taking the time to share them.
I think what you are describing there is pretty much the case for most countries. I don’t think there is a country in the world where things are getting better and better. All countries talk about the good old days, and it’s probably not sentimental nostalgia, things were easier in times gone by.
I remember life before VAT and I’m sure you remember the days when there was no GST in Australia. Where did it come from? What is it for? If my memory serves, VAT was first brought in at 8% to help replace the hated poll tax. But then they came out with council tax, but did they scrap VAT? No! 8% became 10, 15, 17.5 and now 20%.
Australia isn’t unique in becoming more expensive.
Sunseeker, you sort of answered Tony’s question before he asked it. The UK has bucket loads of stealth taxes. They must have a stealth tax think tank. A big one. I remember about 6 or 7 years ago, one of the governments, can’t remember which, introduced an additional 137 or something stealth taxes within a one 4 year term in charge.
So trust me, the UK is getting more and more expensive to live in and it’s probably outstripping Australia in that respect.
Update:
Somebody pointed out I got the VAT thing wrong. So I checked the history of it in the UK, and I did get it wrong.
So here’s a correction, this time I didn’t rely on my memory, but good old Google.
VAT was introduced in 1973 at 10%. In ’74 it was lowered to 8%, ’76 raised to 12.5% and ’79 15%. Here’s where my muddled memory kicked in; in 1991 John Major’s government raised it to 17.5% to subsidise cuts in the poll tax. If memory serves, (oh dear I’m going to do it again and someone will tick me off) this was to be a temporary measure until the council tax was finalised. But of course, when the council tax took over from poll tax, VAT didn’t go back to 15%.
On January 4th this year, VAT was raised to (ouch!) 20%.
While not exactly income tax related , it’s worth mentioning that there are number of government subsidies available to residents.
For instance , the government(s) ( State and / or Federal ) will make a significant contribution to converting your car to LPG / Dual fuel , to adding a solar hot water system to your house , adding solar power electricity generation to your house as either stand alone ( not grid connected ) or with feedback to grid where excess generation ( kilowatts )are bought back.
Tony Cousins , it sounds like you have done well with your hard work , If you , as you say “we now do not get one dollar in any shape or form from the goverment ,no pension,no health card,no subsidised presciptions from the chemist just nothing.”
Then , basically , you have too much wealth to qualify .
Millions of retirees or near retirees as well as as many millions more of people worldwide took a big hit on their investments / superannuation due to the GFC , you are not alone if that’s the case .
Still , it’s nice to live in a country where the safety net of an age pension exists , wouldn’t you say ?
For interests sake , here is a government link which shows allowable assets etc. as per a means tested pension – http://www.centrelink.gov.au/internet/internet.nsf/payments/chartab.htm#a
Personally , I think Australia’s pension scheme is quite generous .
Hi there,
Very interesting reading the various comments on the UK,RSA and the like we have lived in Australia for some 40 odd years,we have worked hard ,been smart,took risks,employed poeple and created work and employment.
We have over that period never taken one dollar from the goverment but paid millions back in both personel tax and company tax.
Upon reaching 65 and having saved a few dollars along the way we now do not get one dollar in any shape or form from the goverment ,no pension,no health card,no subsidised presciptions from the chemist just nothing.
We are now self funded retirees because we worked hard etc, etc,when our funds get less and below the asset test threshold we may then be able to get a part pension,assets counted are every thing except your house,this is the way the goverment wishes things to go.
Australia is a great country or was it is now becoming very exspensive indeed basic services like gas,water,and power going through the roof,we live in the west where we are all awaiting the mineral boom which has created a twin economy with poeple in it and the poeple out of it whom have to meet the high cost of living created by it with house reposesions growing by the day.
Australia was the land of milk and honey but is now reverting very much to BYO.It aint all beer,sun and skittles just beware!!
Regards
Self funded retirees
Hi Bob,
Great site. We are considering moving to Oz and your site has been a real inspiration. I am originally from South Africa (RSA) but am now a UK citizen. My wife is an original Brit.
I love pretty much everything about the UK: It has given me fantastic opportunities and a better lifestyle than I could have had in RSA.
The main things I cannot stand about the UK is the weather (I suffer from SAAD so the winters are bad) and the lack of space in housing (my wife grew up in a large house in the English countryside and feels the same way!.
Anyway, sorry for waffling on like this on your tax page, but I think you highlighted something very important about the UK.
Although it’s “sticker price” tax rate looks on the surface to be quite attractive compared to say Oz, most people don’t understand the stealth taxes involved (I work in finance, so know a bit more than most).
National Insurance, no matter what they may call it (according to my accountant), is tax. It’s a double tax that hits employees and employers. Plain and simple. Throw in the 20% VAT rate, the hideous duties on fuel, record levels of council tax and all the other little bits and pieces of tax that are hidden in the woodwork, and you soon see that the UK does in fact have a very onerous tax regime.
Another random comment: I’ve also visited my sister in Brisbane (Caboolture area) and am amazed at how clean everything is, for a significantly lower rate of council tax. When you see our neighbourhood in North East England and how the streets are NOT cleaned up, maintained and sanitised, you are often left asking the question: “what exactly do I pay fantastically high council taxes for?”
Thanks again. Hope to check out more of your site over the next few days.