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.
For more updated information about tax, please see my post:
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?