Yahoo Finance Australian workers cop largest tax increase in developed world
Tax cuts are on the way, but Australian workers have already faced the biggest increase in tax in the developed world.
Australian workers copped the largest tax increase in the developed world last year. The tax spike disproportionately impacted low and middle-income earners.
The average personal tax rate increased by 7.6 per cent for the 2022-23 financial year, according to the Organisation for Economic Co-operation and Development's (OECD ) Taxing Wages report. That increase is the biggest out of the 38 countries in the OECD.
In comparison, Luxembourg was in second at 5 per cent.
The main causes? Bracket creep and the end of the low and middle-income tax offset.
"This was due to the cessation of a tax credit and the fact that nominal earnings increased while earnings thresholds in the tax schedule remained the same in nominal terms," the OECD report states.
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Bracket creep occurred as workers grappling with rising inflation sought out pay increases to keep up with the cost of living. This pushed a greater proportion of their pay into a higher tax bracket, therefore they were taxed at a higher rate.
The low and middle-income tax offset, known as “the lamington”, awarded taxpayers with a lump-sum payment of up to $1,080 after they filed their tax return. It ended in 2022 after Labor chose not to extend the measure, as the Coalition did before the 2022 election.
This was the reason many Australians found their tax return lacking last year.
When will Australians get tax relief?
Tax cuts will be coming from July 1, which Treasurer Jim Chalmers said would “provide relief to around 2.9 million Australians with incomes under $45,000, who would have received nothing under the Coalition’s plan”.
Under the cuts, all taxpayers will get a smaller tax rate, with reforms to the policy targeting more relief toward those on low and middle incomes.
The Medicare levy will also change, with the threshold before you need to pay the 2 per cent levy increased to 7.1 per cent.
The changes would mean a single earning up to $26,000 would not have to pay the Medicare levy, up from the previous threshold of $24,276.
