Why is Tax So High in Australia?

[Deactivated] on 01/02/2022 - 09:58
Last edited 01/02/2022 - 09:59

If we earn over $180 thousand a year we have to pay 45% in income tax, Medicare Levy and mandatory Superannuation contributions. Plus the 10% GST on most items we purchase. This is not including other tax luke stamp duty and etc.

We have one of the highest Tax rates in the world yet we don't have free education, Our roads and public transport are in terrible shape and our Hospitals are way understaffed with very long wait times.

I really do wonder why our tax rate is so high and where the money is really going? Because it certainly isn't for education,roads and healthcare.

Financial

Comments

squaredonut on 02/02/2022 - 20:05

I feel the same as well, but like others have said, we have it good in Australia, everyone pitches in.

But yes the general sentiments of:

Wow nice I got a 20-30k pay rise… hmmm after tax and divided up per month, yeah it's decent, but you then start thinking how much more hours or responsibility you might need to put in, and it puts you off.

I think the other issue is that people feel shafted by how the money is put to use and what we are getting out of it from society. But yes as others have stated it's largely because age pension chews up a lot of it, so the perception that a lot of the tax revenue going to the areas that you directly see is what blinds a lot of people.
- loki niflheim on 15/02/2022 - 10:37
  
  +1
  
  I think the other issue is that people feel shafted by how the money is put to use and what we are getting out of it from society.
  
  Nowadays when I see this comment, I think of the difference between Android users and Apple users XD.
  
  "So you don't like how they use your money, what are you doing about it? Are you exercising your democratic rights?"
  
  Apple users: "When my iPad is close to my phone, the phone will automatically share the WiFi."
  
  Android users: "I have to manually turn off and turn on hotspots"
  
  News for Apple users since OS13.1: "You can not turn off your hotspots. Your iPad behaves that way because your hotspot is always on"
  Apple users were surprised, dismayed, then decided that it's actually a good thing and should be secure as Apple is trustworthy.
  
  Most people think like an Apple user, they just want to sit there and let other people decide what's good for them then complain when it turned out that they don't like it but don't really do anything about it because they're too locked in to laziness.
  
  However, democracy requires you to think like an Android user. You need to educate yourself on the details and assess what's going on at least every year instead of just getting the next model that looks trendy, flashy, fashionable and full of marketing buzz words, and trusting it'll be good. Android users watch and read reviews, several on the same phone because each review have biases.
  
  Let's hope we don't get another Scomo model this year.
  - rektrading on 15/02/2022 - 10:42
    
    "So you don't like how they use your money, what are you doing about it? Are you exercising your democratic rights?"
    
    Yes. Move one's income sources to low and tax-free jurisdictions.
ozlab on 03/02/2022 - 04:14

-1

Because almost everything is overpriced here. If the tax is lower, the budget won't be enough to pay and causing deficit.
nobro25 on 03/02/2022 - 07:07

In 2050 the Chinese dollar will be higher than the Aussie Dollar.
- rektrading on 03/02/2022 - 07:42
  
  There won't be an Aussie dollar in 2050.
  
  The world will be using a reserve currency in an economic zone and private monies in the outskirts.
  - pangwen on 05/02/2022 - 17:25
    
    But apparently there will be a Chinese "dollar"? Not sure with geopolitical trends going the way they are that China will be renaming their currency from Yuan to Dollars any time soon.
    - rektrading on 05/02/2022 - 17:28
      
      The CCP have a strong case with the eYuan. They'll push it on all mobile devices and let it out into the world like Rona.
      
      People will load up the eYuan using their local bank account, travel all over the world and pay Chinese owned shops using their private network.
      
      It will bypass FinCEN, AUSTRAC and other Western regulators will be left in dark.
      - yokel on 14/02/2022 - 07:54
        
        @rektrading: Yep today there isn’t much use for Mastercard and Visa over there.
jianh on 03/02/2022 - 10:59

+4

"Our roads and public transport are in terrible shape"

cries in 3rd world country
- MrMarket on 03/02/2022 - 23:20
  
  Travel to Asia like Thai Land, India, Viet Nam, Cambodia
  or South America and South African countries and come back here and complained
  
  Australia is a country a lot bigger than most of these countries with a fraction of the population
  and you can drive to place out of no where in Australia and you still on good roads
  go to country side in these countries, you be lucky if you see a small patch of concrete
  
  grass is not greener on the other side, it probably brown or burned
  you are in one of the top country in the world and you don't even realise it
  
  just think of tax as price you paid for staying in paradise and if you not happy with this paradise price, free to move to cheaper country
  and many more will love the swap
  - jianh on 04/02/2022 - 12:30
    
    +3
    
    Spot on. Public transports (busses, trains, etc) are so clean, spacious and punctual in Australia. This goes the same as public infrastructures too (parks, footpaths, cycling paths, jogging trails)
    
    And you can drink from tap water? Try do this in 3rd world country. Do it.
    
    There are many more that is properly done in Australia compared to other countries, just not arsed enough to list them here.
    - virhlpool on 05/02/2022 - 01:48
      
      -2
      
      This goes the same as public infrastructures too (parks, footpaths, cycling paths, jogging trails)
      
      Not to argue but please visit 20 random major parks/ playgrounds in Australia and see how many of them have public toilets filthy or how many water bubblers aren't functioning properly or how many bins are overflowing with trash. You won't be pleased with your observation. I am sure it all can be managed better with the kind of tax money people pay.
raspudala on 03/02/2022 - 11:14

+4

" Our roads and public transport are in terrible shape"

You need to get out and see the world more, then you will know how roads in bad shape look like. And public transport, at least in Sydney, is not in a terrible shape either.
computer barn find on 03/02/2022 - 12:41

+2

Because you voted for it. Remember that nice highway bypass or that nice train station upgrade that you said you wanted during voting time.
You say you didn't vote it, too bad 51% of the people said they wanted it.

An it not just your wages, when you get taxed buying the shopping its like you are getting taxed on the same money twice or even 3 times.
1. you get taxed on wages
2. the business has to pay tax
3. you get taxed again when buying from the business.
sashatheman on 03/02/2022 - 12:56

+2

Because we get a good safety net and benefits.
I would rather live in a country with a high tax rate that uses that tax to lift up the standard of living of the poorer people, then have a bit more money in my pocket while poverty is abound, like in the US where the income discrepancy is really wide.
Oppressa on 03/02/2022 - 15:15

It's all a matter of perspective. Our taxes are lower than Denmark's:
https://www.mylifeelsewhere.com/compare/australia/denmark#:~….
tryingtohelp on 03/02/2022 - 15:18

If you really want to improve the tax situation in Australia?
Stop accepting or paying in cash. Stop worrying about that 10%GST, the entire amount you pay in bank transfers/credit cards is going towards the abn accounts and is reported/taxed.
I happen to know several people who are running their own business, living on Centrelink and have purchased properties over a million $.
How smartly they start paying taxes only for the 3 months to get the loan approved. Makes me sick to death paying such a great slab of taxes to support those who are making more than me?
- rektrading on 03/02/2022 - 16:30
  
  Privacy is a human right. Cash is the only medium of exchange that provides absolute privacy.
  
  Some technologies provide verifiable anonymity. They can satisfy both privacy and transparency concerns.
- virhlpool on 05/02/2022 - 01:54
  
  Isn't it government's job though to watch this and find some solutions? There should be a way to force businesses/ shops/ restaurants to use digital payments (and salary payments) and not cash. This isn't a problem unique to our country - I am sure some countries would have managed this better and can be replicated here.
c3xanada on 03/02/2022 - 16:24

+2

You make 120k a year and are complaining about the 180k marginal tax rate? lol
Hugh G Rection on 03/02/2022 - 17:30

if you don't like it here, you can move? i don't think anyone is forcing you to stay here, am i right?
ootnat on 03/02/2022 - 17:45

+2

At that income level ($180,000), more money (so less tax) won't make you any happier.
What does make people happy is stuff like health, education, and security—government stuff. This won't get me many upvotes on a place like Ozbargain but $180,000 puts you in the global top 1% for income, even if you have 2 children
- Griffindinho on 05/02/2022 - 22:40
  
  The wealthy don’t have salaries lol. It’s only middle upper class plebs who rely on salaries.
scrambledeggs on 03/02/2022 - 17:48

-1

I make $140k a year and think the tax rates are fine, get over it ya whinger go elsewhere if you don't like it.
- mdavant on 04/02/2022 - 09:47
  
  So you still get government handouts
- techlead on 04/02/2022 - 20:28
  
  I make way more than that and I still think tax rates are fine.
  
  We get a good deal for what we pay.
- virhlpool on 05/02/2022 - 01:58
  
  +1
  
  Let's be fair.. just because you think the tax rates are fair, it doesn't permit you to ask OP to leave the country. "Go elsewhere" is the most ridiculous comment I see in discussions. Why does OP have to leave the country if they think the tax system isn't fair? Everyone has a right to discuss or debate or argue over a matter and still live in the country. No?
Blackadda on 03/02/2022 - 18:57

+5

Yes because society here thinks if you're earning that much you must be soooo rich so pay your tax and shut up, whilst most of them pay stuff all and claim benefits of some sort or get free solar panels, etc under income thresholds.

It's also a disincentive to have a traditional nuclear family with 1 parent working and 1 not, because if the working parent gets good pay you're still worse off than if you both work lower paying (in total) jobs.

Our govt spends like crazy, is terribly inefficient at it (public service just keeps getting bigger whilst doing nothing but making the core delivery more cumbersome) and politicians like to throw money at people to try and win votes (this started with John Howard era and has been prevalent since)

I like that the tax free threshold has been lifted, its a really good way of looking after the low incomes, but the top end has had it harder and harder due to bracket creep and the double whammy of other measures like div 293 (putting extra tax on compulsory super) and the ineligibility for a lot of othe rschemes and things.

And then we get the added benefit of paying years worth of tax just for transacting on a property and 10% on any goods and services we actually spend money on.

But you can be an offshore party and make money here tax free through loopholes that are near impossible to close…
- mdavant on 04/02/2022 - 09:47
  
  +2
  
  Perfect post.
  
  Of which only 5% of Australians (or less) would understand.
- dmcneice on 04/02/2022 - 10:10
  
  +2
  
  My thoughts exactly. I work 60 hours a week to try and get my family ahead, wife cant work so looks after the kids as best she can. Our household pays just over 55k in tax. A similar 2-parents working earning 90k each pays around 43k, 12k less.
  
  Then if you did get up to DIV 293, the effective marginal tax rate becomes insanely high (45% + 2% + 15% tax on super). And the politicians dont even need to pay it..
  - Blackadda on 04/02/2022 - 11:20
    
    I forgot about the health care rebate too.. don't get that either which makes it cost around $500 a month for the family.
  - leiiv on 05/02/2022 - 11:53
    
    You should work just 30 hours a week and your wife also work 30 hours a week and take turn in looking after the kids.
salin on 03/02/2022 - 22:17

+2

Don't forget the 170 billion nuclear submarine deal!
dickiee on 04/02/2022 - 02:17

Has any said 'bikes' yet?
- mdavant on 04/02/2022 - 09:45
  
  Even scarier are bikies on bikes
diceman99 on 04/02/2022 - 05:46

Because we're a nanny state. Paye tax gst alcohol tobacco stamps duty. Land tax. Superannuation. Petrol tax. Licences etc etc etc
jaimex2 on 04/02/2022 - 10:01

+1

It seems that way but that high tax is there to incentivise investing and stop people hoarding money.

Once you are high income brackets you start looking at ways to avoid tax and most of those involve investing which creates more jobs and stimulates the economy.
dr on 04/02/2022 - 11:09

I'm going to tell you two things:
- learn about the marginal tax rate, as the others pointed out, you are conflating two things and coming to completely wrong sensationalistic conclusions.
- I would be extremely happy if my tax bill is let say a million dollars or five millions dollars (sounds like a lot of money, right?), because that would mean that I probably earned 3 times that amount (with all the tax minimization strategies available in Australia).

So stop whining, and if you don't like 45% marginal tax rate feel free to find a job that will pay you $100K per year ;-)
- Blackadda on 04/02/2022 - 11:14
  
  +1
  
  Nah but what about people who earn 250k and are sole income earners for a family, they aren't 'filthy rich' and pay a (profanity) ton in tax, get no health care rebate, get no child care support, no relief payments whenver they're going around… they get royally rooted and probably have no life working 60+ hours a week.
  
  stuff them though they're rich whingers right… with their big mortgage and all
  - Quantumcat on 04/02/2022 - 15:46
    
    The partner could get a part time job and bring in $30k and pay no tax. Or the person on a high salary could create a company and pay their partner a low wage to do nothing. They're not rooted - if they're not doing something like that then they're just not very clever or are too penny pinching to talk to accountants
    - Blackadda on 04/02/2022 - 16:16
      
      you can't move PAYG income legally
  - dr on 05/02/2022 - 22:06
    
    +1
    
    I'm very familiar with that scenario and as I said I'm looking forward to the hypothetical day when my tax bill will be a million dollars or more. :-)
    
    May I ask why sole income earner for the family? Why the spouse is not working? If married wisely, the spouse could have similar earning potential, thus giving up to $500K taxable household income. Please don't cry that would be twice the amount of tax paid… :-)
    
    Also… to put things in proper "numbers perspective", according to https://paycalculator.com.au/ person earning 250K per year is in top 2% income earners and takes home net after tax $158,297.80 per annum (that is before any deductions, negative gearing, novated lease etc…) Half of that is $79,148.90 which is equivalent to pre tax salary of $105,337.00 - iow if both spouses earn $105,337.00 each they would have the same net household income as the single $250K earner. How many families in AUS are on dual $105.3K income? So before you cry poor me, count your blessing and consider that most of AUS do not have luxury of one spouse staying at home and spending time with kids, or hobbies etc…
    
    So if your spouse is earning $250K, please don't be lazy go get a job, even average paying one, and Bob's your uncle!
Dack Smith on 04/02/2022 - 13:18

+1

OP is now in the penalty box.

Username checks out
- techlead on 04/02/2022 - 14:32
  
  I wonder why haha
HeroNoone on 04/02/2022 - 17:53

+2

Well, about roads and public transport being in a terrible shape…

Where I come from 90% of roads like this https://images.app.goo.gl/xr3sVQd2PLPUP5Ch7

And they use those https://images.app.goo.gl/gWXc2ReyhhZ1v7LG7 tuna cans to transport people.

It is easy to complain.
- virhlpool on 05/02/2022 - 02:07
  
  Fair enough, but don't compare a country with the worst of the places please. Have high standards when you compare. Not all developed (or even developing) countries have roads and public transport as bad as what you shared.
Raj09 on 05/02/2022 - 00:22

It'll make better sense to reduce income tax and raise gst. At least it'll encourage more work and income
- techlead on 05/02/2022 - 09:29
  
  No, that would be regressive. That will affect the low income earners way more than the upper end of town.
  
  Think of it like this, its harder for someone to pay 10% of $1000 than 10% of $1 million, this is why the tax rates are tiered and not a flat rate.
  - Raj09 on 05/02/2022 - 11:30
    
    How about this? Reduce income tax overall with tiers as well. An d increase tax on gst items with basic food stuffs exempt. What I mean here is to encourage more people to earn instead of discouraging that. If you increase gst on other consumption items eg handbags etc it does not matter. You don't pay for the expensive handbag if you can't afford it. Income tax is redundant I think
    
    See how companies can get away with paying less tax while making massive profits. What I'm suggesting is make the tax system fairer while encouraging people to earn.
    - techlead on 05/02/2022 - 15:59
      
      You are proposing a luxury tax, which I'm not opposed it. I'm all for taxing luxury items. We already have a luxury car tax, which I think is very good. It should extend to other luxury items like handbags and watches. No handbag is worth more than $3k, let alone the tens of thousands I see some bags go for, its ludicrous.
      
      I always see a line waiting to get into LV or Gucci, it hilarious.
      - Raj09 on 05/02/2022 - 16:01
        
        @techlead: Yes exactly. Cut income tax or reduce it and put a luxury tax or increase gst on luxury items.
        
        techlead on 05/02/2022 - 16:03
        
        @Raj09: Let's hope the ALP do something when they get in most likely after the Federal election this year. I think if the winning margin is large enough, they can say they have a mandate to make radical changes, but I think they will be conversative in their first term, even with a huge landslide victory.
        
        Raj09 on 05/02/2022 - 16:04
        
        @techlead: Fat chance Man. It depends on who lobbies and finances them. But let's see
        
        techlead on 05/02/2022 - 16:07
        
        @Raj09: One thing is for sure, ScoMo is definitely gone. Everyone, even his own ministers are trash talking him lol
        
        Raj09 on 05/02/2022 - 16:13
        
        @techlead: Ah I wish he'll be gone. He's a scumbag and a liar. But you never know man. He's got lobbies and the Murdochs behind him.
        
        techlead on 05/02/2022 - 16:19
        
        +1
        
        @Raj09: Should be easy to get rid of him. He didn't win the last election by much, he only won by the skin of his teeth. There are 151 seats, 77 required to form a majority government (76 plus 1 for the speaker and the speaker can't vote), and ScoMo won exactly 77 seats.
        
        So even with the huge misinformation campaign, misleading the Australian public about ALP's policies, they've only managed to scrap through with the bare minimum to win.
        
        Raj09 on 05/02/2022 - 16:36
        
        @techlead: I am hopeful
        
        yokel on 14/02/2022 - 07:51
        
        @techlead: I’d put money on hung parliament
        
        techlead on 14/02/2022 - 10:58
        
        @yokel: You can, but I don't think that will happen.
        
        yokel on 15/02/2022 - 15:45
        
        @techlead: Watch four corners 14/2/2021- punters in the street still can’t get their head around Albo let alone the idea they cast vote a for a local member in lower house and state seat in the senate.
        
        techlead on 16/02/2022 - 09:28
        
        +1
        
        @yokel: End of the day, people are tired of the Coalition after 9 years. They'd want a change. The Coalition has achieved nothing. Its a lost decade.
        
        People will judge ScoMo more. Look at Abott, he got elected because he's not Rudd, not because people were particularly excited about him. He achieved nothing before he got rolled by Turnbull.
sarah747 on 05/02/2022 - 09:32

+2

But the richest can always manage to pay no tax.
https://www.abc.net.au/news/2021-06-08/tax-stats-ato-million…
- leiiv on 13/02/2022 - 11:49
  
  Of course, that is by design. Who do you think create our laws and run the country?
Nanokillaz on 05/02/2022 - 11:34

+2

The infrastructure, schools and hospitals are actually decent in Australia so I'm fine where my tax money goes. A bunch of money has been spent on COVID programs such as jobseeker/keeper. Compare that to the US and you'll see we have a good standard of living in Australia.
- yokel on 14/02/2022 - 07:49
  
  Yeah the states is ok to visit. I would not want to live there let alone require medical care there.
bobolo on 05/02/2022 - 13:09

-1

We have high tax because Australians enjoy one of the easiest lifestyles of any 1st world nation. Try not to think of it too much and appreciate a life where essentials like healthcare and education are free, and most importantly, you cannot be left on the streets to die of homelessness/starvation - unless you chose to or are in personal extrenuating circumstances (mental health, drug affected, domestic violence etc).
MayhemVC on 05/02/2022 - 14:04

+1

As pointed out above you don't pay 45% income tax on EVERY dollar at $180,000, just on every dollar OVER $180,000.

"I really do wonder why our tax rate is so high and where the money is really going? Because it certainly isn't for education,roads and healthcare."

That's pretty much exactly where it goes.
You don't have to pay for primary or secondary education, tertiary education is a deferred payment scheme (the smart people get into uni, not the rich people).
The roads here in major cities are pretty good and generally accessible during heavy rainfall events, or at least soon after.
Our healthcare system, while not perfect, would be envied by MANY around the world. If you get sick you'll get fixed at no personal expense.

Spend a bit of time overseas and you'll see first-hand where the money goes.
I have been to 26 countries, I have 3 passports and I choose to live in Australia, with all it's taxes.
It's not perfect and it's certainly not cheap but most things work well enough.
[Deactivated] on 05/02/2022 - 19:49

+1

Just check the 2nd page of tax return doc which will shows how much tax $ you paid spent for what. Then you'll get the idea what's the problem and why politicians don't wanna talk about it.
t0087669 on 13/02/2022 - 10:22

Genuine question, I have been fortunate for the past year with success of my sole trader business. Will get expecting earning 200k at the end of this financial year.
Tbh this is my first year being on ABN and shocked that I’ll have to pay 60k in tax when I do my tax return. For this FY I’ll try to max out my concessional contribution for super and possible purchase some high cost equipment for instant tax write off.

what are high income individual / subcontractors are doing to minimise taxable income? Is property investment the only way? I have heard some change the sole trader status into business, will that help pay lower tax rate?

Thank you
- rektrading on 13/02/2022 - 11:51
  
  Getting paid in cash is a popular option.
- SBOB on 13/02/2022 - 12:18
  
  Tbh this is my first year being on ABN and shocked that I’ll have to pay 60k in tax when I do my tax return
  
  no different being your first year on ABN/sole trader, or an employee of a business.
  earning 200k has ~65k of tax to be paid.
  
  if you're earning 200k you should be smart enough to have known you have tax liabilities to your earnings, and you can probably also afford to pay an accountant for some time to explain ways to lessen your taxable revenue.
- Adrian Player on 15/02/2022 - 12:59
  
  +1
  
  Funnel income into a discretionary trust, with a bucket company attached + 50k each for husband and wife into super + max asset write off + depreciation reports on property + setting up as a company to get the 26% business tax rates + franking credits on dividends
  
  Many more as well.
yokel on 14/02/2022 - 07:46

Go live in another country with a different system if you don’t like it. It’s not like there is not a range of legal strategies to minimise payable income tax the most well known being negative gearing of investment properties.
loki niflheim on 15/02/2022 - 09:59

To be honest if you're in that tax bracket, generally you have used at least one method to reduce the tax you pay. I know this from working closely with various corporate finance teams for at least a couple of years in total. They're a very creative bunch, the stuffs they do to not pay tax were eye-opening and perfectly legal.

Public school was free, however government funding to public schools have been reduced in recent times and for some reason government is giving private schools funding too. We really need to fight this sort of illogical stuff that got put in place and people forgot about it.

In terms of education, most my post-uni graduate education were government-funded so there are funding going into education in some ways. TAFE education is also almost always 100% government funded so for example you pay $300 instead of $1700.

Why is Tax So High in Australia?

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