Australian taxpayers hit with some of the highest taxes in the world

Out of 38 countries across the world, Australia ranked as one of the highest for how much people’s wages are taxed. Now experts have called for reforms.

Australians are being slugged with some of the highest taxes in the world, meaning they are taking home less money in their pay packet, the latest report from the Organisation for Economic Cooperation and Development (OECD) has revealed.

It showed Australia ranked fourth as one of the highest income taxing countries in the developed world, only behind Denmark, Iceland and Belgium.

On average, Aussies were slapped with 23.2 per cent tax on their wages, well above the average of 14.9 per cent across all 38 OECD nations.

In comparison, Japan’s citizens were taxed at a rate of 7.8 per cent, Britain’s rate was 14.3 per cent, the US took out 17.2 per cent from salaries, while New Zealand came in at 19.4 per cent.

Australians are one of the highest taxed nations in the world. Picture: Getty Images

Australian National University tax and transfer policy institute director Bob Breunig said there was a growing wealth disparity and “taxes on effort” needed to be reduced.

“We have a very inefficient stamp duty regime and a very heavy burden on economic ­activity through corporate and personal tax. At the same time, we have this growing wealth disparity, which we don’t do anything to tax,” he told The Australian.

New Federal Treasurer Jim Chalmers has flagged working with states and territories on tax reform, with ideas such as swapping out stamp duty for land taxes.

Professor Breunig said a federal land tax would be a good opportunity to reform the tax system.

“I’d put it in as a Covid repayment measure because I think it has no negative productivity ­effects,” he said.

“You could say to people, ‘Any land tax you pay, you can ­deduct from wages and salary’, so it wouldn’t change the tax burden on battlers, but you would be taxing people who have wealth and aren’t working.”

The possibility of a land tax has been floated. Picture: NCA Newswire/Gaye Gerard

According to H&R Block director of tax communications Mark Chapman, the change in government could also impact household finances.

The so-called “stage three” tax cuts have already been legislated under the previous government, which means they’ve already got the green light to go ahead, unless the ALP makes an unexpected change.

To refresh your memory, the tax cuts will see the 32.5 per cent marginal tax rate cut to 30 per cent to make one big tax bracket between $45,000 and $200,000 from July 1, 2024, while the 37 per cent tax bracket will be completely scrapped.

Mark Chapman, director of tax communications at H&R Block. Picture: Supplied

Mr Chapman said high income earners would be the big winners.

“This will be particularly effective for higher income earners, with gains of $1125 per year for an individual on $90,000, rising to $9075 per year for a person on $200,000 or more,” he said.

But the scrapping of the Low- and Middle-Income Tax Offset (LMITO) has also already been confirmed, meaning those who currently receive it “will notice what’s effectively a tax increase when they submit their 2023 tax returns”, Mr Chapman said.

However, it’s important to note that the LMITO is still in place for 2022 returns.

“This could be a rise of up to $1500 for those entitled to the full LMITO,” Mr Chapman said.

– with Alexis Carey

Originally published as Australian taxpayers hit with some of the highest taxes in the world