High income earning Australians are being left out of pocket after tax time, with up to 46% total tax being deducted from their income, according to a study published today by accounting firm UHY Haines Norton.
Australia falls behind key trading partners China, Japan, the United States and New Zealand for the income earners making more than $US250,000 ($285,000) or more per year.
Australians with an income equivalent to $US250,000 are taking home $US156,075 after tax: 62.43% of their income is received after tax, whilst 37.57% goes on paying income tax.
Australians who have an income of $US1,500,000 are taking home $US812,221.00, with 54.14% of their pay received after tax – lower than that of their counterparts on $250,000 – but with a total tax deduction of 46%, only better than key trading partner Japan in this area.
David Tomasi, a partner at UHY Haines Norton, told SmartCompany: “Higher income earners can really only bear so much at the end of the day. There’s a point where an incentive does diminish for them and that’s one thing Australia has to be careful of.”
“Incentive for entrepreneurs can disappear, they say ‘I’ve had enough’ and move offshore. I’ve seen that with a lot of companies over the recent years,” he says.
“We can throw the baby out with the bath water if you increase taxes so high and reduce people’s incentives.”
However, Tomasi says the higher taxes are needed to ensure Australia’s way of life remains.
“Obviously roads, rail, issues with Australia geographical size and lower population indicate higher taxes,” he says.
“Keep it in perspective though, we are one of the G20 nations, and you could always make a comment that everyone complains all the time about how much tax they pay, but in some degree we don’t lead the pack, but we are well ahead of regional competitors.”
The fairness of Australia’s tax system is backed up by The International Tax Competitiveness Index recently released by US think tank Tax Foundation. It found Australia had a fifth overall tax rating internationally, with corporate tax ranking at 24th, international tax rules ranked 22nd, consumption tax at eighth, property tax at fourth and individual tax ranking of eighth.
Despite this, the UHY report shows low income earners in Australia outperform the top 10 trading partners in the low to medium incomes bracket ($US25,000-50,000).
Australia has the second-lowest tax impost for those earning $US25,000, and the fourth-lowest rate of taxation for those earning an average income of $US50,000, according to the study.
For instance, an income earner taking home $US50,000 per year, is keeping $US41,123 of their earnings. These income earners receive 82.25% back after tax, with only 17.75% in total being deducted.