How much is our work taxed in Australia compared to other countries?
The OECD recently released its latest Taxing Wages 2022 report, and it’s interesting to see where Australia falls compared to other developed nations when it comes to tax. One of the purposes of this particular paper was to look at the impact of Covid-19 on how workers were taxed across 38 different nations – and it makes for interesting reading!
Australia’s ‘tax wedge’ falls just below the OECD average
The ‘tax wedge’ is the gap between what the employer pays for labour and what the worker takes home, and there’s an enormous range between nations. In Belgium, workers lose 52.6% of their income to taxes, while in Colombia it’s zero.
Here in Australia, the tax wedge in 2021 was 27.1%. That’s considerably lower than the OECD average of 34.6% but not quite as low as our Kiwi friends across the ditch, whose tax wedge was an inviting 19.4%. The Aussie wedge compares well with other developed nations, dipping just below the USA’s figure of 28.4 and undercutting the main European results. Germany and France have figures in the high 40s and even the UK’s score of 31.3% looks less healthy than the Aussie wedge.
Here are a few other countries’ tax wedge numbers, to put things in perspective.
2021 tax wedge by country
- Belgium – 52.6%
- France – 47%
- Netherlands – 35.3%
- OECD average – 34.6%
- United Kingdom – 31.3%
- United States – 28.4%
- Australia – 27.1%
- New Zealand – 19.4%
- Colombia – 0%
You can see the full table here.
Starting a family cuts your Aussie tax bill
Across all 38 nations analysed, families with children pay a lower tax wedge than single earners without children. The average was 24.6% for single-earner families with children, compared to 28.8% for double-earner families with children and 34.6% for individuals without children.
In Australia, there’s a clear advantage to starting a family. The single-earner family tax wedge was 19.1%, while the double-earner family was 24.9% and the single person tax wedge was 27.1%.
Are you paying the right amount of tax?
If you think that you may not be paying the right amount of tax, give us a call or send us an email. We can talk to you about how you structure your business and personal assets, and ways to help you only pay the tax you need to pay.
Get in touch, we’d love to hear from you.
About the author
Ms Janelle Yi is the senior manager and leads and manages the Business Services and Tax team at DFK Laurence Varnay, which specialises in business services and tax . Her team also deals with various ATO audits and disputes, as well as with private rulings.
Janelle has following qualifications:
Bachelor of Commerce (Accounting) at Macquarie University
Master of Taxation at University of New South Wales.
She also acts as a Justice of Peace and is a member of both CPA Australia and member of The Tax Institute of Australia
With over 15 years in the accounting and taxation industry, she has extensive experience and expertise managing a diverse portfolio of clients, including high-net worth individuals and various ASX listed companies from the mining, telecommunications and financial services industries.
