Australians Face World’s Largest Tax Hike as Singles Hit Hardest in 2023.
Australia witnessed a considerable increase in the tax burden on single workers, as per a recent report.
Single Australian workers were the hardest hit by tax hikes among advanced economies in 2023, as revealed by a new report.
It was found that Australia had the most significant increase in the tax burden (income tax plus employee and employer contributions minus cash benefits) for single workers, with a rise of 2.14 percent points, followed by Luxembourg with a 1.39 percent point increase.
Despite this, Australia’s average tax rate for workers (29.2 percent) remained lower than the OECD’s average of 34.8 percent, with the country ranking 30th among OECD nations.
The OECD attributed the substantial increase in tax rates for Australian workers to nominal earnings growth and the elimination of the Low and Middle Income Tax Offset (LMITO).
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This policy allowed workers earning under $126,000 (US$82,439) to receive a tax cut of up to $1,500.
Following the expiry of LMITO on June 30, 2022, workers faced higher tax payments in subsequent financial years.
Furthermore, Australian workers experienced substantial wage hikes due to high inflation in 2023.
The increase in earnings led to a portion of workers moving into a higher tax bracket, resulting in increased tax payments.
Stage 3 Tax Cut to Take Effect in July
The OECD’s report follows the Labor government passing its stage three tax cut legislation in February with the Opposition’s support.
The stage three tax cut was introduced by former Prime Minister Scott Morrison, aiming to provide substantial tax reductions for various income groups.
As per the original plan, the government planned to eliminate the 37 percent tax rate for income between $120,000 and $180,000, and enable taxpayers earning between $45,000 and $200,000 to pay a single tax rate of 30 percent.
Despite promising to retain the proposed tax cut unchanged during the federal election in 2022, Labor later revised the policy, which was criticized by the opposition for breaking their election promise.
Under the new law, Australians earning between $45,001 to $135,000 will face a 30 percent tax rate, while those earning between $135,001 and $190,000 will have to pay 37 percent from July 2024.
Prime Minister Anthony Albanese defended the changes to the stage three tax cuts, citing cost of living pressures.
While the opposition supported the changes, they criticized Labor for reneging on their election pledge.
