Tax pressure mounting for Australians amid high living costs
Australian workers are grappling with the sharpest increase in average tax rates among developed nations, coinciding with a surge in the cost of essential goods, reveals the latest report from the Organisation for Economic Cooperation and Development (OECD).
New data from the OECD spotlights Australia's startling 7.6% spike in average tax rates in 2023, marking the highest surge globally.
The cessation of the low- and middle-income tax offset (LMITO) and bracket creep have dealt a double blow to Australians, particularly impacting low- and middle-income earners.
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Increasing burden for Australian taxpayers
The end of the LMITO, a measure initially introduced by Scott Morrison's government to revamp the personal income tax system, has significantly escalated the tax burden for millions of Australians earning less than AU$126,000 annually.
Single individuals earning approximately two-thirds of the average income, around $67,000, now find themselves shelling out a substantial 20.2% of their wage in taxes, a stark 17% leap from the previous year. This marks the highest tax hit on this demographic since the early 2000s.
Conversely, those earning 167% of the average wage, roughly $166,000, witnessed only a marginal 0.1% uptick in their tax burden, maintaining a lower level compared to 2015.
The OECD attributed Australia's tax hike primarily to the cessation of the LMITO and stagnant earnings thresholds in the tax schedule. While the government's stage 3 tax cuts promise relief to all taxpayers, spokesman for Treasurer Jim Chalmers emphasised Labor's commitment to delivering tax cuts for Australians from July onwards, envisioning a decline in the average tax rate from 25.4% to 23.9%.
This escalation arrives amidst a backdrop of accelerating inflation, driven by surging petrol prices, a significant household expense. Since the March quarter of 2021, petrol prices have skyrocketed nationally by 43.7%, far outpacing the 16.6% overall inflation increase and the 10.3% rise in wages over the same period.
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Will new policies ease the effects of high taxes and living costs?
As Australians navigate these financial challenges, the looming question remains whether policymakers will introduce measures to alleviate the tax burden and address the soaring costs of living, ensuring a more equitable economic landscape for all.
Nationwide, petrol costs have surged by 43.7% since the March quarter of 2021. During this timeframe, general inflation has risen by 16.6%, while wages have seen an increase of 10.3%.
Oils and fats, including olive oil and sunflower oil, have experienced the second-largest spike. Prices for these essential cooking ingredients have skyrocketed by 39.2%, driven by the conflict in Ukraine.
Construction expenses for new homes have surged by nearly 35%, accompanied by a significant 32% rise in insurance costs.
While food price hikes have shown signs of slowing down in recent months, families have been grappling with the impact of steadily rising prices over the past three years.