How Much Tax Are You Actually Paying?

While income tax is straightforward, the process extends beyond filing the ATOs grab. Aussies are also taxed on spending and saving, and sometimes we even pay taxes on taxes.

According to a report in 2021 by the Australian Taxpayers’ Alliance and the Liberal Democratic Party, Victorians lose roughly 45% of potential take-home earnings to tax. This means a minimum-wage worker could make nearly $62,000 instead of less than $39,000, providing a more reasonable living wage.

For the average Victorian with an income of $63,440, employer costs amount to about $73,200, inclusive of superannuation, payroll tax, and additional benefits. Shockingly, the government collects over 55%, surpassing $40,000, from this gross income.

Consumption taxes, such as the GST, customs duties, and excise taxes, disproportionately affect lower-income individuals. Smokers, for instance, face a significant burden, paying $5,200 annually in tobacco excise taxes, impacting lower-income brackets the most.

The complexity doesn’t end there. GST often results in taxes on taxes, exemplified by insurance duties. With the impending 12% increase in the superannuation guarantee, Australians are still concerned about their retirement. This increase might not compensate for the average 25% reduction in retirement income due to superannuation taxes.

In Australia, individuals pay tax three times on every dollar earned: on earnings, purchases, and savings, where inflation isn’t considered in capital gains calculations. With 125 separate taxes across local, state, and federal levels, understanding the true tax burden becomes challenging.

Despite the government’s aim for a progressive tax code, the proliferation of consumption taxes undermines this goal, often impacting vulnerable citizens. Australians, already burdened with numerous taxes, face economic challenges, making it an opportune time to reconsider tax structures and regulations.

The report’s findings are alarming, revealing that taxes claim over 50% of income for Australians across various income brackets. The government’s expanding size and appetite for revenue have led to excessive taxation, contributing to stories of waste and inefficiency.

Published initially in the Spectator on April 26, 2021, this article sheds light on the pressing need to re-evaluate Australia’s tax system, especially in the post-crisis period, to alleviate the burden on individuals and businesses.