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Appendix 4.2: Net personal average tax rate analysis

The net personal average tax rate is a measure of an employee's total wage-based tax burden. It is the sum of personal income tax plus employee social security contributions, less cash benefits as a percentage of gross wages. The net personal average tax rate is represented diagrammatically in Appendix chart 4.2.1.

Appendix chart 4.2.1: Net personal average tax rate

Appendix chart 4.2.1: Net personal average tax rate

The net personal average tax rate can be described as a measure of a family household's wage-based disposable income, and is important since it is a measure of the employee’s incentive to increase the number of hours they work or to seek promotion.

The following analysis details Australia’s position amongst the OECD-30 countries for each of the eight family types using the net personal average tax rate and net personal marginal tax rate. In general, the net personal average tax rate in Australia is consistently ranked between eleventh and fifteenth lowest in the OECD-30 for seven of the eight different family types. (see Appendix table 4.2.1).

Australia’s position for the eight family types

Appendix chart 4.2.2 and Appendix chart 4.2.3 show the net personal average tax rate of the OECD-30 for the eight family types, with Australia’s position highlighted. Appendix chart 4.2.4 and Appendix chart 4.2.5 show the net personal marginal tax rate of the OECD-30 for the eight family types. The OECD averages and Australia’s rankings for the net personal average tax rate and net personal marginal tax rate are summarised in Appendix table 4.2.1 to Appendix table 4.2.4.

Australia’s net personal average tax rate for an average worker is 24.0 per cent, which places it thirteenth lowest in the OECD-30 and third largest in the OECD-10 after the United Kingdom and the Netherlands. The net personal marginal tax rate in Australia for an average worker with no children is 31.5 per cent, placing it ninth lowest in the OECD-30 and fifth lowest in the OECD-10.

In Australia, the net personal average tax rate for a single worker earning 67 per cent of the average wage with no children is 20.3 per cent, placing it fourteenth lowest in the OECD-30 and fourth highest in the OECD-10. The United States and the United Kingdom both have higher net personal average tax rates, while Canada and New Zealand have lower net personal average tax rates. The net personal marginal tax rate for a worker earning 67 per cent of the average wage in Australia is 31.5 per cent and is the thirteenth lowest in the OECD-30 and fourth highest in the OECD-10. This is within two percentage points of both OECD averages.

In Australia, a single worker earning 167 per cent of the average wage with no children has a net personal average tax rate of 31.7 per cent, placing it fifteenth lowest in the OECD-30 and the second largest in the OECD-10. This value is slightly below the OECD-30 average and above the OECD-10 average. The net personal marginal tax rate for this worker in Australia is 48.5 per cent of gross wages placing it eighth highest in the OECD-30 and second highest in the OECD-10.

For a single parent earning 67 per cent of the average wage with two children in Australia, the net personal average tax rate is -11.8 per cent, which is third lowest in the OECD-30 and the OECD-10. Eight other countries in the OECD-30 provide a net overall benefit to this family type and therefore have a negative net personal average tax rate. The net personal marginal tax rate in Australia for this single parent is 66.4 per cent, which is the second highest in the OECD-30 and the OECD-10 after the United Kingdom. For these single parents, the United States and Luxembourg are the only countries which have reasonably large net benefits and relatively low net personal marginal tax rates.

For a single-income married couple earning the average wage with two children, the net personal average tax rate is 10.9 per cent in Australia, placing it eleventh lowest in the OECD-30 and fourth lowest in the OECD-10. The lowest net personal average tax rate for this family type is in Ireland. The net personal marginal tax rate in Australia for this family type is 51.5 per cent, which is the fifth highest in the OECD-30 and third highest in the OECD-10.

In Australia a dual-income married couple with one partner earning 100 per cent and the other 33 per cent of the average wage with two children has a net personal average tax rate of 15.7 per cent placing it twelfth lowest in the OECD-30 and fifth lowest in the OECD-10. Ireland has the lowest net personal average tax rate for these families.

In Australia, a dual-income married couple earning 100 per cent and 67 per cent of the average wage with two children has a net personal average tax rate of 18.5 per cent, which places Australia twelfth lowest in the OECD-30 and the fifth largest in the OECD-10.

For a dual-income married couple earning 100 per cent and 33 per cent of the average wage with no children, the Australian net personal average tax rate is 20.8 per cent of gross wages, which is thirteenth lowest in the OECD-30 and seventh lowest in the OECD-10.

In Australia, the net personal marginal tax rates for the last three family types discussed above all have a value of 31.5 per cent which places Australia either eleventh or thirteenth lowest in the OECD-30 and fifth highest in the OECD-10. The Netherlands and Canada have the highest net personal marginal tax rate in the OECD-10 for these family types.

In summary, Australia’s net personal average tax rate is placed between eleventh and fifteenth lowest in the OECD-30 for seven out of the eight family types. The exception is for a single worker earning 67 per cent of the average wage with two children for which Australia is third lowest in the OECD-30. Australia’s net personal marginal tax rate is above both the OECD-30 and OECD-10 averages for a single worker earning 167 per cent of the average wage with no children, a single parent earning 67 per cent of the average wage with two children and for a single income married couple earning the average wage with two children. For families with dependants, any high net personal marginal tax rates are a result of Australia’s relatively highly targeted social security system.

Appendix table 4.2.1: Australia’s net personal average tax rate — comparison with OECD-30

Appendix table 4.2.1: Australia’s net personal average tax rate — comparison with OECD-30

Note: The country with the smallest net personal average tax rate has a rank of one.

Source: OECD Taxing Wages, 2005.

Appendix table 4.2.2: Australia’s net personal average tax rate — comparison with OECD-10

Appendix table 4.2.2: Australia’s net personal average tax rate — comparison with OECD-10

Note: The country with the smallest net personal average tax rate has a rank of one.

Source: OECD Taxing Wages, 2005.

Appendix table 4.2.3: Australia’s net personal marginal tax rate — comparison with OECD-30

Appendix table 4.2.3: Australia’s net personal marginal tax rate — comparison with OECD-30

Note: The country with the smallest net personal marginal tax rate has a rank of one.

Source: OECD Taxing Wages, 2005.

Appendix table 4.2.4: Australia’s net personal marginal tax rate — comparison with OECD-10

Appendix table 4.2.4: Australia’s net personal marginal tax rate — comparison with OECD-10

Note: The country with the smallest net personal marginal tax rate has a rank of one.

Source: OECD Taxing Wages, 2005.

Appendix chart 4.2.2: Net personal average tax rate (as a percentage of gross wage earnings) for singles

Net personal average tax rate for a single worker earning 67 percent of the average wage with no children (left)
and for an average worker with no children (right), OECD-30

Appendix chart 4.2.2: Net personal average tax rate (as a percentage of gross wage earnings) for singles

Appendix chart 4.2.2: Net personal average tax rate (as a percentage of gross wage earnings) for singles

Net personal average tax rate for a single worker earning 167 per cent of the average wage (left)
and for a single parent earning 67 per cent of the average wage with two children (right), OECD-30

Net personal average tax rate for a single worker earning 167 per cent of the average wage (left) and for a single parent earning 67 per cent of the average wage with two children (right), OECD-30

Source: OECD Taxing Wages, 2005.

Appendix chart 4.2.3: Net personal average tax rate (as a percentage of gross wage earnings) for married couples

Net personal average tax rate for a single income married couple earning the average wage with two children (left)
and for a dual income married couple earning 100 and 33 per cent of the average wage with two children (right), OECD-30

Appendix chart 4.2.3: Net personal average tax rate (as a percentage of gross wage earnings) for married couples

Appendix chart 4.2.3: Net personal average tax rate (as a percentage of gross wage earnings) for married couples

Net personal average tax rate for a dual income married couple earning 100 and 67 per cent of the average wage with two children (left)
and for a dual income married couple earning 100 and 33 per cent with no children (right), OECD-30

Net personal average tax rate for a dual income married couple earning 100 and 67 per cent of the average wage with two children (left) and for a dual income married couple earning 100  and 33 per cent with no children (right), OECD-30

Source: OECD Taxing Wages, 2005.

Appendix chart 4.2.4: Net personal marginal tax rate for singles

Net personal marginal tax rate for a single worker earning 67 percent of the average wage with no children (left)
and for an average worker with no children (right), OECD-30

Appendix chart 4.2.4: Net personal marginal tax rate for singles

Appendix chart 4.2.4: Net personal marginal tax rate for singles

Net personal marginal tax rate for a single average worker earning 167 per cent of the average wage (left)
and for a single parent earning 67 per cent of the average wage with two children (right), OECD-30

Net personal marginal tax rate for a single average worker earning 167 per cent of the average wage (left) and for a single parent earning 67 per cent of the average wage with two children (right), OECD-30

Source: OECD Taxing Wages, 2005.

Appendix chart 4.2.5: Net personal marginal tax rate for married couples

Net personal marginal tax rate for a single income married couple earning the average wage with two children (left)
and for a dual income married couple earning 100 and 33 per cent of the average wage with two children (right), OECD-30

Appendix chart 4.2.5: Net personal marginal tax rate for married couples

Appendix chart 4.2.5: Net personal marginal tax rate for married couples

Net personal marginal tax rate for a dual income married couple earning 100 and 67 per cent of the average wage with two children (left)
and for a dual income married couple earning 100 and 33 per cent with no children (right), OECD-30

Appendix chart 4.2.5: Net personal marginal tax rate for married couples

Appendix chart 4.2.5: Net personal marginal tax rate for married couples

Source: OECD Taxing Wages, 2005.

 

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