Income tax already takes a $170 billion bite out of Australian wages every year, but experts predict it could soon claim an even larger share.
A greater tax take will come as more Australian wage earners move into higher tax brackets, according to the Centre for Independent Studies. It predicts that without any changes to tax rates, more than a third of wage earners will be in the top two tax brackets in just five years. The average Australian will lose 26.6 percent of their net income to tax in five years, compared to just 22.5 percent in the 1970s. Fulltime workers making only minimum wage will face a marginal tax rate of 34.5 percent when the Medicare levy is factored in. Approximately 70 percent of workers will see a third of any pay rises eaten up within the five-year forecast period.
Tax cuts would ease the problem, but the Center says it’s unlikely these will come in the next Federal Budget. The Center suggests reducing the income tax levy by an average of $57 a week to ease Australians’ tax burden. However, that would take $30 billion from the government’s coffers at a time when it can ill afford it.
“Large reductions would be desirable and the economic benefits in the form of faster growth would lower the revenue cost over time,” the Center for Independent Studies report states. “However, managing large losses of revenue in the short-term within overall budget constraints would be a challenge to government.”
Tax may be one of life’s inevitabilities, but at Chase Edwards we don’t think you need to simply accept the amount you pay. Our tax minimisation specialists are experts at reducing the amount of tax ordinary Australians pay each year. Call 1300 854 833 today to discover how to reduce your tax burden.