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Tax on some Australian families second highest in developed world

April 13, 2017

Tax on some Australian families second highest in developed world

Eryk Bagshaw, The Sydney Morning Herald, 11 April 2017

The tax on an Australian family earning $82,000 a year has risen to the second highest rate in the developed world, figures from the OECD show.

Australia’s tax level now trails only Denmark’s for a single-income family earning $82,000 a year with two children, according to the report.

Average families with two children and one parent earning up to $82,000 and another earning $54,000 face the highest tax levels in a decade, and the fourth highest among 36 other economies in the developed world, at 22.1 per cent.

Prime Minister Malcolm Turnbull has favoured corporate tax cuts instead of personal income tax cuts ahead of the May budget, arguing cutting the corporate tax rate for companies worth up to $50 million would flow into increased productivity and higher wages for workers.

“As we can afford to reduce personal income taxes, we will,” he said in an address to the National Press Club in February.

The Turnbull government adjusted the tax bands in the 2016 budget to prevent bracket creep, with half a million Australians potentially falling into the second highest tax bracket, putting billions of dollars in wages at risk.

The Organisation for Economic Co-operation and Development report into taxing of wages, to be released on Wednesday, found the average tax on a family earning $82,000 a year dropped from 25.6 per cent in 2000 to 21 per cent in 2008, before rising to its current level of 24.3 per cent under the Labor and Coalition governments.

Relief for families hitting the decade-high tax rate will come for those with children in childcare this year, after the Turnbull government pushed through changes to funding following a two-year stalemate, and tied them to $8 billion worth of savings in family tax benefits.

The changes will mean a family earning $80,000 with two children in childcare will be up to $3400 a year better off.

As a compromise, those receiving family payments who don’t have children in childcare will have their family benefits frozen below the rate of inflation for two years under a deal struck with the Senate crossbench. Families earning more than $350,000 were also banned from accessing childcare subsidies under the deal.

Pension changes initiated by the Howard government have resulted in single-parent families who rely on welfare being up to $6000 worse off over the past decade, according to research by the Australian National University Centre for Social Research and Methods

The OECD report found that for a single person with below-average earnings of about $54,000 a year, Australia had the fourth highest tax in the developed world, below Denmark, Belgium and Iceland.