Tax Rates In Australia in Comparison to The US and The UK

Taxation in Australia has come under scrutiny for being particularly high. To demonstrate whether or not this claim is true, we examine the tax rates in Australia and how they compare with the US and the UK.

Australian income tax

Taxable income

Tax rate

$0 – $18,200

0%

$18,201 – $37,000

19%

$37,001 – $80,000

32.5%

$80,001 – $180,000

37%

Over $180,000

45%

The above table illustrates the income brackets in Australia and the percentage rate at which each is taxed.

Once you’re earning over $18,201, you already have to start paying a high tax rate of 19%. This rockets up by over 13% as soon as you reach $37,001. But this still pales in comparison to the highest tax bracket of $180,000+, at 45%.

Of course, only a small minority reach that highest tax bracket. However, it still affects the economy, as many businesses choose to operate from abroad, and individuals work slightly less to avoid having to pay such high rates.

The pros

The pros of such high income taxes, are a highly functioning country, consistently voted as one of the top 10 most liveable in the world.

Furthermore, indirect taxes, such as the GST, are among the lowest in the world.

The UK

Taxable Income

Tax rate

Up to £5,000

0%

£5,001 – £31,785

20%

£31,786 – £150,000

40%

Over £150,001

45%

As you can see, tax rates in the UK are similar to those in Australia. In the second highest tax bracket – which is wider than the equivalent in Australia – you’d be paying 3% more. On the other hand, the highest tax bracket only starts at the equivalent of approximately AUD 380,000. That is a significant difference – $200,000.

Pros: One advantage that the UK does have in terms of its taxes, is that their National Health Service (NHS), is far more extensive than Australia’s Medicare. Sending money from UK to Australia is easy.

The US

Taxable Income

Tax rate

$0 – $9,275

10%

$9,276 – $37,650

15%

$37,651 – $91,150

25%

$91,151 – $190,150

28%

$190,151 – $413,350

33%

$413,351 – $415, 050

35%

Over $415,051

39.6%

Income tax in the US is applicable to any earnings, from a rate of 10%. While it is heavy on low earners, tax rates do not rise dramatically as earnings do. The 28% tax rate is only applicable for those earning over $91,150. The highest bracket of 39.6% is only applicable to those earning over $415,000!

Pros

Compared to both the UK and Australia, the US’s income tax rates are much lower – for high earners. This makes it a particularly attractive place to do business.

On the other hand, if you’re earning less than $9,275, you pay a relatively high rate of 10%, which is significant for low earners. Sending money from the USA to Australia is easy.

Conclusion

The tax rates in Australia are among the highest in the world. Compared to the US, high earners will be paying far higher rates on much lower incomes. However, compared to the UK, Australia’s tax rates are on par, or slightly lower.