Tax rates in Australia in comparison to the USA and the UK

Australian tax rates have 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 Tax Rates

Taxable income Tax rate
$0 – $18,200 0%
$18,201 – $37,000 19%
$37,001 – $80,000 $3,572 plus 32.5%
$80,001 – $180,000 $20,797 plus 37%
Over $180,000 $54,097 plus 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 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.

UK Tax Rates

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.

US Tax Rates

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.