Do you know why the tax refund that many Australians expect has been reduced dramatically? Check out why! As a country, Australia depends on corporate and personal income tax, with personal income tax, including taxes on capital gains showing 40% of revenue compared to the OECD average of 24%. Additionally, the amount we pay, we expect a reward in return. Tax deductions work as rewards that minimises the net income amount that is assessed for tax purposes and tax rebates that reduce the tax payable, producing a refund for some. Additionally, refunds positively impact tax compliance.
A temporary low and middle-income tax offset was created as part of the previous administration’s efforts to flatten the progressive individual income tax system. The offset’s lifespan was twice increased, in part as a stimulus-response to COVID-19.
For taxpayers making up to $126,000 annually, the offset provided up to $1,080 from 2018–19 to 2020–21 and up to $1,500 in 2021–22. This provided many people with a big boost each tax season and helped millions of Australians with their tax returns. For many people, the elimination of this offset has resulted in a significantly smaller tax refund than in past years.
Do We Pay More Tax As Compared to Other Countries?
It completely relies on how you consider the statistics. From personal income, Australia gathers 40% of tax revenue which makes Australia the 4th highest taxing country for personal tax in the OECD. An average single worker’s take-home pay is 77% of their gross wage as compared to the OECD average of 75.4%. Australian take-home pay average is 84.1% for the average worker with a family, (i.e. one married earner with 2 children) once family and tax benefits are considered. It means Australia is a highly taxing country but refunds much of that in tested benefits form.
Like other countries, Australia doesn’t have social security contributions. These contributions show an average of 27% of the total tax take for OECD countries. Because of the progressive tax system of Australia, high-income earners feel the pain of taxation. 55.3% of the tax revenue is made by the top 11.6% of Australian income earners from personal income tax. With the last round of legislated income tax cuts because of start on 1 July 2024, it should minimise the overall dependence on personal income tax related to corporate and other taxes. Hence, do we pay more tax compared to other countries? The answer would be yes if you are a high-income earner. If you are not a high-income earner, the answer would be no.
Is a Second Job Worth It?
The driver of an Uber recently disclosed that he started driving to pay off his second mortgage. He invested in real estate, but because of the rising interest rates, he was forced to find new sources of income to keep the property. His “day job” begins early and ends at three in the afternoon, at which point he departs to begin driving. He is not the only one who does a second job. According to the latest stats from the Australian Bureau of Statistics, the number of workers has increased by 2.1% since December 2022 and these workers do second jobs. 947,300 people in Australia do multiple jobs. The reason behind this is not the same.
Is It Worth It?
Australia possesses a progressive income tax system – the more you earn, the more you have to pay in the form of tax, and access to social benefits taper off. When considering a second job, it’s critical to be aware of your whole situation, including your potential earnings, cost of living, and the implications of this income level.
Because they are frequently independent contractors, many people who take on a second job in the “gig economy” fall into a trap. In other words, it is your responsibility to handle your tax concerns. For instance, all Uber drivers are obliged to have an ABN and register for GST. There is a compliance cost associated with this, and from a cash flow standpoint, 1/11 of the amount received must be sent to the Tax Office once every three months. To guarantee that you have the cash flow to pay the tax when it is due, it is crucial to quarantine both the GST owed and the income tax. The advantage is that you can write off the costs associated with your second job.
If you do a second job, make sure that your tax-free threshold applies to your highest-paying job from the perspective of PAYG withholding.