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Effective tax rates from Budget personal tax plan revealed

Publication date: 11 May 18 | Source: THE TAX INSTITUTE

SYDNEY, 11 May 2018

Senior Tax Counsel Professor Robert Deutsch and Tax Counsel Stephanie Caredes at The Tax Institute have worked up some very revealing numbers showing the effective rate of tax at different levels of income now, post 1 July 2018 and post 1 July 2024 based on the Government’s personal tax rate plans. The Table below encapsulates their research.

SINGLE PERSON HOUSEHOLD – NO MEDICARE EXEMPTION APPLIES

Current Rates

Post 1 July 2018

Post 1 July 2024

Income Amount

Total payable

Effective average tax
rate (%)

Total payable

Effective average tax
rate (%)

Total payable

Effective average tax
rate (%)

$10,000

Nil

0

Nil

0

Nil

0

$20,000

Nil

0

Nil

0

Nil

0

$30,000

$2,397

7.99%

$2,197

7.32%

$2,197

7.32%

$40,000

$4,947

12.37%

$4,657

11.64%

$4,492

11.23%

$50,000

$8,547

17.09%

$8,017

16.03%

$8,007

16.01%

$60,000

$12,147

20.25%

$11,617

19.36%

$11,607

19.35%

$70,000

$15,697

22.42%

$15,167

21.67%

$15,157

21.65%

$80,000

$19,147

23.93%

$18,617

23.27%

$18,607

23.26%

$90,000

$22,732

25.26%

$22,067

24.52%

$22,057

24.51%

$100,000

$26,632

26.63%

$26,117

26.12%

$25,507

25.51%

$110,000

$30,532

27.76%

$30,167

27.42%

$28,957

26.32%

$120,000

$34,432

28.69%

$34,217

28.51%

$32,407

27.01%

$130,000

$38,332

29.49%

$38,197

29.38%

$35,857

27.58%

$140,000

$42,232

30.17%

$42,097

30.07%

$39,307

28.08%

$160,000

$50,032

31.27%

$49,897

31.19%

$46,207

28.88%

$180,000

$57,832

32.13%

$57,697

32.05%

$53,107

29.50%

$200,000

$67,232

33.62%

$67,097

33.55%

$60,007

30.00%

 * “Tax payable” includes the Medicare levy and adjustments for the low income tax offset and low and middle income tax offset where relevant.

Professor Deutsch comments that “the Table shows that even though the Government’s policy will deliver the same marginal tax rate of 32.5% for a person on $50,000 and a person on $180,000 from 1 July 2024, the effective tax rates will be 16.01% and 29.50% respectively. After 1 July 2024, the actual tax paid will be $8,007 for the $50,000 earner and $53,107 for the $180,000 earner. Furthermore, the effective rate, which is what really matters, is highly progressive rising gradually from nil on an income of $20,000 to 30% on an income of $200,000.

“It clearly is not correct to say that the same tax is paid by someone on $50,000 and someone on $180,000. The most that can be said is that they have the same marginal tax rate which is a very different thing,” said Professor Deutsch. 

ENDS 

For more information, please contact: Professor Robert Deutsch on 0438 043 833 or Stephanie Conway, Media Relations Contact on: 02 8223 0011.

The Tax Institute is the leading forum for the tax community in Australia. Our reach includes membership of 12,000 tax professionals from commerce and industry, academia, government and public practice and 40,000 Australian business leaders, government employees and students. We are committed to representing our members, shaping the future of the tax profession and continuous improvement of the tax system for the benefit of all, through the advancement of knowledge, member support and advocacy.

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