A new report has revealed that single Australian workers faced the highest tax increases among advanced economies in 2023. The OECD’s Taxing Wages 2024 report showed that Australia experienced the most significant rise in the tax burden for single employees, with a 2.14 percent point increase. This was attributed to growth in nominal earnings and the abolishment of the Low and Middle Income Tax Offset (LMITO).
Despite the tax increase, Australia’s average tax rate for workers (29.2 percent) was still below the OECD average of 34.8 percent, ranking the country 30th among OECD nations. The LMITO, introduced in 2018-19 to provide tax relief to low and middle-income earners, ended on June 30, 2022, leading to higher taxes for workers in subsequent financial years.
Additionally, Australian workers experienced significant wage rises in 2023 due to high inflation. The Fair Work Commission raised the minimum wage by 5.75 percent in June 2023 to help workers cope with the sharp rise in inflation, which peaked at 7.8 percent in December 2022.
Among 38 OECD countries, 23 reported a rise in tax rates for single workers, 13 saw a decrease, and two had no change in tax rates. The report comes as the Labor government passed its stage three tax cut legislation, introducing changes to tax rates for different income groups.
Under the new law, Australians earning between $45,001 to $135,000 will pay a 30 percent tax rate, while those with incomes between $135,001 and $190,000 will pay 37 percent from July 2024. Prime Minister Anthony Albanese defended the changes, citing cost of living pressures, while the opposition criticized Labor for breaking its election promise.
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