Posted Under: Accounting and Taxation Posted On 30/09/2015
My fourteen year old son asked me this morning, “Mum, how much tax does the average person pay?” Great question, as he starts thinking about careers and getting excited about earning income. Basically, I went through some figures and explained that the more you earn, the higher the tax percentage you need to pay. As a refresher for us all, here are the 2015/2016 taxation rates for Australian residents.
TAXABLE INCOME TAX ON THIS INCOME
0 – $18,200 Nil
$18,201 – $37,000 19c for each $1 over $18,200
$37,001 – $80,000 $3,572 plus 32.5c for each $1 over $37,000
$80,001 – $180,000 $17,547 plus 37c for each $1 over $80,000
$180,001 and over $54,547 plus 45c for each $1 over $180,000
Of course, the above rates do not include the Medicare Levy of 2% and a Temporary Budget Repair Levy (which is payable at a rate of 2% for taxable incomes over $180,000).
Also remember that tax deductions can reduce your overall tax payable, and that is our job to work with you on identifying and claiming tax deductible expenses.
All that being said, I continued my conversation with my son (and his 12 year old sister and 10 year old sister) emphasizing that paying more tax should not be a disincentive to aiming to earn more income, especially if/when he has control over his earning capacity, and given the option I would rather be in a higher tax bracket because it means I will have more in my ‘hand’ at the end of the day.
Definitely a conversation worth having with your children and grandchildren at the right time.
Disclaimer – I don’t want my children to ‘chase the dollar’, but rather pursue a career in something they are interested in, that uses their talents, and to have life balance (so they have time for their mum Lol). Still, it is worth giving them a basic understanding of how our tax system can work to their advantage……