Everyone earning under $300k pays less income tax in Australia

Next year the Labor Government in Australia is continuing with the tax cuts legislated by the previous Government. This lowers the marginal tax rate on all income up to $200,000 to a maximum of 30%. Once implemented, 99% of New Zealanders will be paying more income tax than someone on the same salary in Australia.

So someone on $120,000 is paying an extra $60 a week tax in NZ compared to Australia. Only if you earn over $300,000 a year do you start to pay more income tax in Australia.

This shows the average tax rate on the level of income. At $40,000 you pay 15% in NZ compared to 10% in Australia. At $80,000 you pay 22% in NZ vs 19% in Australia.

But it gets even worse than that, because GST in Australia is lower also. The difference in after tax income (so income less income tax and average GST paid) is $63 a week for someone on $50,000, $109 a week for someone on $100,000 and $165 a week for someone on $150,000. For someone on $200,000 they are paying $241 a week less income tax and GST in Australia.

Labour will soon try and push for an increase in our top tax rate from 39% to 45%, on the basis that Australia has that as their top tax rate. But that is ignoring all the tax rates below it. Someone on $200,000 in NZ is already paying $241 a week more tax (including GST) than someone in Australia.

In NZ someone on $200,000 pays $58,120 in income tax compared to $51,592 next year in Australia. The GST rate of 15% is 50% higher than the Australian rate of 10% and is more broad based than in Australia. So the overall impact is a “rich prick” on $200,000 is paying way way more tax already in NZ.

It probably isn’t until you are earning around $650,000 than you pay more income tax and GST in Australia than you do in New Zealand.

Once the tax rate for income between $45,000 and $200,000 in Australia drops to 30%, I expect to see even more Kiwis moving to Australia.