In Australia, taxes play a significant role in funding both personal and corporate endeavours, with personal income taxes making up a substantial 40% of revenue – well above the OECD average of 24%. Naturally, we expect some reward when we contribute such a significant portion of our income. This comes in the shape of tax deductions and offsets, which decrease our taxable income and ultimately lead to refunds for some taxpayers. These refunds, in turn, promote tax compliance and a positive engagement with the tax system.
Recent years have seen shifts in how tax refunds are calculated. The government introduced a limited-time low- and middle-income tax offset, extending it twice to support citizens during the COVID-19 pandemic. This measure provided up to $1,080 from 2018-19 to 2020-21 and up to $1,500 in 2021-22 for those earning up to $126,000. The positive impact was substantial, boosting the tax returns of countless Australians.
However, with the conclusion of this offset, many have experienced a significant reduction in their tax refunds compared to previous years. This change results from the evolving tax landscape and government measures to recalibrate the income tax system.
Australia's approach to taxation stands out globally, with personal income taxes contributing to a substantial portion of the nation's tax revenue. This places Australia as the fourth highest taxing country for personal taxes within the OECD. However, Australia's figures align with international averages when looking at take-home pay after taxes and benefits.
Considering the comprehensive picture is essential, as Australia also offers means-tested benefits that offset its relatively higher taxation levels.
The allure of a second job can be enticing, whether to manage increased costs or to explore new ventures. However, there are factors to weigh when contemplating a second income stream. Australia's progressive income tax system means that higher earners will face higher tax rates on their additional income. Additionally, those working in the gig economy, such as rideshare drivers, must be aware of their tax obligations as independent contractors. Managing tax affairs and complying with GST requirements can add complexity and costs to the second job. However, it's worth noting that expenses related to the second job can be claimed, helping to offset some of the tax burdens.
Understanding the factors behind reduced tax refunds and weighing the benefits and drawbacks of a second job is essential for Australians seeking financial stability. LEAD Advisory Group is here to assist you with your tax planning and financial needs. Contact us today to ensure you make informed decisions and maximise your financial outcomes.
