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Taxing Wages: Australia vs Other Countries

Taxing Wages: Australia vs Other Countries

The OECD recently released its latest Taxing Wages 2023 report, and it’s interesting to see where Australia falls compared to other developed nations when it comes to tax. One of the purposes of this particular paper was to look at the impact of Covid-19 on how workers were taxed across 38 different nations – and it makes for interesting reading!

Australia’s ‘tax wedge’ falls just below the OECD average

The ‘tax wedge’ is the gap between what the employer pays for labour and what the worker takes home, and there’s an enormous range between nations. In Belgium, workers lose 53% of their income to taxes, while in Colombia, it’s zero.

Here in Australia, the tax wedge in 2022 was 26.9%. That’s considerably lower than the OECD average of 34.6% but not quite as low as our Kiwi friends across the ditch, whose tax wedge was an inviting 20.1%. The Aussie wedge compares well with other developed nations, dipping below the USA’s figure of 30.5% and undercutting the main European results. Germany and France have figures in the high 40s, and even the UK’s score of 31.5% looks less healthy than the Aussie wedge.

Here are a few other countries’ tax wedge numbers to put things in perspective.

2022 tax wedge by country

  • Belgium – 53%
  • France – 47%
  • Netherlands – 35.5%
  • OECD average – 34.6%
  • United Kingdom – 31.5%
  • United States – 30.5%
  • Australia – 26.9%
  • New Zealand – 20.1%
  • Colombia – 0%

You can see the full table here.

Starting a family cuts your Aussie tax bill

Across all 38 nations analysed, the tax wedge for the couple with children is generally smaller than that observed for the single individual without children: the OECD average tax wedge for the one-earner married couple with two children was 25.6% compared to 34.6% for the singleaverage worker.

In Australia, there’s a clear advantage to starting a family. The single-earner family tax wedge was 20.2%, while the double-earner family was 24.6%, and the single-person tax wedge was 26.9%.

Are you paying the right amount of tax?

If you think you may not be paying the right amount of tax, give us a call or email. We can talk to you about how you structure your business and personal assets and how to help you only pay the tax you need to pay.

Get in touch – we’d love to hear from you.