Taxing Wages 2022

Australia (2020-2021 Income tax year)

Abstract

This chapter includes data on the income taxes paid by workers, their social security contributions, the family benefits they receive in the form of cash transfers as well as the social security contributions and payroll taxes paid by their employers. Results reported include the marginal and average tax burden for eight different family types.

Methodological information is available for personal income tax systems, compulsory social security contributions to schemes operated within the government sector, universal cash transfers as well as recent changes in the tax/benefit system. The methodology also includes the parameter values and tax equations underlying the data.

 

 

The national currency is the Australian dollar (AUD). For the 2020-2021 income tax year AUD 1.33 was equal to USD 1. The average full time worker earned AUD 93 313 in 2020-2021.

1. Personal income tax system

1.1. Federal income tax

1.1.1. Tax unit

Members of a family unit are taxed separately. However, individual eligibility for some tax offsets, as well as liability for some taxes, levies and surcharges, are at least partially dependent on the circumstances of other members of an individual’s household.

1.1.2. Tax allowances and credits

1.1.2.1. Standard tax reliefs

• Basic reliefs: Income earned up to AUD 18 200 by resident taxpayers is subject to tax at a zero rate.

• Standard marital status reliefs: No relief available.

• Relief(s) for children: See Section 4.2 for more detail on transfers related to dependent children.

• Relief for social security contributions and other taxes: No such contributions are levied.

• Reliefs for low income earners: A tax offset worth a maximum of AUD 700 is available for low income earners called the Low Income Tax Offset. Taxpayers whose taxable income was less than AUD 37 500 in 2020-2021 are eligible to receive the full amount of the offset. Between taxable income ranges of AUD 37 501 and AUD 45 000, the offset is reduced by AUD 0.05 for every AUD 1 by which a taxpayer’s taxable income exceeds AUD 37 500. When taxable income exceeds AUD 45 000, the offset is further reduced by 0.015 AUD for every AUD 1. The offset is no longer available once a taxpayer’s taxable income exceeds AUD 66 667.

• Reliefs for Low and Middle Income Earners: A tax offset worth a maximum of AUD 1 080 is available for taxpayers with earnings up to AUD 126 000 called the Low and Middle Income Tax Offset. Taxpayers whose taxable income was less than AUD 37 000 in 2020-2021 are eligible to receive AUD 255. The offset is increased by AUD 0.075 for every AUD 1 by which a taxpayer’s taxable income exceeds AUD 37 000 up to a maximum of AUD 1 080 when the taxpayer’s earnings are between AUD 48 000 and AUD 90 000. The offset is then reduced by AUD 0.03 for every AUD 1 by which a taxpayers earnings exceed AUD 90 000 and is no longer available once a taxpayer’s taxable income exceeds AUD 126 000.

• Relief for mature age workers: No relief available.

• Relief for recipients of certain social security benefits: The Beneficiary Tax Offset is available for those who receive certain taxable social security benefits called ‘rebatable benefits’. It ensures that a person who is wholly or mainly dependent on rebatable benefits, and does not have any other taxable income, is not liable for income tax. The amount of the Beneficiary Tax Offset available to an individual is determined by the total amount of the rebatable benefit(s) they receive in an income year.

• Relief for taxpayers who maintain a dependant who is genuinely unable to work: A taxpayer who maintains a dependant who is genuinely unable to work due to invalidity or carer obligations may be eligible for the Dependent (Invalid and Carer) Tax Offset. This tax offset is worth a maximum of AUD 2 816 in 2020‑2021. To qualify for the offset in 2020-2021, the combined adjusted taxable income of the taxpayer and their spouse (where one exists) should not exceed AUD 100 000. The amount of offset that may be received is reduced by AUD 1 for every AUD 4 by which the dependant's adjusted taxable income exceeds AUD 282 and is no longer available once the dependant’s adjusted taxable income exceeds AUD 11 546. This offset is not included in the Taxing Wages model.

• Relief for pensioners and seniors. The Seniors and Pensioners Tax Offset (SAPTO) is available to recipients of taxable Government Pensions, including Parenting Payment Single. The SAPTO is also available to Australians who meet all of the Age Pension eligibility criteria except the income and/or asset tests. The SAPTO is worth up to AUD 2 230 for a single taxpayer, up to AUD 1 602 for each member of a senior couple not separated by illness and AUD 2 040 for each member of a senior couple separated by illness. The offset is withdrawn at the rate of AUD 0.125 for every AUD 1 that a recipient’s income exceeds their relevant shade out threshold dependent on their circumstances. For a single taxpayer, the offset is withdrawn from AUD 32 279 and is no longer available once income reaches AUD 50 119. For members of a couple not separated by illness, the offset is withdrawn from a combined income of AUD 57 948 and is no longer available once combined income reaches AUD 83 580.

• Other: No other standard relief available.

1.1.2.2. Main non-standard tax reliefs applicable to an average worker include:

• Relief for superannuation: Contributions to a low income spouse’s superannuation attract an 18% rebate up to a maximum rebate of AUD 540. In 2020-2021, the Low Income Superannuation Tax Offset matches AUD 0.15 for each AUD 1 of concessional contributions from at least AUD 10 up to AUD 500 a year for eligible individuals with annual incomes up to AUD 37 000. In addition in 2020-2021, eligible individuals with incomes not exceeding AUD 54 837 can make non-concessional contributions and receive a co-contribution of 50%, up to a maximum of AUD 500. The co-contribution rate progressively decreases for incomes between AUD 39 837 and AUD 54 837, at a rate of AUD 0.03 per AUD 1 of income above AUD 39 837.

• Relief for private health insurance: For the 2020-2021 income year, there are different rebate amounts depending on age and income. For individuals below 65 years without dependants and with annual income for surcharge purposes below AUD 90 000 the rebate is 25.059% of the cost of cover for eligible private health care for the period 1 July 2020 to 31 March 2021, and 24.608% for 1 April 2021 to 30 June 2021. The same rebate rates apply for families (couples and individuals with at least one dependent child) below 65 years with annual income for surcharge purposes below AUD 180 000. The threshold is increased by AUD 1 500 for each dependent child after the first.

The rebate percentages are reduced for individuals and families with annual incomes above these amounts. The rebate percentages are also higher for individuals and families aged 65 years or more.

• Other non-standard reliefs provided as deductions are:

  • subscriptions paid in respect of membership of a trade, business or professional association or union;

  • charitable contributions of AUD 2 or more to specified funds, authorities and institutions, including public benevolent institutions, approved research institutes for scientific research, building funds for schools conducted by non-profit organisations etc.; and

  • work-related expenses including cost of replacement of tools of trade, cost of provision and of cleaning protective clothing and footwear, travelling between jobs or travelling in the course of employment, and expenses related to working from home.

1.1.3. Tax schedule

General rates of tax - resident individuals

 

Taxable income (AUD)
Not less than		Not more than	Tax at general rates on total taxable income
0	18 200		NIL
18 201	45 000		19c for each AUD in excess of AUD 18 200
45 001	120 000		AUD 5 092 + AUD 0.325 for each AUD in excess of AUD 45 000
120 001	180 000		AUD 29 467 + AUD 0.370 for each AUD in excess of AUD 120 000
180 001 and over			AUD 51 667 + AUD 0.450 for each AUD in excess of AUD 180 000

To nominally contribute towards the cost of basic medical and hospital care, a Medicare levy is imposed on the taxable incomes of resident taxpayers. In 2020-2021 the levy is applied at the rate of 2.0% of the taxable income of an individual.

Certain thresholds are applied before the Medicare levy is imposed. For taxpayers aged under Age Pension age in 2020-2021, an individual was not liable for the levy where their taxable income did not exceed AUD 23 226. A taxpayer in a couple or sole parent family who is not receiving Parenting Payment, (see section 4.2), does not pay the levy if the taxable family income does not exceed AUD 39 167. Individual senior Australians of Age Pension age were not liable to pay the levy where their taxable income did not exceed AUD 36 705. Pensioner families (including couples and sole parents on Parenting Payment) and senior Australian families of Age Pension age, did not become liable to pay any Medicare levy until their combined income in 2020-2021 exceeded AUD 51 094. The thresholds are increased by AUD 3 597 for each dependent child.

Where an individual’s or family’s taxable income exceeds these thresholds, the Medicare levy shades in at a rate of 10% of the excess taxable income over the threshold, until the levy is equal to 2.0% of the individual’s or family’s total taxable income.

Individual taxpayers who had income for surcharge purposes greater than AUD 90 000 in 2020-2021 (or if a couple had a combined income greater than AUD 180 000 plus AUD 1 500 for each dependent child after the first child) but who did not have a complying private health insurance policy, were liable for the Medicare levy surcharge. The surcharge rates are 1%, 1.25% and 1.5% depending on the taxpayer’s income for surcharge purposes above these thresholds. The surcharge rate is applied as a flat rate on their taxable income, reportable fringe benefits and any amount on which family trust distribution tax has been paid. However, the majority of taxpayers with income above the thresholds purchase a complying policy and avoid incurring the surcharge. The surcharge is therefore not included in Taxing Wages 2020-21.

1.2. State and local income taxes

In Australia no states or territories levy a tax based on a resident’s income.

2. Social security contributions

2.1. Employees’ contributions

None. There is, however, a Medicare Levy which is based upon taxable income. See Section 1.1.3.

2.2. Employers’ contributions

No contributions are collected from employers or employees specifically for pensions, sickness, unemployment or work injury benefits, family allowances or other benefits.

Part of Australia’s retirement income system is the provision of compulsory employer contributions (the Superannuation Guarantee system). In 2020-2021 the Superannuation Guarantee required employers to pay 9.5% on top of employees’ gross ordinary time earnings to an approved superannuation fund, provided they earn more than AUD 450 per month (they may also choose to make contributions for workers earning less than this threshold). This threshold is not indexed. There is also a limit to the Superannuation Guarantee. In each quarter any earnings beyond a threshold are not covered by the Superannuation Guarantee. This threshold is indexed to a measure of average earnings. In the 2020-2021 tax year this threshold was AUD 57 090 per quarter. The Superannuation Guarantee rate will remain at 9.5% until the end of 2020-2021, then increase by 0.5 percentage points each year until it reaches 12% in 2025-26.

These contributions are not reflected in the ‘Taxing Wages’ calculations because they are not a form of taxation (they are not an unrequited transfer to general government). While employers are legislatively required to make contributions to approved superannuation funds, superannuation funds are private, although subject to regulation. Employers’ contributions are generally made to individual accounts and form part of employees’ personal superannuation assets. Some defined benefit schemes for public sector employees and private defined benefit schemes also exist. The employee may take superannuation benefits as either a lump sum payment or pension on retirement. Accordingly, superannuation contributions are reflected in the Non-Tax Compulsory Payment calculations.

3. Other taxes

3.1. Pay-roll tax

Australian State Governments levy pay-roll taxes on wages, cash or in kind, provided by larger employers to their employees. The rates of pay-roll tax, thresholds and deductions differ between States. In New South Wales, the State with the largest population, the pay‑roll tax rate in 2020-2021 was 4.85% for employers with total Australian wages in excess of AUD 1 200 000. Employers are entitled to an exemption from tax, or a pro-rated pay-roll tax threshold, on wages paid in New South Wales up to a maximum of AUD 1 200 000. The exempt amount is reduced based on the proportion of the employer’s New South Wales pay-roll to its total Australian pay-roll.

4. Universal cash transfers

4.1. Transfers related to marital status

There are no cash transfers made on a universal basis to married couples.

4.2. Transfers related to dependent children

• Family Tax Benefit Part A (FTB(A)) is paid to a parent, guardian or an approved care organisation to help families meet the costs of raising children. For 2020-2021, the base rate of FTB(A) is payable where the combined adjusted taxable income of the family does not exceed AUD 98 988. The payment shades out at the rate of AUD 0.30 per AUD 1 of income over the ceiling until the payment is nil. The base rate of payment is AUD 1 587.75 per annum for dependent children aged under 18 and for dependent full time students aged 16 to 19. A higher FTB(A) benefit is available for lower income earners, and the value of this benefit is dependent on the age and number of children. For 2020-2021 families may receive a maximum payment of AUD 4 942.10 for each child aged under 13 years and AUD 6 427.65 for each child aged 13 to 15 years and for each child aged 16 to 19 in full time secondary school. For 2020-2021 an end of year supplement of AUD 781.10 per child is also available for families with a combined adjusted taxable income of less than AUD 80 000. For 2020-2021, the higher benefit tapers out at the rate of AUD 0.20 for each dollar of income over AUD 55 626 until the base payment is reached. However, people receiving any social security allowances or pensions automatically qualify for the maximum higher benefit. The attached calculations assume each dependant is between 5 and 12 years of age.

• Family Tax Benefit Part B (FTB(B)) is targeted at single income couple and sole parent families. Eligibility for FTB(B) is contingent upon having a child under the age of 16 or a qualifying dependent full-time student up to of the end of the calendar year they turn 18. There are two separate income tests applied to the parent(s). The parent earning the higher amount (or the sole parent, in the case of single parent families) must have an adjusted taxable income less than AUD 100 000 for the financial year for the family to be eligible. A secondary earner income threshold is also applied to the parent earning the lower amount. For 2020-2021, this threshold is AUD 5 767, above which the entitlement is reduced by AUD 0.20 for each dollar of income. There is no secondary earner income test applied to sole parents. For 2020-2021, the maximum payment is AUD 3 314.20 (including a one-off supplement of AUD 379.60 paid at the end of the financial year) if the youngest dependent child is aged between 5 and 15 (or up to the end of the calendar year they turn 18 years if the dependent child is a full-time student), and AUD 4 580.75 (including a one-off supplement of AUD 379.60 paid at the end of the financial year) if there is at least one child under 5 years. The attached calculations assume each dependant is between 5 and 12 years of age.

• Recipients of the Family Tax Benefit may elect to receive the benefit in fortnightly instalments or as an end of year lump sum payment.

• A Newborn Supplement and Newborn Upfront Payment may be paid to families for each baby born from 1 March 2014. To be eligible families will need to be eligible for FTB(A) and not be accessing Parental Leave Pay for that child. For multiple births, Parental Leave Pay may be payable for one child and Newborn Supplement for the other child or children. The total value of the Newborn Supplement and Newborn Upfront Payment in 2020-2021 is up to AUD 2 279.89 for the first child (and all multiple births) and up to AUD 1 140.57 for subsequent children. This supplement and upfront payment replace the previous Baby Bonus.

• On 1 January 2011 Australia’s first Paid Parental Leave scheme commenced. The scheme provides two government-funded payments: Parental Leave Pay and Dad and Partner Pay. Parental Leave Pay (PLP) provides the primary carer of a child with 18 weeks’ pay at the national minimum wage (AUD 753.80 per week before tax in 2020-2021), in the year following the child’s birth or adoption. The primary carer must have worked for at least 10 of the 13 months prior to the birth or adoption, and for at least 330 hours in that 10 month period with no more than an eight week gap between two working days. The primary carer’s adjusted taxable income must be equal to or less than an income test threshold in the financial year prior to the date of claim or date of birth or adoption, whichever is earlier. The income test threshold is AUD 151 350 for the 2020-21 financial year. PLP and Newborn Supplement cannot be paid for the same child. A person cannot claim FTB(B) or the dependent spouse, child housekeeper and housekeeper tax offsets while they are receiving PLP.

• Dad and Partner Pay (DAPP) provides the father or partner of the primary carer of a child with two weeks’ pay at the national minimum wage (AUD 753.80 per week before tax in 2020-21), in the year following the child’s birth or adoption. The father or partner must have worked for at least 10 of the 13 months prior to the birth or adoption and for at least 330 hours in that 10 month period with no more than an eight week gap between two working days. The father or partner’s adjusted taxable income must be equal to or less than the income test threshold in the financial year prior to the date of claim or date of birth or adoption, whichever is earlier. The income test threshold is AUD 151 350 for the 2020-21 financial year. DAPP and PLP may be paid for the same child.

• Child Care Subsidy (CCS) replaced the previous Child Care Benefit (CCB) and Child Care Rebate (CCR) from 2 July 2018. CCS is a means-tested payment which assists families with the cost of approved child care. CCS is payable to eligible families with incomes up to AUD 353 680. A percentage of the cost of childcare is subsidised, with the applicable percentage varying from 85 per cent for families with income less than AUD 69 390 to 20 per cent for families with income between AUD 343 680 and AUD 353 680. CCS to families with income above AUD 189 390 are capped at AUD 10 560 per child. The attached calculations assume no child care usage.

4.3. Other transfers

Income support payments in Australia are assessed on fortnightly income. The descriptions below present annualised estimates of fortnightly rates and thresholds by summing up applicable rates across the 2020-21 year. The modelled results presented in Taxing Wages 2020-21 reflect people who have constant income over an entire year. In practice, it is common for fortnightly payment values to fluctuate as recipients’ circumstances change.

JobSeeker Payment

JobSeeker Payment is the primary taxable payment payable to people aged from 22 years to Age Pension age (66 years in 2020-21) who are unemployed or are regarded as unemployed. JobSeeker Payment is also payable to a member of a couple if their youngest child is aged 6 years or more and to single parents if their youngest child is aged 8 years or more. It is conditional on recipients fulfilling a personal Job Plan, which typically involves taking part in activities such as job seeking or training. In 2020-2021 the annual JobSeeker amount for singles without dependants was AUD 15 093.78 and for partnered individuals was AUD 13 663. Recipients are also eligible for an Energy Supplement, and potentially other supplementary payments. These payments taper out at a rate of AUD 0.50 per AUD 1 for incomes between AUD 3 064.10 and AUD 6 656.00, and reduce at a rate of AUD 0.60 per AUD for incomes over AUD 6 656.00. Under the thresholds and taper rates that applied in 2020-2021, the JobSeeker payment may be available to some full time workers under the OECD definition of 30 or more hours of work per week. The JobSeeker Payment for partnered individuals reduced by AUD 0.60 for each AUD 1 of their partner’s income above AUD 28 988. For single principal carers with dependent child or children, it reduced at a rate of AUD 0.40 per AUD 1 for incomes over AUD 3 064.10.

Parenting Payment

Parenting Payment is a taxable payment payable to low income families with responsibility for the care of a young child. Partnered persons are eligible if they have a qualifying child under six years of age, and sole parents are eligible if they have a qualifying child under eight years of age.

In 2020-2021 the maximum annual amount of Parenting Payment (Partnered) (PP(P)) was AUD 13 663. Only one parent in a couple can be entitled to PP(P). The maximum annual amount of Parenting Payment (Single) (PP(S)) in 2020-21 was AUD 21 002.28. Recipients are also eligible for an Energy Supplement, and potentially other supplementary payments. These payments are subject to income and assets tests. The PP(P) tapers out at a rate of AUD 0.50 per AUD 1 of income over AUD 3 064.10 up to AUD 6 656.00, and reduces at a rate of AUD 0.60 per AUD 1 for income over AUD 6,656.00. Under the PP(P) income test, a spouse receives a reduced Parenting Payment, tapering at a rate of AUD 0.60, when the higher earning partner’s income exceeds AUD 28 988. If the spouse has little or no income (less than AUD 3 064.10 per annum), he or she would not receive any Parenting Payment when the higher earning partner’s income exceeds AUD 52 760. PP(S) reduces by AUD 0.40 for each AUD 1 of income above AUD 5 007.60 plus AUD 639.60 for each child other than the first.

Pharmaceutical Allowance

Pharmaceutical Allowance (PA) is a non-taxable supplementary payment payable to eligible persons to help with medicine costs; for example, persons who receive the PP(S). PA is added to the maximum basic rate of PP(S) before a person’s PP(S) entitlement is calculated. Anyone with a PP(S) entitlement, after PA has been added, receives the full amount of PA. For 2020-2021, the payment is AUD 161.20 for singles and AUD 80.60 for coupled individuals.

Telephone Allowance

A non-taxable Telephone Allowance is available on a quarterly basis to eligible individuals, including individuals who receive PP(S). The basic rate of the Telephone Allowance is AUD 120.80 for 2020-2021.

Energy Supplement

The Energy Supplement (ES) is an extra payment to help with energy costs, paid alongside certain income support payments. The ES is not indexed. The amount of the supplement varies depending on the main income support payment. FTB(A) and FTB(B) recipients are only eligible for the ES if they have been continuously eligible for their payment since 19 September 2016.

• For eligible FTB(A) recipients, the maximum amount of ES is AUD 91.25 per year for each child under 13 years and AUD 116.80 for each child aged 13 to 19 years.

• For eligible FTB(B) recipients, the amount of ES is AUD 73.00 per year for each child under 5 years, and AUD 51.10 per year for each child aged 5 to 18 years.

• Recipients of PP(P) receive AUD 205.40 annually, and recipients of PP(S) receive AUD 312.

• For JobSeeker Payment recipients, the ES is AUD 228.80 annually for singles without dependents, and AUD 205.40 for partnered individuals.

The calculations assume families and individuals are eligible for the energy supplement as a significant proportion of FTB(A) and FTB(B) recipients were eligible for the supplement in 2020-2021.

5. Recent changes in the tax/benefit system

Permanent changes to working age income support payments

Permanent changes to the basic rate of a range of working age income support payments, including the JobSeeker Payment and Parenting Payment, came into effect on 1 April 2021. From this date, the basic rate of the payments was increased permanently by AUD 50 per fortnight and the income free area for JobSeeker Payment and Parenting Payment (Partnered) was increased to AUD 150 per fortnight.

Other material changes made in response to the COVID‑19 pandemic are described in section 5.1.

5.1. Changes to labour taxation due to the COVID pandemic in 2020 and 2021

Bringing forward personal income tax cuts

To provide additional support to Australian taxpayers, Stage 2 of the personal income tax plan was brought forward from 1 July 2022 to 1 July 2020. This included increasing the Low Income Tax Offset to AUD 700, and the following changes to rates and thresholds:

• the upper limit of the 19% personal income tax bracket was raised from AUD 37 000 to AUD 45 000 and,

• the upper limit of the 32.5% personal income tax bracket was raised from AUD 90 000 to AUD 120 000.

Furthermore, the Low and Middle Income Tax Offset was retained for the 2020-21 and 2021-22 income years.

Introduction of the JobKeeper Payment

On 30 March 2020, the Australian Government introduced the temporary JobKeeper Payment, a fortnightly wage subsidy paid to employers and required to be passed on in full to each eligible employee.

In the first phase of JobKeeper (30 March to 27 September 2020) eligible businesses and not-for-profit entities were able to receive AUD 1 500 (before tax) per fortnight per employee to cover the cost of wages. To be eligible for the Payment, businesses had to project a decline in Goods and Services Tax turnover of 30 per cent (for employers with annual turnover of less than AUD 1 billion), 50 per cent (for employers with annual turnover of more than AUD 1 billion), or 15 per cent (for certain charities). Self-employed individuals were also eligible to receive the JobKeeper payment.

In the extension phase of JobKeeper (28 September 2020 to 28 March 2021) business eligibility was re-tested with reference to actual declines in Goods and Services Tax turnover and the Payment was reduced and paid at two rates. From 28 September 2020 to 3 January 2021 the payment rate was AUD 1 200 per fortnight for employees who worked 20 hours or more a week on average in the reference period and AUD 750 for employees who worked less than 20 hours a week on average in the reference period.

From 4 January 2021 to 28 March 2021, the payment rate was AUD 1 000 per fortnight for employees who worked 20 hours or more a week on average in the reference period and AUD 650 for employees who worked less than 20 hours a week on average in the reference period.

The JobKeeper Payment ended on 28 March 2021.

Introduction of COVID-19 Disaster Payments

The COVID-19 Disaster Payment was announced by the Australian Government on 3 June 2021 in response to COVID-19 lockdown measures. It is a lump sum payment paid by the Australian Government directly to claimants who have lost work or income because of a COVID-19 lockdown. The COVID-19 Disaster Payment has three different rates based on the number of hours of work lost by an eligible recipient and whether or not they are receiving an income support payment:

• AUD 200 per week for those in receipt of an income support payment who lost eight or more hours of work per week or a full day of their usual hours per week (i.e. what the person was scheduled to work, including shifts of less than eight hours) as a result of a lockdown;

• AUD 450 for those who lost between eight and less than 20 hours of work per week or a full day of their usual work hours per week as a result of a lockdown; and

• AUD 750 for those who lost 20 hours or more of work as a result of a lockdown.

These are flat rates paid for those who lose work in an eligible lockdown period. Rates and eligibility for the payment evolved substantially between the initial policy announcement and the end of the 2020-21 income year.

The modelled income earners in Taxing Wages 2020-21 are assumed to work full time, and not lose hours during the COVID-19 pandemic. As such, modelled income earners would not meet the eligibility requirements for the COVID-19 Disaster Payments. These payments have therefore not been modelled.

Introduction of Pandemic Leave Disaster Payment

The Pandemic Leave Disaster Payment (PLDP) was announced by the Australian Government on 3 August 2020 after several state governments introduced payments for those without access to paid leave entitlements or Australian Government income support, and who were required to isolate or quarantine due to COVID-19. The payment provides AUD 1 500 for each 14-day period a person must self-isolate, quarantine or care for a person with COVID-19. The payment is taxable. This payment has not been modelled in Taxing Wages 2020-21, as it is paid on an ad-hoc basis.

Temporary changes to income support payments and introduction of the coronavirus supplement

From 27 April 2020, recipients of a range of income support payments including JobSeeker and Parenting Payment received a taxable coronavirus supplement of AUD 550 per fortnight (14 day period) for the remainder of the financial year. The coronavirus supplement was paid in addition to the standard means-tested income support payment, and the full AUD 550 was paid in each fortnight the recipient qualified for a non-zero amount of income support. This payment was made to eligible recipients for a maximum of 5 fortnights during the 2019-20 financial year, however some continuously eligible recipients received the payment in 4 fortnights depending on their payment date. The AUD 550 supplement was continued until 24 September 2020, at which time it was reduced to AUD 250 between 25 September and 31 December 2020, and then to AUD 150 between 1 January and 31 March 2021. The supplement was discontinued after 31 March 2021. The supplement is taxable and has been included in Taxing Wages 2020-21.

The taper rate for the partner income test for the JobSeeker Payment was temporarily reduced from AUD 0.60 to AUD 0.25 per AUD 1 of income over the income test threshold from 27 April 2020 to 24 September 2021. Similarly, some means tests and waiting periods, including the assets test, were also suspended for most income support payments over this period, and payment eligibility was expanded. From 25 September 2020 to 31 March 2021, the partner income test taper rate was increased slightly to AUD 0.27 per 1 AUD over the designated partner income free areas. The partner income taper rate reverted to 0.60 AUD per 1 AUD from 1 April 2021.

From 25 September 2020 to 31 March 2021, the income free areas for the JobSeeker Payment were also increased from AUD 106 (with a taper rate of AUD 0.50 per AUD 1) and AUD 256 (with a taper rate of AUD 0.60 per AUD 1), to a single larger income free area of AUD 300 with a single AUD 0.60 per AUD 1 taper rate over this larger threshold. On 1 April 2021, thresholds for the JobSeeker income test reverted to two thresholds, as part of a package of permanent changes to the working age income support payments.

One-off Economic Support Payments

Recipients of a range of income support payments and allowances, including the Age Pension and Family Tax Benefit, were eligible for one-off non-taxable Economic Support Payments during 2020-21. These payments were made in March 2020 (AUD 750), July 2020 (AUD 750), December 2020 (AUD 250) and March 2021 (AUD 250). Economic Support Payments occurring in 2020-21 have been included in Taxing Wages 2020-21.

6. Memorandum items

6.1. Identification of an average worker

The source of the information used in replying to the questionnaire was the Australian Bureau of Statistics publication Average Weekly Earnings — Australia, catalogue number 6302.0. The survey is now conducted on a biannual basis (it was previously conducted on a quarterly basis up to the June 2012 quarter) and is based on a representative sample of employers in each industry. As a result of this change in frequency, average weekly earnings for the 2020-2021 income tax year have been calculated as the average of the two biannual figures (November 2020 and May 2021 (released in August 2021)).

In August 2009 the Australian Bureau of Statistics (ABS) redesigned the survey and replaced the industry classification based on the 1993 edition of the Australian and New Zealand Standard Industrial Classification (ANZSIC), which had been in use since 1994, with the 2006 edition of ANZSIC. The 2006 edition of ANZSIC was developed to provide a more contemporary industrial classification system, taking into account issues such as changes in the structure and composition of the economy, changing user demands and compatibility with major international classification standards. Accordingly, the average wage figure for 2010 and later years is inconsistent with that provided for previous years.

All wage and salary earners who received pay for the reference period are represented in the Survey of Average Weekly Earnings (AWE), except:

• members of the Australian permanent defence forces;

• employees of enterprises primarily engaged in agriculture, forestry and fishing;

• employees of private households;

• employees of overseas embassies, consulates, etc.;

• employees based outside Australia; and

• employees on workers’ compensation who are not paid through the payroll.

Also excluded are the following persons who are not regarded as employees for the purposes of this survey:

• casual employees who did not receive pay during the reference period;

• employees on leave without pay who did not receive pay during the reference period;

• employees on strike, or stood down, who did not receive pay during the reference period;

• directors who are not paid a salary;

• proprietors/partners of unincorporated businesses;

• self-employed persons such as subcontractors, owner/drivers, consultants;

• persons paid solely by commission without a retainer; and

• employees paid under the Parental Leave Pay Scheme.

The sample for the AWE survey, like most ABS business surveys, is selected from the ABS Business Register which is primarily based on registrations with the Australian Taxation Office's (ATO) Pay As You Go Withholding (PAYGW) scheme (and prior to 1 June 2000 the Group Employer (GE) scheme). The population is updated quarterly to take account of:

• new businesses;

• businesses which have ceased employing;

• changes in employment levels;

• changes in industry; and

• other general business changes.

Earnings comprise weekly ordinary time earnings and weekly overtime earnings.

Weekly ordinary time earnings refers to one week’s earnings of employees for the reference period attributable to award, standard or agreed hours of work. It is calculated before taxation and any other deductions (e.g. board and lodging) have been made. Included in ordinary time earnings are award, workplace and enterprise bargaining payments, and other agreed base rates of pay, over award and over agreed payments, penalty payments, shift and other allowances; commissions and retainers; bonuses and similar payments related to the reference period; payments under incentive or piecework; payments under profit sharing schemes normally paid each pay period; payment for leave taken during the reference period; all workers’ compensation payments made through the payroll; and salary payments made to directors. Excluded are overtime payments, retrospective pay, pay in advance, leave loadings, severance, termination and redundancy payments, and other payments not related to the reference period.

Weekly overtime earnings refers to payment for hours in excess of award, standard or agreed hours of work.

6.2. Employers’ contribution to private health and pension scheme

In Australia very few employers make any contributions towards health schemes for their employees, especially where the employee is at a wage level comparable to that of an average production worker.

Employer contributions to pension schemes are primarily through the superannuation system. This is described in section 2.2.

2021 Parameter values

 

Average earnings/yr	Ave_earn	93 313
Dependant Spouse Tax Offset	spouse_cr	0
income limit	sp_lim	0
withdrawal rate	sp_redn	0
income limit (primary earner)	sp_lim_p	0
Low Income Tax Offset	low_inc_cr	700
	low_inc_lim	37500
	low_inc_redn	0.05
	low_inc_lim_2	45000
	low_inc_redn_2	0.015
	low_inc_lim_3	66667
Tax schedule	tax_sch	0.000	18200
		0.190	45000
		0.325	120000
		0.370	180000
		0.450
Medicare levy	medic_rate	0.02
exemption limits	sing_lim	23226
married	m_lim	39167
sing parent receiving PPS	SAPTO_lim	51094
+ per child	ch_lim	3597
shading-in rate	shade_rate	0.1
Part A FTB max	FTB_A_max	4942.1
Part A FTB basic	FTB_A_base	1587.75
part A income limit 1	FTB_A_lim1	55626
part A income limit 2	FTB_A_lim2	98988
reduction rate 1	FTB_A_taper1	0.2
reduction rate 2	FTB_A_taper2	0.3
additional limit2 per extra child	FTB_A_child	0
Large family supplement	FTB_A_large	0
Part A FTB Clean Energy Advance (CEA) max	FTB_A_CEA_max	0
Part A FTB CEA basic	FTB_A_CEA_basic	0
Part A FTB Energy Supplement (ES) max	FTB_A_CES_max	91.3
Part A FTB ES basic	FTB_A_CES_basic	36.5
Part A FTB max end of year supplement	FTB_A_supp	781.1
Part A FTB max end of year supplement threshold	FTB_A_supp_lim	80000
Part B FTB	FTB_B	3314.2
part B partner income limit	FTB_B_lim	5767
reduction rate	FTB_B_taper	0.2
income limit (primary earner)	FTB_B_lim_p	100000
Part B FTB CEA no child <5 years old	FTB_B_CEA_5	0
Part B FTB ES no child <5 years old	FTB_B_CES_5	51.1
Economic Supplement (COVID-19 support payment) ($750)	Eco_supp_1	750
Economic Supplement (COVID-19 support payment) ($250)	Eco_supp_2	250
Single Income Family Supplement max rate	SIFS_max	0
Single Income Family Supplement phase-in threshold	SIFS_in_lim_pr	68000
Single Income Family Supplement taper in Rate - primary earner	SIFS_in_taper_pr	0.025
Single Income Family Supplement phase-out threshold (primary earner)	SIFS_out_lim_pr	120000
Single Income Family Supplement taper out rate (primary earner)	SIFS_out_taper_pr	0.01
Single Income Family Supplement phase out threshold (secondary earner)	SIFS_out_lim_sec	16000
Single income family supplement phase out taper - secondary earner	SIFS_out_taper_sec	0.15
Parenting payment single	PPS	21002
reduction rate	PPS_taper	0.4
income limit	PPS_lim	5007.6
additional limit per child	PPS_ch_lim	639.6
Parenting payment single CEA	PPS_CEA	0
Parenting payment single Energy Supplement (ES)	PPS_CES	312
Pharmaceutical allowance	PA	161.2
State pay-roll tax rate (NSW)	Pay_roll_rate	0.0485
Additional parameters
JobSeeker Payment single rate	NSAS	15094
JobSeeker Payment single CEA	NSAS_CEA	0
JobSeeker Payment single ES	NSAS_CES	229
JobSeeker Payment partnered rate	NSAP	13663
JobSeeker Payment partnered CEA	NSAP_CEA	0
JobSeeker Payment partnered ES	NSAP_CES	205.4
reduction rate 1	NSA_taper1	0.5
reduction rate 2	NSA_taper2	0.6
income limit 1	NSA_lim1	3064
income limit 2	NSA_lim2	6656
Coronavirus supplement
Fortnightly Rate 1		550
Fortnightly Rate 2		250
Fortnightly Rate 3		150
Rate 1 start date (2020-21)		01-07-2020
Rate 1 end date (2020-21)		24-09-2020
Rate 1 days (2020-21)		85.00
Rate 2 start date (2020-21)		25-09-2020
Rate 2 end date (2020-21)		31-12-2020
Rate 2 days (2020-21)		97.00
Rate 3 start date (2020-21)		01-01-2021
Rate 3 end date (2020-21)		31-03-2021
Rate 3 days (2020-21)		89.00
Weighted average fortnightly supplement (2020-21)	Weighted_avg_CVS	231.10
Senior Australian and Pensioner Tax Offset	SAPTO	2230
Senior Australian and Pensioner Tax Offset Maximum Section 159N rebate	SAPTO_Max_159N	445
Senior Australian and Pensioner Tax Offset single threshold	SAPTO_thresh	32279
Senior Australian and Pensioner Tax Offset taper rate	SAPTO_taper	0.125
SchoolKids Bonus	SKB	0
	SKB_lim
Telephone allowance	Tele_A	120.80
Income Support Bonus - Single	ISB_s	0
Income Support Bonus - partnered	ISB_p	0
Low and Middle Income Tax Offset	LMITO_Base	255
	LMITO_Taper1	0.075
	LMITO_Taper2	0.03
	LMITO_Max	1080
	LMITO_Thr1	37000
	LMITO_Thr2	90000

2021 Tax Equations

The equations for the Australian system in 2021 are mostly repeated for each individual of a married couple. However, the spouse credit is relevant only to the calculation for the principal earner and the calculation of the Medicare levy uses shading-in rules which depend on the levels of earnings of the spouses. The basis of calculation is shown by the Range indicator in the table below.

The functions which are used in the equations (Taper, MIN, Tax etc) are described in the technical note about tax equations. Variable names are defined in the table of parameters above, within the equations table, or are the standard variables “married” and “children”. A reference to a variable with the affix “_total” indicates the sum of the relevant variable values for the principal and spouse. And the affixes “_princ” and “_spouse” indicate the value for the principal and spouse, respectively. Where the calculation for one earner considers variables for the other earner, the affix "_oth" is used. Equations for a single person are as shown for the principal, with “_spouse” values taken as 0

 

	Line in country table and intermediate steps	Variable name	Range	Equation
1.	Earnings	earn
2.	Allowances	tax_al	B	0
3.	Credits in taxable income:
	Credits in taxable income of principal	taxbl_cr_princ	B	IF(AND(Children>0,Married=0),Taper(PPS,earn_princ,PPS_lim+PPS_ch_lim*(Children-1),PPS_taper),IF(AND(Children=0,Married=0),taper2(NSAS,earn_princ,NSA_lim1,NSA_lim2,NSA_taper1,NSA_taper2),IF(Married>0,taper3(NSAP,earn_princ,earn_spouse,NSA_lim1,NSA_lim2,NSA_taper1,NSA_taper2,0),,0)))
	Credits in taxable income of spouse	taxbl_cr_spouse	B	IF(AND(Children>0,Married=0),0,IF(AND(Children=0,Married=0),0,IF(Married>0,taper3(NSAP,earn_spouse,earn_princ,NSA_lim1,NSA_lim2,NSA_taper1,NSA_taper2,0),0)))
4.	CG taxable income	tax_inc	B	earn+taxbl_cr+Coronavirus Supplement
5.	CG tax before credits
	Medicare Levy	med_levy	B	medicare(tax_inc,sing_lim,m_lim,SAPTO_lim,ch_lim,shade_rate,medic_rate,Married,tax_inc_oth,Children)
	Tax liability	liab	P	Tax(tax_inc, tax_sch)
6.	Tax credits :
	Spouse credit	spouse_cr	P	Taper(IF(Children>0,0,spouse_cr*Married),earn_spouse+taxbl_cr_spouse,sp_lim,sp_redn)
	Low Income Tax Offset	low_cr	B	LITO(Tax_Inc,low_inc_lim,low_inc_cr,low_inc_lim_2,low_inc_redn,low_inc_lim_3,low_inc_redn_2)
	Senior Australian and Pensioner Tax Offset	sap_cr	P	IF(AND(taxbl_cr_princ>0,NOT(AND(Children>0,Married=0))),Tax(taxbl_cr_princ,tax_sch),IF(taxbl_cr_princ>0,Taper(SAPTO,tax_inc,SAPTO_thresh,SAPTO_taper),0)
	Beneficiary tax offset	ben_cr	B	IF(AND(taxbl_cr>0, NOT(AND(Children>0, Married=0))), Tax(taxbl_cr, tax_sch), 0)
	Low and Middle Income Tax Offset	lmito_cr	B	MAX(0,IF(Tax_Inc<LMITO_Thr1,LMITO_Base,MAX(IF(Tax_Inc<LMITO_Thr2,MIN(LMITO_Max,LMITO_Base+(Tax_Inc-LMITO_Thr1)*LMITO_Taper1),LMITO_Max-(Tax_Inc-LMITO_Thr2)*LMITO_Taper2))))
	Total	tax_cr	B	spouse_cr+low_cr+sap_cr+ben_cr
7.	CG tax	CG_tax	B	Positive(liab-tax_cr) + med_levy + TBRL
8.	State and local taxes	local_tax	B	0
9.	Employees' soc security	SSC	B	0
11.	Cash transfers:
	Family Tax Benefit (Part A)	ftbA	J	IF(PA>0,((FTB_A_max+FTB_A_CES_max+IF(earn_princ+earn_spouse<FTB_A_supp_lim,FTB_A_supp,0))*Children+IF(Children>2,(Children-2)*FTB_A_large,0)),MAX(((FTB_A_max+FTB_A_CES_max+IF(earn_princ+earn_spous<FTB_A_supp_lim,FTB_A_supp,0))*Children-Positive((earn_princ+earn_spous+taxbl_cr_princ+taxbl_cr_spouse)-FTB_A_lim1)*FTB_A_taper1),Positive((FTB_A_base+FTB_A_CES_basic)*Children-Positive((earn_princ+earn_spous+taxbl_cr_princ+taxbl_cr_spouse)-(FTB_A_lim2+(Positive(Children-1))*FTB_A_child))*FTB_A_taper2)))
	Family Tax Benefit (Part B)	ftbB	J	IF(earn_princ<FTB_B_lim_p,IF(Children>0,Taper((FTB_B+FTB_B_CES_5),earn_spouse+taxbl_cr_spouse,FTB_B_lim,FTB_B_taper),0),0)
	Pharmaceutical Allowance	PA	J	AND(Children>0,Married=0)*IF(Taper(PPS+PA+PPS_CES,earn_princ,PPS_lim+PPS_ch_lim*(Children-1),PPS_taper)>0,PA,0)
	Clean Energy Advance	CEA	J	IF(AND(Children>0,Married=0,Taper(PPS+PPS_CES,earn_princ,PPS_lim+PPS_ch_lim*(Children-1),PPS_taper)>0),PPS_CEA,IF(AND(Children=0,Married=0,taper2(NSAS+NSAS_CES,earn_princ,NSA_lim1,NSA_lim2,NSA_taper1,NSA_taper2)>0),NSAS_CEA,IF(AND(Married>0,taper3(NSAP,earn_spouse,earn_princ,NSA_lim1,NSA_lim2,NSA_taper1,NSA_taper2,NSAP_CES)>0),NSAP_CEA)))+IF(AND(taxbl_cr_princ>0,Married>0,taper2(NSAP+NSAP_CES,earn_princ,NSA_lim1,NSA_lim2,NSA_taper1,NSA_taper2)>0),NSAP_CEA,0)+IF(AND(ftbA>0,ftbA>FTB_A_base*Children+IF(Children>2,(Children-2)*FTB_A_large,0)),FTB_A_CEA_max*Children,0)+ IF(AND(ftbA>0,ftbA<=FTB_A_base*Children+IF(Children>2,(Children-2)*FTB_A_large,0)),FTB_A_CEA_basic*Children,0)+IF(ftbB>0,FTB_B_CEA_5,0)
	Energy Supplement	CES	J	IF(AND(Children>0,Married=0,Taper(PPS+PPS_CES,earn_princ,PPS_lim+PPS_ch_lim*(Children-1),PPS_taper)>0),MAX(0,Taper(PPS+PPS_CES,earn_princ,PPS_lim+PPS_ch_lim*(Children-1),PPS_taper)-Taper(PPS, earn_princ,PPS_lim+PPS_ch_lim*(Children-1),PPS_taper)),IF(AND(Children>0,Married=0,Taper(PPS+PPS_CES,earn_princ,PPS_lim+PPS_ch_lim*(Children-1),PPS_taper)=0),0,IF(AND(Children=0,Married=0,taper2(NSAS+NSAS_CES,earn_princ,NSA_lim1,NSA_lim2,NSA_taper1,NSA_taper2)>0),taper2(NSAS+NSAS_CES,earn_princ,NSA_lim1,NSA_lim2,NSA_taper1,NSA_taper2)-taper2(NSAS,earn_princ,NSA_lim1,NSA_lim2,NSA_taper1,NSA_taper2),IF(AND(Married>0,taper3(NSAP,earn_spouse,earn_princ,NSA_lim1,NSA_lim2,NSA_taper1,NSA_taper2,NSAP_CES)>0),taper3(NSAP,earn_spouse,earn_princ,NSA_lim1,NSA_lim2,NSA_taper1,NSA_taper2,NSAP_CES)-taper3(NSAP,earn_spouse,earn_princ,NSA_lim1,NSA_lim2,NSA_taper1,NSA_taper2,NSAP_CES-NSAP_CES)))))+IF(AND(Married>0,taper2(NSAP+NSAP_CES,earn_princ,NSA_lim1,NSA_lim2,NSA_taper1,NSA_taper2)>0),max(0, taper2(NSAP+NSAP_CES,earn_princ,NSA_lim1,NSA_lim2,NSA_taper1,NSA_taper2)- taper2(NSAP,earn_princ,NSA_lim1,NSA_lim2,NSA_taper1,NSA_taper2)),0)
	SchoolKids Bonus	SKB	J	0
	Single Income Family Supplement	SIFS	J	sifs(tax_inc_princ,tax_inc_spouse,ftbA+ftbB,SIFS_max,SIFS_in_lim_pr,SIFS_in_taper_pr,SIFS_out_lim_pr,SIFS_out_taper_pr,SIFS_out_lim_sec,SIFS_out_taper_sec)
		cash_trans	J	ftbA+ftbB+taxbl_cr_princ+PA+taxbl_cr_spouse+Tele_A+CEA=CES+SKB+SIFS
	COVID-19 Economic Support Payment	Eco_supp_1 and Eco_supp_2	B	IF(OR(ftbA>0,ftbB>0),Eco_supp_1+2*Eco_supp_2,0)
	Coronavirus Supplement (Principal)	Weighted_avg_CVS	B	IF(taxbl_cr_princ>0,Weighted_avg_CVS*26,0)
	Coronavirus Supplement (Spouse)	Weighted_avg_CVS	B	IF(taxbl_cr_spouse>0,Weighted_avg_CVS*26,0)
	Telephone Allowance	TA	B	IF(Married=0,IF(Children>0,IF(Taper(PPS+PA+PPS_CES,earn_princ,PPS_lim+PPS_ch_lim*(Children-1),PPS_taper)>0,Tele_A,0),0),0)
	Employer’s State pay-roll tax	tax_empr	B	earn*Pay_roll_rate

Key to range of equation B calculated separately for both principal earner and spouse P calculated for principal only (value taken as 0 for spouse calculation) J calculated once only on a joint basis. Key refers to an optimisation of benefits i.e. Parenting payment for principal and Newstart allowance for spouse versus Parenting payment for spouse and Newstart allowance for principal.