kirsty&al

Hello,

I stumbled across this spreadsheet I did last year before leaving the UK. I have updated with the current tax allowances.

Please note that it was meant to be a general guide and compares UK PAYE-Class 1 NI with Oz PAYG. Obviously your tax situation will be unique (for example self-employed people pay a different NI in the UK).

Please feel free to, ask for explanations, provide constructive feedback or point out any errors (politely).

Cheers
Alistair

Sue from Manchester

Hi Alistair

Looks like it might be a very useful comparison table. Does the UK tax include NI then? that would make it a truer comparison because the UK NI is a sort of "hidden" tax. If added to PAYE it would give the true rate that our salaries are taxed at. Sorry to ask such a dumb question.

kirsty&al

Hi,

I did include Class 1 NI contributions on the UK side as this represents a truer value of tax in the UK (as you said). On the Oz side I included the 1.5% medicare levy but not the extra 1% levy for higher earners, because most high-earners in the UK tend to have private medical insurance (which they either pay themselves or is paid by their employer and taxed by IR).

Cheers
Alistair

Sue from Manchester

Ta, that's what I thought. Very useul

Quinkana

A lot of people spend all their income hand to mounth - no savings - so indirect taxes matter.

VAT 17.5%(?), GST 10% - on after income tax spending.

Indirect_Tax_Rate / (1 - Marginal_Income_Tax_Rate) = Effective_Indirect_Tax_Rate

UK 0.175 / (1 - 0.4) = 0.292 = 29.2%
AU 0.1 / (1 - 0.475) = 0.19 = 19%

kirsty&al

Hello

I found an error in the spreadsheet.

I have attached the updated one to this post.

Regards
Alistair

rapitts

Also note that this doesnt include the employers 9% of superannuation within OZ

kirsty&al

Nor does it include the employers NI in the UK (12.8% of the employee's pay over £91/week (£4732/year)).

Both of these are mentioned in the spreadsheet (although the UK rate used to be 10.5%). I left them out as they are paid by the employer on top of the salary in both countries. Obviously the lower rate in Oz reduces wage costs for employers rather than being a benefit for the employee.

Regards
Alistair

Quinkana

Adding consumption taxes:

kirsty&al

Hello,

Thanks for that, however, I'm not sure all of the income after tax should be subject to VAT/GST. The main reason for this is that most food in UK and Oz, which takes up a significant proportion of the household budget, is free of these taxes. Added to this is the apparent higher prices for food in the UK which is not due to VAT. Also different people have different savings habits.

Unfortunately this means that the consumption side of the equation can be subjective which is why I left it out. It is also why I left out the complications of self employment, capital gains, pensioner allowances (in UK), and income from savings (which can sometimes, but not always, have a 2% tax advantage in the UK).

Last year when I did this, I got around the subjectivity of consumption by applying the Cost of Living Index, as calculated by the UN, which at that time was around 71% for Oz compared to the UK. This measure includes the effect of all indirect taxation, including duties (e.g. petrol) as well as VAT/GST and lower cost of production.

Regards
Alistair

Quinkana

Quite right too. What it illustrates is that the headline (income tax rates) is not the whole story, as I'm sure many know. The % tax take is very similar for the UK and Aus - slightly lower in Aus.