When it comes to income tax, many Australians feel they’re paying more than their fair share. According to a new report from the OECD (Organisation for Economic Co-operation and Development), that feeling might not be entirely wrong—but there’s more to the story.
Australia’s Income Tax Rate: High at First Glance
The OECD data shows that Australian workers paid an average of 25.3% of their gross wages in income tax last year. That’s the fourth-highest among developed nations, behind only Denmark, Iceland, and Belgium. Compared to the OECD average of 15%, Australia’s income tax seems steep.
However, this number doesn’t tell the full story.
What Other Countries Include That Australia Doesn’t
In most other countries, workers are required to pay social security contributions—mandatory payments that fund pensions, healthcare, unemployment benefits, and other government services. These contributions are in addition to regular income tax.
But Australia is one of just four OECD countries (alongside Colombia, Denmark, and New Zealand) that does not charge a separate social security tax on wages.
When we take these employment-related taxes into account, Australia’s total tax on wages—including income tax and compulsory super contributions—actually falls closer to the OECD average of 25%.
In other words, Australia’s overall tax burden on workers is more moderate than it seems, especially when compared to countries where income tax is lower but social security costs are high.
What About Superannuation?
In place of traditional government-managed social security, Australia requires employers to contribute to workers’ superannuation accounts, currently set at 11.5% of gross wages, rising to 12% in July. While super contributions aren’t technically a tax (because the funds belong to the worker), they do serve a similar purpose to retirement pensions in other countries.
This system allows Australians to retain control over their retirement savings, unlike in many European countries where contributions go into a general pool and may not reflect individual payments.
Why This Matters for Tax Planning
If you’re a professional, business owner, or high-income earner, understanding how Australia’s tax system compares internationally can help you make better-informed financial decisions—especially around super, retirement, and asset planning.
And with debates ongoing about tax thresholds, bracket creep, and wage indexation, it’s more important than ever to have a trusted adviser who understands the system—and can help you legally minimise your tax.
Need to Review Your Tax Strategy? Speak to Boa & Co. Today
At Boa & Co. Chartered Accountants, we help clients just like you stay on top of Australia’s evolving tax landscape. Whether it’s personal tax planning, business structuring, or superannuation optimisation, we’ll ensure your money works harder for you—not for the ATO.
Call us today on 1300 952 286,
Email us at [email protected], or
Visit www.boanco.com.au to book a consultation.