Personal Income tax

[Springbok]

Just made a very pleasant discovery today - I'm paying LESS tax in Australia for every dollar earned, than in South Africa! Whereas South Africans pay 14% Value Added Tax on goods and services, Australians pay only 10% General Sales Tax. PLUS Personal Income Tax in Australia is less than in South Africa and you actually see where your tax dollars go, as opposed to South Africa where a lot of it seemingly just "disappears" ... anyway here is how the personal income tax rates stack up:

The current S.A. tax rates are:

18% if you earn less than R112,500 p/a;

R20,250 + 25% if you earn R112,500 - R180,000 p/a;

R37,125 + 30% if you earn R180,000 - R250,000 p/a;

R58,125 + 35% if you earn R250,000 - R350,000 p/a;

R93,125 + 38% if you earn R350,000 - R450,000 p/a;

R131,125 + 40% if you earn more than R450,000 p/a.

The current Australian tax rates are:

0% if you earn less than $6,000 (R36,000) p/a;

15% if you earn $6,000 - $30,000 (R36,000 - R180,000) p/a;

$3,600 (R21,600) + 30% if you earn $30,000 - $75,000 (R180,000 - R450,000) p/a;

$17,100 (R102,600) + 40% if you earn $75,000 - $150,000 (R450,000 - R900,000) p/a;

$47,100 (R282,600) + 45% if you earn more than $150,000 (R900,000).

When you do a few calculations, you will find that the EFFECTIVE personal income tax rates are substantially lower in Australia than in South Africa. For example, someone who earns R300,000 p/a in South Africa, pays an effective tax rate of 25.2%. The equivalent income in Australia is $50,000 p/a, for which the effective tax rate works out at 19.2%. That means you save roughly $250 or R1500 every month when you live in Australia and earn Aussie dollars instead of living in South Africa and earning Rands. That saving levels out at around $400 or R2400 per month for incomes greater than $80,000 (R480,000) p/a. What's more, someone who earns R300,000 p/a in S.A., has a good chance of earning more than the equivalent of $50,000 p/a in Australia.

Even someone who earns $150,000 (R900,000) p/a would be better off in Australia, despite being taxed at a higher maximum marginal tax rate of 45% in Australia vs. 40% in South Africa. In South Africa his effective tax rate works out at 34.6%, whereas in Australia it would be 31.4%.

[P.Vorster]

Ek het so 'n tyd terug gedink om die selfde vergelyking te doen, so dankie jy spaar my baie moeite!!!!

Dit wys jou net dat die gaaping in die eerste en derde wereld lande nie sommer sal verander nie, so alle "eerste denkendes" moet maar 1st wereld lande toe trek

[W+R]

Thanks, MOST useful!

[Survival]

Springbok, I don't agree with your assumption only comparing RSA/AUS taxable income based on exchange rate. It is a known fact that the cost of living in Australia is much higher than in RSA. I unfortunately don't have access to HR Mercer Scale (to confirm the exact conversion factor) but what we've found was that you need to earn around 2.5 times your RSA salary in Aus to have the similar lifestyle as back in RSA.

Please see attached, I've rework your tax comparison calculations and based on percentage you will then pay more tax in Australia.

springbok.xls

I do agree that you get more back in return (Safety, Medicare, etc.) for your tax contribution in Australia compare to RSA even though you pay more.

Edited September 6, 2007 by Survival

[Pixi]

The assumption that a direct parallel can be drawn between the exchange rate and your tax rate is certainly scary Lets expand on the assumption with a further assumption : I've seen on various budgets that people budget 400 dollars a week for housing - lets budget R5000 a month in SA. So here we go: 50000 dollars minus tax at 19,2% is 40 400 minus accomodation of 400 x 52 and your left with 19 600. Multiply it to rand and you have R117 600. Compare to the R300 000 minus tax at 25,2% is R224 000 minus R60 000 and your left with R164 400. But is all assumptions, I have to agree that Survivals method will give a more accurate answer. Plus we are assuming that your income is salary. If we start to look at the taxes of indiviuals who have their own businesses through companies, SA is much ''cheaper' due to the difference in how dividends (profit distribution) is taxed. Don't want to get to technical, but I think we can agree that we will not mind paying higher tax if we can also benefit from the taxes we pay.

[Nilo]

Hi ya all

I can only compare our salary in South Africa and our lifestyle there to our salary in Aus and our lifestyle here. No fabulous calculations or anything just day to day living and available money!

We had to budget for everything in SA even food, cellphone cards, take aways etc etc. I worked in SA as well. Our lifestyle in SA was a bit stress full where money was concerned. Hubby had a company car and I had an old skedonk.

Now in Aussie we arrived with two suitcases and very little money. We had to set up house, from furnature to cuttlery to crockery to pots sheets duvet inners pillows, EVERYTHING a house needs. We had to buy a car, we had to do and pay for our PR medicals for 3 people do and pay for our IELTS for 3 people and have a holiday for a week in NZ all within 8 months.

We managed very well got what we need and not to shabby I might add. We are driving a better car than in SA in fact we have two, we have better furnature, I have all the parafinalia that I need for the house. Des has all plus that he needs for his trade and pottering in the garage. I buy what I want when I want. And I don't work here! And we have managed to save!!!

So in closing - Australia offers a BETTER lifestyle than South Africa!!!! And that doing the same or similar work.

Lovies

Nilo

[Springbok]

Springbok, I don't agree with your assumption only comparing RSA/AUS taxable income based on exchange rate. It is a known fact that the cost of living in Australia is much higher than in RSA.... what we've found was that you need to earn around 2.5 times your RSA salary in Aus to have the similar lifestyle as back in RSA.

Thanks for that, mate. Yes the issue of the "real" exchange rate, it's true that on average, goods and services cost about 2.5 times as much here than in S.A. But you don't need to earn 2.5x more in Australia to have a similar lifestyle (financially at least) than in South Africa. Depends how and where you live though, so it will vary from one person to the next. So while your disposable income will buy you less goods & services in Australia than a comparable income in South Africa, the Australian government gets a smaller slice of your real taxable income than what is the case in South Africa. We get back more in return for our tax dollars over here and do not have to pay for things like ADT, Tracker, security guards, etc.

I think we can agree that we will not mind paying higher tax if we can also benefit from the taxes we pay.

Absolutely!

Australia offers a BETTER lifestyle than South Africa!!!! And that doing the same or similar work.

Agreed.

[DesV]

When you go on holiday do you stay in budget accomodation that is run down, where the services do not work or do you pay a premium to stay in better accomodation with better services ......? I rest my case Australia is one of the highest taxed countries but wow everything works here, walk into public toilets, they are clean and have toilet paper, telephone call boxes work, fast internet, postal service is outstanding, who cares I will pay higher taxes at least I get it back in services.

But it is an interesting calculation regardless of which way you look at it.

[starfish]

Thanks Charl, very helpful post.

Regards,

Scott