Last year, Australia's personal income tax growth was the highest in the world, outpacing all other advanced economies.
This is largely due to "tax bracket climbing," which has led to record federal tax revenues.
According to the latest report released by the Organisation for Economic Co-operation and Development (OECD) on Thursday evening, an average childless wage earner was required to pay about $24,791 in personal income tax last year, an increase of 7.6% on 2022.
By contrast, Luxembourg, which had the second-largest increase in personal income tax, saw an increase of only 5%.
In Australia, nearly a quarter of gross wages (24.9%) will be used to pay personal income tax, second only to Denmark (36%), Iceland (27.3%) and Belgium (26%), and well above the OECD average of 15.4%.
As high inflation pushes employees to seek pay increases in response to the rising cost of living, their earnings are included in a higher tax bracket known to economists as "bracket creep."
Of the 21 member states of the OECD, only four countries, including Australia, have not automatically adjusted their tax brackets to offset wage increases based on inflation.
The OECD report also mentions the elimination of the low- and middle-income tax credits, which further boosted income tax revenues.
During Morrison's administration, this tax credit was known as a "lamington" and taxpayers could receive a lump sum payment of up to $1,080 after filing an annual tax return with the Australian Taxation Office.
This tax credit was extended in the last budget of the coalition government before the 2022 elections, but expired in mid-2022 when Labour decided not to extend it again.
According to an independent analysis by the Australian Bureau of Statistics, the recent significant increase in personal income tax, which reached a record $304.8 billion last year, has prompted the government to adjust personal income tax rates to provide more attractive Stage 3 tax relief.
In response to the data, a spokesman for Finance Minister Jim Chalmers said that the upcoming tax breaks are better than the old laws enacted by the former Morrison government.
"Under Labor, every Australian taxpayer will be entitled to tax relief from July, and the average tax rate will be reduced from 25.4 per cent to 23.9 per cent as a result of our tax relief," he said. ”
"According to our plan, the portion of taxpayers' income that will be used to pay taxes will decrease over the next 10 years. ”
The tax reform will come into effect on July 1.
However, Chalmers' opponent, Angus Taylor, said the increase in income tax revenues had a serious impact on the living standards of Australians.
"Hard-working Australians are suffering from rising costs of living, higher loan repayments and higher tax revenues due to Labour's economic mismanagement," Mr Taylor said. ”
He added: "What is even more infuriating is that the Labor government has reneged on all its tax commitments since the last election by designing a bad tax crackdown on multinational corporations and instead taxing Australian companies and industries." ”
The latest population report predicts that the federal budget will increasingly rely on personal income tax, which is expected to rise to nearly 60 percent of total federal tax revenue by 2063, up from 49 percent today.