Your true pay brackets revealed

Good piece by Micheal West
Bizarre: your true pay brackets revealed - Michael West

True Marginal Rates

< $21,595 nil
$21,596 to $21,980 19.00%
$21,981 to $27,475 29.00%
$27,476 to $37,000 21.00%
$37,001 to $48,000 33.00%
$48,001 to $66,667 36.00%
$66,668 to $90,000 34.50%
$90,001 to $125,333 40.50%
$125,334 to $180,000 39.00%
$180,001 to $229,469 47.00%
$229,469 to $250,000 62.00%
>$250,001 47.00%

 

And then it changes for seniors. Thats what economists do. That take a simple concepts and make it ****ing difficult.

And throw in franking credits etc. Up to a level they are refundable and a neg marginal rate occurs. Then that fades out and eventually its extra tax but not at the marginal tax rate.

Super pensions, partly taxable pensions, ETPs, death benefits from super to a adult child and so on all affect this

There are millions of potential outcomes. Marginal tax rates are a oversimplification. It looks at the tax on the next $1 of income. Not the next $10 or $10,000 or $100K

 

how do they get 62%?

 

This bracket of particular interest?

 

Yes, i want to make sure i never go there!

 

Neville numpty used 20 year old terminology in his description: And, at the top, the super contributions surcharge “fades in” rather brutally,

He means Div 293 I believe.

1. Div 293 tax applies to the member but can be released and paid by the fund so it has $0 cost to the member but lets humour this opinion piece of bad maths
2. Div 293 would (at worst) be 15% x 9.5% x income and commences when total income (including employer super) = $250K so in the scale he discounted it back to the taxable income element. So on $20k more income at a start point of $230K that means the extra tax cost is $3562.50 for the Div 293. And the base tax on the $20K is at 47%.
3. The extra tax applicable to the extra $20K salary is therefore $9400
4. Total extra tax is $3562.50 + $9400 = $12962.50
5. Total additional tax is $12962.50 / $20,000 = 64.8125%

In reality Div 293 doesnt operate this way. But lets accept its right. Because once its paid on a single dollar of income the next affected dollar is always only subject to a tax rate of 47.01425%. The cut in for a simple model would be $226,250 for a person who does not salary sacrifice. This taxes all the super at the extra 15%. But its not a range.
His band is incorrect. It should consist of a single dollar range. Therafter the marginal tax rate is 47.01425 % until the taxpayer hits the max super contribution level ($216,120) when contributions would cease to grow and then the scale reverts to 47%

This same regressive issue used to be evident in some CGT calcs before Costello made it easy. I once had a client taxed at 85% on a CGT issue. It took several tax managers in the firm to run the maths and realise it was spot on and a bizarre issue applicable at a specific income band.

Burn the economists I say

 

The fact you need to go through all this maths proves there's a problem with the tax system.

The mind boggles how complicated it is when you add in family tax benefits and childcare rebates and end up with >100% marginal rates.

 

Is the HELP debt included or did I miss it in the somewhat complex structure?