“Nothing is certain except for death and taxes.”
– Benjamin Franklin 1789
In many business forums and groups I am a part of, the topic of paying taxes often comes up.
Our account told me a loooong time ago that, as a business owner, tax is a good thing, it means you have made a profit. 🙂
Now, I don’t know about you, but while I do arrange our business finances so that we legally minimise our income tax as well as we can, I seriously do not object to paying my fair share of tax.
While I can most certainly object to some of the ways our politicians spend our taxes, I do accept the fact that our tax helps to fund schools, hospitals and aged pensions (among other things)
I know that our tax amount comes nowhere near close to even paying for my mother’s pension!!
I got into a “discussion” with a lady one day who swore that her husband paid over 50% of EVERY dollar he earned. When I pointed out that the top tax rate in Australia is only 45%. Still, she was adamant. Many others pointed out that her effective tax rate would be much less than even 45% as we have a sliding tax scale and the 45% is only on amounts over $180,000.
On further discussion, it turns out this lady is a stay-at-home mum of two toddlers and is being paid the maximum in Family Tax Benefits. She could not understand that a large portion of her husband’s tax was in fact coming back to her directly in the form of Family Tax Benefits., and that her husband’s effective tax rate would be quite low. ( some guessed at less than 15%)
My husband also complains occasionally about the apparent high tax rates, so I created an excel spreadsheet to show him what his actual tax percentage is.
We don’t have Family Tax Benefits anymore but I have added it in so you might get a better idea as to what your effective tax rate is.
I hope you find this interesting.
Download the Effective Tax Rate sheet here.