Tax burden on Australians at the highest level since 2008, with former RBA official warning it might get worse

The tax burden on Australians is at the highest level in almost two decades, new government data shows, with a former Reserve Bank official warning it is likely to get even worse.

From Federal income taxes to State government stamp duty and local council rates, they have been going up since COVID, with borrowing levels skyrocketing by a third during the last financial year, mainly to finance transport infrastructure projects that don’t generate a financial return.

The average Australian is now paying $24,652 in tax to the Commonwealth Government but this rises to $30,633 when State and Local government charges are factored in, the Australian Bureau of Statistics revealed on Tuesday.

The states with the most number of people paid more in taxes per capita with Victoria having the highest average of $31,257, ahead of NSW ($31,035), Western Australia ($30,585), ACT ($30,377), Queensland ($30,133), South Australia ($29,608), Tasmania ($28,805) and the Northern Territory ($28,491).

Total taxation revenue as a share of gross domestic product reached 30.2 per cent in 2024-25.

This was the highest since the 2007-08 financial year at the height of the China-led mining boom and before the worst of the Global Financial Crisis.

Since dropping to 27.7 per cent of GDP in 2019-20, during the pandemic, the tax burden has been growing ever since.

Higher inflation has been pushing Australians into higher income tax brackets, leading to the Commonwealth government collecting even more revenue during a commodity price boom, former Reserve Bank senior research manager Peter Tulip said.

“Inflation is pushing people into higher and higher tax brackets and some of that is being offset by the effective indexation of the tax brackets but less than the effect of inflation,” he told The Nightly.

“Commodity prices are high so the Government is reeling in a whole pile of company tax receipts.”

Across all three levels of government, Australia’s tax revenue grew by 4.7 per cent during the last financial year to $839 billion.

At the time, that was well above the 3.4 per cent increase in wages and more than double the 2.1 per cent inflation rate when price pressures were still contained in the middle of last year.

The Federal Government, however, wasn’t even the biggest beneficiary of higher tax revenue with its take growing by 4 per cent in 2024-25 as the collector of income taxes and the GST.

Canberra’s total tax take of $675.2 billion is four times the combined tax revenue of all the states and territories of $140.7 billion plus $24.6 billion from every local council.

State governments appeared to be reaping in more money from stamp duty revenue, thanks to soaring house prices, with Brisbane and Perth’s double-digit increases boosting the tax take.

“That leads a more than one-for-one increase in State government stamp duty receipts,” Dr Tulip said as the chief economist with the Centre for Independent Studies.

Queensland’s tax revenue surged by 11.1 per cent to $25.2 billion, ahead of mining-rich Western Australia’s 9 per cent increase to $14.7 billion.

NSW, Australia’s most populated State, saw its revenue climb by 7.7 per cent to $48.4 billion.

South Australia’s tax revenue went up by 6.7 per cent to $7.2 billion while Victoria saw a more modest 5.8 per cent increase to $39.6 billion.

Average state and territory government revenue rose by 7.7 per cent compared with 6.3 per cent for local councils.

South Australian councils had the biggest revenue increase of 7.5 per cent.

Governments from all levels are also borrowing more with total public sector borrowing increasing by 29 per cent to $112.2 billion in 2024-25, out from $86.7 billion in 2023-24.

The State-government led boom in rail infrastructure projects was likely to lead even higher State taxes, given these projects were unlikely to generate a financial return.

“The public benefits may be high, but those benefits don’t come in the form of revenue that can be raised to pay off a loan,” Dr Tulip said.

“These big infrastructure projects need to be financed through other revenue sources like taxation.”