Effective tax rates in NZ, Aus and the UK

Posted on 21 May 2010

With the New Zealand Government's announcement of income tax cuts in the May 2010 Budget, how do New Zealand's income tax rates stack up against those of countries our young emmigrees flock to? (Namely Australia and the UK).

In two words, "surprisingly well".

When looking at headline tax rates a person earning the average wage in New Zealand will have an effective income tax liability of just 16%, compared with 18% for average wage earners in the UK and 20% in Australia (as of 1 October 2010 once the new NZ tax rates come into effect).

Actual gross rates will vary depending on an individual's situation as extra tax and insurances are applied (ACC in NZ, Medicare in Aus, etc.) and certain rebates or benefits may be claimed (working for families in NZ, accommodation allowances in Aus, etc.)

Tax rates for average wage earners in NZ, Australia and the UK
  Avg. Salary Tax Rate
New Zealand NZD 49875 16.00%
Australia AUD 67116 20.39%
United Kingom GBP 25428 18.08%

In local currency terms New Zealand's new tax rates really shine against the competition, with effective rates coming in lower for all incomes over $44000/annum.

Tax Rates Compared - NZ,AU,UK (in NZD)

When comparing salaries converted into NZD the picture isn't quite so clear, though the New Zealand tax rates do come in lower for higher salaries of around $150,000 and over. However conversion into NZD is fairly meaningless without considering the relative cost of living in each country.

Tax Rates Compared - NZ,AU,UK (in local currency)

With large fluctuations in currency exchange rates over the last year it is hard to get a meaningful perception of relative purchasing power between the countries.

Until some official PPP figures are released we'll confine this analysis to the headline figures above and a comparison of tax rates at multiples of the average wage in each country.

Tax Rates at multiples of the average wage
  @ Avg. Wage @ Twice Avg. Wage @ Thrice Avg. Wage
New Zealand 16.00% 23.90% 26.93%
Australia 20.39% 28.02% 31.86%
United Kingom 18.08% 24.33% 29.55%

Again the NZ income tax rates come out on top - lower for a range of comparable income levels.

Although tax isn't everything, would-be economic migrants may wish to re-evaluate their decisions based on the 2010 budget announcements.

Average earnings figures were sourced from Statistics New Zealand, Australian Bureau of Statistics and the Office for National Statistics UK.

1 Comment

You need to be logged in to comment.

I'm not sure where your rate of 18.08% for the UK comes from. According to my calculations, it should be 14.9%. However, if you add in ACC Earner's Levy and Employee National Insurance contributions then a New Zealand employee on an average wage would be taxed less than a UK employee on an average wage (percentage wise).