Aussie Workers Face Higher Tax Bracket by 2031

The average Australian worker is on track to move into the 37% tax bracket by 2031, raising concerns about rising tax burdens. Economists suggest that adjusting income tax thresholds annually could prevent this, but it may challenge government revenue planning. Without indexation, more workers will pay higher tax rates over time.

Currently, Australia does not automatically adjust tax brackets for inflation or wage growth, unlike many other OECD countries. This system, known as “bracket creep,” gradually pushes workers into higher tax categories as their incomes rise. Experts argue that failing to address this issue places an increasing burden on wage earners.

Forecasts indicate that by 2031, the average full-time worker will shift from the 30 per cent bracket to the 37% bracket once their earnings surpass $135,000. Without indexation, personal income tax rates are expected to hit a record 26.7% on average—up from 24.6% today—costing workers thousands more per year in taxes.

If tax brackets were indexed annually, the average tax rate would remain stable, preventing workers from unintentionally paying more. However, any move to index tax brackets would require the government to find alternative revenue sources, whether through spending cuts or new taxes. While some economists support indexation to improve tax fairness, others caution that such a move could complicate future tax reforms.

With an election approaching, neither major party has committed to further tax cuts, leaving the future of income tax policy uncertain. If bracket creep continues unchecked, workers may see a growing portion of their paychecks go to taxes in the coming years.

Source: Australian Financial Review, PBO