Australia's income tax threshold is 1.82 million yen. Only income tax is deducted from salaries. A highly satisfying country where you can receive a pension without paying premiums.
1. The 1.03 million yen threshold
Nowadays, there is not a day that goes by without the "1.03 million yen threshold" being reported in the news. It is said that because income tax payments are triggered when annual income exceeds 1.03 million yen, students tend to curb their working hours every December. Parents also face an increased tax burden and reduced household take-home pay if their dependent child's annual income exceeds 1.03 million yen, as they lose the dependent deduction.
As annual income increases, not only does the 1.03 million yen "tax threshold" occur, but so does the "social insurance premium threshold." When annual income exceeds 1.06 million or 1.30 million yen, spouses working part-time face the burden of social insurance premiums, leading to a decrease in take-home pay.
On the other hand, the income deduction for personal income in Australia is approximately 1.82 million yen (18,200 Australian dollars). Calculated at 1 AUD = 100 JPY. This rate is used throughout this article. This deduction amount is close to the 1.78 million yen requested by the Democratic Party for the People.
Beyond the personal income system, Japan's social insurance system also seems to have room for improvement in the future. Social insurance premiums, such as health insurance and employees' pension insurance, which are deducted from monthly salaries, are increased every year and are at a high level compared to other countries.
I would like to compare the income tax and social insurance systems of Japan and Australia and explain the differences.
2. Differences in income tax systems
a. Income tax deduction amount
Japan: 1.03 million yen (Basic deduction + employment income deduction)
Australia: Approximately 1.82 million yen (18,200 AUD)
b. Resident tax
There is no resident tax in Australia. The only tax on personal income is income tax.
2. Differences in social insurance systems
a. Employees' Pension / National Pension
Japan: Payment obligation arises when exceeding 1.06 million or 1.30 million yen
Australia: There is no burden on the individual. Old-age pensions are paid by the government after retirement.
b. Health insurance
Japan: Payment obligation arises when exceeding 1.06 million or 1.30 million yen
Australia: 1.5% of taxable income is paid at the time of tax filing. Low-income earners (for singles, 35,000 AUD - approximately 3.5 million yen or less) are exempt from payment.
3. In Australia, only income tax is deducted from monthly salaries
- There is no resident tax
- No national burden for pensions
- Health insurance premiums are paid at the time of tax filing
4. Australia's dream-like pension system
4-1. Old-age pension that provides 200,000 yen per month without personal contributions
There is no burden on the individual to receive a pension. Even without contributions, the government provides an old-age pension of approximately 200,000 yen per month for singles and 300,000 yen per month for couples. (As of 2024)
4-2. Private pension (Superannuation) contributed by employers
This is a private pension that employees are mandatorily enrolled in, established for the purpose of enhancing assets after retirement, separate from the government-managed old-age pension.
Employers are obligated to contribute an amount equivalent to 11.5% (as of 2024) of the employee's wages as premiums.
Subscribers themselves can make additional voluntary contributions.
There are many pension investment plans available, and subscribers can choose a plan according to their own preferences, considering the size of returns and safety.
Depending on the investment results, it is possible to hold assets worth tens of millions of yen at the time of retirement.
5. Comparison of payslips (Japan has many deductions)
<Japan>
- Income tax, resident tax, employees' pension insurance premiums, health insurance premiums, employment insurance premiums, nursing care insurance premiums
* Too many items are deducted from the salary
<Australia>
- Income tax
* You can confirm the pension amount that your employer has contributed for you, and it is a pleasure to look at the payslip
[References]
JETRO (Tax system in Australia)
https://www.jetro.go.jp/world/oceania/au/invest_04.html
Ministry of Health, Labour and Welfare (Social security system in Australia)
https://www.mhlw.go.jp/wp/hakusyo/kaigai/08/dl/31.pdf
Daiwa Institute of Research (Learning from Australia for Japan's private pension reform)
https://www.dir.co.jp/report/research/policy-analysis/social-securities/20240524_024414.pdf
NLI Research Institute (Regarding the medical security system in Australia)
https://dl.ndl.go.jp/view/prepareDownload?itemId=info%3Andljp%2Fpid%2F8370275&contentNo=1
NHK (Mechanism of the 1.03 million yen tax threshold)
https://www.nhk.or.jp/shutoken/articles/101/015/16/#:~:text=%E3%81%84%E3%82%8F%E3%82%86%E3%82%8B%E5%B9%B4%E5%8F%8E%E3%81%AE%E5%A3%81%E3%81%AE,%E8%B2%A0%E6%8B%85%E3%81%8C%E7%94%9F%E3%81%98%E3%82%8B%E3%81%9F%E3%82%81%E3%81%A7%E3%81%99%E3%80%82