this post was submitted on 09 May 2024
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[–] [email protected] 2 points 6 months ago (1 children)

I can't say for other countries, but Canada uses a non-refundable tax credit called the basic personal amount. As long as you make less than that, and file your taxes correctly (and maybe even if you don't), you will pay no income tax. Each province has a similar thing at a similar amount.

So yes, there is a marginal tax rate at even $1, but no one is paying until about $15k.

[–] [email protected] 1 points 6 months ago (1 children)

Interesting. How does that interact with your take-home paycheque? In Australia your income tax is deducted by your employer, so if your only interaction with the tax system is "do job. make money. pay tax on that money", come tax time you should get 0 tax bill and 0 refund, it already having been paid as you go.

If it's a tax credit outside the income tax system, I imagine that would be taken into account after the fact? So you end up getting a big refund every year. Which is nice, but surely would be nicer to have had the money all year? Or do employers' payroll systems take that into account basically like it's part of income tax?

[–] [email protected] 2 points 6 months ago

As a general rule, it will be calculated as part of your tax withholding. If, based on the portion of your annual pay for the year covered by that paycheque, you would be under the limit, no income tax would be withheld. There are a number of modifications to help ensure you've had the expected taxes withheld by the end of the year, and they usually work out well. If your paycheques vary wildly, you may see some tax withheld on one and not the other, but if you're consistently not earning enough to put you at a point where you'd be paying taxes for the year, you won't see any deductions and won't have to wait for your tax return to have those withholdings returned.

That said, there are a number of tax credits that apply for low income earners, so you will probably see a tax return even if taxes weren't withheld. Also, there are other deductions that will happen regardless of your income.