Definitions

Marginal tax rates

Effective marginal tax rate

The term "effective marginal tax rates", often abbreviated as EMTR refers to the combined effect of income tax and means testing of government welfare. It is the percentage of an extra unit of income (extra dollar, euro, yen etc) that the recipient gets to keep after income tax is removed and after any decline in welfare entitlement.

Calculating the EMTR is typically very dependent on individual circumstances and involves a consideration of welfare withdrawal rules, income tax laws, low income tax offsets, tax rebates and the individuals tax and welfare status. As such tables showing EMTRs are rarely published. The net effect however is generally a higher effective marginal rate of tax than that suggested by income tax tables.

External References

  • http://melbourneinstitute.com/publications/reports/WebReport.pdf
  • http://www.amp.com.au/group/3column/0,2449,CH34906%255FNI155234%255FSI3,00.html
  • http://bovination.com/cbs/marginalTaxRate.jsp
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