Millionaires in Australia are managing a tax bill of $0

Extract from The Guardian

Opinion

Tax

Greg Jericho

Tax stats also once again highlight it is the wealthy who benefit from negative gearing

@GrogsGamut

Tue 2 Apr 2019 10.06 AEDT Last modified on Tue 2 Apr 2019 11.41 AEDT

It helps to have a good accountant, and it helps to pay that person a lot of money. Photograph: Steven Saphore/AAP

The release of the latest taxation statistics by the Australian Taxation Office shows the top 10% of taxpayers paid their lowest share of tax since 2005-06 and that the number of millionaires avoiding tax continues to rise.
The statistics also highlight the ongoing gender income gap, with new breakdowns of occupations revealing that men have a higher median salary than women in 90% of all occupations.
The release of the annual taxation statistics by the ATO is a true delight for stats lovers. There is an absolute trove of information that can be gleaned from the 13.87 million taxation returns we filled out in 2016-17.

The big-ticket item the data shows is that in 2016-17 a growing number of millionaires were able to avoid paying tax. Sixty-nine people who earned more than $1m in 2016-17 paid $0 in tax – an increase from 62 in 2015-16, and 48 in the year before that.
How did they do it? Well let’s just say it helps to have a good accountant, and it helps to pay that person a lot of money.
Of the 68 millionaires, 27 claimed a deduction from the cost of managing tax affairs totalling $16.4m. They also claimed a massive $149m in gifts or donations – which was a big jump on the $57.5m donated by non-tax paying millionaires in 2015-16, with the increase likely to have come via one very large benefactor.
Should the ALP win office, these millionaires will be unable to get as much benefit from using accountants. The ALP intends to limit the amount you can deduct from the cost of managing your tax affairs to $3,000.
This won’t affect many of us – more than 99% of us either do our own taxes or pay less than $2,500:

But for those who earn more than $180,000, it can be very expensive to reduce your taxable income.

Nearly 90% of those in 2016-17 with a total income of above $180,000 remained in the top tax bracket, and they pay on average just $1,429 to manage their tax affairs. Of the 694 who were able to get their taxable income down to within the $37,000 to $87,000 tax bracket, the cost was significantly more – an average of $18,618.
But the big spending was done by those who were able to get their taxable income below the tax-free threshold of $18,200; they paid an average of $133,151:

Such a policy of limiting the deduction to $3,000 might ensure millionaires and the like pay their fair share of tax and help increase the amount of tax paid by the wealthiest.
In 2016-17, the top 10% of taxpayers – those with a taxable income above $126,635 (alas this is taxable income so excludes the millionaires who paid no tax) paid 44.5% of all income tax. That was the lowest amount for over a decade:

One area also down this year was the number of people negative gearing. Just 9.4% of individuals recorded a rental loss in 2016-17 – the lowest since 2009-10:

This is not due to people getting out of the rental market – quite the opposite. In 2016-17 a record 15.5% of individuals claimed a gross rental income. But falling interest rates make it tougher to negative gear as the cost of servicing your loan actually falls.
But the tax stats do once again highlight just how exaggerated the benefits of negative gearing flow to the wealthy.
Just on 3.5% of all individuals earned over $180,000 in total income, but they accounted for 8% of all negative gearers and claimed 15% of the total loss of money from rent:

The tax stats also highlight the massive income gap between men and women. While women make up 49% of all taxpayers, only in the bottom two tax brackets do they represent more than this amount. The account for just 26% of those earning over $180,000:

The situation is even worse when broken down according to occupations.
Of the 1,165 different occupations that had both men and women work, just 124 had women earning a higher median salary or wage than their male counterparts.
And mostly these were lower-paying occupations.

Out of the 208 occupations with a median salary above $87,000, just two had women with a higher median salary than men – state governor (not the easiest of job to get!) and neurosurgeons (and when including other income besides salary, male neurosurgeons had a much higher median income).
And yet of the 50 occupations with a median salary below the tax-free threshold, 26 had women with a higher median salary than the men.
It means that while just 22% of all occupations have a median salary below $37,000, they account for nearly 70% of the occupations where women have a higher median salary than men:

Tuesday’s budget will produce lots of talk about average income earners, help for taxpayers and fairness.
But the latest tax statistics show that women and men are at very different levels when it comes to average and median incomes. Fairness is also tough to sustain when the ability to reduce the amount of tax you pay is skewed towards those who can either afford an expensive accountant or an equally expensive rental property.

• Greg Jericho is an economics writer for Guardian Australia