Modern Australian
The Times

Other Australians earn nothing like what you think. If you're on $59,538, you're typical

  • Written by Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

I’m guessing you earn less than A$200,000.

And I’m guessing you think you’re missing out. People keep telling you so.

On one side of politics Labor leader Anthony Albanese says anyone earning $200,000 dollars a year “can’t be described as being in the top end of town”.

On the other, Prime Minister Scott Morrison parries with interviewers when asked whether people on $180,000 to $200,000 (the biggest beneficiaries of his planned 2024 Stage 3 tax cut) are “high income”.

“They’re hardworking people working out on mines and difficult parts of the country,” he says. “They deserve a tax cut.”

Hardworking or not, Australians on more than $200,000 are rare. And an awful lot of them don’t work at all.

$200,000 is unusual

I’ve never quite understood why politicians are so keen to tell us such incomes are normal. It might be because they are on them. Each backbencher gets $211,250 plus a $32,000 electorate allowance (boosted by $19,500 if they turn down the use of a private-plated vehicle) plus home internet and travel allowances.

Very detailed tax office figures (updated on Monday) tell us what the rest of us earn, all 14.3 million of us.

Only 2% of those required to pay tax earned more than $211,365. Only 3% earned more than $188,667.

Everyone else — the other 97% — earned less than $188,667, most of them a good deal less, and many more earned even less and weren’t required to pay tax.

Other Australians earn nothing like what you think. If you're on $59,538, you're typical What you report to myGov, the ATO reports to us, with a lag.

The figures released on Monday are for 2018-19, because it takes a while for the tax office to receive and process all the forms. 2019 is when Albanese said $200,000 wasn’t the “top end of town”, 2018 is when Morrison unveiled Stage 3.

The typical taxable income (typical in the sense that half earned more than it, half less) was $59,538. If that’s what you’re on, you’re more likely to find people who earn close to what you do than anyone who earns more or less.

We can get an idea of how lonely it is at the top by examining the top 1%, those Australians with a taxable income of greater than $350,134.

There aren’t many of them, just 110,613 — 82,258 men and 28,355 women.

Only 39,209 have taxable incomes of more than $500,000, and of these only 14,467 have taxable incomes of more than $1 million.

Life at the top needn’t be taxed

You’re probably thinking there’s a difference between taxable incomes and actual incomes, and the tax office figures show you’re right.

15,358 Australians reported total incomes of more than $1 million. By the time they had applied legitimate tax deductions, the number had shrunk to 14,467.

Some of these million-dollar earners were able to shrink their taxable incomes very low indeed. 45 cut their taxable incomes to less than the tax-free threshold of $18,200 — meaning they didn’t have to pay anything, not even the Medicare levy.

Another eight managed to escape the Medicare levy even though their taxable incomes were above $18,200, and another 21 escaped income tax while paying the Medicare levy.

Read more: Yes, some millionaires pay no tax, but crimping deductions mightn't help

Many of these millionaires weren’t “hardworking” in the sense Morrison meant. Only 9,144 of the 14,467 Australians on taxable incomes of more than $1 million worked. Only 17,883 of the 57,120 Australians on more than $250,000 worked.

Only nine of the 45 million-dollar earners who cut their taxable incomes to less than the tax-free threshold worked. 27 received so-called franked dividends from companies that had paid tax, enabling them to cut their own tax bills or receive rebates from the tax office. On average, each received dividends of $2.25 million.

Many who aren’t taxed are generous

Seventeen of the 45 million-dollar earners received capital gains, on average $6.4 million each. 38 received interest, averaging $290,000 each.

Against that were set expenses, small and large. Three claimed for work-related car expenses averaging $27,340 each, 13 claimed expenses averaging $57,200 for assistance with tax affairs, eight claimed for previous losses from farms averaging $684,000 each, and eight for losses from other businesses averaging $408,000.

But by far their biggest expense was donations. 14 gave away a total of $161 million in gifts or tax-deductible donations — an extraordinary average of $11.5 million each.

Most of us aren’t like these people.

Most of us claim more modest deductions

Three-quarters of Australians in the tax system earn less than $89,173.

Those on that income typically claim between $1,500 and $1,900 in deductions (men claim more than women) and, thanks to negative gearing, claim losses on properties of between $1,800 and $2,600 (again, men claim more than women).

Such Australians typically report between $1,200 and $2,100 in capital gains (more for women than for men).

If higher-earning Australians are unaware of how most of us live, it’s understandable. Surgeons mix with other surgeons. On average each of Australia’s 4150 surgeons earns $394,303, making surgery our highest-paying occupation.

We mix with, and marry, people like us

And they increasingly marry each other. In 2010 the Productivity Commission found that 68% of Australia’s high earners were married to other high earners. A decade earlier it was 49%.

And high earners live near each other. The average income in Sydney’s Double Bay (Australia’s highest-earning suburb) is $202,598. The average income in Ruse in Sydney’s Campbelltown is $55,100.

People in Double Bay don’t drive through Ruse on their way to the city.

Read more: The Low and Middle Income Tax Offset has been extended yet again. It delivers help neither when nor where it's needed

In the United States it is often the other way around. There, low-income suburbs are more likely to be near the city, meaning that high-income Americans at least see them as they go in to town.

That most of us have little idea of what others earn suits those in charge when they propose tax cuts skewed to high earners.

They can con us that most of us will be better off, and those on high incomes can con themselves they are not already better off.

Authors: Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

Read more https://theconversation.com/other-australians-earn-nothing-like-what-you-think-if-youre-on-59-538-youre-typical-162251

How to Choose the Right Lawyer in Melbourne for Your Situation

Choosing legal support can feel difficult, especially when the stakes are personal or business-related. The right lawyer in Melbourne should underst...

Hoteliers Look to Clever Value Adds to Increase Revenue

The Australian hospitality industry is still in recovery mode after a notoriously rough patch in recent years. While there has been a post-COVID tra...

Moving to Queensland? Here’s How to Prep Your Car for the Big Move North

There’s no sign of the northern migration slowing down, with thousands of southerners fleeing from chaotic lifestyles and cooler climates for a brig...

Diesel Shortage to Impact Trades and Contractors

Strait of Hormuz blockage affecting all major parts of trades and construction Trades and construction across residential, commercial and industria...

Why Holiday Home Owners Turn to Rental Management Agents

The Allure — and the Reality — of Renting Out Your Property Owning a holiday home is a dream for many Australians. Whether it's a beachside sha...

Why Finding Reliable Doctors In Bundoora Is Important For Long-Term Health

Access to quality healthcare plays an important role in maintaining overall wellbeing and managing health concerns early. Trusted Doctors in Bundoor...

Understanding the Different Types of Car Services: Minor vs Major

When it comes to car maintenance, one of the most important things every vehicle owner should understand is the difference between a minor and a maj...

How Superannuation and TPD Insurance Work Together

Superannuation is an essential part of financial planning in Australia. It is designed to provide individuals with income during retirement, helping...

Tiny Towns funding granted for Mt Hotham and Mt Buller upgrades

Alpine Resorts Victoria (ARV) has welcomed funding support from the Victorian Government’s  Tiny Towns Fund, with both Mt Hotham and Mt Buller se...

Locksmith Services: Why Professional Security Solutions Matter More Than Ever

Security is a critical concern for homeowners, businesses, and vehicle owners alike. Whether it involves protecting a property, replacing damaged lo...

Why Tooth Fillings Are Important For Protecting Damaged Teeth

Cavities and minor tooth damage are common dental problems that can worsen if left untreated. Professional tooth fillings help restore damaged teeth, ...

The Connection Between Visibility and Driver Confidence

Operating a vehicle safely requires an immediate, uncompromised stream of visual information from the surrounding road environment. A driver's decis...

Important Things To Know Before Starting An SMSF Setup

Planning for retirement requires careful financial decisions, and many Australians are now looking for more direct control over how their superannua...

Why Retail Cleaning Plays a Key Role in Customer Experience and Business Success

Professional retail cleaning services are an essential part of maintaining a welcoming, safe, and professional environment for customers and staff...

Simple Ways to Make a Commercial Property More Appealing to Buyers

Selling or leasing a commercial property isn’t just about listing the square metres, taking a few photos and waiting for the right person to appea...

What Café Owners Should Know Before Upgrading Their Display Setup

A café display fridge does a lot more than keep cakes cold and sandwiches fresh. It quietly shapes the way customers browse, the way staff move beh...

Creating a Backyard That Feels Comfortable All Year Round

A great backyard doesn’t need to be huge, expensive or perfectly styled. Most of the time, the spaces people actually use are the ones that feel e...

How Homeowners Can Make Smarter Energy Decisions Before Upgrading

Energy upgrades used to feel like something you only looked into after a power bill gave you a nasty surprise. These days, though, more homeowners a...