Sixty people earned more than $1 million yet paid no tax in 2019-20, Australia’s highest earners live in Perth, and the country’s lowest incomes have been recorded in regional New South Wales.
The Australian Taxation Office’s (ATO) latest statistics are based on the tax returns of almost 15 million Australians for 2019-20.
Analysis of the data by The Australia Institute reveals 60 Australians earned more than $1 million in that financial year but did not pay a cent of income tax, compared to 66 the year before.
On average, these 60 individuals earned $3.5 million each.
Managing your tax affairs is an allowable tax deduction. Some of those who earned more than $1 million but paid no tax claimed that deduction.
“Some people earning a million dollars or more paid on average $80,000 each to manage their tax affairs, which reduced their taxable income below the tax-free threshold,” said Australia Institute senior economist Matt Grudnoff.
Another allowable deduction is litigation costs for managing your tax affairs.
Of those earning $1 million but paying no tax who claimed this deduction, the average amount claimed was $250,000.
“Our taxation system is full of complexity and the latest tax statistics show that some people on very large incomes are able to pay very smart people very large sums of money to take advantage of that complexity to reduce the amount of tax they have to pay,” Mr Grudnoff said.
“This highlights the need in Australia for a Buffett rule, which sets a minimum rate of tax based on people’s gross income. This would prevent high-income earners from using lots of deductions to avoid paying tax.”
Nearly 2.3 million Australians declared rental income to the ATO in 2019-20, and the data show around 72 per cent of landlords owned one rental property, 19 per cent owned two, while nearly 86,000 people owned four or more.
On average, they made a loss (were negatively geared), but those losses shrank in 2019-20 as the Reserve Bank cut interest rates before and early on during the COVID pandemic, reducing the interest deductions claimed by landlords. The median loss was $400 and the average just $73.
What are Australia’s richest and poorest postcodes?
The ATO figures show eight of the nation’s highest-earning postcodes were in Sydney, while five of the lowest-earning postcodes were in regional NSW.
In 2019-20, Western Australia’s Cottesloe and Peppermint Grove, which share the postcode 6011, topped the list with an average taxable income of $325,343.
The next highest earners were in the Sydney postcode 2027, which takes in the harbourside suburbs of Darling Point and Edgecliff. There, the average taxable income was $205,957.
In third place was postcode 2023, Sydney’s Bellevue Hill, where the average taxable income was $195,204.
Those living in regional NSW were among the nation’s lowest average income earners.
In Gurley NSW (postcode 2398), Burren Junction, Drildool, Nowley (postcode 2386) and Boomi, Garah (postcode 2405), the average taxable incomes were negative, likely due to farming losses.
Surgeons reap more than $400,000 on average while a hospitality worker struggles
Doctors continue to dominate in terms of earning the highest average incomes, while apprentices and food workers struggle.
The taxation statistics showed surgeons had the highest average income – $406,068 – with anaesthetists earning only slightly less ($388,814), internal medicine specialists ranked third ($310,848) and financial dealers ranked fourth ($279,790).
As per usual, hospitality workers, who are often younger and work in part-time or casual jobs, represented occupations with the lowest average taxable incomes.
The lowest paid were apprentice hospitality workers ($19,877), fast food cooks ($20,447), apprentice trainees in sport and recreation ($20,447) and apprentices in cleaning services ($24,330).
What does the average person earn?
In contrast to the millionaires, the average taxable income for Australians was $63,882 in 2019-20, up just 2.1 per cent on the previous tax year.
Men continued to earn more than women, averaging $74,559 versus $52,798.
The median, or middle, earning Australian made $48,381, with men ($56,746) still earning considerably more than women ($41,724) on this measure, which effectively removes the effect of extremely high and low incomes.
Australians continued to find a wide range of work-related expenses to deduct, with nearly 9.4 million people claiming an average deduction of $2303, although the typical deduction was a more modest $1092.
Again, unlike some millionaires, the typical Australian claimed just $180 for managing their tax affairs.
That typical, median Australian paid $11,330 in income tax, which was just under a quarter of their taxable earnings.
The bulk of Australians (41.5 per cent) who filed tax returns in 2019-20 fell in the $37,001-$90,000-a-year income bracket, but the majority of tax collected (68.4 per cent) came from those earning over $90,000 a year.
Most of that came from the upper-middle income group earning between $90,001-$180,000, rather than the smaller cohort earning above $180,000.
Almost 1.4 million Australians declared an income or loss from running a non-farming business, although the average profit was just $27,417 and the median $12,227, indicating that many of these are likely to be side hustles.
The early effects of the pandemic were also apparent in the number of taxpayers declaring that they had received Australian government allowances and payments, which jumped from 933,806 in 2018-19 to 1,674,555.
A further 683,443 people who filed a return to the ATO collected an Australian government pension.
The median Australian had less than $50,000 in superannuation funds, while the average balance was much higher at $145,388, skewed upwards by the extremely large super funds held by a relative handful of individuals.
Where does the ATO collect its taxes?
The 2019-20 taxation statistics show that individuals continue to be by far the biggest source of tax revenue, contributing almost 53 per cent of collections.
Companies contributed about 21 per cent of the government’s tax revenue and, despite there currently being $3.4 trillion worth of superannuation assets (May 2022), in 2019-2020 super funds contributed just over $20 billion in taxes due to heavily reduced tax rates.
The Albanese government last week released a discussion paper on restricting the ability of multinationals able to shift profits overseas disguised as interest and royalties.
ATO data show 5399 companies declared interest expenses overseas worth $44.1 billion and 1538 companies declared royalty expenses overseas of $8.8 billion.
Overall, 32 per cent of mining companies that produced an income paid tax. This ranged from 13 per cent in exploration to 44 per cent in construction material mining.
“With the mining industry largely foreign owned and employing relatively small numbers of workers, tax is one of the few benefits the industry could provide to the rest of Australia,” Mr Grudnoff said.
“But the taxation statistics show that many mining companies continue to pay no tax.
“It is high time the government targets this industry for tax reform to ensure that it started to pay its fair share of tax.”
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