Tax stats for 2016-17

The ATO have published their annual tax data (for 2016-2017).  I first started playing with this data in the early-mid noughties. It was so unknown then that I once had a referee to a journal article claim that the data I was using was  confidential to the ATO. I had to point out that this ‘confidential’ data were available at zero-price on the ATO website. Nowadays everyone crunches these data and the statistics are widely known.

Not widely enough though. There is a still a lot of ignorance about the Australian tax burden – so I’ve pulled out some statistics on interest.

First up – the original analysis I did (updated). The net tax share of the top 25%, middle 50%, and bottom 25%.

I calculated these numbers because the then shadow Treasurer Wayne Swan had argued that the tax burden was increasing falling on the poor, the disadvantaged, etc. At the time the argument that the top 25% of taxpayers bore 63.4% of the net tax burden was heresy.  People carried on and on – I was ignoring tax incidence (as if individual taxpayers could pass on the income tax), I left out the GST, …, according to Swan I was a Neanderthal should go back to the dark ages where I belonged (demonstrating his knowledge of history being as good as his economics).  What none of them argued was that this is precisely how a progressive graduated income tax is supposed to work.

For 2016 – 2017 the top 25% paid 67.6% of net income tax collected in that year. The bottom 25% paid 2.8% of net income tax collected in that year. The middle 50% paid 29.5% of net income tax collected in that year. The share of the middle 50% has been declining over time – that represents Director’s law at work.

Now let’s have a look at that by tax bracket.

The minority in the top bracket pay 29.9% of net tax collected. True – less than the totals for the two brackets below then, yet nearly ten times the amount than their population numbers.

The average effective tax rate for that year was 24.6%. Anyone earning above $86,434 would have paid a higher effective tax rate. On a salary of just $86,434 you are – according to the logic of the graduated progressive tax system – rich. Those individuals are in the 78th percentile (or in the top 23% of income earners).

Let’s drag out some other numbers – the top 1% of net tax payers earned 9.4% of all taxable income, paid 16.7% of all net income tax and faced an average effective tax rate of 43.6%.

I wanted to look at those individuals earning above $120,000 – a good salary – but the ATO segments the data slightly differently – so incomes above $121,568. These individuals make up just 11% of taxpayers, they earn 33.4% of taxable income, and pay 46.4% of net income tax collected. They face an average effective tax rate of 35.3%.

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37 Responses to Tax stats for 2016-17

  1. RobK

    Thanks Sinc,
    Handy refresher and update.

  2. stackja

    ALP wants to tax the ‘rich’ to make them poorer and make the ‘poor’ ‘richer’. What could possibly go wrong?

  3. stackja

    BS says ‘it’s time for change’.
    After taxes there won’t be much change left.

  4. Mak Siccar

    Many thanks – very interesting and informative. Can you please somehow publish this in the MSM so that the general public can be informed?

  5. RobK

    Sinc,
    Might it be easier for those not used to reading this kind of thing, if, instead of ” 46.4% of net income tax” you said: “46.4% of net income tax collected”. I know its redundant but I think it might clarify it a bit for beginners, who need to know this stuff.

    [Good point. Sinc]

  6. RobK

    The share of the middle 50% has been declining over time – that represents Director’s law at work.
    Would it not also be an artifact of bracket creep?

  7. Roger

    The share of the middle 50% has been declining over time – that represents Director’s law at work.
    Would it not also be an artifact of bracket creep?

    And the baby boomers retiring and paying less tax.

  8. RobK

    Roger,
    A large demographic bubble would likely have some kind of impact too, perhaps moderated by immigration.

  9. Sinclair Davidson

    Would it not also be an artifact of bracket creep?

    Could be – but I don’t think so over the past few years. The middle income brackets aren’t growing very much. That is due to low wage growth.

  10. RobK

    So the analytical question is: how much of the middle 50%’s contribution reduction is due to Director’s Law, demographics or bracket creep?(or some other factor).
    This is actually a fundamental question if policy changes are to be considered.

  11. RobK

    Has income tax payable increased due to tightening of deductions, having the effect of bolstering bracket creep?

  12. RobK

    Has wages growth been even even across the income spectrum?

  13. John Constantine

    Shorten tells us on one advert that the banks and multinationals will have to pay their fair share, he also mentions the big end of town no longer escaping paying their fair share.

    But won’t it be more likely that the end of cash will actually drag large numbers of australias poorest back into paying tax to compensate for fleeing multinationals?

    All the proles doing cashies for an extra shifty fifty or two a week are firmly in treasuries sights, lets never pretend that they won’t be hit hardest by the coming taxgrabs.

    Unless they work for smokes. Cigarettes, not just jailhouse currency any more.

    Comrades.

  14. RobK

    Just wait for dark cryptos to get a hold and throw a spanner in the works.

  15. DB

    The table should also include a % of taxable income.

  16. John Bayley

    @RobK:

    They don’t even need to be ‘dark’ (i.e. Monero).
    One of the ‘majors’, Litecoin, is starting to trial Confidential Transactions now. These will be optional – at least to start with – but given that crypto-currencies are software, if LTC can do it, then so will Bitcoin (BTC), which is not that different anyway.
    I do believe this will be one of the very few ways to avoid Big Brother knowing absolutely everything about us once they get around to abolishing cash.

  17. rickw

    They face an average effective tax rate of 35.3%.

    I don’t think this is right, if you are PAYE in this bracket the rate is 47%, plus whatever you pay in GST less what you can deduct. Seems to be a long way from the average you are quoting?

  18. RobK

    JB,
    I do believe this will be one of the very few ways to avoid Big Brother knowing absolutely everything about us once they get around to abolishing cash.
    NSA &Co will step in to help the state, no doubt. Obviously the tax dept has already ruled crytos are to be treated as income, iirc.

  19. Ƶĩppʯ (ȊꞪꞨV)

    Would it not also be an artifact of bracket creep?

    There’s been a huge crackdown on late and unpaid tax returns, even self assessed PAYG go straight to debt collectors if overdue. The government is a donkey riding on the taxpayer.

  20. RobK

    Rickw,
    The way I read it, that figure was the average over the portion under consideration(not a given taxable bracket but a decile grouping). I think you might be conflating gross income and taxable income (after deductions). GST is seperate altogether as it applies to stuff you buy as a consumer.

  21. RobK

    Zippy,
    So ATO recovery effectiveness may also be a factor.

  22. Robber Baron

    Sinc, what will you do next year when this data will no longer be publicly available under the Shorten 1000 year Reich?

  23. Chrism

    A graph of per taxpayer dollar amoutns for each group please

  24. min

    Plus a Medicare and the debt levy puts outgoings to 52% I believe.
    However I see faux facts has a piece on cancer patients costs for MRI s etc .seems 40% had out of pocket costs . They forgot to mention that they probably have private cover and that is why it cost.

  25. I have a dream of having 20/20 vision…i.e.
    20% flat income tax with limited deductions (First $20,000 tax free)
    20% Broad based GST (Encourages savings)
    20% Company tax
    (approx) 25% increase to all Centrelink payments which will be taxed at 20%
    $20 GP co-payment (I’m ok with making it free for kids, long term ill etc though not keen)
    Legislation which forbids governments from spending more than the previous years tax collection.

    Then watch the budget balance, the nation become net savers and the economy to boom.
    Within 15 years or so we’d be eligible to join the G8

  26. Sinclair Davidson

    PAYE in this bracket the rate is 47%

    That’s the marginal tax rate. The effective tax rate is the amount of tax paid divided by taxable income.

  27. Sinclair Davidson

    A graph of per taxpayer dollar amoutns for each group please

    Sorry – not sure what you’re asking for.

  28. Ƶĩppʯ (ȊꞪꞨV)

    Swan (Mr 110% tax rate) makes neanderthals look like geniuses.

  29. John Bayley

    RobK:
    NSA &Co will step in to help the state, no doubt.

    Well they can try.
    They have apparently invested a lot of money into software that can track the Bitcoin blockchain, but then again, that may not be enough if the blockchain can be ‘obscured’.
    They also have not managed to shut down the black markets yet, despite having huge funds at their disposal.

    Obviously the tax dept has already ruled crytos are to be treated as income, iirc.

    Yes they have, but then again, they’d have to be able to prove that your cryptos were not really lost when your laptop fell out of your boat while fishing.

  30. Suburban Boy

    Sinc, the stats you calculate are critical to understanding the political debate on taxes. More power to you.

    But since about half of the adult population pays no income tax, the figures seriously understate the tax burden of Australians with high incomes. It would be very useful if you included numbers for taxes paid by percentages of the adult population, not just percentages of taxpayers.

  31. Squirrel

    Not sure if there would be sufficiently reliable statistics to do it, but an analysis over the same 20 year period of the proportion of the top 25% of taxpayers on the public payroll (including taxpayer funded jobs, not just direct public sector employees) would be most interesting.

    Whatever the answer to that question, long overdue competition reforms in sectors of the economy which have been largely, if not totally, protected from real (global) competition might mean that many people currently grinding their teeth about their tax burden would have more pressing concerns.

  32. David Brewer

    Thanks Sinc, this shows up BS’s BS wonderfully. No matter how hard he squeezed at the top, there is just not all that much there.

    Even if he doubled tax on the top 1% – raising their effective tax rate to 87.2% – that would only boost income tax receipts by 14%, and total revenue by 6%, from which you would have to deduct all the other taxes they would no longer pay because they had so little money left to buy anything.

    And of course you could only do it once, before said 1% fled to lower tax jurisdictions, taking their capital, energy and business skills and ideas with them.

  33. Buccaneer

    Does every Australian adult qualify as a taxpayer?

  34. Pyrmonter

    Is there any recent work on the incidence of indirect taxes? I remember something by Freebairn, Porter and Walsh in the late 80s concluded that they were heavily regressive, but that was in the days of WST and substantial tariffs.

  35. Linden

    I see the would be PM, Shorten using the mysterious phrase in referring to tax and the paying of it as ;’paying their fair share’. It would be good of Mr Shorten and any other running pollies for that matter, to provide a working definition of ‘paying their fare share ‘ or paying your fair share’; as it would apply to the Tax Act? Every time I hear a discussion about tax and paying tax, every ones says ‘I pay more than my fair share’. I begs the question under Mr Shorten fair share dogma will each of us be paying more or less?

  36. John A

    There is often talk among SJWs about the disparity between the “Top 1%” and the “Bottom 1%” as if that explains all the financial woes of the world.

    Is there sufficient detail in the tax stats to make such a comparison?

    It would be kind-a nice schadenfreude to be able to answer their specious data with some real data.

  37. We are nearly 1 trillion AUD in debt.

    We will not see significant tax cuts this side of 2040.

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