Australia’s richest people Gina Rinehart and Andrew Forrest are the country’s biggest taxpayers

Australia’s two richest people could potentially have a combined tax bill of more than $2bn this year if iron ore prices keep rising.

Western Australia’s rich red Pilbara dirt twins Gina Rinehart and Andrew ‘Twiggy’ Forrest are not only Australia’s two richest people, they are also the nation’s two biggest taxpayers.

The List, The Australian newspaper’s ranking of the country’s 250 richest people, has Rinehart topping the list at $36bn followed by Forrest just shy of $30bn.

It also incidentally lists a staggering 122 individuals and families in total as billionaires – somewhat mind-boggling for someone who grew up when millionaires were rare and no-one would ever have thought we would get to see even the odd billionaire.

Indeed, ‘way back then’ even government budgets were presented in millions; and then along came Gough and the rest, including ‘million’ as a big number started to become history. A history, which leads to that now being the cost of an average house in Melbourne and Sydney.

Well, Rinehart and Forrest also paid between them at least well over $1.1bn – that’s $1100m – in tax in the 2018-19 year, according to figures from the Australian Tax Office.

We don’t yet have those figures for the 2019-20 year, but the soaring price of iron ore which has sent rocketing the profits of their two core companies, Hancock Prospecting and Fortescue Metals, suggests their combined tax payment for that year would go well above $1.5bn.

Further, it’s going to be even higher in this current 2020-21 year – the duo will pay well over $2bn between them - as we are now three quarters of the way through and the iron ore price has gone even higher and is showing no signs of plummeting.

Gina Rinehart.

We can estimate Forrest’s tax bill for the 2019-20 and 2020-21 years from the financial reports of his 36 per cent owned publicly listed Fortescue.

In the 2019-20 year Fortescue’s tax bill leapt from $1.9bn to $2.5bn. Forrest’s share of that bill was around $860m.

For the latest December half Fortescue’s tax bill leapt to over $2.2bn. Double that for the year makes around $4.5bn – and Forrest’s share of the tax bill would top $1.5bn.

Rinehart’s Hancock is wholly-owned within the family. We get its tax data from the ATO’s “Corporate Tax Transparency” disclosures.

The most recent shows Hancock – effectively Rinehart – paying $540m tax in 2019-20. Judged by the Fortescue (and BHP and Rio) figures, that will have soared towards $1bn in the 2019-20 year and will top $1bn this current year.

Yes, both get franking credits on any dividends paid to them.

Andrew Forrest.

But it is crucial to understand that does not return to them any of the tax paid at the corporate level; it means only that they don’t pay a second layer of tax on the dividend income.

Again it’s worth explaining to anyone under the age of about 55 that this elimination of the dreaded, punitive and economically distorting “double taxation of dividends” was done by a Labor treasurer Paul Keating.

By any assessment, the duo pay their full – indeed, even fuller – share; as shown explicitly by the ATO data.

For the 2019-20 year, Hancock paid $540.6m tax on its taxable profit of $1.8bn. That is smack on the 30 per cent corporate tax rate.

Fortescue paid $1.67bn on $5.66bn of taxable profit or 29.5 per cent.

For the tax and numerically challenged journalists at especially the ABC and the former Fairfax broadloids, the tax payments were also an impressive 14 percent (Fortescue) and 17 per cent (Hancock) of their total revenues, before any operating costs AND state royalties are deducted.

In 2019-20 Fortescue paid an additional $1.1bn in royalty to WA and will pay at least $1.7bn this year.

That tells us why WA will be the only state to have a budget surplus this year and goes a long way to explaining Mark McGowan’s crushing election win.

Originally published as Australia’s richest people Gina Rinehart and Andrew Forrest are the country’s biggest taxpayers