What the average Australian earns and what salary constitutes ‘well-off’ these days

New data has revealed what salary puts you in the top 2 per cent of earners and what the average Aussie takes home. Are you well off?

What’s an average income in Australia?

If you ask our political leaders, chances are they’ll offer up a figure that’s vastly higher than what you consider to be run-of-the-mill – and probably much more than you earn.

Labor leader Anthony Albanese rather infamously agreed in June 2019 that Aussies earning $200,000 a year “can’t be described as being in the top end of town”.

And Prime Minister Scott Morrison was asked in October last year what he considered to be a high income, and batted away suggestions that those on between $180,000 and $200,000 – set to benefit most from the Government’s stage three tax cuts – weren’t it.

Those workers are generally ones “who work in the heavy industry sectors of this country” such as mining, Mr Morrison told reporters at the time.

“And for a period of time, many of these workers they’ll go out and work on the mines. It’s hard work, you’re away from your families. It’s fly-in and it’s fly-out. And you do earn a bit more when you’re doing that,” he said.

“But I tell you what, you put a bit of it away too and I don’t think they should be penalised and treated like they’re some merchant banker in Sydney. They’re not. They’re hardworking people working out on mines and difficult parts of the country. I think they deserve a tax cut.”

The virtues of backbreaking manual labour aside, the PM’s suggestion that those earning around $200,000 a year are just normal, average Aussies couldn’t be further from the truth.

RELATED: PM says people earning $180,000-a-year aren’t rich

What constitutes a high income?

New data released by the Australian Taxation Office has detailed precisely what the country’s 14.3 million workers take home in their pay packets, and what it takes to be in the top 2 per cent of earners.

Peter Martin is a visiting fellow at the Crawford School of Public Policy at Australian National University and crunched the ATO data.

Despite the claims from our political leaders, earning $200,000 or more is rare – just 2 per cent of people required to pay tax earn more than that.

“Only around 3 per cent earned more than $188,667,” Mr Martin, a former Commonwealth Treasury official, wrote in an article for The Conversation.

“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.”

The top-earning occupations in Australia, according to new ATO data.

It could also be that perpetuating the myth that an income like $200,000 is fairly standard and not wealthy suits the interests of politicians, Mr Martin suggested.

“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.”

RELATED: Budget 2021: Ten million Aussies to lose $1080 tax cut

Scott Morrison reckons an annual salary of $180,000 doesn’t make you rich – maybe because he earns $550,000 a year. Picture: Getty Images

Anthony Albanese has similar views about what makes someone a high income earner. He pockets $390,000 a year, by the way. Picture: NCA NewsWire/Dan Peled

What the average Australian earns

The vast majority of Australians earn a great deal less than the figure our pollies would have us believe is pretty middle of the road.

In fact, the typical taxable income – half earned more than it, half earned less than it – was $59,538, Mr Martin said.

“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,” he said.

“We can get an idea of how lonely it is at the top by examining the top 1 per cent, 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.”

For the record, Mr Morrison pockets $550,000 a year – he’s the fifth highest-paid world leader, behind Singapore, Hong Kong, USA and Germany – and Mr Albanese takes home $390,000 a year.

RELATED: Scott Morrison dismisses calls for politician pay cuts

Associate Professor Bruce Bradbury from the Social Policy Research Centre at UNSW said most Australians believe they’re ‘middle income’ when they’re really anything but.

“In part, this stems from a confusion between average wages and average household incomes,” Associate Professor Bradbury said.

“A couple with two full-time average wages – $82,000 each or $164,000 together – and two children is likely to think of themselves in the middle of the household income distribution.

“In fact, they are more likely to be in the second-highest fifth of living standards. If they don’t have children, they will be in the highest fifth of living standards.

“This discrepancy between perceptions and reality arises because many people don’t work full-time, average wages are greater than median wages and many households, particularly the retired, don’t have any people with earnings.”

So, if you earn somewhere near $200,000, you’re technically quite well-off, despite what Mr Albanese and Mr Morrison may think.

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Aussies who consider themselves to be middle class, in reality may actually be top earners. Picture: Annette Dew

What else makes you wealthy

If you own your home or have an investment property, chances are you’re also quite well-off – a monster capital city mortgage notwithstanding.

The past year of the coronavirus pandemic has been uncertain and destabilising for most aspects of life, but the value of your property isn’t one of them.

New data from property research firm CoreLogic found national dwelling values rose 2.2 per cent in the month of May, with Sydney remaining one of the top-performing markets.

Median prices in the NSW capital rose 3 per cent in May and are now a staggering 11.2 per cent higher over the past 12 months.

Even Melbourne, now in the grips of its fourth lockdown since COVID-19 hit Australia, has seen a 5 per cent annual change in its median dwelling value.

That strong rise is being experienced across the board, both in regional and metropolitan areas, and in every state and territory.

CoreLogic research director Tim Lawless said 97 per cent of the 334 regions analysed for real estate price growth saw a lift over the past three months.

“Such a synchronised upswing is an absolute rarity across Australia’s diverse array of housing markets,” Mr Lawless said.

So, if you have a pile of bricks to your name, you’re likely even more well off.

If you have some money in shares, you’re also doing quite well – especially at the moment, despite the global chaos wreaked by Covid.

The ASX 200 is 18.6 per cent higher now than it was 12 months ago, with some of Australia’s biggest performers recording a bumper year.

Resource giants BHP and Rio Tinto, where many superannuation funds park a portion of their members’ nest eggs, have jumped 28.5 per cent and 22.4 per cent respectively.

The big banks are all up even more, with Commonwealth Bank leading the charge at 40.5 per cent, while other corporate giants are also roaring – Wesfarmers is up 31 per cent, Woolworths 14.5 per cent and Aristocrat Leisure 45.3 per cent.

The average Aussie income and tax paid, according to the latest Australian Taxation Office figures.

The rich are getting richer

A report released late last year by UNSW and the Australian Council of Social Services found average household wealth has exceeded $1 million for the first time.

But income inequality is deteriorating rapidly, with those in the top 20 per cent of wealth-holders some six times better off than those in the bottom 20 per cent.

And it gets worse the higher up the ladder you look.

The average wealth of those in the top 20 per cent is $3.25 million, which is 90 times more than those in the bottom fifth, who have an average of $36,0000.

Those in the lowest 10 per cent hold $8000 in average net wealth, while the bottom 5 per cent have net debts of $5000.

The trend of the rich getting richer has continued during Covid. Picture: iStock

There are a number of indicators of growing wealth, but one clear sign is in the sale of luxury vehicles.

CommSec tracks the sales of 17 luxury brands, from Aston Martin to BMW, Maserati and Mercedes, and found a fairly unsurprising slump during the first several months of the Covid pandemic.

But more recently, things have bounded back – in the year to May 2021, 93,057 new luxury vehicles were sold in Australia, which is a 31-month high.

“In fact, in the year to May, annual sales of both Lexus and Porsche new vehicles were at record highs,” CommSec chief economist Craig James wrote in his report “The Wealth Effect”.

“Rolling annual sales of Mercedes Benz, Maserati, Lotus, Lamborghini, Bentley, BMW, Audi and Aston Martin vehicles were all higher in May than a year ago.

“Rolling annual luxury vehicle sales are up 11.9 per cent on a year ago and have outperformed the total vehicle market for the past 20 months.”