Wealthier Australians pay the most tax, and they receive the biggest tax breaks through various concessions or exemptions. There’s nothing particularly controversial about that.
For example, the fewer than four per cent of Australians with taxable earnings above $180,000 pay almost a third of the total tax take, according to the ATO.
But by targeting the tax breaks of the “wealthy”, the Albanese government reckons it’s on a winner.
Jim Chalmers has overhauled what had become a rather obscure tax expenditures statement into an instrument of class war aimed at prosecuting its case for clawing back revenue in the May budget.
Super is being targeted now, but this analysis provides plenty of ammunition for an assault on capital gains tax concessions, negative gearing, family trusts.
The key is the distributional analysis, which shows who are enjoying the most of these exemptions, concessions and deductions.
Spoiler: it’s not the poorest Australians.
Amusingly, Jim Chalmers in a statement said: “The tax expenditures and insights statement is a requirement under the charter of budget honesty – it’s not a statement of policy or intent”. Two sentences later he happens to mention that the statement “shows the 10 biggest tax expenditures are worth more than $150bn annually – around a third of the top ten is made up of superannuation tax discounts”.
The largest super tax concession is the $21.5bn in estimated revenue foregone in this financial year as a result of the lower 15 per cent tax applied to earnings on super in the accumulation phase, and the zero tax applied to earnings in retirement.
Then there’s another $23.3bn the tax man loses by only applying a 15 per cent impost on contributions into super.
“The majority of these super tax breaks go to high income earners. For instance, over 55 per cent of the benefit of superannuation tax breaks on earnings flow to the top 20 per cent of income earners, with 39 per cent going to the top 10 per cent of income earners.”
No agenda here!
That’s a massive pool of money for a government who wants to spend big but needs to take steps to chip away at a $50bn deficit that stretches beyond this decade.
But to make real inroads into that deficit without hurting middle class Australians will be difficult.
It’s worth noting that you are in the top 10 per cent of highest earners in the country – the top decile and the biggest beneficiaries of concessions – if your wage is $130,000 or more. That’s a good wicket, but it doesn’t make you “rich” if you’re living in one of the big cities.
It might, though, make you a target for tax hikes.
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