Ahead of the federal budget tonight, the Grattan Institute has put together a useful fact sheet including detailed distributions of what Australians actually earn. It covers: the distribution of taxable incomes reported by the Australian Taxation Office (ATO); the distribution of individual and household incomes reported by the ABS; and the main measures of wages. Below are key extracts:
More than three-quarters of Australian workers earn less than the average full-time wage of $90,300. The typical Australian worker earns just $57,918. Most Australians earn less than the average hourly wage, and many employees only work part-time.
The typical worker earns $57,918. But more than a third of Australian adults aren’t in paid work, so the earnings of workers aren’t a good guide to the incomes of all people. The typical adult’s income is only $36,893, according to the ABS…
The top marginal tax rate of 45 cents in the dollar kicks in on taxable incomes above $180,000 a year. Journalists often use this threshold as shorthand for ‘high income’. But it may surprise you to know that just 3.1 per cent of Australian taxpayers had taxable incomes that high in 2016-17, the latest year for which figures are available. Only another 14.9 per cent had taxable incomes exceeding $80,000 a year. So a taxpayer with an income of $80,000 a year is therefore in the top 20 per cent of Australians…
The most comprehensive source of data on the distribution of Australians’ incomes is the ABS Survey of Income and Housing. It provides a representative snapshot of the incomes of all Australians, including those not in paid work. The ABS publishes data on gross (pre-tax) and disposable (post-tax) individual and household incomes…
So here’s the bottom line: the typical Australian household reported a disposable income of $89,319 in 2015-16, but that figure falls to $52,930 after adjusting for household size.
Grattan also notes that the Coalition Government has misrepresented the tax data in lobbying against Labor’s policy changes to negative gearing and franking credits:
Negative gearing allows investors to deduct losses on their rental priorities against their wage and salary income, suppressing their taxable incomes. Therefore relying on the taxable incomes of those affected by the ALP’s proposed changes, without deducting rental losses, is misleading. People can have a high total income, but a low taxable income, if they deduct a lot of money through negative gearing or other means.
And taxable income ignores the largest source of income for many wealthier retirees: tax-free superannuation. This has led to claims that most people affected by the ALP’s franking credits changes are low-income earners. Their taxable incomes may be low, but their total incomes are not. Most of those affected are retirees too wealthy to receive any Age Pension.
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I will add that the Coalition typically uses the $80,000 threshold as the definition of ‘middle-income earners’ in relation to negative gearing, when in fact a taxpayer with an income of $80,000 a year is in the top 20% of Australians.
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
