Contributed by Adam Carlton
It is no secret that the richer you are, the more you are favoured by Australia’s taxation system.
According the Australian Financial Review’s latest Rich List for 2017, the richest 200 have $232 billion between them. Sixty are billionaires.
Including the Medicare levy, this group paid an income tax rate of 23.5 percent. This is the rate on paper. They employ high priced lawyers and accountants to take advantage of all sorts of loopholes to pay even less.
People on a wage do not have the advantages and must pay 23.9 percent. On the surface, it looks like the difference is marginal. But wage earners do not have the advantage of the loopholes that are enjoyed by the mega rich. In other nations, controls can be more stringent. It’s why many people choose to hire a law firm to handle their tax, such as Tax Page in Canada.
Back to Australia where the trusts, company structures and offshore havens reduce their declared income and therefore pay much less income tax. This is possible because corporations law regards the business structures set up as a separate entity to the owners.
Trusts holding and nominee companies do not have the audit reporting requirements of other companies. Therefore, money parked in them is not declared. Networks of companies are also set up to obscure the money trail. The owners are able to use them, not only to hide money parked in them, but also to cover a range of costs associated with their lifestyle. They can live off company credit accounts and pay a portion of a range of bills and have all of this written off as expenses to the company.
There is something obscene about the claim that the rich are bearing to great a tax burden and that this needs to be lowered further.
This section of Australian society tends to accumulate very expensive property. When they sell it, a 50 percent discount on capital gains tax is a windfall. The Treasury estimates that trimming the capital gains tax (CGT) discount from 50 per cent to 40 percent, would generate $11.1 billion in the next financial year. The figure excludes property in the hands of companies. It gives an idea of how much money is involved.
It should be noted that the big growth area for the mega rich is owning property.
Most of the attention over concerns with the unfairness of the existing tax system has been on company tax, no doubt fueled by government lowering of the company tax rate and growing public awareness of the scale of corporate tax avoidance and the use overseas tax havens. This concern is warranted and action is needed.
With this in mind, if you would like to learn more about how businesses can best navigate the complexities of paying tax, you might want to reach out to some of the different Tax Accountants Adelaide has to offer.
That being said, if the intention of changes to the tax system is to shift to a fair tax system that ensures all contribute a fair share, personal income tax also needs to be considered. There must be a shift to a more progressive system that is based on affordability to pay.
Considerable support has been generated for the Greens proposal for a top income tax rate of 50 percent. Even this is going to be of limited effectiveness, unless there is an end to the loopholes that enable declared income to be cut down to a fraction of what it really is.