Thank you, tax man!

During a recent wet Queensland weekend, I spent some time tidying up my personal paper work. In the process, I came across my 2013/14 income tax assessment. Attached to the assessment was a lovely letter from Australian Taxation Office (ATO) thanking me for my tax contribution.

Included in that letter was a line-by-line breakdown of how my “contribution” was spent.

Now I am sure that the tax I paid, and how it was spent, was proportionately the same for all taxpayers, but it did provide some interesting reading.
The largest single component of my contribution (almost 37%) was spent on welfare, with 15% supporting the age pension, 10% being paid to families, 7% for people with disabilities, 2.8% for the unemployed, and 1.7% being used for “other” purposes.

With the recent media coverage around the unsustainability of the current welfare bill, I guess there were no real surprises with the information provided by the ATO.

But this got me thinking…

While I respect the need to pay taxes, and thereby make a contribution to a better society, I wondered how many Australians actually pay tax. A little bit of Internet surfing started to reveal some interesting results. One report based on some research conducted by the National Centre for Social and Economic Modelling revealed that almost half (48%) of Australia’s 12.2 million “income units” pay no net tax. By that they mean that even though these “income units” may actually pay some tax, they receive welfare payments that exceed the tax they otherwise pay. The welfare generally comes in the form of pensions, family tax and/or childcare rebates.

Other data, this time from the ATO, revealed that the median household pays $18,000 a year in tax, but receives $5,200 in welfare payments and almost 18,500 in government services including free or subsidised healthcare, education and childcare.
Needless to say, the welfare debate is going to continue for some time to come. It will be interesting to see how the Government tackles some of these issues in the upcoming Federal Budget.

And for anyone that is interested, of the tax we paid in 2013/14, almost 18% was spent on health, 8% of defence, 8% on education, almost 8% of running the public service, and 3.7% was spent on interest to cover Government debt. The rest was spent on transport and communication, housing and community, foreign affairs and economic aid and other minor expenditure items.

  • Jake
    February 27, 2015

    PK are you including GST and sin taxes in those figures?

    • Peter Kelly
      March 3, 2015

      Thanks for your comment. The figures cover federal direct taxes. They don’t include GST and indirect state taxes.

  • Phil Tucker
    February 27, 2015

    That’s right Peter, 50% pay no tax. The top 2% of tax payers pay 26% of all income tax paid. Thanks for your interesting article.

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