A Golden Age of Tax Concessions for the Rich

New data released by the Australian Treasury in February shows it is a golden age of income tax concessions for the rich. Tax concessions for the wealthy in Australia are at unprecedented levels. They benefitted nearly $40 billion from seven major tax concessions in 2019-20. The avarice of the rich is robbing disadvantaged schools and other public services of much-needed revenue. It has huge social and economic costs.

The latest tax expenditure statement (now called Tax Expenditures and Insights Statement) shows that the top 10% of taxable income earners received $39.1 billion from just seven forms of tax concessions. The total revenue forgone from these seven tax concessions in 2019-20 was a$84.4 billion and 46% of this went to the top 10% of income earners.

Major Tax Concessions for Top Income Earners, 2019-20

Tax ExpenditureRevenue Forgone ($M)Share to Top 10% (%)Gain by Top 10% ($M)
Employer Superannuation Concessions20,250306,075
Superannuation Earnings15,750396,143
Rental Dedications18,600356,510
Franking Credits17,2006811,696
Capital Gains Discount9,240756,930
Donations & Gifts1,970551,084
Managing Tax Affairs1,40047688
Source: Australian Treasury,Tax Expenditures and Insights Statement, February 2023.

The figures ignore tax avoidance through family trusts. High income earners can also reduce taxation through family trusts. Trust earnings can be allocated to family members who have low income from other sources so that the taxable income attracts the lowest rate of tax possible. For example, a high proportion of the trust income can be allocated to adult family members who work part-time so as to take advantage of the tax-free threshold applying to them. In some circumstances it is possible to reduce the tax bill to almost zero.

The Treasury does not estimate the tax revenue lost through this rort. However, it does show that about 22% of those who receive trust distributions are in the top income decile and they accounted for about 60% of all income received from trusts by individuals. This amounted to about $31.2 billion.

Estimates of the loss to tax revenue are hard to come by. However, a few years ago the University of NSW tax law expert, Dale Boccabella, estimated that tax avoidance through family trusts is reducing government taxation revenue was at least $2 billion a year. At the time, he said this was a conservative estimate. 

The rich also get rewarded with tax concessions to employ armies of lawyers, financial consultants, and accountants to arrange their tax affaires to avoid tax. The costs of this “wealth defence industry” can be claimed as a tax deduction. The Tax Expenditures and Insights Statement shows that the top 10% of income earners received a tax concession amounting to nearly $658 million in 2019-20.

The cost of these tax concessions is borne by the rest of the community. It siphons off revenue that would be better used to fund schools, TAFE and universities as well as other services such as health care, mental health, public housing, unemployment benefits and so on. As the economists Emmanuel Saez and Gabriel Zucman have observed, tax avoidance is “the triumph of injustice”.

The Stage 3 tax cuts for the rich will rob even more funding from services for low income families. According to estimates by the Parliamentary Budget Office the Stage 3 tax cuts will cost $243 billion over eight years from 2024-25 to 2032-33. The top 20% of income earners would receive a tax cut of $188 billion, nearly 80% of the total benefit of the tax cuts. Those with a taxable income of $180,000 or more would get $118 billion. The top 1% of income earners, with taxable incomes of over $309,000 in 2021-22, will get a tax cut worth $11.8 billion. This massive windfall for the richest people in Australis will exacerbate inequality and deny much needed funding for key services such as public education, health care, aged care and the NDIS.

To compound the injustice, the richest families in Australia also benefit from over $1 billion a year in government funding for the elite private schools they send their kids to. Figures published on My School show that 126 of the richest schools in Australian received $1.25 billion in government funding in 2020. Not only do the wealthy avoid paying tax, but they get huge subsidies out of the taxes paid by the rest of the community. The sheer scale of the avarice is gobsmacking.

These schools have a massive resource advantage over public schools. Yet, public schools which enrol over 80% of low socio-economic, Indigenous, remote area and disability students are massively under-funded. They are under-funded by nearly $7 billion this year alone.

It is a disgraceful injustice and an inexcusable waste that elite private schools catering for the wealthy should continue to receive government funding while disadvantaged public and private schools are denied adequate funding and face severe shortages of teaching staff and educational materials. Yet, the avarice of the wealthy and their tax concessions goes unchallenged by governments while the rest of the community, especially disadvantaged families, suffers from inadequate services. As the US Supreme Court Justice Oliver Wendell Holmes famously said over 100 years ago: “Taxes are what we pay for civilized society”. It is time the rich in Australia fulfilled their obligation to support a better society.

One Reply to “A Golden Age of Tax Concessions for the Rich”

  1. There seems to be a growing narrative being put out about how high-income earners are rorting the system.

    As you clearly don’t fall within this bracket, let me explain something to you.


    These so-called “rich deductions”, they are freely available to anyone. Does everyone have the means for them to be beneficial? No. But that’s like saying we shouldn’t sell nice cars because not everyone can afford to buy one.

    If anything, you are actually discriminated against by the tax system if you are classified as high-income.

    In case you aren’t aware, there are grumblings around the super system. Which is infuriating because I am already penalized because of my salary. You get to have your retirement savings put in at 15% tax, mine? 30%. This isn’t even if I exceed the $27,500 cap. It’s just always 30%. How is that fair….

    The purpose of Super is to ensure you save enough to fund yourself in retirement and don’t have to rely on a pension. To penalize people for trying to build a nest egg to ensure they have enough money to feed themselves and pay medical bills in old age is shortsighted. It will just mean more people will need access to the pension, which means increasing taxes even more, and so the cycle goes.

    The Government says a super balance of $400k for a couple should see you live comfortably in retirement. If you work it out, that’s $500/week per person, and you’ll be out of funds after 7/8 years. The retirement age is currently 67. You do the math.

    I’m not a business owner, I’m not a multimillionaire, I don’t own a house or a boat, or even a car…. I put as much as I can after the Government has taken HALF every month into trying to ensure I have enough when I retire because I’m afraid that in the coming years there will be more taxes, and more caps, and more limits. Because they never roll any back, they just take more.

    I’m now 30, in the highest bracket, and even putting the max into super, and saving as much as possible, by the time I retire I would still not be able to buy a house in Sydney outright.

    Maybe instead of asking the people for more money, they should have a look at how they are spending our money.

    For example, The NDIS budget last year was larger than the budget for the whole country’s Medicare. $30b was spent on 1% of the population, $27b was spent on the remaining 99%….

    Or how about we reassess our foreign aid program? We gave a quarter of a billion dollars to Indonesia last year, who spent it on weapons. We gave similar to India, they spent it on Spacerockets. Etc.

    This country could be wealthier than the Oil nations, but our Government has sold off our assets to foreign companies with no ongoing royalties. The Australian Gas fields, for example, if we charged the same royalty on exports as other countries, we’d be wealthier than the Saudis, but the QLD government just gave it away. And now they have gas shortages.

    Who owns the rights to our water supplies? Oh right, China.
    Who owns the biggest agriculture producers? Saudis
    Who owns the ports? China

    If they are so concerned about money, maybe they shouldn’t have given away our mineral and resources rights away for free for produce and money to be shifted offshore.

    It’s not top-bracket employees that are rorting the system, it’s our own freaken Government.

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