Just a point on taxing the rich. Tax them too much and they will just leave.
Many high earning Aussies have left our shores for countries with more favourable tax regimes.
The UK experienced a mass exodus of cash and high earners in the darkest years socialist excess. A more reasonable tax scale has seen that trend reverse.
Canada, which has a taxation regime similar to Australia (but a lower cost of living), loses most of its brains to the US because of lower taxes (and higher wages)
People, it is not just income tax that we shoulkd be looking at, but the overall taxation burden. Multiple layers of indirect taxes ensure that we are paying way more than just our marginal rate.
The dollars earned at the 47% marginal rate, you will end up paying much more effective tax on.
Example: Suppose you work some overtime taxed at 47% (+1.5% medicare levy) to save up fo a holiday that cost $1,100.
To pay $1,100 you need to earn $2134…on an item that is worth $1000(exclusive of GST)
Your effective taxrate = 53.14%
Thats not including all the other little hidden taxes and levies.
Too High!!!
Good point WayneL. You can’t expect higher income earners to subsidise the whole nation without some benefits for them. It leads to hiding income offshore or perhaps even investing in trust structures to minimise tax paid (that was a little naughty of me to bring up [
][])Let the infidels leave, I say [
]kay henry
Let the infidels leave, I say []kay henry
Opinions often change as circumstances change[
][}]Fudge111, from your post I’d say you have a lot to learn about money and investing. To say that someone with a family is silly not to be able to live on $70,000 is just plain naive. I really think it would be wise for you to go out and find someone who has a copy of the game Cashflow 101 and go and learn about the value of money. This might teach you that it’s harder to get ahead the more income you earn as with more income you have more expenses, therefore it’s hard to adjust your lifestyle so that your passive income will outweigh your expenses. This might teach you something useful.
Point taken Paul, i don’t want this to get personal,
Fudge111It’s all good. No problems here… a bit of “spirited debate” never hurt anyone though… [
]Cheers,
Paul…“I want to be rich, and stupidly happy – so far i’ve only managed to achieve the stupid part…”
Hi Fudge: though the families that I mentioned before might have a marginal tax rate of 30c in the dollar, their effective marginal tax rate is much higher if they recieve most forms of health or family benefits.
This is because as their income increases their benefits are clawed back. Thus they might keep much less than 70% of the extra income they earn.
Let’s say someone’s income increases by $1000. The tax rate is 30c so they actually get $700. Now let’s say that the benefit that they’re on decreases by 40 cents for each extra dollar they earn (this is hypothetical – it might be more, it might be less). So there’s $400 more gone. Thus from that original $1000 increase the person is left with only $300. That’s an effective marginal tax rate of 70% and above than that paid by top income earners.
Of course to fix this by making the benefit universal would mean much more ‘middle class welfare’ and higher taxes for all, so one has to draw the line somewhere.
And it’s not just families either who have high EMTRs. Daryl Dixon was on the radio last night talking about the new super co-contribution for low income workers.
If you are earning up to $27k/year and put in $1000 then the government would also put $1000 into your super. If your income was above this the amount the government put in would drop until it was zero at $40k.
Sounds good, and it is, but it further increases the EMTR for people in the $27-40k range.
Peter
Luckyone wrote:
I really think it would be wise for you to go out and find someone who has a copy of the game Cashflow 101 and go and learn about the value of money. This might teach you that it’s harder to get ahead the more income you earn as with more income you have more expensesWith Cashflow 101 you pick up a card and you’re stuck with particular expenses. These cannot be changed.
Fortunately in real life we have a bit more choice, and we can increase, decrease or change expenditure.
Now if we couldn’t make choices, what a real misery life would become!
If this can’t or don’t want to trim spending, then some people might prefer keeping their expenditure at current levels and looking at ways to increase income to increase savings. My favourite wealth book ‘The Millionaire Mind’, though it praises frugality and living below your means, says that both approaches have been used successfully by millionaires surveyed.
Or if neither appeals, maybe changing their financial independence objectives to something that’s more achieveable in harmony with other goals would be better.
therefore it’s hard to adjust your lifestyle so that your passive income will outweigh your expenses.‘hard’ because there are entrenched habits to change. But not impossible for most people. It depends on our values and what’s important. And it doesn’t matter if some people end up being financially independent at 70 rather than 35 if their life has been fulfilling in other ways.
We can’t all be Steve McKnights, but I think most employed Australians who put 20% of their income each week into wise investments will do alright. If you want financial independence earlier just add leverage and/or higher savings.
Regards, Peter
The only fair tax system is one which charges people exactly the same rate no matter how much they earn or what gender they are or if they are single, married etc. If the tax rate was the same for all people then every person would pay the same proportion of their income as someone who earned less. Earn more pay more…The incentive to earn more would be greater and people would work harder. The current Australian tax system is biased in favour of the poor and discriminates against the wealthy (over $63500).
And if you think that your tax contribution stops at the tax you pay on your salary then forget it. GST, Excise, Duty, Ansett Levy, Tax on Alcohol, Fuel etc etc all go on top. The real total amount of tax that we pay is probably in the region of 60-70% of what we earn!
Oh whats the point of complaining!
Well, i give in except to say that if people all struggle on 70k every person at the supermarket where i work must be bankrupt!!
And how can you explain Broz’s family, 5 kids and annual income 25,000, they manage it, so that is all i will say about that issue.
Fudge111[
][]key henry – Re your statement “Let the infidels leave, I say”
It sounds like you need to be the one leaving. Try a stint in Afghanistan, Iran, Cuba or North Korea where there are a lot fewer “infidels” and let us know how you like it!
Just remember, Australia is a free, capitalist (infidel) and democratic society. I would put it to you that it is the best place in the world to live for many reasons but not because it has a business friendly tax system
!Here Here, Aus is the best place to live in the world, stop being a bunch of sooks, people who are greedy are the ones who give the rich a bad name, that is why all the rich are automatically assumed to be snobs!
Fudge111[
]hehe Fudge- enjoying yourself there? [
]kay henry
What a can of worms this is.
Individual tax in Australia is very high with a top tax rate of 48.5% (all in), what most people don’t take account of is the ludicrously low tax free allowances here. Plus the fact that usually these allowances are not automatically adjusted for inflation each year (bracket creep of a different kind that affects everyone).
As far as I am concerned, there is not only little incentive to work harder, but there is also little incentive for an entrepreneur to take risks when tax accounts for a large chunk of their potential profits (even though this has changed for the better).
Anyone who thinks that earnings above $60k should be taxed at nearly 50% is living in cuckoo-land. Add on mind boggling property stamp duty rates and Australia becomes an investment no-go for many. I have not and will not buy any property here that is already established while we are getting fleeced by greedy politicians via stamp duty. I would rather go o/s to spend my money.
There is also no incentive for anyone to save here. Superannuation laws make investing for your future much harder than it needs to be, unless you a politician of course.
So there Australia, your tax system sucks!
Talking of how the Tax System does little to encourage people to save for their own retirement. This is also true of the current talk about taking away -gearing by the RB. Many people now prefer to invest in property for their retirement instead of equity markets. Take away -gearing and suddenly you have a whole lot of people who wont have enough to retire on! This along with the aging population would be a disaster and that is why it just must not be allowed to happen.
You make some great points domdom, but i am going to stick with my theory.EVERYONE gets their first $6000 tax free
EVERYONE gets their next $15600 at 17%
EVERYONE gets their next $30,400 at 30%
EVERYONE gets their next $12,500 at 42%and therafter they are taxed at 47%, i mean, everyone gets a fair go, and 47% is high but it is still low enough too encourage people too continue making money.
Interesting interpretation, and yet so very very flawed.
It fails to take into account the fact that someone on higher incomes worked damn hard to have that income – a tertiary qualification doesnt come cheap. Meanwhile, they’ve sacrificed 3-4 years of earning potential.
Then of course, all the govt benefits are means tested, so higher income earners are most certainly not treated equally.
The current system is taking far too much (both in direct tax and lost benefits) from middle income earners (which the govt claim, according to their own definition, are on high incomes).
The best things the government could do is:
(a) allow people to claim PPOR home loan interest as a deduction
(b) allow income splitting across all dependents to reduce individual tax rates
(c) set the tax rates with a lower emphasis on the middle-income earners, and index it to CPIMany other suggestions, but those just to start with….
I think the rich should just be happy they are well off and not be greedyPeople in the top bracket aren’t rich!!!! $62k, if your wife is at home taking care of kids, and you’re paying a mortgage, is not much money at all.
The other thing you’ve neglected to consider is the very reason why you’re here (in this forum)… to find a means of retiring comfortably. The govt has made it very clear it wants us to fund our own retirements. How do you propose we do that if it’s all going in tax???
Our tax dollar these days gets us very little…. we’re discouraged from using medicare, whilst still being required to fund it thru the levy, tertiary education costs are climbing, we’re forced to fund our own retirement rather than look forward to a pension. It stands to reason that we should want to hang onto our money because the reasons for doing so are nothing to do with greed, and all about necessity!
Well, i give in except to say that if people all struggle on 70k every person at the supermarket where i work must be bankrupt!!And how can you explain Broz’s family, 5 kids and annual income 25,000, they manage it, so that is all i will say about that issue.
They manage it with a lot of help from the government. My dad used to have a production manager working for him. They guy ended up quitting because he could get mroe money in welfare and child support payments from the govt, than he could on an award-rate 9-5/5day job!
Certainly, someone on 25k will do it tougher than someone on 50k. However, don’t ignore the fact that the person on 50k worked hard (harder than the person on 25k) to get where they are, and have every right to profit from their work. Also, many business owners took a great risk to go out on their own (my parents started with nothing) – the money they make is their reward for that risk. They repay society by providing employment. Someone whinging about being on a low income has only themsleves to blame because they chose to (a) not to better in school (b) take the easy road and not risk failure by starting their own business.
Hi fellow taxpayers,
What are your thoughts on an even simpler tax system?
Double the tax free threshold to $12,000 and pay a flat rate of tax after that amount regardless of personal income. No claimables, no rebates, income derivation is up to the individual.
Staples cost the same for all, luxuries are a choice for those who choose to afford it.
Regards, Phil
Richmond
If you note I did mention that there are people who do deserve help and that I was more than happy for my tax to help them.
You are right I can’t judge them from a picture, however I also didn’t see a gun to their head saying they must smoke or not to make use of the free support networks provided by the gov. for what problems they may or may not have.domdom
I couldn’t agree more with education but there are many people who also don;t want to learn. I mean how many people will tell you the stockmarket is dangerous and that you will lose money and yet they will have spent less that 10 min learning about it? It still comes down to the choice to find out more about it and whether it really is that risky.
Fudge
I think the brackets should be adjusted as eventually bracket creep will leave those earning less to also be on the top tax bracket. You will also find that those high income earners who can be taxed more will generally have more resources at their disposal to minimise tax… ie trusts.CGT deductions are still applied at the marginal rate, however it is a discount. (ie less dollars of tax for equivilent in income). It is generally those who are in the higher incomes that can make better use of this to minimise tax paid.
Finally Richmond, I know you probably didn;’t intend for it but please watch what you say about ivory towers and looking down on lesser people. It comes very close to being personal (not that I really mind but others may). Burn my ideas for all you what, It’s one of the wonders of free speech, besides i love discussion, but when it gets personal it’s a sad, sad day. Oh and I do realise how lucky I am and I am more than willing to offer what little help and knowldge I have to those who CHOOSE to take that first step.
It’s all about choices!
Josh
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