What are these people doing in order to pay no tax?

I'm sure lots of you have been getting your tax return documents in order over the last month, so this is just a discussion (not for accounting or legal advice) for news reports like this:

https://www.abc.net.au/news/2020-07-18/tax-stats-2017-18-ato...

"There were 14,907 Australians who declared a total income of more than $1 million in 2017-18." and
"However, out of that millionaire group, the data also show 73 paid no net tax in 2017-18. For 54 of those millionaire earners, that was because they had enough deductions to lower their taxable income below the tax-free threshold of $18,200."

What do you think these people are doing to reduce their taxable income by that much?
Making a deduction is one thing, getting it back (or most of it back) is another.

I have an accountant, and am not in this million dollar category, but some examples of possible deductions would be interesting to talk about.

Comments

              • @Pete10001: What's this got to do with paying taxes? If a dentist is earning the salary of someone who is considered to do alright in less than an eighth of the time required, what excuses do you have to not pay your taxes?

                • @bkhm: u miss the point regardless of it being 15k or 500k ppl ripping the system are ripping the system

                  the system itself needs to change - your mindset of having ago a wealthy only is why it will never change…if it doesnt change 4 all then it will continue the way it is….

                  The system needs to be fairer - Labor last election 'targeted' the top end of town and they lost from a pretty much unlosable position.

                  I prefer a 'flat' simple tax system that is the same for all with NO loopholes but im not an accountant…..

                  • @Trying2SaveABuck: If you want a flat simple tax, then it's got to be much higher than what the minimum one is now. So now, people earning 40, 50k, will be paying what, 40% tax? The same people who survive paycheck to paycheck and you want to tax them more? Now the poor are poorer and the rich are richer. Or do you want to keep the tax rate at 19% so now we have less money overall as a country and have to cut back on healthcare, education and defence? You choose because this is how a flat tax system works.

                    u miss the point regardless of it being 15k or 500k ppl ripping the system are ripping the system

                    How are people on 15k a year ripping off the system? You're missing the point, the whole point of taxing the wealthy higher is to redistribute the wealth from what is essentially an unfair system where the rich maintain rich through private education where they can almost guarantee most students will get a high enough score to enter dentistry and nepotism whilst the poor stay poor. It's essentially an unfair system where some kids never had a chance in the first place. So when these people earning more and more money, why should we not tax them more? This is just so the poor don't have to suffer as much and the rich still stay rich. The highest tax bracket is 45% but that's over 180k. So if you are earning 1M, you still get to keep more than $300,000, 6 times the median salary of Australia PER YEAR on top of what you earned up to 180k. To avoid tax is just GREED poor people who may avoid tax is because they have to forgo basic necessities if they don't. There is a very big difference here. You want these people to have MORE money? For what purpose exactly, who needs more than 400k per year? Why can't we put this money to better use like creating jobs, improving the health care system, funding education, science, training programs, mental health programs etc. We have to take into account how much more revenue this money would make in the economy than a single persons bank account, hence taking all this into account, it makes sense to tax rich people more, they should realise this and pay what is required of them.

                    NO loopholes

                    Loopholes aren't a consequence of a tax system, you can have a flat or tax bracket system and have loopholes. What I hate is when people use it as an excuse, the law shouldn't have to cover every single aspect of what we do. If one day it became legal to shoot people on the street, does that suddenly make it okay? Even if it was legal, would you not want them to do it? Policies mean nothing unless people enact them. Just because it's legal doesn't mean you have to do it.

                    • @bkhm: tax the wealthy more to redistribute it fairly to people that need it more?

                      alright 2 points 1st do you trust the government to 'redistribute it fairly' ? becuz i sure as hell dont tbh we pay enough tax to ensure there is minimal inequity in Australia but so much is wasted on 'shit' and poor mismanagement federally/state/local council

                      2nd point who determines who needs the money most? we spend $30bn on Aboriginals/TSI for them to continue to have a bigger gap every year? we spend about 10bn on refugee re-settlement in which 91% of them are on welfare 3 years after re-settlement….also they are far more likely to commit crimes then other migrants, 350m is spend on MP pensions annually when MPs are all multi-millionaires…….i could go for ever

                      Your argument that money would be taken out of education, defence and health care is so f**ken stupid becuz we waste money on shit - you need to go back to school and look at the facts we are one of the heaviest tax peoples in the world yet have some of the most in-efficient process

                      You need to stop comparing us to USA - compare our system to Switzerland, Canada, Liechtenstein etc places with FAR LESS natural resources and land then we have yet have higher wages, less taxes but similar standards of living

                      • @Trying2SaveABuck: Well then it seems your problem isn't the tax SYSTEM but government whereas I was simply referring to the system of taxing rich people more. You wanted a flat rate but now it's the government that's the issue?

                        alright 2 points 1st do you trust the government to 'redistribute it fairly' ? becuz i sure as hell dont tbh we pay enough tax to ensure there is minimal inequity in Australia but so much is wasted on 'shit' and poor mismanagement federally/state/local council

                        Then vote for the right people

                        2nd point who determines who needs the money most? we spend $30bn on Aboriginals/TSI for them to continue to have a bigger gap every year? we spend about 10bn on refugee re-settlement in which 91% of them are on welfare 3 years after re-settlement….also they are far more likely to commit crimes then other migrants, 350m is spend on MP pensions annually when MPs are all multi-millionars…….i could go for ever

                        Right so let's all stop paying taxes ?

                        You need to stop comparing us to USA

                        When did I do this?

                        Canada

                        Do you have a source for this? So let me get this straight, don't look at countries where tax rate is low and the system is inequitable but look at systems where the tax rate is also low but they have equal quality of life? Sounds a bit like cherry picking to me. Maybe there's more to it than just tax rates? So you're saying we use money inefficiently hence we don't actually need to be taxed as much and you want to propose a flat rate system. What tax rate would this be?

                        I need to go back to school but you type like a fifth grader

                        • -1

                          @bkhm: There is no point arguing with an idiot have a good day

                          • +1

                            @Trying2SaveABuck: haha okay, well you kept switching your arguments so much I wasn't even sure what you were advocating for in the end. Although this sort of outcome is what I predicted anyways, common response from someone who faces cognitive dissonance and you were the one who suggested a flat rate but couldn't even answer the question of what flat rate is a perfect example of that. Even that last statement you made is false, I can definitely think of reasons why you would want argue with an idiot. Have a good day too :)

                  • @Trying2SaveABuck:

                    Labor last election 'targeted' the top end of town and they lost from a pretty much unlosable position.

                    So what policy proposal did you particularly like from Labor? Let's examine that…

              • @Pete10001: Difference is, the training required to become a dentist, and all the knowledge associated is difficult and not for everyone. Also I imagine the training and equipment required to become a dentist is a lot more expensive than training to become a teacher.
                Finally, dentistry is pretty high risk - if you screw up, you could get sued and lose your job.

                Not disrespecting teachers, but there are plenty of jobs that should be paid higher. On the other hand, a high performing teacher should get paid well for good work, but that just causes a bunch of other issues.

            • @bkhm: And that ATO data for a surgeon is bullshit because they are all tax minimising. There'd be almost no full time surgeons in Australia who 'only' make $300k. Maybe junior surgeons in public hospitals, but any surgeon in private practice would laugh at that figure.

              • @DisabledUser100949: Exactly, this means that either an overwhelming majority of surgeons are rorting the system or some are minimizing to basically zero whilst others pay tax on the full amount whilst the amount of people on welfare or low income doing the same is negligible.

                • @bkhm: They can't minimise to zero because of medicare, but they certainly earn a lot more than that.

                  • -1

                    @DisabledUser100949: Well then it's probably that the majority is doing it. Went to see one last week, saw 3 patients within 15 minutes, first patient was $216, the next two $115 and she's constantly booked out. Even if she makes half of what she charges, not even considering the surgery days ($2500 for 2 hours, 6 surgeries a day) that's about 1M.

            • @bkhm: what you dont understand is the people getting 15k from center link in Australia need the system they need the top 1% to pay taxes, we all do….the top 1% dont need the system, they dont need Australia…..the system im not rich but if a middle income earner like me thinks the system isnt fair then you certainly have a problem Bcuz everyone i know who is a similar situation to myself feels the same way….

              I find it amazing how much people run with the idea of 'tax the rich' if it was 'that easy' then the we wouldnt have any problems would we?

              I cant be bothered rebutting all you're argue becuz i've leant a long time ago not to argue with people entrenched ignorance and stupidity. - if you think the commonwealth or state governments spend money effectively then good on u

              Ill just say this Trump didnt pay a lot of Income tax because more years he didnt make any money. He wasnt actually a great business man he inherited his wealth, loads of his businesses (hotels etc) run at a loss. - But you're mate social social mate Bidan is actually up for half a million in tax fraud. But you wont ever heard the media report that accurately

              The tax system isn't fair imo

          • @Trying2SaveABuck: "no illegal migration"

            Well… If you are not an Aboriginal, then you are an illegal migrant. Just ask Aboriginals.
            Oh well, if only the world was perfect.

  • -1

    They're donating to the liberal party

  • +1

    If people knew the disproportionate wealth of this country and incentives for rich people there would be rioting.

    Yet we have crappy tax laws when it comes to big corporations. But we drive people to suicide for fake robodebts and we spend more on franking credits then we do on schools.

    Yet we continue to vote for what is not in our best interests. Reap what you sow.

    • +3

      I think most politicians line their own pockets, irrespective of who you vote for. The more I've learnt, the more disillusioned I've become with our political system.

  • -1

    Most of the high earners use complex tax structures… various trusts, holding companies and so on to pay relatively little tax. The average Joe who can't avail himself of these, is then left to carry the burden.

    • Can you describe an example of the flow within these complex tax structures and how much tax is actually being saved? Let's run the numbers and compare to average Joe.

    • If you are a PAYG employee on 250k pa. there are literally ZERO options to reduce tax other than the usual super contributions/salary sacrifice car/negatively geared property and charitable donations. What else can high earning PAYG employees do? One must open a PTY LTD and get their income that way to open up avenues of tax optimisation.

      • But at the end of the day, what do they do to convert the untaxed money into personal properties (houses, furnitures, cars, electronics, luxury goods, foods, clothes, etc)? As any declared personal income will be taxed accordingly, and I assume we can only that money for personal expenditures? Ones can have lots of assets and money in their Pty Ltds, but if they only draw the money up to the tax-free threshold, then their lifestyle will be no different than the poor people working on minimum wage.
        Something is missing here.

  • If I were those people I'd pay just enough to get off the radar.

  • "Why do racing drivers live in Monaco? Clarkson's Motorworld - BBC"
    https://www.youtube.com/watch?v=_ObRzF8I5DE

  • This is a great discussion, thank you to everyone who commented.

    I'd be wondering about those who mentioned charity, surely they would have to "prove" or show that the charity is legitimate and actually being charitable. It looks like Shane Warne got around those and got cleared of wrongdoing - however still had to shut the charity down.

  • People also forget that if rich people that are making a ton of money are usually also spending a ton of money. This results in GST, stamp duty, luxury car tax etc. So even if they've dodged a ton of personal income tax, they still paid a bunch of other taxes.

    • "People also forget that if rich people that are making a ton of money are usually also spending a ton of money. This results in GST, stamp duty, luxury car tax etc. So even if they've dodged a ton of personal income tax, they still paid a bunch of other taxes."

      You think so? There are people who look just like an average Joe, and you'd have no idea they are millionaires.

  • Start an abn
    Run a sole trader
    Over time build it up become a company
    Employ people - 10+ tax benefits for employing people
    Start a family trust
    Distribute money into lower tax earning family members
    Buy investment properties as many as you can up to your max borrowing power - tax write offs for investment properties
    When you want to buy vehicles do it at end of financial year and use instant asset write off for tax
    Build and sell duplexes triplexes and 4-8 town house and villas - hold for 12 months to reduce cgt and resell
    50k into super every year tax free
    Never sell shares or etf portfolio's - if you need cash get a margin loan against the shares and use the cash for your living expenses
    Buy and run a trucking business - very easy business to run on 0 net profit tax position while making a whole lot of money
    Build up to 5-10 investment properties then put granny flats behind each for 120k a pop creating a 8% yield and tax beenfits for building new depreciation and fixtures and fittings.

    The list is endless.

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