I just want to understand how this is even possible??
https://www.abc.net.au/news/2022-08-09/millionaires-paid-no-…
Also, the median earning Australian made $48,381.
Does this mean most ozbargainers are very well off with all the threads of people making 3-4 times this amount?
Don't be silly, he voluntarily went away to get re-educated about the wonders of the CCP.
Invest in something that's making a loss on paper, but will appreciate in value so much that when it is time to pay tax you'll have even more money anyway. Like a million dollar house that will be worth 1.6 million in ten years time. Though if you have a million in cash then you're probably better off positively gearing your properties so you can qualify for more credit so you can buy even more properties.
Only works when property is rising though
Most of the stuff these "rich" people do can be afforded by anyone, accountants aren't expensive.
Not those who asks for $80k a year for their tax-avoiding accounting services though.
You know if the ATO accuses you of tax avoidance you are guilty unless you prove otherwise (too busy to find the particular section)
Most likely the cost goes to tax planning and structures. Just like a lot of people who run business get told to setup a family trust.
The article talks about zero tax for 1 year but it goes on about how the laws should changed to stop it. That is like saying you made $100k on shares and suddenly you are considered rich and let's changed the rules.
I would like to know is whether these people that paid zero tax paid in tax in prior years or years after.
It is like a business that made $20k profit in 2019 before covid the made a $20k loss in 2020. Grossed $1m in 2020 and paid zero tax and ABC wants to change the tax rules on the basis of 2020. It is just selective reporting.
The 6,581 people living in postcode 6011 earned an average of $325k each. Impressive.
Plot twist, this postcode is ~6500 unemployed people and Gina Reinhardt.
Averages……
Median. Not the same.
Agreed. Hence why the 'average' quote is not indicative of necessary reality
Close, Gina isn't in 6011 but Andrew Forrest is.
Mining execs.
By rorting the system.
Ordinary people could do the same thing, but it would require co-operation and a lot of trust, making it unlikely. And if they did manage it, and it started to catch on, laws would be passed to stop it immediately, because no government can run without money.
So this is the only way to go then. Promote the tricks so a lot more people can do it so new laws would be passed.
The government doesn't really need the tax money since they can create the money but they do need us to need their money so we can pay the tax.
That's right inflation is a myth.
Only the US government can do that.
Does this mean most ozbargainers are very well off with all the threads of people making 3-4 times this amount?
Yes, I think most Ozbargainers are very wealthy but also Scrooge McDuck-level stingy.
One has to be very wealthy to spend $2k on gift cards in one Coles/Woolies visit, like a lot of people claim to do whenever such deals are posted.
If it saves you money in the long run, then you don't have to be wealthy. I bought a years worth of subscription credit when Zip had their double cash back weekend thing going on. It's a lot of money up front, but 12 months later you've saved money in the long run.
You have to be wealthy enough to have the 'lot of money up front'. Look up the 'boots theory'
sure, for many, $2k isnt that much. But its a lot for quite a few people; so it depends on where you sit on the economic scale as to whether you call someone who can load up with $2k of cards or a year of subscriptions 'wealthy'
I wouldn't consider myself wealthy. If I were wealthy I'd just pay what things cost. The only reason I buy in bulk, the only reason I have a pile of toilet paper and other bulk items, is because I'm so poor that I need to do things that cost the least in the long run. I did buy leather boots and solid leather bag when I was younger and went hungry for a few weeks to pay for them, but I still got them. My parents said even as a kid I was always comparing the cost per gram of candy, trying to work out what the best "value" was in showbags and stuff. And honestly, it'd be better to be wealthy and buy whatever and not overthink it.
The only reason I buy in bulk, the only reason I have a pile of toilet paper and other bulk items, is because I'm so poor that I need to do things that cost the least in the long run.
This requires a certain level of wealth to pull off though.
There are (more people that you'd think) who can't even afford to buy the 48 packs of toilet paper. Some can only afford the twin-packs or individual rolls (much higher cost per unit). Same applies to the larger bottles of moisturiser, etc.
And with buying these physical things in bulk, they often lack the space to store them (smaller dwellings).
My parents said even as a kid I was always comparing the cost per gram of candy, trying to work out what the best "value" was in showbags and stuff.
lol I used to do the same thing, but then I'd hoard/save a lot of the lollies for too long, and they'd expire :(
That said, we were lucky to be taken to the show and have show bags bought for us :)
the boots theory is exactly the point.
nobody sensible thinks they are wealthy, not even the ultra-wealthy. the poor certainly know they are poor tho
So purely looking at shares investing it works something like this. I invest $100 each in stock A B and C, after a year stock A and B get sold for $200 each and stock C basically died to $0.thanks to the capital gains 50%discount after holding my investment for a year my taxable income from selling the shares is only $100, except I made a loss on stock C…. So my taxable income ends up being $0….yet I now have $400 from. Investing $300….multiple this into however much money the rich have to play with.
thats not the way it works
You made a gain of $200. You take your losses off that gain to get $100. Then you claim the GGT discount and pay tax on $50. (you dont claim the discount and then deduct your losses from the discounted amount)
So you invested $300, you paid tax of (say) $23 and you have $400 in your pocket.
Of course you have made a profit, but thats because you invested in a share that went up.
I agree that the capital gains discount is ridiculous for a one year investment; it really should be linked to CPI or something like that (so after a year you get a discount of the CPI amount).
it really should be linked to CPI or something like that (so after a year you get a discount of the CPI amount).
As someone who’s been dabbling in shares since the early 90s, CGT used to be calculated after taking into account inflation as calculated by CPI, then I think it was changed to the straight 50% discount after 1 year to “simplify” calculations.
Correct, as the cpi calculations were difficult to calculate, and time consuming to confirm by the ATO they were removed, and the 50% was added as a concession
Oops, thanks for correcting!
What if C was sold in the previous year such that I'm carrying forward a loss of $100 and then in the current year sold A and B? Can I then claim the CG discount first and then offset against the previous year's loss?
no, its always 'gains less loss' = net gains. you then discount the net gains. If you are carrying forward a less, then that just falls into the 'loss' category
They do pay tax, but in a different way it goes to their accountants whose job it is to know the workarounds and loo-pols to a system designed to help the rich.
People are still amazed criminals get off with great lawyers while broke ass people doing much less get canned.
Anybody remember the saying ITS ALWAYS ABOUT THE MONEY.
loo-pols
The what :/
If those accountants are expensive, how much does one that knows how to spell loopholes cost?
The goal of rich people is to own nothing, but control it all.
How is this possible? Through companies. The company owns the car. The company owns the real estate. But who controls the company? The rich person. So all the assets are in their control, yet they pay no tax because they have no income.
This!
And when the company has too many to pay as taxes - make another company to offset them.
this article wasnt about that, it was about people who had an income of $1m (not people who had companies that earned $1m).
You dont avoid paying tax by having money in a company. Companies pay 25% or 30% tax with no tax free threshold and no capital gains discount. Yes, its worth it if you hold the money in a company and you have no other income, because you can claim dividend imputation etc and end up paying lower tax and can also split the income if you have other low income relatives.
But its far from paying 'no tax'; you are paying a reduced tax and perhaps (unless audited/unless you are careful) being able to slide some non deductible expenses in as deductible company expenses.
Don’t forget fringe benefits tax (FBT) rules which are specifically put into place to stop/reduce such obvious rorting to give private non-company-related benefits to the companies’s directors, employees, etc,
You dont avoid paying tax by having money in a company. Companies pay 25% or 30% tax with no tax free threshold and no capital gains discount.
Well ya do actually. The idea is to have a company that makes little or no actual profit.
So all revenue is spent on expenses, growth, and company owned cars, computers, phones and other toys for the owners personal use.
The owner will also pay himself and the wife a salary for day to day expenses and other tax deductible stuff like political donations and expensive tax agents etc
But actual taxable income will be kept to a minimum.
Then the individuals will be paying tax on the income they are paid from the company. So still not avoiding tax. This is also a highly targeted area for tax audits and focus from the ATO
@gromit: Of course it's still avoiding tax. lol
Why do you think it's a 'highly targeted area' if they aren't doing any avoiding?
@trapper: It's highly targeted as people tend to make a lot of mistakes in this area where they think they can legitimately avoid tax but can't. Like all those things you mention incur fbt.
@gromit: I have a work phone and laptop that I use as my own - and that's not even a company I own lol
How much tax do I owe?
Of course it's still avoiding tax. lol
Its 'evading' tax, meaning 'yes, people do it, but its illegal'. thats completely different to 'here is a way to legitimately not pay tax'. Its like simply not declaring income - its 'avoiding tax' but its not a loophole
As to how much tax do you owe - if its a work phone and laptop, you will have to provide a declaration that they are used for work (probably its in your work contract ie work phones and computers are to be used for work purposes, although you can use it for limited personal purposes). Then your company can claim it as a tax deduction because its a work expense
if they just gave you a computer and said 'its all yours, do whatever you want' then they will have to pay FBT on it. For example, if they gave you a phone and you used a different phone for your work calls, then clearly the first phone is not for work purposes. So its a fringe benefit and FBT is payable
Of course for things like phones and computers, if you have a work computer you probably use it for work for 8+ hours a day . If its a phone and that is the number people call you for business purposes, its a work phone. So saying its a work expense is legitimate and isnt 'tax avoidance' (even if you use it after hours to look at, well, whatever you look at)
Cars are where people often get into trouble; you cant claim it as work car if you only use it to drive to and from work or to the coast. And thats very easy for the ATO to pick up and slap the company with FBT. Even tradies, who legitimately can claim car expenses and will use their ute as their only car, will have to allocate work vs personal use and pay tax accordingly.
There are no free perks here; people get into trouble all the time for not following the rules.
@trapper: As dtc says, you seem to be confusing tax avoidance and tax evasion/fraud. If the company has given you devices to use for work purposes that is perfectly legal tax deduction, if they have given you devices for your personal use then they owe the ATO FBT (note this is a company debt to the ATO not you personally), similarly with cars and other benefits and yes a lot of people commit fraud here hence why they are targeted. But these aren't loopholes or unfair benefits, it is people commiting tax fraud if they are instead tax deducting it as a business expense instead of declaring it as a fringe benefit then they are committing a crime. Yes anyone can lie to the ATO and reduce their tax burden….as long as they don't get caught.
You dont avoid paying tax by having money in a company.
Yes you can. You can argue that this is 'tax avoidance' or 'tax evasion' or a mixture of both, but whatever you call it there is still less tax actual being paid.
Doesnt Barefoot Investor have a example of this with investment homes?
Make a business for the investment homes, purposly lose money for 3 yeas, use the tax cedits in 4th year to make big money. Keep cash from 4th year to live on, repeat.
Pretty sure same tactic is used on farms and other business.
Can you give a simple example with numbers to show how this tactic really works?
Many years ago when I was young I relied on Barefoot Investor's advice to delay buying a house because he expected it to become cheaper. Monumental mistake. He has zero credibility in my view.
I don't recall him stating delaying buying a home?
I recall buckets and paying all non tax deductible debt.
That book is really for financial retards meaning someone that has a very basics understanding of investing
Business tax is 30%, so doesn't matter if you make money in year 1 or year 3, it's the same thing. Recommending people to make a loss in 3 years to keep cash on 4th year is a terrible idea.
Worse than feast and famine in the bible. 3 years of insolvency with 1 good year.
The kind of lifestyle you want to sell to your worst enemy.
I don't think "pay a good accountant a lot of $$" is the type of answer OP was after…
I think they were wondering what it is that the accountants do.
Exactly.
But to get the clearer picture, we must be able to obtain the data that tracks each millionaire not only for one financial year, but for their lifetime.
For example, millionaire A has been lodging tax return for 40 years, so in those 40 years how much money has they made and how much tax has they paid? That figure will give a much more accurate understanding.
The yearly based tax system combined with the brackets somehow creates unfairness:
A makes $10,000 every year for 10 years and pays a total of $0 tax for those 10 years.
B makes $100,000 in year 2020 and does not make anything for the next 9 years, and will pay a total of $24,500 tax for those 10 years.
A ends up better than B.
ABC is not 'leftist'.
They pay lip-service to left-wing social issues to appear left-wing, but their board of directors is stacked with ex-newscorp / right-wing members appointed by the coalition.
Even if those 60 people with an average gross income of $3.5m were to have zero deductions and charged flat 40%, that's $84m in lost revenue
Thats a drop in the ocean compared to the billions wasted on Welfare handouts, public housing etc.
I agree the LNP wasted a lot of money with their implementation of pandemic stimulus (welfare handouts).
I'd rather pay for public housing and sensible welfare than fund those 60 people's tax deductions. Even if I didn't care about the well-being of vulnerable Australians, selfishly; public housing and welfare keeping those people fed and sheltered means if I go for a jog at night, I won't be killed for my smartwatch headset. If people get desperate enough, they'll do what it takes to survive and provide for their loved ones.
ATO site:
Imagine the 15 million individuals who lodged tax returns for the 2019–20 income year were represented as 100 people.
The top 6% of taxpayers shoulder 48% of the tax burden.
People in the top 6% are not the ones setting up offshore accounts to hide their assets. And those who are doing the right thing and paying tax, will see a great tax reduction in 2025. The issue is the top ~0.3% who aren't paying any tax, and are often having their investments subsidised by the tax payer (the tax payer includes the top 6%).
billions wasted on Welfare handouts, public housing
Those Japanese French US Nuclear subs are pretty awesome though right?
The top 6% of taxpayers shoulder 48% of the tax burden.
And who actually does the labour?
ABC news is definitely leftist.
As far as journalists go it’s a conservative-free zone. The make up of their on-air presenters is deliberately skewed towards diversity, and you can’t watch it for more than 5 minutes without a story on aboriginals, climate change or LGBQ issues.
Their board may be stacked with liberal appointments but they consistently fail to govern the ABC and push it towards balance.
you can’t watch it for more than 5 minutes without a story on aboriginals, climate change or LGBQ issues
This is exactly what I mean. Apart from climate change, those issues are annoying distractions for the majority of voters. They over represent minorities and pay lip service to their issues, but when they're discussing anything relevant to most Australians voters, the substance of what they're saying ultra conservative.
When they interview a lnp polititian, they'll fondle his balls but when they interview an alp polititian it's constant hard ball questions and "where will the money come from?!" (Last I checked, lnp wasted the most money and got us into this record breaking debt with nothing to show for it)
I knew plenty of doctors who made a good income from their medical services They had other business ventures which they deliberately ran to make a loss to offset their medical revenue.
My cousin's late husband ran a farm for one. They would plant crops and then either feed them to the cattle or plough them into the ground.
My son went to GPS schools (on a scholarship) with sons of some of these guys. They could send their kids to these expensive schools, but still be making a loss on paper. It's called tax avoidance.
No one 'deliberately makes a loss to offset medical revenue'. If you make a profit you pay 49c in tax including medicare. If you make a loss you lose $1. Even a doctor can tell that losing 49c is better than losing $1
If you are talking about making an income loss so you can convert the loss into a capital gain, well thats just negative gearing. May or may not be a good idea but its hardly something which only rich doctors do. Earn $1m, make an income loss on a farm of $200k but the farm grows by $300k in capital value
Btw, the whole 'Pitt St farmer' rort was stamped out in the 1990s. If you earn over $250k you cannot negative gear a farm. Your cousin's late husband either didnt understand or this was a very long time ago.
Yeah, this, I love the stupid idea that people will deliberately lose $100 to avoid paying $40 in tax.
As you say, it's more about building up capital gains at the expense of income.
Stop this bullshit please, no one deliberately runs thing at loss to offset other income. If you understand how tax works, for every extra dollar earned, at worst they still get 50c. Running at loss, at best they still los 50c on a dollar.
People do start 'hobby' businesses though, or branch existing business into a side hobby, and then that side hobby burns most of the profit.
Sure it's not making them any actual money, but maybe they wanted to spend money on that hobby anyway. So better to use pre-tax income.
Sounds like some financially incompetent individuals. Paying tax is cheaper than losing the money through losses.
Might as well burn rolls of $100 in the enclosed fire place and claim it as "fuel costs" less trouble.
People will believe in all kind of hocus pocus rich people say.
Isn't donation to approved charities the way out of paying tax?
Vaguely remember someone very public donating ~300 million (business money, of course) so "his tax money" will go straight to those he decided it was worth it.
Makes a lot of sense.
It's not really 1:1 though is it…
For example on our individual tax brackets:
Say I have $45,000 in taxable income before the donation. If I don't make a donation I can just pay the $5,092 in tax. If I instead don't want to pay any tax, I would need to make a donation of $26,800 to use as a deduction to bring it down to the tax free threshold of $18,200.
You'd have to really think our tax money was spent terrible or be highly connected to the 'charity' that you're donating to think that was a good deal…
And do you actually get "something" back from the highly connected "charity"?
What do you mean by 'get something back'? In australia, you can only donate to an entity that has a charitable exemption, so if the charity is giving back money to people who dont fall within their charitable purpose, the exemption can be revoked and revoked retrospectively (meaning the previous donations are no longer deductible and you have to pay extra tax). this is not an idle threat, the government audits charities all the time.
The US has different rules, so dont confuse stories about US charities/organisations with Australia
@dtc: I mean, some 'charities' still pay exorbitant salaries to CEOs and Board Members, which isn't exactly 'giving back' to the people their trying to help. But at the end of the day those CEOs and Board Members have to pay tax on that income anyway. So swings and roundabouts…
Also, I believe donations to political parties are deductions for individuals. I can see some potential 'benefits' that those high income earners might get from those donations. But, I can't see them donating enough to get taxable income to 0. Because at the end of the day, they do have to part with that money and live off what remains.
@dtc: Not in the form of money of course. Many times, favours and connections are more important than money, especially in business. Nobody can audit that.
Now, do people usually "buy" favours and connections using donations?
And do you actually get "something" back from the highly connected "charity"?
It has to do with "your money" doing, benefiting, those "you" chose, without any other collateral nor direct "benefit".
Say, donating to an approved charity for the homeless versus taxes spent in anything else but homelessness. As an example only. Sustainable versus non-sustainable could be another.
If you're in the top tax bracket it's almost 50% going to the tax man.
A donation could well make sense when you're donating $2 for every $1 it costs you.
We need to start taxing charities too. Look up the scietologist branch of Australia.
Never mind the individual millionaires (bad though it is)— have a look at all of the huge companies polluting the world, raking in BILLIONS, and paying zilch.
Ah yes, the old misinformed X didn't pay X tax blanket statement, AOC is that you?
What's your problem exactly? If they're allowed to do it then it's not their problem, it's the system.
"In 2019-20, Western Australia's Cottesloe and Peppermint Grove, which share the postcode 6011, topped the list with an average taxable income of $325,343." Hey, that's the average OzBargainer annual income.
Sometimes I think I'm the only poor person in the entire country. Wealth doesn't trickle down. When there are lots of rich people, the price of everything (particularly services) inflates, making the poorer even more penurious.
Lots of reasons.
Deductions and possible carried over losses.
Too many people believe they are not paying their fair share, well they are… Just not in the form of income tax.
I’m not sure if it was included in that article, but the suggestion was to have a “Buffett Clause” which would enforce a minimum amount of tax onto a person earning huge incomes. Probably a sliding scale.Remember, you can’t factor in loopholes, into tax laws, until a loophole is discovered.
The $80k for account fees is one thing, but more curious was the litigation costs of $250k
Quote "Another allowable deduction is litigation costs for managing your tax affairs. Of those earning a million dollars but paying no tax who claimed this deduction, the average amount claimed was $250,000."
The Tax office website says this
You can claim a deduction for the litigation costs you incurred in managing your tax affairs. Litigation costs include:
- court fees
- Administrative Appeals Tribunal fees
- solicitor, barrister and other legal costs.
So the accountant also has a lawyer or two on their books to fight for a loop hole or defend last year's loop hole….
The shear magnitude of this surprised me more.
welcome to the real world - if you want something to be angry about, try this - the big four accounting firms that help big corporations earning $BILLIONS in Australia to pay NO TAX in Australia - https://michaelwest.com.au/kpmg-ey-revenues-surge-whats-the-…
you do know the difference between companies and partnerships right?
the article is paywalled so I dont know what the argument is, but partnerships distribute their profits to, well, their partners. and the partners declare that as income and pay tax
Because they didn't earn taxable income. Their holding company elsewhere and their relatives did.
A lot of sloshing took place and while they didn't pay income tax they leaked cash all over their little setup into the tax system anyway.
That’s terrible reporting.
"Some people earning a million dollars or more paid on average $80,000 each to manage their tax affairs, which reduced their taxable income below the tax-free threshold,"
The above didn’t tell me anything meaningful.
Some people employ an accountant at $80k per year whose sole job is to make sure no income tax gets paid.
Right. And what exactly do you propose as a solution?
Attempting to close the supposed loopholes, making the tax system even more ridiculously complex and convoluted than it already is, making it just that much harder for the Average Joe to get a tax break, and ultimately making the value of such accountants even higher?
A BuffettClause.
Just make nothing. Saves having to make $80k to pay an accountant.
They spent a lot to get there though. On top of the accountant fees that have been discussed a lot, the article also mentioned:
"Some of the other big ones included donations ($114.4 million), interest deductions ($14.3 million) and dividend deductions ($16.9 million)"
Assuming all these 60 people donated equally, $2m donations per person is still a large chunk. Though hopefully that goes to helpful charities / organisations.
Not sure what dividend deductions here mean, but if they are franking credits, doesn't that mean they have already paid that portion of taxes elsewhere?
Yes, I can only imagine dividend deduction referring to receiving fully or partially franked dividends and claiming the appropriate deduction. If the company paying out the dividend has already paid tax on the profit that the dividend is coming from, this deduction just ensures that there isn't double taxation of that profit.
It's not some crazy loophole. Either that tax is being paid by the company @30%, or it's being passed on to shareholders who will pay their marginal tax rate.
Trash journalism from the ABC what a surprise…the mass number of idiots will think people making millions pay no tax
The more you earn, the more tax you need to pay, should be up to 80% on earnings over $150,000
The current system sucks because people become extremely selfish once they start earning the big bucks….. and don’t want to give back to the society they owe everything to.
The tax system is so skewed towards the filthy rich it’s just unbelievable.
Money sickos
A wild communist appears
Alot of these problems will go away if Australia simply had a flat tax of say 15%, with no deductions.
However, there are political and accounting lobbies (including dare I say, ATO itself with a billion dollars budget on its own) that are vested in making the tax system so complicated that only the truly rich (hundreds of millions in networth) can pay tens of thousands yearly to an accountant to game the system, while the bloke on $150k feeding a family of four pays more taxes.
Even better, 0% personal income tax, and direct all ATO resources to corporations.
I think Jack Ma is experiencing this right now. Seems to be what you’re advocating for