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RUBY:

From Schwartz Media I’m Ruby Jones, this is 7am.

Australia’s wealthiest postcodes, and the millionaires who pay no tax have been revealed in the latest data drop from the tax office.

It gives us new insight into who has wealth in Australia, how they keep a hold of that wealth and whether the taxation system is fair.

Today - author Chris Wallace on who the real burdens are on our economy.

It’s Thursday August 18.

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RUBY:

Chris, the Tax Office recently released some data and there were some pretty interesting things contained in that release. But let's begin with what we learnt about the richest people in the country. There are 60 millionaires in Australia who, it turns out, paid no tax in the last financial year. What can you tell me about that?

CHRIS:

That's right Ruby, The Australia Institute economist Matt Grudnoff did the terrific service of finding the 60 millionaires in the ATO data who mysteriously paid no tax at all.

Now obviously the richer you are, the better tax advice you can get. So if you're of a mind to minimise or, god forbid, actually evade tax, there's a lot of professionals around who will help you do that.

There are tax havens you can use. There are trusts. There's negative gearing. There is lots of things you can do to minimise your tax. But you've got to ask yourself, when you look at these figures, are there a bunch of tax bludgers in Australia that really need to be brought to account so that everyone is paying their fair share, not just most of us.

But the other thing that's unfair to ordinary people who don't have access to sophisticated tax advice, they are paying their fair share. So take the average income earner. The ATO stats show that they're earning about $63,000 a year and they're paying about 30% of that in tax.

Now how does that sit next to the knowledge that there are 60 millionaires in Australia who paid 0% tax? It's just plain unfair. It's inequitable.

RUBY:

Okay. So I think it's fair to say that it's a sign that Australia's taxation system isn't operating in a particularly fair way. When you have average wage earners who are paying around 30% tax, but you have millionaires who aren't paying any. So what else does this data, when you dig into it, tell us about the distribution of wealth in Australia?

CHRIS:

Well, that's the thing. The ATO does a terrific thing where they work out by postcode what average taxable incomes are. So you're in Melbourne, right? So let's take 3142, which is a postcode that includes Toorak. Residents of that postcode's average taxable income was nearly three times the national average.

Similarly in Sydney, let's take the 2027 postcode which includes Darling Point and Point Piper. Of course that's Malcolm Turnbull territory. The average income, average taxable income was more than three times the national average, so even higher than Melbourne's 3142 postcode.

But the absolute champion highest average taxable income in fact went to Perth's 6011 postcode, where on average the taxable income is five times the national average, a whopping $325,000 a year per taxable income earner. Now bear in mind Ruby that's an average.

So you can imagine the gigantic income some of those leafy Peppermint Grove and seaside Cottesloe residents are enjoying and of course turn around and take a look at the welfare system.

What are people trying to survive on, on job keeper? I mean, it's just farcical.

RUBY:

So could you explain then what the underlying mechanisms that are contributing to this inequality, the ways in which that the tax system benefits these people who might be living in Point Piper or Cottesloe and earning $300,000 a year?

CHRIS:

Well, the richer you are, the more avenues there are to divert income and create losses and switch your income and get it flow to areas of low taxation. One of the big things that jumps out on the figures is how much Australians love a rental property investment. So nearly one in five wage earners own a rental investment property and more than half of investment property owners enjoy tax breaks from negative gearing.

So we're all in effect subsidising their property investment. And it's those 1.2 million Australians whose property investments are being subsidised by taxpayers who put the fear of god into politicians wanting to reform property taxation. 90,000 of those people who own rental properties and are enjoying negative gearing tax breaks own three or more rental properties.

So you can see how those higher earning individuals who can afford multiple investment properties get a multiplication of benefits from the system. So it raises questions really about why the system works so well for people who can afford multiple rental properties.

And on the other hand, why we have such a huge homelessness problem in Australia which governments seem so reluctant to spend money on to solve.

And it's built a culture where, you know, on the one hand welfare recipients get pounded as dole bludgers, but on the other hand, people who arrange their affairs consciously to pay less tax, often fully compliant with the law - no one calls them tax bludgers.

So there's this incredible asymmetry in the system about who's seen to be behaving and misbehaving.

And of course, tax bludgers seem to get away with it quite happily and without adverse comment.

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RUBY:

Chris, it's not as though we've ended up in this position by chance. This is the result of decades of taxation policy decisions. Could you tell me a little bit about that? And I suppose what you've observed happens when governments or oppositions who are trying to form government have tried to suggest reform to the taxation system.

CHRIS:

So it's been a problem for governments for for many, many, many decades to get companies, to get rich individuals, to pay their fair share of tax. And there have been many famous parliamentary episodes, for example, during the Rudd Government and the Gillard Government where Treasurer Wayne Swan tried to bring in a super resource profits tax.

Archival tape -- Wayne Swan:

“What this adds up to is a package of measures to strengthen our economy, to broaden our economy, to simplify our tax system, and to strengthen the economy, particularly given the challenges that are coming our way as a consequence of the resources boom and economic change in our region.”

CHRIS:

And of course when the Rudd and Gillard government tried to do that, all hell broke loose.

Archival tape - [mining tax protest]

Archival tape -- Tony Abbott:

“We're in the position we're in because the Government has trashed Australia's international reputation with its proposal for a great big new tax on mining.”

CHRIS:

The mining resource sector mounted a massive publicity campaign to pound the government into submission on this.

Archival tape - [mining tax ad]

CHRIS:

In fact the tax ended up having to be watered down. Lest the Gillard government can’t collapse under the weight of the campaign.

Archival tape -- News reporter:

“Today we have a breakthrough agreement that moves Australia forward. The tax battle ended with a whimper. The Prime Minister returned to Canberra and went straight into the Cabinet Room to seal a deal with the miners.”

CHRIS:

So that and of course Bill Shorten's attempt during his most recent term of Opposition leadership to reform negative gearing, to reform franking credits, to make the superannuation tax system fairer. Of course that was one of the things that helped cost him government at the previous election.

And you’ll note that Anthony Albanese didn't take those policies to the last election and got elected, but only by a majority of two seats. So tax is a really potent election issue and it's very hard even if you're in government as the resource super profits tax showed under the Rudd and Gillard government, but especially so from Opposition Bill Shorten and his shadow treasurer Chris Bowen paid a very high price for taking those policies to an election and being unable to explain them well enough to persuade voters it was a good idea.

RUBY:

And you mentioned earlier this idea of quote unquote 'tax bludgers' - so the millionaires who aren’t paying tax. And that’s obviously flipping the idea of the ‘dole bludger’ - which is this trope of someone ripping off the welfare system, and I suppose by extension, ripping off you, the taxpayer. So where did the trope of the ‘dole-bludger’ come from? And how did it become a common way to describe people who are on welfare?

CHRIS:

Yes, Philip Mendes from Monash University has done some terrific research on this. At a recent workshop at Macquarie University on poverty, he gave a terrific historical perspective on just how that has unfolded. And he locates to the Henderson Commission into Poverty under the Whitlam government the kind of high point in Australia, a conversation about what poverty is, what can be done about it, and what constructively can be done to reduce absolute levels of poverty in Australia.

And he then traces since that time under the Whitlam government, an incredible marshalling of forces, partly media forces, partly through think tanks like the IPA, a really sustained effort to blame poor people for their poverty.

Archival tape -- Unknown person:

“No more bludgers. Just sitting around on my bum all day. Now you have to earn your benefits.”

CHRIS:

Through this concept of individual responsibility.

Archival tape -- Unknown person 2:

“It's up to individuals in the community to accept personal responsibility for their lives and their destiny.”

CHRIS:

Creating the idea that somehow, if you're poor, it's your fault, you're blameworthy.

Archival tape -- News reporter:

“We have one of the most generous welfare systems in the world, but some people take advantage of it. Using taxpayer money on things like drugs and gambling. Is a cashless card the answer?”

CHRIS:

And through this kind of psychological frame, creating a whole suite of policies where it's become the default that government unthinkingly takes a very punishing approach to people in poverty rather than an investment approach designed to lift them out of poverty and back into the economic mainstream of Australia.

RUBY:

And so when you talk about emphasising the burden that these so-called ‘tax-bludgers’ have on the rest of us – I mean, what are the consequences of wealthier people not paying tax? How does that actually affect us in practical terms?

CHRIS:

We're either all in this society together or we're not. And the idea of paying fair shares according to your need and ability is a very basic equity idea that historically has stood Australia and Australians in good stead.

And of course, Ruby, it comes down usually to who's in office. For 20 of the last 26 years, that's been the Coalition. For more than twice as long in the post-war period the Coalition's been in office than Labor, so you tend to get these long periods of Coalition government where things get less fair and then you get Labor coming in every so often and trying to make it more fair. And ever the tide is going in and out on tax equity in the system and there's no mood for major tax reform now, that's another issue.

RUBY:

I mean, that was my next question. Because the Labor Party did go into this election without promising any tax reforms. So to actually change the law, to do things like abolish negative gearing or get rid of stage three tax cuts or find a legal way to enforce taxes on millionaires. I mean, those are big reforms that there doesn't really seem to be much political appetite for.

CHRIS:

Well, I think there's an appetite for making the system fairer under the new government. It probably won't look like big bang tax reform, but I think stay tuned for a lot of smaller changes that together add up to big effects. And yet no one's talking about hounding billionaires into the ground or out of the country.

It's just about everyone recognising and fulfilling their responsibility as citizens to pay their fair share to contribute.

Because you might be a rich professional or rich business person in Australia. Terrific. Good luck to you. But the fact that you can do business in this country, do it safely, do it legally, that's to do with a system that we're all part of, that we're all signed up to supporting.

So everybody's got to do their bit one way or another. And let's see that happen in a fair way.

RUBY:

Chris, thank you so much for your time.

CHRIS:

Pleasure.

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RUBY:

Also in the news today...

Former Prime Minister Scott Morrison says he plans to continue as the local member for Cook, after fronting the media to answer questions about being secretly sworn in to multiple ministries.

Speaking at a press conference yesterday, Scott Morrison said that it was "necessary" for him to have additional powers while he was prime minister during the COVID-19 pandemic.

Earlier, his colleague former home affairs minister Karen Andrews and conservative media personality Andrew Bolt called for Morrison to resign from parliament.

And

De-extinction scientists from University of Melbourne are leading an effort to bring back the now-extinct thylacine, commonly known as the Tasmanian Tiger, using genetic engineering – and reintroduce it to the wild over the coming decade.

The Tasmanian Tiger became extinct after a decades long campaign by European settlers to exterminate the species, Benjamin, the last known thylacine, died in captivity in Hobart Zoo in 1936.

I’m Ruby Jones, this is 7am. See you tomorrow.

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