Australia’s Mature Tax System Revealed by Recent Research
The recent announcement in the Weekend Financial Times, about the high numbers of Americans who do not pay tax, has caused some debate in international revenue circles and the situation has been likened to Australia where a similarly high number of people are excluded from the tax system. That means that high-income earners are under more pressure to make greater contributions to provide the funding required to keep the economy turning. In the US, 47% of the population is not paying taxes, but Australia has come in with 45% of the local population that doesn’t pay their taxes.
The defense being taken on the American side is that when you take Medicare and social security beneficiaries out of the equation that figures is whittled down to only 18%, and there is still a large percentage of people earning below the tax thresh hold.
Australians are levied GST and plenty of other taxes for their daily living beyond the scope of what is charged by the tax system. There is estimated to be 7.4-million people in Australia not paying tax but around half are retired and many are students who have yet to enter the workplace. A third of the total number are retired people over the age of 65 and who are living off of investments like superannuation and still are below the tax thresh hold.
Thirteen per cent of the total is also aged between 18 and 24, and most of them are students who don’t have full time employment and even be getting help from the government. There is also a large percentage of stay at home moms who are making a social contribution by raising families. In the 30 to 44 age bracket there is a significantly higher percentage of women not paying tax than men and the ratio outweighs men by three to one. The Financial Review has classified the results as a sign of a “progressive tax system” and experts say that the categories not paying taxes are to be expected. Analysts have said that tax contributions should be reviewed over the course of a lifetime and that many of the people who are not currently paying tax have been paying it in the past or will be paying it in the future.
One of the biggest strengths of the Australian tax system is that people are levied on the amount of tax they can afford to pay. That means that when people are in full time employment they will pay more and when they are going through times when their income stream is low they will be charged less.
Faced with the reality of an aging population Australia’s system may prove to be unsustainable in the long term and al alternative system has been suggested for the way forward. Older generations are entitled to rebates on their savings and superannuation funds but with so many of them coming into age the government is going to battle to be able to keep up with the rebates when so much is being removed from the tax contributions that have been being made over the last few decades.
It puts consumers into a tight spot especially the younger generations who have to dig into their savings or take out personal loans to be able to keep up with the rising costs of living. Although the concept of more debt may not seem to make sense on first glance, personal loans can be compared at Bankwest, or any of the other major banks and even yield cost-efficient results. Some argue that, while the model may be well-meaning and democratically mature in principal it’s not necessarily going to work in people’s favor in the next few years. Saving for retirement has taken something of a backseat for consumers as well, as they focus their energies and budgets on settling outstanding debts like mortgages and personal loans and have stopped growing their credit card debt.
