Lets Get The Party Started

Let me introduce you to Ms. Justa Avaridge.

Lets say she’s just one of the 12,964,285 individuals that earned income in 2014 requiring them to lodge an individual tax return.

Her group, the 55.1% of Australia’s population (of 23,125,868) that self generated their income for that year.

Most interesting though if we remove the portion of the population that is not likely to be in employment and requiring the lodgement of an individual tax return – [Those 8,715.527 persons either under 17 or over 65] – then Ms. Avaridge now represents 88.3% the of the 14,410.341 of the 'working age group'.

Which still leaves of course, for one reason or another, 1,446,056 persons (11.7%) of the 'working age group' that didn't lodge an individual tax return in 2014.

Our nation is a corporation which each year incurs expenses, requiring income.

Because the days of piracy are gone and we can’t roam the high seas or land masses of the planet plundering the wealth of others and shipping it back in chests of booty and we have sold allmost all the land acquired as the consequence of conquest and we, the nation, have given up owning trabitional businesses of a nation, that returns profit to the nation, such as the Commonwealth Bank and telecommunications, we are left with having to generate this income solely by one method only – Taxing the locals

So just how much a year does Ms. Avaridge earn?

Well her tax group (individuals) paid $166.2 billion (Yes that is correct 'billion') in Income tax that year, so her average share of Tax on that tax payer figure is $12,820.

Based on the 'personal' tax rates of 2014, paying $12,820 in tax, requires her to have an annual taxable income of $65,450.

Providing for an effective income tax rate of 19.6% of her income

After Income Tax, this leaves Justa with a disposable income of $52,630.

'Disposable' is used as a loose term because as we shall see Ms. Avaridge does not get to 'dispose' of this amount totally as she may wish.

So in the words of that famous commercial advertisements “- wait-we know you want more “. - More taxes that is.

Australians paid $52 billion in GST tax in 2014.

Now a GST tax, as you know, is applied to the purchase of goods and services BUT is passed down the line to be born by the end user - such as Ms. Avaridge.

A significant portion, say 90%  of the burden for this $52 billion will most logically fall on individual Australians and 88.4% of those will be in the purchasing age group (17 to death) and because the working age group (14,410,341) are in the period of their life where they are most economically active they will shoulder the highest proportion. I have chosen 80% of the 88.4% of the 90% of the total

So Justa's 2014 share of GST Tax, on this bases, is $3,014.

After GST Tax this leaves Justa with a disposable income of $49,616.

But wait-we know you want more . - More taxes that is.

The government collected in 2014 a range of miscellaneous taxes placed on things like fringe benefits; alcohol; luxury cars; wine; and rent for petroleum products, which collectively add another $32.8 billion.

No doubt these cost initially placed on Industry will be passed down the line in the final cost of products and services charges, to be eventually paid for by the consumer.

At the end of that line is our unfortunate Ms. Avaridge.

So Justa's 2014 share of these taxes , on this bases, is $2,530.

After miscellaneous Tax this leaves Justa with a disposable income of $47,078.

But wait-we know you want more . - More taxes that is.

The government collected in 2014 $7.3 billion in Capital Gains taxes.

This tax, which everyone knows, is placed on the sale of things sold for more value than what you paid for them. - No that's not correct! - The money is fine, the definition is not!

Well! - Except of course, if the things you sold were things that you brought to sell as part of the business of buying and selling things - Well that’s not accurate either.- It gets pretty messy

Let's use an example:

If you’re a storekeeper and you buy packs of biscuits for $1.25 and sell them for $1.50 thus making $0.25 'gross' profit then, after deducting 'operating expenses', you will pay income tax on the remainder of the 'net' profit (taxable Income)

BUT and here is the crunch- Yep pun intended!

As a storekeeper if you buy shares in say a tech company for $1.25 and then sell them for $1.50 making $0.25 'gross' profit, in this scenario, you will be subjected to a capital gains tax on the transaction - go figure.

Now you know why there is a robust and growing part of the economy for tax lawyers and commercial accountants.

But hey -I've wandered far off topic, let’s get back to Ms. Avaridge's share of the $7.3 billion of Capital Gains tax collected in 2014.

Now in all fairness to reality, a whole host of people go on for a number, if not many, years without ever incurring capital gains tax, but when they do they usually are quite large values in nature.

For example a person with a rented property may sell the property some 10/15 years after purchasing it and may make a gain in the value of the property of say $200,000.

Unfortunately for that individual that gain will fall within the year of sale and be added on to the person’s income for that year to determine the tax. Unless the employ a tax deferal strategy.

So how, you say, does the tax department know how much tax is pertinent to a capital gains?

Well the devil is in the detail.

If you have filled out a tax return and most of you haven’t, (at least 75% use tax agents to do their returns) you will have noticed that in the process, there is the requirement to detail any capital gains events over a certain value that has occurred in that financial year.

I suspect this is where they get their data from.

But hang on we still haven’t worked out how much is Ms. Avaridge's average, annual, share?

Well for my purposes and this has to be a personal view, to find the average I’ve taken the total tax paying entities for 2014:

and divided that into the $7.3 billion

So Justa's 2014 share of this tax , on this bases, is $4,227.

After Capital Gains Tax this leaves Justa with a disposable income of $42,859.

This figure of course, is of absolutely no use whatsoever except to demonstrate the concept of how ubiquitous and pervasive taxes are in populating the daily living expenses of an individual.

NOTE: Australia’s gross domestic product (GDP) in 2014 was $1.57 trillion. The total revenue collected by the Federal government in taxation for that year was $337.3 billion or 20.8% of GDP- Ms. Avaridge contribution from her annual personal production (APP) at this stage is at 34.5% of her GPI (Gross Personal Income).

But wait-we know you want more . - More taxes that is.

State Taxes
Now that we have done with the Federal taxes let’s now look at State taxes and what Ms. Avaridge will need to fork out from her ever diminishing disposable income.

To do this however we will need to induct Justa into one of the states or territories of Australia.

Given that I live in Queensland she may as well come and reside here, in the now hotter part of the country.

State taxes are a little bit easier to avoid as long as you want to live in hibernation in a cave, rely on foot-power or just a horse for transportation and a have monk like attitude towards possession of earthly goods.

For Queensland this is where this state derives its taxation money

I know what you’re about to say, a lot of these look like consumption taxes. Which is what of course they are.

But wasn't, I hear you say, the Australian community promised in 1997 that all State's consumption taxes would be eliminated with the introduction of the new federal GST?

YES! of course-But they weren't eliminated and why?

Because the people that manage state governments are just people. They have the same uncontrollable urges that are found across the whole spectrum of humans, of which the most commonly demonstrated is the urge to acquire as much as you can whenever the opportunity presents.

So the States gladly accepted the GST dollars from the Federal government but proceeded merrily on their way and held on to a number of their consumption taxes (which they had promised to forego) but of course under the Australian Constitution of 1901 the Federal government and the community for that matter, were powerless to do anything about it.

So the introduction of GST was just a sham or more precisely put - a tax scam.

Any rate let’s see what Ms. Avaridge might be up for, from her disposable income.

The Queensland Government was not helpful in providing Revenue figures for the financial year 2014. The only figures I could find online indicated $12.1 billion in taxes for the FY 2014 and that year had a population 4,737,700 of which 2,582,085 or 54.5% lodged individuals income tax returns.

So about 2.6 million commercially active adults.

However

Staying with my thesis that all taxes other than 'income' levied on businesses are treated by business as a cost of production and factored into the final sale price of any product or service these taxes will filter down to the community individuals.

You only have to listen to any good or service provider's organisation that is called to explain an unexpected price rise (in excess of inflation) and you will be presented with an explanation that the root cause is a consequence of legislative impositions (including taxation) on their business

If you need any further evidence, just have the government put up excise duty and check out the price rise in a bottle of beer.

In the final analysis businesses rarely get left with the tax cost of doing business.

Individuals in the community are at the end of the line, and just like the trickle-down economy, the trickle-down taxation affect is that Ms. Avaridge will end up footing her share for most of this $12.1 billion bill as well.

But how much is an interesting question and your guess might be just as useful as mine but I am saying that individuals will pick up at least 80% of the states revenue raising.

For this exercise I am saying that individuals of the working age group will pick up 75% of that that 80%.

So Justa's 2014 share of these taxes , on this bases, is $2,554.

After State taxes this leaves Justa with a disposable income of Just $40,249.

But wait-surely you want more . - More taxes that is.

Well sadly yes there is one lot to come - local government

Australian local governments raised approximately $11 billion in 2014 in land associated taxes but the good news for Ms. Avaridge is that again, if she doesn't own or rent property then she can totally escape local government taxes.

But let’s assume that Justa is not going to live on the bank of the creek under a sheet of iron or plastic tarp.

There are 14 million properties in Australia paying $11 billion in local governments taxes

So Justa's 2014 share of these taxes , on this bases, is$810.

After Local taxes this leaves Justa with a FINAL disposable income of her initial gross income of $65,450 of Just $39,433

That is just 60.2% of GPI (Gross Personal Income) left for the non tax components of -

• Food;
• Accommodation;
• Transport;
• Communication;
• Health;
• Entertainment;
• Insurance;
• Clothing and
• Misc living etc .

So- Go knock yourself out Justa!

Base Data cited on this web site are drawn from the ATO the Parliament of Australia the ABS and Treasury web sites. -
The assumptions are mine. Warren Bolton. Edited by Alyssa Bolton