Saturday, May 14, 2011

Tax benefit anger wasted on those earning $150,000

IF YOU'RE earning $150,000 a year, are you living on Struggle Street? Should we be outraged for you if some government decides you don't need family benefits?

No. Taxation statistics imply that only 3 to 4 per cent of Australians earn $150,000 a year. Compared with other Australians, they're not struggling.

Far more Australians have household incomes over $150,000. Updating the latest household income data from the Bureau of Statistics, 17 per cent of households, or one in six, have pre-tax incomes of more than $150,000.

But that's almost irrelevant to the budget cuts. The only benefit that depends on household income being under $150,000 is the baby bonus. And freezing its threshold until 2014 will deny benefits to only about 2000 families.

Coalition and media claims that households on $150,000 would lose the much bigger Family Tax Benefit B are wrong. They would lose Family Tax Benefit B, or the dependent spouse rebate or paid parental leave, only if the income of the primary earner rises over $150,000.

Anyone on that salary is not on Struggle Street. In 2008-09, only 3 per cent of Australians reported taxable incomes of $150,000 or more. Since then, household incomes per head have grown by 5 per cent. If evenly distributed, that would put 3.5 per cent of Australians above $150,000.

Families Minister Jenny Macklin said yesterday that only about 20,000 people stand to lose Family Tax Benefit B under the changes. "And let's remember: if they get a pay rise, families will still have more money in their pocket overall," she said.

However, it is a different story for the biggest benefit of all: Family Tax Benefit A, which goes to 1.9 million families, and will cost taxpayers $13.7 billion next year. It has no single threshold, but a number of them, depending on how many children you have, and their age. They range from $101,191 upwards, with most between $110,000 and $150,000.

Bureau of Statistics data for 2007-08, updated for growth in household incomes since, implies that a third of Australian households now earn more than the lowest threshold and by 2014, almost one in two could be above the threshold at which about the basic benefit starts to reduce.

Ms Macklin said yesterday about 76,000 families, about 4 per cent of beneficiaries, are likely to lose Family Tax Benefit A because of the freeze on thresholds. Another 210,000 families, or 11 per cent, will face a reduction in benefits.