It seems counterintuitive that an Australian with a yearly income of more than a million dollars would pay no tax.
But that's the convenient reality for around 50 taxpayers, according to UNSW.
Last year, Yahoo Finance reported 69 millionaires managed to incredibly deduct their way to a taxable income below the $18,200 tax-free threshold. It seems this year there is a similar number in the zero tax club.
Together the 50 millionaires claim around $50 million in tax deductions to slip into the tax-free bracket.
Sure, these millionaires claim the usual deductions that the rest of us do – like work-related costs, charitable donations and franking credits. But there is one massive claimable cost that the average Joe wouldn't have access to.
That's the "cost of managing tax affairs".
The ordinary Australian might pay $50 to $300 to use a tax agent or an accountant to assist them with their tax return, which can be claimed as an expense.
But many of these millionaires incur tens of thousands, if not hundreds of thousands to professionally manage their tax – helping them reduce their taxable income significantly.
The solution that's been proposed for a while is to put a cap on the "tax affairs" expense.
"This idea harks back to the lead-up to the 2019 Federal Election, where the Australian Labor Party proposed a cap on the cost of managing tax advice deduction at $3000," said UNSW senior lecturer Dr Ann Kayis-Kumar.
"This policy aimed to address the problem of millionaires paying zero tax, and it would have applied from 1 July 2019, affecting individuals and other business-like structures such as trusts and partnerships taxed as individuals, not companies."
But Kayis-Kumar, who is also a UNSW Tax Clinic Director, said such a cap would not work.
"Often we see people identifying issues, then a policymaker suggestion aimed at addressing that mischief is implemented. But then it doesn't work because there's a workaround," she said.
"It's a legislative and regulatory whack-a-mole: you plug one hole, but then another appears."
So a limit on tax management costs could simply waste resources on enforcement without any real result.
Institute of Public Accountants president Andrew Conway told Nine last year that a cap could stop Australians receiving full and complete professional advice.
"The likely scenario is when a client gets to a bill of $3000 they say, ‘stop providing me services’," he said.
"That’s going to lead to a system that crumbles."
Kayis-Kumar said a better solution would be to increase audits on high-worth individuals.
"The overwhelming response [to my research] was that the Australian Taxation Office should be conducting more audits, including of high wealth individuals," she said.
"This is in line with previous research and literature that the perception of increased risk of audit leads to changes in behaviour."
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