Many beat tax bracket creep
Tens of thousands of Australians manage their income tax to avoid higher tax brackets in a sign of the damage bracket creep does to the integrity of the entire system.
Figures obtained by The West Australian show spikes in the number of people just below key tax thresholds and sharp falls in the number above the thresholds.
The phenomenon is most pronounced just below the top marginal tax rate of 45 per cent that applies from an income of $180,000 a year.
There are 73 per cent more people with a declared income between $179,000 and $180,000 than people with an income between $178,000 and $179,000.
The number then falls more than a third for those getting $180,000 to $181,000.
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There were more people declaring a taxable income just under the $180,000 cut-off than people earning about $140,000.
Just below the $80,000 threshold, where in 2011-12 people faced a step up to a 37 per cent rate from 30 per cent, there is also a spike.
The number of people who declared just under $80,000 in taxable income was 30 per cent higher than those declaring between $78,000 and $79,000. It then fell a quarter just over $80,000.
Even for people on low incomes there was a similar spike just under the $37,000 cut-off.
Across the three thresholds, almost 50,000 people appear to manage their income to avoid a higher tax rate.
Bracket creep - when people are pushed into higher tax brackets because of ordinary wage increases - is highlighted in the Abbott Government's tax discussion paper as one of the biggest issues facing the tax system.
The Government has also signalled it may commission a review of the sustainability of the nation's retirement system because of the ballooning costs of tax concessions and pensions.
Assistant Treasurer Josh Frydenberg said yesterday links between tax, the age pension and superannuation had to be examined.
Despite the tax discussion paper backing big changes to the GST, the Government has effectively denied any moves unless the Opposition supports it.
Labor leader Bill Shorten said lifting or broadening the GST would disproportionately hurt lower income earners. He said the Government should focus on multinational firms shifting income to avoid tax.
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