Australia’s richest people pay $1.4 billion in tax despite holding $500 billion in wealth, a new report shows.
Australia’s wealthiest people use a complex web of trusts and companies to hide potentially billions of dollars from the tax office.
Auditor-General Ian McPhee has released a report on the Australian Taxation Office’s handling of high-wealth individuals (HWIs) – people who control an estimated net wealth of $30 million or more each.
Mr McPhee said the tax compliance of the 2650 HWIs and 3700 potential HWIs, who had a total estimated wealth of $500 billion in 2012/13, represented a “significant revenue risk”.
The tax office estimates the wealthiest Australians contributed $1.4 billion in tax in 2011/12.
“Despite (this tax contribution) … there is a perception among the wider population that the rich may not always pay their fair share of tax,” the audit report says.
HWIs tended to have “complex business arrangements”, including closely held companies and trusts, each of which is a separate taxpaying entity.
They might maintain expensive lifestyles without relying on income in a conventional taxable form, the report says.
Information available on the wealthy is often limited because private companies and trusts are not subject to the disclosure requirements of the stock exchange.
Also, they are “not overly affected by Australian Securities and Investments Commission requirements”.
The tax office has put significant effort into clawing back revenue from the wealthy, finding an extra $3 billion through compliance checks since 1996.
It has 300 staff aiming to do about 500 audits and risk reviews this financial year.
But Mr McPhee concluded that 70 per cent of the audits and 84 per cent of the reviews “did not have a financial outcome”.
When audits or reviews resulted in the tax office seeking more tax to be paid, two-thirds were objected to and 49 per cent resulted in a “positive outcome” for the wealthy individuals.
“Going forward and in anticipation of a focus on a larger pool of HWIs (from 2600 to about 6300), there is scope for the tax office to improve its risk assessments to better target active compliance activities and reduce compliance costs for both HWI taxpayers and the ATO,” the auditor’s report says.
The ATO has agreed to the auditor-general’s two recommendations, to review its processes and gather better figures on the cost of its compliance activities and the extra money it collects.