Income tax is the largest source of revenue for the federal government, so the Australian Greens think it is essential that the system has integrity and is no longer open to exploitation.
However, the wealthiest income earners are able to manipulate their tax affairs in a way that ordinary Australians cannot. 56 people who earned over a million dollars in 2013-14 were able to drive their ‘work expenses’ down to below the tax-free threshold of $18,200 and not pay a single cent to the tax office (but they collectively paid their accountants $47 million the same year).
The Greens' plan for a high income tax guarantee is a safeguard of our progressive income tax system and ensures that the system is working properly, that tax is being paid by those who can most afford it.
Protecting the 99%
Data compiled by the Australia Institute shows that the top 1% claim $2 billion worth of deductions between them - the same as the 2 million Australians in the bottom 16% of income earners.
Our plan acts as a guarantee on income tax for those people with annual incomes above $300,000, which puts them in the top 1% of income earners.
Our plan limits the deductions that the top 1% of income earners can claim. The measure will only apply to people who have a total income of $300,000 or more a year. Their marginal tax rate should be 47 cents in every dollar over $180,000. They will still be able to claim legitimate work expenses as deductions against their income, but they won’t be able to reduce it below 35% of their total, pre-tax income.
Safeguarding the system and raising revenue
Most of the 185,000 taxpayers who this would affect are already paying a fair amount of tax, but even with the small number of people manipulating the system, the independent Parliamentary Budget Office estimates this measure would raise $7.3 billion over the forward estimates and a total $35 billion by 2025 to invest in public services and infrastructure.
Targeting tax avoidance
In response to the breadth and depth of tax avoidance and the public’s exasperated frustration that nothing significant is being done by the Parliament, the Greens recently released the most comprehensive response to tax avoidance that Australia has ever seen. Our tax avoidance plan contains 18 measures aimed at putting an end to this era of shameless and brazen tax avoidance. The announcement for a floor under tax deductions sits alongside our plan for targeting tax avoidance.