Tax cuts revealled in the latest budget

[wtr]

Umm...$6 per week? A bit lean I reckon.

Not taking a stab at the ones who are wealthier off, but it's being said on the radio today that the pattern in the latest budget goes a little something like: the RICHER you are, the more tax cuts you'll get, and vice versa.

And it's also being said that the motive behind the 'more for the richer' was to encourage all mid-low income earners to strive for higher grounds so that they too can share a slice of the unfair privilege. And all this is supposed to crank up the speed of our economy? :confused:

The rich just keep getting richer, and the poor keep getting poorer and poorer?

And poor old KB was forced to comment against the government's $6 offer.:o

What's wrong with today's world?:o

So, post your thoughts.

[scblack]

You have to look at the PERCENTAGES involved. The percentage fall for low income earners is LARGER than the percentage fall for higher income earners. The dollars are bigger, but it is just relative.

It has been a topic of discussion for some time that Australia's higher tax rates are very uncompetitive compared to overseas.

This makes it difficult for us as a country to keep, and to attract talented people.

[johnny]

I understand the percentages are different, but in real terms, the people recieving this will only have an interest in how much they get as a dollar figure. You can't buy nappies and school shoes with percentages.

I also understand the problem of the brain drain. Yet this tax cut will go nowhere near easing that. that actual system needs to be overhauled, not slightly tweaked. I'm only going off what I read/hear/watch, not off an educated position.

The rich get richer, the poor get the picture
The bombs never hit you when you're down so low
Some got pollution, some revolution
There must be some solution but I just don't know
The bosses want decisions, the workers need ambitions
There won't be no collisions when they move so slow
Nothing ever happens, nothing really matters
No one ever tells me so what am I to know





You wouldn't read about it, read about it
Just another incredible scene, there's no doubt about it

Hammer and the sickle, the news is at a trickle
The commissars are fickle but the stockpile grows
Bombers keep acoming, engines softly humming
The stars and stripes are running for their own big show
Another little flare up, storm brewed in a tea cup
Imagine any mix up and the lot would go
Nothing ever happens...

You wouldn't read about it, read about it
One unjust ridiculous steal, ain't no doubt about it
You wouldn't read about it, read about it
Just another particular deal, there's no doubt about it

...

Midnight Oil.

[FR Drew]

[QUOTE=scblack]You have to look at the PERCENTAGES involved. The percentage fall for low income earners is LARGER than the percentage fall for higher income earners. The dollars are bigger, but it is just relative.
QUOTE]

Arrrgghh! No No No No NO!

If the tax free threshold is changed at the bottom of the scale and the percentage of the lower rates is reduced from 15 to 17 percent, it is not only the people at the bottom who get that tax cut, it is EVERYBODY.

The way the tax system works is that for each income zone where there is a tax rate, you get charged however many cents in the dollar. When you get to the rate above, you get taxed at what 100% of the lower rates tax would be (as you earned over 100% of those cents in the dollar) and then however many cents in the dollar for each dollar you earn in the tax rate above.
----------------------------------------------------------
Example: Say the tax free threshold is 6000, from 6001 to 25000 is 17%, 25001 to 35000 is 23%, (made up numbers but it will serve for the purpose)

If you earn 5000 you pay zero tax

Earn 20000, you pay no tax on the first 6000, so your taxed income is 14000.
14000 x 0.17 = $2380 in tax.

Earn 30000, you pay no tax on the first 6k, 17 cents in the dollar on the next 19k to take you to the 25k threshold (which is $3230) and then 23 cents in the dollar on the 5000 you earn to get you up to 30k (.23 x 5k = 1150) so your total tax is $4380

Now, if I as prime minister raise the tax free threshold from 6k to 7k, not only will the guy on 20 thousand dollars get his tax dropped by $170 (the 1k difference in tax free threshold x 17%) (bringing mr 20k's tax bill to 2210) the guy earning 30k will also have his tax reduced by $170 (now paying 4210)

If I play with the lowest tax rate to make it 15% instead of 17% as well as modifying the threshold then the guy earning 20k pays no tax on his first 7k and 15 cents in the dolalr on his next 13k so his tax has now fallen to $1950.

Note that mr 30k also gets the 2% cut on the money he earns between 7k and 25k so although he's still paying 23% of the money he earns from 25k up to 30k (that $1150 we saw before) he's now paying 2% less on the 18k he earns from 7k up to 25k so that element of his taxable income has dropped to 2700. His total tax, now 3850

So, in tweaking the lowest marginal tax rate and raising the tax free theshold I have dropped mr 20k's tax from 2380 to 1950 ($430 or about $8.25 a week)

In contrast, I've dropped my 30k's tax from to 4380 to 3850 (530 or about $10.20 per week)

**NOTE: the thresholds were adjusted from 10k down to 7k and I re-jigged the maths, I think it's correct but can't be stuffed cruching it all from the ground up.

So the guy earning more has got all the tax cut that the guy at the bottom gets and then more on top for every extra dollar that he earns. If we were now to drop the higher tax brackets then the guy at the bottom gets no additional advantages while the bloke up top (and the folks earning 3 or 4 times as much as him) are smiling more and more and more.

This crap about higher income tax rates for the upper ends meaning that people won't want to earn more is a phenomenal crock of shit. They're not getting taxed 43 cents in the dollar for every dollar they earn, only for the ones from 75000 upwards (or wherever the threshold is). Below that threshold they're getting taxed the same as everyone else.

I mean, Mr 30k (poor him) is getting taxed 1900 dollars more than mr 20k.
The fact that he has 26600 in his pocket where mr 20k only has 18500 doesn't seem to get a look in. AND for every single dollar that mr 30k earns up until 25 thousand, his tax free threshold and his bottom tax rate is EXACTLY the same as mr 20k is paying. The difference in tax comes purely from the extra money he earns.

If someone told you that they would give you 1000 bucks and you could keep all of it, that'd be nice wouldn't it?

If someone told you they'd give you 10,000 bucks but you had to give 30% of it back I think you'd be a tad bit better off.

Of course, those who tell us that higher tax rates up high are a disincentive to earn more would like you to believe that people would take the 1k cos they'd get to keep all of it. What BS!

BTW, for the minor modification that Howard did to the upper tax rates last time around (a 2% drop I think it was) the money spent there could have made university education free for all. That's right, no more HECS for anyone.

But of course, we'd rather see folks earning 90k and up with an extra few dollars in their pockets than let the great unwashed go to uni, wouldn't we?

This governments priorities are really really screwed up.

Cripes! That's a Johnny sized post!

[GoingDHfast]

Thanks man, that was a really good explanation! I used to work for the Tax Office and had forgotten alot of that shit, good refresher course :)

[Rik]

And it's also being said that the motive behind the 'more for the richer' was to encourage all mid-low income earners to strive for higher grounds so that they too can share a slice of the unfair privilegeWho said that those at the lower end of the income scale aren't striving to acheive? That's what's so stupid about that statement... maybe they're stuck in a position with no education or poor facilities and cannot break through. So why not give them the opportunity to acheive by supplying them with facilities instead of "incentives"?
It's all one big sales spiel, getting the voter to buy in to the same BS for the next election, with no longterm strategies for development.

[johnny]

Cripes! That's a Johnny sized post!

Most things with real substance cannot be reduced to an entertaining one paragraph.

I know SFA about this kind of domestic stuff, so I'll wait for scblacks response your counter etc.......

This is the kind of stuff that should be publically DELIBERATED and DISCUSSED, not DEBATED with ritual opposition and salesmanship.

[FR Drew]

Thanks man, that was a really good explanation! I used to work for the Tax Office and had forgotten alot of that shit, good refresher course :)

Of course, my rates and thresholds were all fabricated. And thinking about it further, making the threshold jump from 6k to 10k instead of the 6.5k or 7k that might concievably happen actually weighted the proportional benefit to mr 20k far more than it would have to mr 30k with 7k threshold and 15% in the 7-25 bracket.

The main reason that when people work overtime their pay drops is because the computer systems designed to calculate tax for most folks payroll are dumb. If you work heaps of overtime in 1 fortnight and get an extra 1.5k in the pay packet, the computer assumes that this is your standard weekly rate (2.5k a fortnight as compared to 1k a fortnight) it then calulates your tax as if you were earning that amount of money every fortnight so although you actually have about 26000 income plus the occasional o/t stint netting you an extra 5k over the year, you're being taxed as if you were earning 65000!

That means that a massive slice of your fortnight of overtime goes in tax even though it's a freak occurrence and you have to wait till end financial year to get it back again.

Actually, on further thought, I'll go back and tweak the example to a threshold change from 6k to 7k.

love that edit.

[scblack]

[QUOTE=scblack]You have to look at the PERCENTAGES involved. The percentage fall for low income earners is LARGER than the percentage fall for higher income earners. The dollars are bigger, but it is just relative.
QUOTE]

Arrrgghh! No No No No NO!

Cripes! That's a Johnny sized post!

OK, FRdrew, I will explain a little more fully. But what you must look at is the EFFECTIVE tax rate. That means you earn $xx,xxx and pay a total of tax, of which is a percentage of the total amount earned - an effective tax rate. The individual tax rates along the way mean little really compared to the total amount of tax paid.

Current Tax rates are as follows:
$0-$6,000 NIL
$6,001-$21,600 17%
$21,601-$58,000 30%
$58,001-$70,000 42%
$70,000 plus 47%

Budget changes are:
17% reduced to 15%
42% rate from $63,001 from 1/7/2005 (from $70,001 from 1/7/2006)
47% rate from $95,001 from 1/7/2005 (from $125,001 from 1/7/2006).

I'll use your Mr$20k, and Mr$30k to explain EFFECTIVE tax rates.

Current tax rates:
Mr$20k - $6,000 NIL + ($14,000 * 17%= $2,380)
Total tax paid $2,380 divided by $20,000 = 11.9% EFFECTIVE tax rate.
Mr$30k - $6,000 NIL + ($6,001-$21,600 * 17%= $2,652) + ($8,400 * 30%= $2,520)
Total tax paid $5,172 divided by $30,000 = 17.24% EFFECTIVE tax rate.

Budget tax rates:
Mr$20k - $6,000 NIL + ($14,000 * 15%= $2,100)
Total tax paid $2,100 divided by $20,000 = 10.5% EFFECTIVE tax rate.
Mr$30k - $6,000 NIL + ($6,001-$21,600 * 15%= $2,340) + ($8,400 * 30%= $2,520)
Total tax paid $4,860 divided by $30,000 = 16.2% EFFECTIVE tax rate.

Thus Mr$20k has gone from 11.9% effective tax rate down to 10.5% - a 1.4% fall.
And Mr$30k has gone from 17.24% effective tax rate down to 16.2% - a 1.04% fall.

Thats what I mean - the lower income earner has had a GREATER percentage fall in income tax paid.


I understand it does not sound fair that a higher income earner gets a bigger DOLLAR tax cut, but thats only because they pay much more in dollar terms to begin with, and the smaller tax cut percentage will become a bigger dollar number.


I will later on put up a post with my preferred tax system.

[FR Drew]

Hmm, love to se you crunch the numbers for mr 50k and mr 100k.

I guess the point is that many believe those skimming the cream in society should put more of the top end of their salary into cow milking.

Personally, I think we ought to be paying more tax, not less.

Friends were recently overseas and in Sweden i think it was, anyway, one of the countries in Scandanavia. The effective tax rates were between 30 and 40% if I recall. All child care was free, all schooling was free, all university education was free, all health care was free, all public transport ran on time (trains every 5 mins, not every 3/4 of an hour), everything was clean and well maintained.

Now we can have a system with low taxes but with those on low incomes paying a higher EFFECTIVE PERCENTAGE of their salaries for health care, schooling, child care, having massive hecs debts (you give the discount to rich folks who can afford to pay it upfront while slugging pooer students a higher percentage for deferring their payment) or we can have a system where the taxes are higher.

Problem is, our electoral and political system has been so dumbed down that a Prime Minister with a track record of not keeping election promises, lying to the electorate, having "guidelines" with regard to conflict of interest by ministers rather than any rules, spending taxpayers money on party political advertising totalling 100's of millions of dollars can win an election by pointing to boat people and saying that he'll keep the kind of folks who would throw their children overboard out of the country (even when actually they weren't). Hell, I know people who voted for the Libs cos Beasley was fat!

Yes, people earning more (most of whom were univeristy educated back when it was free) pay a higher effective tax rate. The govt funded facilities helped them get there, I think that they should put a greater share back if they're getting a bigger share out.

I left my old electricians job earning in the high twenties, low thirties, went to uni, I got a science degree and I'm earning somewhere in the high forties or more now. My degree cost the tax payer alot more than I had to pay in HECS, I'm earning more and yeah, I actually think that I should be paying a higher effective percentage of tax than the guy who is still on 28k as an electrician. I'm reaping the benefits, why shouldn't I pay for the privillege.

How about the money mr howard is pumping into private health funds? I don't see the waiting lists much shorter, private health cover is actually going UP in price. The way it looks to me, the only people Mr Howards health fund program benefits are those who have shares in a private health insurance company. billions in taxpayer dollars vanishing in a puff of smoke.

Better the higher taxes and free health care for all I say.

But on a platform like that, I'd never get elected in Aust, I'm not playing a race card or using wedge politics.

As I said a few months ago, "The Right Honourable John Howard, how come we call him that when most of the time he's neither?"

[johnny]

I left my old electricians job earning in the high twenties, low thirties, went to uni, I got a science degree and I'm earning somewhere in the high forties or more now. My degree cost the tax payer alot more than I had to pay in HECS, I'm earning more and yeah, I actually think that I should be paying a higher effective percentage of tax than the guy who is still on 28k as an electrician. I'm reaping the benefits, why shouldn't I pay for the privillege.

Without trying to defend JH here.....

If you were a sparky, typically considered lower/middle class along with chippies, mechanics, plumbers, bakers, panel beaters etc., and you were able to take yourself to uni, then you aren't necessarely getting any particular type of privelidge. Hecs allows pretty much everyone the chance of a spot at uni. It's up to the grades they get at school, or their ability to fund themselves as a mature age student. Which is exactly what I am doing now.

I came from a middle class background and worked in the most working class jobs possible, and I'm getting by easy enough. Others I study with are in tighter situations and from better/worse backgrounds/education/careers than me. The point is education and the paths to social autonomy ($$$) are available to anyone.

The reason (or one of that I believe plays a factor) there are "classes" that don't have the opportunity to study and progress are values. If anyone can afford to learn (let's not forget tafe), then it must be a decision not to for some. This has to come from a persons values. Where do they get them from? Their upbringing. I have the stats to back this up (ABS, AIC), the higher crime rate areas are the lower employed areas are the lower qualified areas are the lower educated areas. Low education = low qualification = low household income/expentiture is corelated with high crime rates.

Being that these trends are geographically located the presumption must be made that there is some kind of macro generational cycle of values. In otherwords if you come from educated parents you're more likely to value education, and vice versa.

Therefore you are not privelidged, you are lucky.

Lucky to grow up in the family you did. If You are one of the few who have progressed higher than your parents, you're lucky that no one can misprove free will!

I have been to Sweden and I agree with the idea that they get their money's worth for their tax dollar. But just instituting higher taxation will not get this. Sweden has a very different culture to Australia. They are quasi-socialist. Their right looks like our center. They only have three private schools in their whole counrty, students are fed, their dirt roads are better than our tarred roads. Yet only the government can sell alcohol, it's restricted to a government imposed and owned monopoly. They've let in thousands of refugees and put them on generous welfare, now many won't work. There are drawbacks to fully inclusive welfare states.

But hey, I'd much prefer to err on the side of generosity than stinginess! That's why I told John Howard as I shook his hand on election day "If you win, I'm moving to Europe. That's why I'm attempting to transfer my degree to Stockholm University.

Funnily enough, their Peace and Conflict Studies Dept. has a much better reputation than Australia's...........

[FR Drew]

I agree with what you say about the valuing of education Johnny and equally that all you need to do is be able to pay (or go without pay to be able to go to uni), I guess I was in the middle of a tirade or diatribe and didn't make myself clear.

I was fortuante to be able to go to uni. Although I ended up with a HECS debt (now paid off, Yay!) it din't cost me what it really cost, the govt (and therefore the taxpayer) picked up the tab.

Thanks to my uni degree, I'm now earning more. Given that the tax system paid for me to get services (the uni degree) which enables to earn more, I think it's only fair that now I'm on a higher wage, I should pay a higher percentage in tax than those who haven't spent the public dollar going to uni do.

Bah! We've been here before. Those of us who think Howard is screwing the country won't be swayed by the right arguments, those who think he's a top bloke won't be swayed by the left arguments. What's the point?

You wanna argue about Lib versus Labor? It's been covered a billion times before, do a freaking search.

[johnny]

I've never been one to argue party politics. I think it's the antithesis of representative democracy. I'd prefer to discuss issues rationally. As for right or left, I don't subscribe to either view. I give myself the opportunity to change my mind if I find a better answer. It's only other people that call me left. it's an outdeated system of political catagorisation anyway.

As for going to uni and then paying a higher tax rate to return the favour so to speak, some would say you already do that by default. A person who has $40k more to spend will pay more in taxes via expendature. The more money you have the more you give to the economy. You buy the house, the car, the bikes, the holidays and you pay tax on all of them. Especially now we have the GST. Where as the bloke with $7.5k puts in far less, paying less taxes.

Another aspect is self made wo/men and those working dangerous and hard jobs. Take the bloke who runs a medium size earth moving company he built up himself. Why should he and his wife that work 10hrs a day 6 per week, pay the higher rate of tax? They didn't get the uni education etc. Same for blokes who work in mines or run their own successful small business.

I don't have any answers, especially with economics. Just discussing it.

[FR Drew]

Personally, althoug you wouldn't believe it, i'm not party political either, i guess it's just easy to use the labels.

For me, the way things stand at the moment JWH is doing everything in his power to screw over the little guy, prevent him getting pay rises of any sort, reducing his chances to complain should he be exploited, (and god forbid that he should try to get into our country and not be white and arrive by plane). At the same time he's making higher education cheaper for the rich and easier for the dumb rich, giving tax cuts to the top end of town, trashing our environment, selling out our industries, lying to the electorate, not keeping promises etc etc.

My personal point of view is that the folks at the bottom need a bit of a leg up and the folks up the top who are living the good life have some level of obligation to provide that leg up. Equally it'd be good if we had some better services on offer and a bit of a fairer deal for all.

I don't think that makes me a Socialist or even a died in the woll Labor voter. If I thought I could trust JWH and the rest of em to deliver any kind of truth and a fair deal except for highly paid white people, private school students, Health fund CEO's, media magnates, people who wanted to shaft their lowest paid workers and GWBush then I guess I might vote lib. But hey, what's the chance of that happening?

I'm soooo glad he spent millions of taxpayer dollars shoving those Medicare ads down our throats prior to the last election now that most of those promises have been broklen too.

[Ryan]

My personal point of view is that the folks at the bottom need a bit of a leg up and the folks up the top who are living the good life have some level of obligation to provide that leg up. Equally it'd be good if we had some better services on offer and a bit of a fairer deal for all.

Social responsiblity? A fair deal for all? Don't you realise that the capitalist marketplace is the perfect system; capable of providing adequately for all members of society and rewarding those who want to succeed fairly for their toils.

A leg up indeed! If people really wanted to be successful and make lots of money they would, the only reason they fail is because they're a pack of lazy. welfare-collecting single mothers who'd rather claim the baby bonus than get out, join the workforce and start providing for themselves. Anyone would think you were a dirty pinko commie FR Drew. </sarcasm>

This is just right wing economic policy in action. You drop the tax rates, providing less income for the government which means that various government services such as Medicare and Centrelink have to be "optimised" "streamlined" or "purged of bludgers". As services become more and more starved of money you can justify phasing them out for being ineffective tools of government beauracracy and claim that the free market if allowed to compete for such services, would do a better job...score one for small government!

If Labor complains about the gradual erosion of the welfare state the Liberals can just scream "OMG!1! Labor want to take money of your pockets to pay for heroin addicts and dole bludgers!!" in the loudest, shrillest manner possible at the next election and ride peoples intense self interest all the way to another big win.

[bazza]

cbf'd reading that shit. but why are we cutting back taxes? why cant this money go into education, development of public places and our healt system. wtf is wrong with the government. i guess pouring money into things isnt ALWAYS the solution but it helps a shit load more than giving them a pat on the back. tax cuts are just a cheap way for this cheap government to win votes.

its almost as bad as promising to reduce interest rates (which should be rising instead as a result of economic growth) which was one of the cheapest tricks they have ever done. meanwhile they still increased. when is the public going to realise that the government are dicking them around and using money (OHHH NOESS!!!!11ONE we will all die if we dont get that extra few dollars a week!!!) to win votes. its as simple as that. get your freakin asses into gear and get this countrys standard of education, health and other essential services up.

btw military is not one of these.

interesting fact - terrorism has nothing on mother nature............why are we worried so much about terrorism when a heat wave in northern europe last year killed approximatley 25 000 people??

[toodles]

cbf'd reading that shit. but why are we cutting back taxes? why cant this money go into education, development of public places and our healt system

Because our health system sucks ass anyway and $9 a week will pay for private medical insurance I'd rather have.

I'd rather have the money myself than have the government blow it on a their latest pay rise or travel rort. At least if I have the money, it has a better chance of contributing to something actually useful than if the gov't has it.

[johnny]

I'd rather have the money myself than have the government blow it on a their latest pay rise or travel rort. At least if I have the money, it has a better chance of contributing to something actually useful than if the gov't has it.

Sounds like you need a more responsible gov't in your country.

[ona rampage]

Well here is another spin on this for you.

Lets say you are a "high income earner"; lets look at the actual dollar value in tax that these people actually pay. Quite a shit load actually. Now, work that out as a percentage of actual earnings, and see who is and who isn't getting the fair deal out of the Australian tax system.

There is also a difference between "high income earners" and people who just have worked hard, and have high paying jobs. The latter work hard, and get tax extraordinary amounts, for being 'privaleged'? Whereas, the very top end of town (read company CEOs, ect) who are earning over say $300k per annum, are the ones that are getting away with more, via well structured tax shelters, etc. Alan Bond paid next to nothing in income tax every year, yet was one of the richest men in Australia in his time. Try getting some more out of them.

The point earlier about taxing your overtime all in this pay being due to poorly designed payroll systems...Wrong. I work in payroll system implementation, and it is nothing to do with the payroll systems being 'dumb', and all to do with the tax system. The tax system says use these tax scales to tax a person's pay, based on their pay frequency (i.e. fortnightly, weekly, monthly; you can get them off the ATO website). So, if you earn x dollars, you get taxed y dollars. No contingency for spreading the tax, and in fact employers would not be tax compliant if they did.

[scblack]

I will later on put up a post with my preferred tax system.

Here's my addition of a preferred tax system.

I reckon it should be a FLAT TAX - that means say, a 30% across-the-board tax rate, on all income, less a tax free threshold (maybe the current $6,000).

This has a number of advantages over a progressive system, which is currently what we have in Australia.

1. SIMPLE - people can easily understand it. As I said above, it's only effective tax rates that matter, so it will stop confusing people who think the 47% rate, or whatever will mean they get less money. You'll have people not wracking their brains to get the tax system.

2. INCENTIVE - if you know you'll pay the same tax if you earn more, that will stop people getting to a certain tax level, and not accepting overtime. I know of people, and stories of those who would earn up to a certain tax threshold, eg $58,000 taking them up to 42%, and from then on, work very little (earning less), because they thought they were being overtaxed. FLAT tax would let them work away, knowing what they will get, and this should improve home incomes, and productivity.

3. MATCH COMPANY TAX - this will reduce the number of tax schemes setting up companies, to receive income at the lower company rate rather than personal tax rates. People will just get on with working on their business rather than setting up structures to minimise tax.

4. BLACK MARKET REDUCED - people will be less likely to look for cash-in-hand work, or simply not report income. They will not go to a higher tax bracket, reducing incentive to try to hide income form the tax system.

5. COMPLIANCE - unless you have a structure of company's etc, your yearly tax return will be much easier - just earn $xx,xxx and pay 30%. You will pay your accountant less (not good for me :) ), and paperwork etc will be reduced.

There are a number of countries which have introduced such a system, and they are NOT getting less tax revenues, so it appears to be working for them (sorry cannot think which they are and the info is at work, I'm at home). But a couple of them were less advanced eastern bloc countries.

The Flat Tax is one idea, and it is being very seriously debated in financial circles.


Edit - I talked over this with Johnny the other day, and he agreed with me on a Financial topic :eek: hehe

[toodles]

Sounds like you need a more responsible gov't in your country.

Good point. Maybe I'm being unfair. Maybe I should trust them with my money again - they could have changed for the better. Maybe they won't disappoint me this time by unevenly distributing the education budget between private and public schools. Perhaps they won't spend it on stupid military toys and actually spend it where we need it most. I feel so selfish now, I'm sorry government. Here - take my money and spend it the best way possible.

[johnny]

Edit - I talked over this with Johnny the other day, and he agreed with me on a Financial topic :eek: hehe

No way.
You agreed with me! :p :p :p jks


4. BLACK MARKET REDUCED - people will be less likely to look for cash-in-hand work, or simply not report income. They will not go to a higher tax bracket, reducing incentive to try to hide income form the tax system.

I'm living proof of this one.

[FR Drew]

The point earlier about taxing your overtime all in this pay being due to poorly designed payroll systems...Wrong. I work in payroll system implementation, and it is nothing to do with the payroll systems being 'dumb', and all to do with the tax system. The tax system says use these tax scales to tax a person's pay, based on their pay frequency (i.e. fortnightly, weekly, monthly; you can get them off the ATO website). So, if you earn x dollars, you get taxed y dollars. No contingency for spreading the tax, and in fact employers would not be tax compliant if they did.

Looks to me like it's a tax office lurk to get to keep the money for however many months before your tax return.

If you know that a payment is a one off (say a yearly 2% productivity bonus) and not going to be repeated then your pay for the year is 102% of what it was. Why on earth tax that fortnight as if your yearly income was 150% or 170%. What a load of wank!

I can see that overtime might be a different case as that can be repeated during the year, but one off payments aren't. Only reason to do so is so that ATO earns interest on it for months instead of you.

As for SC Blacks flat rate tax, if you had a flat rate of 30%, the rich would still pay less as they'd have accountants squeezing loopholes all over the place.
"Ah, yes well although the money was paid to mr X, it's actually corporation money for the purposes of R&D and not actually income, it's just temporarily diverted to the vehicle he's leasing while his fringe benefits are offset by his dependants live 38% of the time in his second property which is depreciating at a rate of 20% p/a due to them using it. Additionally, because his computer (which is salary sacrificed) is located at that residence which is also curreently being used 65% of the time as his temporary office and therefore is required for him to effectivel earn his income, the fading of the curtains can be claimed back due to the radiation from the screen..."

What EFFECTIVE tax rate will the rich pay under SC Blacks flate rate system. It won't be 30%, I can assure you.

[johnny]

Now you're starting to get into theories of infinite regression, in otherwords no matter what you do, they'll always go one better.

Therefore, the problem, by your analysis, is not the tax system, but the rich themselves.

Feed them to the poor. :p

[FR Drew]

Now there's a real incentive to find loopholes so you officially have a lower income! You're a genuis Johhny.

"Top marginal tax rate for income from 45k-70k will henceforth be 48%, all persons earning $70,001 and over will be eaten."

You be wanting to make sure you had enough deductions wouldn't you?

Think of al the doantions to charities that would be made on the 29th of june each year. :-)

[Ryan]

I think we should run candidates in the next federal election based on this "Eat the rich" platform...at least we'd still be less evil than Family First.

[S.]

cbf'd reading that shit. but why are we cutting back taxes? why cant this money go into education, development of public places and our healt system. wtf is wrong with the government. i guess pouring money into things isnt ALWAYS the solution but it helps a shit load more than giving them a pat on the back. tax cuts are just a cheap way for this cheap government to win votes.

I love this attitude. You'd bitch if they put taxes UP too.

[johnny]

I think we should run candidates in the next federal election based on this "Eat the rich" platform...at least we'd still be less evil than Family First.

You know what, I thought that family first would be evil too. I've listened to three media interviews they've given on Lateline and such........I haven't disagreed with anything that they've said. They certainly don't tow the Howard line. I'm willing to hear them out.

[Ryan]

You know what, I thought that family first would be evil too. I've listened to three media interviews they've given on Lateline and such........I haven't disagreed with anything that they've said. They certainly don't tow the Howard line. I'm willing to hear them out.

Fair call, it's not like they've had a chance to engage in actual politics yet though. I'll suspend judgement until I see how they behave in the Senate.

Scblack and johnny, I hope you realise that supporting a flat tax is a strong indicator of latent libertarian tendencies. If you want I can make you guys some tinfoil hats ;)

[johnny]

Fair call, it's not like they've had a chance to engage in actual politics yet though. I'll suspend judgement until I see how they behave in the Senate.

Scblack and johnny, I hope you realise that supporting a flat tax is a strong indicator of latent libertarian tendencies. If you want I can make you guys some tinfoil hats ;)

Yeah I'm also interested to see how they go in the Senate, I'm tipping that the Libs will be throwing them a few bones. A one vote victory is like kissing your sister apparently.

No way! I'm a right wing communist free marketeer monarchical oligarchist all the way to my yellow center!

[FR Drew]

I'm pretty sure Johnny, that once things get around to Gay rights, IVF for lesbian couples, abortion, censorship etc, that Family First will emerge with a range of policies you're not so in agreement with.

For the present they're talking aboutthings relating to the income and support of families. It's once they get around to "family values" that it's liable to get scary.

[toodles]

You know what, I thought that family first would be evil too. I've listened to three media interviews they've given on Lateline and such........I haven't disagreed with anything that they've said. They certainly don't tow the Howard line. I'm willing to hear them out.

The enemy of my enemy is my friend?

That group is the most sinister party to arrive on Oz politics ever. They make One Nation look like a rational, open-minded affair.

[scblack]

As for SC Blacks flat rate tax, if you had a flat rate of 30%, the rich would still pay less as they'd have accountants squeezing loopholes all over the place.
"Ah, yes well although the money was paid to mr X, it's actually corporation money for the purposes of R&D and not actually income, it's just temporarily diverted to the vehicle he's leasing while his fringe benefits are offset by his dependants live 38% of the time in his second property which is depreciating at a rate of 20% p/a due to them using it. Additionally, because his computer (which is salary sacrificed) is located at that residence which is also curreently being used 65% of the time as his temporary office and therefore is required for him to effectivel earn his income, the fading of the curtains can be claimed back due to the radiation from the screen..."

What EFFECTIVE tax rate will the rich pay under SC Blacks flate rate system. It won't be 30%, I can assure you.

But having a flat tax rate reduces significantly the wealthier persons ability to do exactly what you have described.

The Company tax rate is 30% flat rate.

Personal rates are progressive up to 47%.

That there provides a HUGE ability to structure your affairs, to reduce tax up to 17%. The tax will ultimately be paid at marginal rates, when a dividend is paid from the company to the individual. BUT that can be delayed indefinitely if you wish. Or if you're an older, wealthy person, you can put your funds in your super fund and only pay 15% tax (the disadvantage is this is only accessible after roughly 60-65years old), but if you're wealthy enough to put away big money which would have eventually have been inherited anyway, they can receive the funds having only paid 15% tax on that, rather than 47%.

If the Company tax rate and personal tax rates are the same, there is much less incentive, or even ability to do the above.

FRDrew, you probably hate the fact that I do what you are obviously against, and I do it for a living. I help the VERY wealthy with their affairs, minimising tax and maximising their wealth positions. But one thing I will say, is that MUCH of what they are able to achieve can be done by virtually ANYBODY, who has the knowledge of how to set up their affairs. If you earn a smaller income, a lot of advantages can be lost, due to the progressive tax rates, but these strategies can be used by anybody.

[cam-o]

I help the VERY wealthy with their affairs, minimising tax and maximising their wealth positions.
Sweet, I was MEANT to be very wealthy, so come do mine will ya? :D

[johnny]

The enemy of my enemy is my friend?

That group is the most sinister party to arrive on Oz politics ever. They make One Nation look like a rational, open-minded affair.


That's what I keep hearing, but the few interviews I've seen with them did not bare this out. I too am interested to see what their position will be considering issues such as abortion, gay rights etc. I've already heard them say that they do not agree with our imigration/detention systems. That's a good start for me.

It's hard for me to keep track of a lot of this being that my focus is more international than domestic.

[S.]

The enemy of my enemy is my friend?

That group is the most sinister party to arrive on Oz politics ever. They make One Nation look like a rational, open-minded affair.

"Please explain" how One Nation were not a rational, open minded party?

[Rik]

6% cascading tax on all sales... rational?
I can't remember any more of their policies, but alot of them were out of this world.

[S.]

6% cascading tax on all sales... rational?
I can't remember any more of their policies, but alot of them were out of this world.

What's a cascading tax?

[FR Drew]

But having a flat tax rate reduces significantly the wealthier persons ability to do exactly what you have described.

The Company tax rate is 30% flat rate.

FRDrew, you probably hate the fact that I do what you are obviously against, and I do it for a living. I help the VERY wealthy with their affairs, minimising tax and maximising their wealth positions. But one thing I will say, is that MUCH of what they are able to achieve can be done by virtually ANYBODY, who has the knowledge of how to set up their affairs. If you earn a smaller income, a lot of advantages can be lost, due to the progressive tax rates, but these strategies can be used by anybody.

That's 30% on profit, not 30% on turnover. People who can afford a good accountant who knows the loopholes will always be able to make their profit or income vanish into various things so they pay less tax. Problem is, if you earn less, you have less ability to pay for the most creative accountants.

As you said earlier in the thread, it's about someone's EFFECTIVE tax percentage and although numerically the rich pay more in tax, effectively through creative accountancy, car leases, negative gearing etc most of them pay less EFFECTIVELY.

I don't hate what you do. Hell, a level playing field would be nice but it's not going to happen. Someone has to be an accountant for the wealthy. It just bugs me when people come out with some fiction where they'd like me to believe that the folks earning bucketloads are somehow getting screwed and deserve my sympathy for the cruel tax rates they have to pay.

I live in the real world, the rich will always get it easier, the bottom end will always struggle, opportunities are not equal for all, not all the doors are open for everyone.

Plus, if there weren't rich people, what would we eat once the revolution comes?

[ona rampage]

As you said earlier in the thread, it's about someone's EFFECTIVE tax percentage and although numerically the rich pay more in tax, effectively through creative accountancy, car leases, negative gearing etc most of them pay less EFFECTIVELY.


Well, these used to be great ways of reducing your income tax assessable income, but alas the government cracked down on these a long time ago. Salary sacrifice (or pre tax deductions) on cars are no-where near as attractive as they once were with FBT (Fringe Benefit Tax) lumped onto it, unless you do a lot of kilometres every year (like 30,000 km). Super is good, but you don't see that money again till you retire (and by the time we get to retire, the retirement age will have moved out to 80 :) ). The only decent salary sacrifice item these days is laptops (no FBT, and you can depreciate the asset) but hey, you can only use so many laptops at once.

Negative gearing is also good, but what most people fail to take into account is that you effectively need to be loosing money on the property to be writing any amount off. Hence, the income from the property has to be less then the cost (i.e. mortgage), and then you can write part of that off. Not to say there aren't benefits from negative gearing, but you are in effect loosing money each pay.

As for creative accounting; you need to be pulling in some serious $$$ to get any real benefit IMHO, which counts most of us out (read Alan Bond style creative accounting) and find a decent accountant.

[johnny]

Negative gearing is also good, but what most people fail to take into account is that you effectively need to be loosing money on the property to be writing any amount off. Hence, the income from the property has to be less then the cost (i.e. mortgage), and then you can write part of that off. Not to say there aren't benefits from negative gearing, but you are in effect loosing money each pay.



Is this right? When semi/professional investors (those with two or more investment properties) have their investments negatively geared (pay less tax) this means the public is effectively paying for their investment. The tax they could be paying could be spent on public works. Is it right to say that this is unfair?

Myself, I prefer to positively gear. I run at a profit and then reinvest the profit back into the property. This way I claim the expense on tax and raise the value of the property, therebye raising the value of the rent.

[scblack]

Is this right? When semi/professional investors (those with two or more investment properties) have their investments negatively geared (pay less tax) this means the public is effectively paying for their investment. The tax they could be paying could be spent on public works. Is it right to say that this is unfair?

Myself, I prefer to positively gear. I run at a profit and then reinvest the profit back into the property. This way I claim the expense on tax and raise the value of the property, therebye raising the value of the rent.

Johnny, HANDS UP TO YOU!

People, does anyone really understand what NEGATIVE GEARING means? It is AMAZING how many people do NOT understand what negative gearing means - and this includes MOST of the clods who think an investment property is the bees knees.

NEGATIVE gearing means you are LOSING MONEY. Thats right, every month your tenant is paying LESS than what the property costs you.

This could be what it means:
Property worth $300,000
Loan worth $280,000
Interest at 8% $22,400
Costs of $2,600
Rent of $15,000
Therefore loss of $10,000.

Lets say you earn $80,000 per year, and you own your property, negatively geared, to the tune of $10,000 per year. That means EVERY year, you are letting the taxman help you pay for your property.

BUT you are on the top tax rate 47%, and you lose money every year. So you pay tax on $70,000 income per year. That means the tax man has given you a deduction of $10,000 because you LOST that money, and you pay $4,700 less tax.

Please stop me here, if I miss something. You lost $10,000, pay $4,700 less tax meaning you are $5,300 BEHIND, and want to believe the taxman is paying for your property?

Negative gearing is losing money.

And Johnny is right on the money - POSITIVE gearing is what you want - an investment that MAKES money.