Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Register

1 December 2025

Home / 18

How much income tax do you pay?

There’s a never-ending debate about income inequality and how much taxes people at varying income levels should pay. This was brought onto the front pages by the Occupy movement, which highlighted in the United States that the top 10% of households had an income 11 times larger than the bottom 10% (sometimes called the 90/10 ratio). In Australia, income inequality is not this extreme, with the top 10% about 4 times larger than the bottom 10%.

This article does not buy into the social or equity arguments about income and tax distribution, but as we approach the end of another financial year where tax has again been high on the agenda, it’s interesting to see where personal income tax receipts come from.

A reminder of the current tax scales (check ATO website for updates):

The latest available statistics on numbers and amount in each tax bracket are from 2010/2011, when the bottom tax scale cut out at $6,000. In coming years, there will be far more people paying no tax than indicated in the diagram below. The top marginal tax rate for taxable income over $180,000 is 46.5%, the same in both reporting periods.

The following graph illustrates the amount of tax paid by tax bracket as at 2010/2011, and perhaps the most surprising statistic is the number of people in the bottom category who pay no personal income tax, even when the cut off was $6,000:

  • 45% of all adults, almost 8 million, pay no personal income tax. Another 17% or 3 million pay an average of $1,800. Therefore, 62% of Australians pay 4% of total personal income tax revenue
  • 26% of personal income tax, worth $35 billion or an average of $139,000 each, is paid by the 1.5% of adults or 260,000 people who earn more than $180,000
  • in the middle, 44% of adults or 7.5 million, pay the balance, 69% of income tax.

 

Ashley Owen is Joint Chief Executive Officer of Philo Capital Advisers and a director of Third Link Investment Managers.

 

  •   7 June 2013
  • 2
  •      
  •   
2 Comments
Kevin Chuah
June 09, 2013

Hi Ashley,

As a statistician, I was also surprised by your findings presented here. In order to better understand your findings, I attempted to reconcile the data that you have presented. However, after looking at the source you quote from, I now realise that the data you have presented is not the data actually published by the ATO. Rather you seem to have re-interpreted what the ATO has published in Table 2.13 in the source you quote in the diagram. (Please correct me if I am wrong.)

This table shows that there were a total of around 9.3mn income tax payers in Australia in the 2010-11 income year. Of that 9.3mn, 2.7% have a taxable income of $180,000 or more, accounting for 26.2% of the income tax raised. You have then assumed that there is around 17mn “adults” in Australia, hence your 1.5% figure above.

In a similar way, you have assumed that any of the 17mn “adults” that do appear in this table pay no income tax and as a result, almost 8mn or 45% of “adults” pay no income tax. Importantly, what you have assumed to be “adults” seems to include anyone of “working age” or above.

Taking the latest data from the ABS, we can see that 66% of the Australian population was of "working age" (ie between 15-64). Further, 16.4% of the population where aged 65 or over. This means that roughly 20% of "adults" were eligible for retirement and far less likely to pay income tax. Additionally, a meaningful proportion of those in the bottom-end of the working age population could be expected to be in full-time education, so would also be unlikely to earn enough to pay income tax.

If you adjust your data for the working age population, the statistics look far less alarming. In fact, your 45% figure above would become 31%. One then needs to consider how many young people are in full-time education and how many households have one adult member staying at home. Once you consider that, I'm sure your figures look far less extreme and much less surprising.

ashley owen
June 10, 2013

Kevin, thanks for the feedback. It's all a question of definition. I start with a simple, everyday definition of adults - people over 18 years of age - ie all those entitled (forced actually) to vote - all those who enjoy the privileges of living in this great country - with clean air, safe water, safe food, safe streets, rule of law, protection of property rights, public institutions, national security, etc, etc. It is not an issue of equity, morality, inaliable human rights to welfare, etc - it is a simple fact that all of this must be paid for. One could argue that all people receiving income - of whatever type, whether of "working age" (whatever that is) or not - enjoy the benefits of this great country and ought to contribute financially in some small token way as a proportion of that income, however small that is. On the other hand if you narrow the definition down to those adults who are liable to pay tax after all of the tax breaks, rebates, subsidies, supplements, tax-free pensions, negative income tax transfers, income-splitting and other paper shuffling tricks - then of course close to 100% of people required to pay tax actually pay tax.
cheers.

 

Leave a Comment:

RELATED ARTICLES

Taxation reform: is Canberra serious?

FactCheck: Is 50% of all income tax paid by 10% of the working population?

Firstlinks is sponsored by:
banner

Most viewed in recent weeks

The growing debt burden of retiring Australians

More Australians are retiring with larger mortgages and less super. This paper explores how unlocking housing wealth can help ease the nation’s growing retirement cashflow crunch.

Warren Buffett's final lesson

I’ve long seen Buffett as a flawed genius: a great investor though a man with shortcomings. With his final letter to Berkshire shareholders, I reflect on how my views of Buffett have changed and the legacy he leaves.

LICs vs ETFs – which perform best?

With investor sentiment shifting and ETFs surging ahead, we pit Australia’s biggest LICs against their ETF rivals to see which delivers better returns over the short and long term. The results are revealing.

Family trusts: Are they still worth it?

Family trusts remain a core structure for wealth management, but rising ATO scrutiny and complex compliance raise questions about their ongoing value. Are the benefits still worth the administrative burden?

13 ways to save money on your tax - legally

Thoughtful tax planning is a cornerstone of successful investing. This highlights 13 legal ways that you can reduce tax, preserve capital, and enhance long-term wealth across super, property, and shares.

Why it’s time to ditch the retirement journey

Retirement isn’t a clean financial arc. Income shocks, health costs and family pressures hit at random, exposing the limits of age-based planning and the myth of a predictable “retirement journey".

Latest Updates

Weekly Editorial

Welcome to Firstlinks Edition 639 with weekend update

Thank you for the hundreds of responses to our Reader Survey and to maximise the sample size, we’re leaving it open until this Sunday. Here is an overview of the results so far.

  • 27 November 2025
  • 2
Investment strategies

Where to hide in the ‘everything bubble’

It might not be quite an ‘everything bubble’ but there’s froth in many assets, not just US stocks, right now. It might be time to stress test your portfolio and consider assets that could offer you shelter if trouble is coming.

Investment strategies

The ultimate investing hack: dividend growth stocks

Investors often fall prey to ‘amygdala hijacks,’ letting emotion trump reason. By focusing on dividend-growth with stocks instead of volatile prices, you can steady your mindset and let compounding do the work. 

Investment strategies

CBA or global banks?

CBA’s recent pullback highlights single-stock risk. Global banks trade at lower P/Es with rising earnings and dividends, offering investors both income potential and long-term value beyond the local market.

Investment strategies

Global dividends rising, but Australia lags

Global dividend growth surged in the third quarter, with median growth of almost 6%. Australia was a notable exception as dividends fell, thanks to flagging mining company payouts.

Economy

I called inflation's rise and fall and here's what's next

In 2020, I warned that surging US money supply growth would spark inflation. By early 2023, I said US money supply was dropping dramatically and that meant inflation would decline. Here's what happens next.

Superannuation

Are excessive super funds giving Australia “Dutch Disease”?

The irony is profound: a system designed to secure Australians’ futures may be systematically dismantling the economic diversity necessary for long-term prosperity.

Investment strategies

Could your children pass the inheritance ‘stress test’?

You devote years of your life working, saving and investing, striving to build a legacy that will outlive you. Before any wealth moves to the next generation, here are six questions every parent should ask themselves.

Sponsors

Alliances

Site Map

About Firstlinks

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.