Death and taxes, or taxed to death?

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Manage episode 234063209 series 2148531
By Discovered by Player FM and our community — copyright is owned by the publisher, not Player FM, and audio streamed directly from their servers.

Welcome to Finance and Fury

A plan for structural reforms to help increase Australians’ ability for upward mobility.

The coalition will likely have enough seats to squeeze through a lot of reforms.

Today:

  • Income axes going up aren’t much of a concern
  • What about the taxes you don’t see directly?
  • The effect of these taxes on the economy growth or decline
  • How to reduce your taxable incomes?
Taxes – Government revenue source
  1. Number of taxes – do you know how may taxes you pay each year?
  2. The average Australians pay at least 125 different taxes each year, 99 to Federal, 25 to State and 1 to Local
  3. Total tax collected is approximately $528.5 Bn
    1. Most tax comes from incomes of individuals and businesses – 59% or $312 Bn
  4. Consumption tax like GST makes up 26.8% was supposed to replace state’s stamp duty
  5. Business payroll tax makes up 4.7% or $24.7 Bn charged to companies if they have above a threshold employees/wages
  6. Excises on specific goods – normally ones on top of GST at Government discretion
  7. Sin taxes – consumption tax on goods which are harmful to society
    1. Alcohol – the social cost from loss of labour, healthcare, accidents and crime costs
    2. Tobacco – the effects of smoking are estimated to cost $320 million but the revenue raised is $12 Bn
  8. Does the additional money go back in to addiction treatment programs to help? Or the general spending budget?
Consumption vs Income Taxes
  • Both can’t be kept high
  • If consumption tax increases the cost of living, income tax should be lower
  • Consuming becomes more costly with consumption tax, putting a strain on upwards wealth mobility

Statistics on Taxpayers

  • Individuals and income tax reduction plan for 2022 and 2024
  • Helping reduce the burden GST placed onto families from 2001 onwards
  • Original plan to protect works from bracket creeps
  • With wage growth and inflation going up, if the marginal tax brackets don’t increase too you get bracket creeps
  • Abolishing the entire tax bracket 90k – 180k incentivises hard work
  • Despite these changes you will still see the top 5% of workers paying a 3rd of all income tax collected
  • Someone earning $200,000 pays 10 times more tax than someone earning $45,000 per year

How to reduce certain types of tax?

  • GST? Stop spending so much. Further excises on your spending only reduce with less spending
  • Income tax? Deductions or salary sacrifice
    • Salary sacrifice puts money into super up to $25,000 cap taxed at 15% rather than marginal tax rate
    • Deductions give back the costs of investments or work related expenses and donations to reduce your assessable income

Give to charity – Donate to my CEO Sleepout https://www.ceosleepout.org.au/fundraisers/louisstrange/brisbane

Negative gearing
  • when you spend more on investments than you earn
  • Borrow to invest – home equity
  • Get your marginal tax rate back and for a lot of people the amount back will decline from 2024
  • Lower marginal tax rates for those earning between $40k-$200k

Franking credits – Shares

  • Tax offsets on dividend income
  • Buy fully franked dividend yielding shares, but gets added to gross income
  • Own 1,000 CBA shares. They pay $4.30 per share in dividend so you get $4,300 of income.
  • Plus the franking credit, of $1,843 so total income is $6,143
  • Earning a salary of 100k, assessed at 39% the tax would be $2,396 minus the franking credit of $1,843 so net tax is now $523.
  • Therefore, the marginal tax rate is now 13% instead of 39%
  • But, you will simply pay no tax on dividends if your assessable income is all the way up to 200k, as franking credits offset tax on franked income with a 30% tax rate

Family trusts – No changes to distribution rules

  • Still allows flexibility and asset protection
  • Own assets and distribute income to the lower marginal tax rate individual

Capital Gains/Losses

  • Gains still get the discount for assets owned longer than 12 months
  • Losses, claim against future gains

If you enjoyed this episode leave a rating, if you want to get in contact you can do so here.

Resources:

Individuals taxation statistics - https://data.gov.au/data/dataset/taxation-statistics-2016-17/resource/4161d1b8-f9e3-4f36-b21d-d5d06b43ed2e

Australian taxes - http://taxreview.treasury.gov.au/content/paper.aspx?doc=html/publications/papers/report/section_2-03.htm

208 episodes available. A new episode about every 2 days averaging 24 mins duration .