Taxable income and tax paid in Commonwealth electoral divisions, 2000-01


Current Issues Brief Index

Current Issues Brief no. 2 2004–05

Taxable income and tax paid in Commonwealth electoral divisions, 2000 01
(2003 electoral boundaries)

Stephen Barber and Andrew Kopras
Statistics Section
12 July 2004

Contents

Glossary
Introduction
Main features

Taxation statistics by Commonwealth electoral division
Commonwealth electoral divisions ranked by taxable individuals
Commonwealth electoral divisions ranked by total taxable income
Commonwealth electoral divisions ranked by mean taxable income
Commonwealth electoral divisions ranked by total net tax
Commonwealth electoral divisions ranked by mean net tax
Commonwealth electoral divisions ranked by net tax ratio

Endnotes

Table 1 Taxation statistics by Commonwealth electoral division
Table 2 Commonwealth electoral divisions ranked by taxable individuals
Table 3 Commonwealth electoral divisions ranked by total taxable income
Table 4 Commonwealth electoral divisions ranked by mean taxable income
Table 5 Commonwealth electoral divisions ranked by net tax
Table 6 Commonwealth electoral divisions ranked by mean net tax
Table 7 Commonwealth electoral divisions ranked by net tax ratio

Bibliography

List of Maps
Mean Taxable Income by Commonwealth Electoral Division
Net Tax Ratio by Commonwealth Electoral Division

Maps are available in hard copy (Senators and Members only) or PDF version.

Glossary

Imputation credit. Tax paid at the company rate is allocated to shareholders by way of imputation credit attached to the (franked) dividends they receive. An amount equal to the imputation credit is included in assessable income of the shareholders, who are then entitled to a (franking) rebate of tax equal to the amount included in their income.

Mean net tax. Average (mean) amount of tax paid per taxable individual and equal to total net tax divided by the number of taxables.

Mean taxable income. Taxable income divided by the number of taxables, i.e. the average (mean) amount of taxable income per taxable individual.

Net tax ratio (previously known as effective rate of tax). The percentage of total taxable income paid in tax and equal to total net tax divided by the total taxable income.

Non-taxables. Individual taxpayers who, after taking into consideration the amount of income, deductions, rebates, credits and levies, are not required to pay tax.

Taxables. Individual taxpayers who, after taking into consideration the amount of income, deductions, rebates, credits and levies, are required to pay tax.

Taxpayers. Taxable plus non-taxable individuals.

Tax deduction. An amount that is deducted from assessable income to arrive at the taxable income on which the gross amount of tax to be paid is calculated. Each dollar of tax deduction only reduces tax by the percentage of the taxpayer's marginal rate of tax.

Tax rates scale, 2000-01

Taxable income

Tax payable (a)

From

To

$0

$6 000

Nil

       

$6 001

$20 000

Nil

+

17c

for each $1 over

$6 000

$20 001

$50 000

$2 380

+

30c

for each $1 over

$20 000

$50 001

$60 000

$11 380

+

42c

for each $1 over

$50 000

$60 001

 

$15 580

+

47c

for each $1 over

$60 000

(a) A Medicare levy of 1.5 per cent of taxable income is also payable.

Tax rebate. An amount that reduces tax (i.e. tax offset) that is subtracted directly from the income tax payable. Each dollar of tax rebate reduces tax by a dollar and, in general, rebates and credits allowed cannot exceed the gross tax.

Total net tax. Tax payable by taxable individuals after rebates and credits have been deducted from the gross tax calculated on taxable income. Net tax includes the Medicare Levy as well as the amount equal to the imputation credits, because each taxpayer claiming this credit has effectively paid the tax the dividends (income) they received are already net of tax (paid at the company rate).

Total taxable income. The income of all taxables, to which the tax rates scale is applied; it is equal to total income less deductions.

Introduction

This paper provides taxation information for each Commonwealth electoral division (CED) following the 2003 redistribution of electoral divisions in Victoria, Queensland and South Australia. The information relates to the electoral divisions applicable at the next election and includes such categories as the number of taxpayers (taxables and non-taxables), taxable income and the amount of tax paid. Tables have also been produced that rank the CEDs against some of these categories. The paper also includes choropleth (colour coded) maps of electoral divisions for mean taxable income and net tax ratio.

The statistics in this brief relate to the 2000 01 income year and provide updated information to that published by the authors earlier this year and to the 1996 97 data published by the authors in 1998 99 (see bibliography). However, the statistics are not necessarily directly comparable because of electoral boundary redistributions in all States and the Northern Territory and because total net tax data released by the Australian Taxation Office (ATO) now includes imputation credits.

The information shown in the following tables has been derived from data published at the postcode level by the ATO in Taxation Statistics, 2000 01. The allocation of postcodes to CEDs, or the concordance, is based upon results from the 2001 Census of Population and Housing. When a postcode falls entirely within a CED, the postcode is wholly included within the CED. When a postcode is dissected by CED boundaries the results for the postcode are proportioned between the CEDs based upon the percentages of the population of that postcode that reside in each CED. Postcodes specified in the ATO data that are not featured in the Census have been allocated to a CED using a map overlay method.

The postcode information published by the ATO is for the postcode stated in the home address on each tax return. If a postcode is not stated or, if stated, is not a valid postcode, i.e. no such postcode exists, the information is classified as unallocated within the State or Territory where the tax return was processed.(1)

The tax data shown in the tables were compiled by the ATO from individual tax return forms for the 2000 01 income year. Although the tax statistics were released on 15 December 2003, they only include information from forms which were processed by 31 October 2002. Therefore, the data for 2000 01 are not necessarily complete.

Main features

Taxation statistics by Commonwealth electoral division

Table 1, Taxation statistics by Commonwealth electoral division, shows various categories of tax information for each Commonwealth electoral division listed alphabetically by State/Territory.(2)

This information shows that the ACT has the highest average (mean) taxable income ($43 171) followed by NSW ($41 626) and Victoria ($38 636). The Northern Territory, which had the second-highest average taxable income in 1996 97, has now dropped to fourth.

The ACT ($10 922) pays the highest average (mean) tax. However, the average tax paid in NSW ($10 649) is only just below the ACT and causes NSW to have the highest net tax ratio (25.6 per cent); this is probably due to NSW paying more tax (proportionately) in the top income tax bracket.

The Northern Territory, with greater access to tax rebates such as zone rebates, and Tasmania, with the lowest average taxable income over $4900 below the national average and $9600 below the ACT are the lowest net tax ratio jurisdictions (21.8 per cent).

Victoria is just above the average income, average tax and tax ratio of Australia as a whole, while Tasmania is also the bottom State in average income and average tax.

Commonwealth electoral divisions ranked by taxable individuals

Table 2, Commonwealth electoral divisions ranked by taxable individuals, shows, as expected, the smallest electorates (by number of electors enrolled) at the bottom of the table.(3) Tasmania has four electorates in the bottom five and all five of its electorates are in the bottom eight, while the Northern Territory electorates are bottom and ninth bottom. The ACT electorates of Fraser and Canberra appear almost at the top of this table due to their size they are the largest electorates (by number of electors enrolled) in Australia.(4)

Although not shown in this paper, if a comparison is made of the ratio of taxable individuals to electors enrolled in 2001 a further picture emerges.(5) The top five electorates have, on average, 83 taxables for every 100 electors enrolled; Sydney (NSW) having 98 and North Sydney (NSW) and Wentworth (NSW) each having 88. The bottom five electorates have only 54 taxables per 100 electors; the Northern Territory electorate of Lingiari has only 46. The Australian average is 66 taxables per 100 electors.

The top ten electorates are all inner metropolitan (in Sydney, Melbourne and Canberra). These electorates tend to have lower unemployment levels and more two-income families. Over half of the bottom ten electorates are classified as rural, and electorates such as Cowper (NSW) and Richmond (NSW) both rural electorates on the north coast of NSW also include large numbers of retired people.

Commonwealth electoral divisions ranked by total taxable income

Table 3, Commonwealth electoral divisions ranked by total taxable income, shows similar patterns to Table 2 and is influenced by two factors, firstly, the number of taxable individuals, and secondly, the size of the incomes of those taxables. The ATO states that:

The source and level of income varies according to the age and employment status of the taxpayer. For example, among retirees the main sources of income are government and other pensions and annuities, and eligible termination payments. As a result, the amount of taxable income [is] low among older age groups.

Level of income also varies widely according to geographic location. People of similar incomes tend to live in the same general areas.(6)

An obvious example of the effect of income sizes whether incomes are generally higher or lower relative to other electorates is the re-ordering of electorates throughout this table in comparison with Table 2. At the top of the table, the generally much higher incomes of the north shore and eastern suburbs areas of Sydney and the eastern suburbs of Melbourne have caused these electorates to displace the ACT electorates, which have higher numbers of taxpayers but lower income levels.

At the bottom end of the table, the smaller electorates in Tasmania and the Northern Territory are joined by the NSW north coast and hinterland electorates of Lyne, Cowper, Page and Richmond and the Queensland rural electorate of Wide Bay.

Commonwealth electoral divisions ranked by mean taxable income

Table 4, Commonwealth electoral divisions ranked by mean taxable income, shows an income spread from just over $29 500 in Wide Bay (Qld) to almost $70 900 in Bradfield (NSW). Calare (NSW) and Bowman (Qld) are the electorates in the middle of the table with average incomes over $35 500.

As mentioned above, unemployment levels have an important effect on the number of taxpayers and the level of income. In the December quarter 2000, Bradfield (NSW), North Sydney (NSW) and Wentworth (NSW) were estimated to have unemployment rates of 1.7 per cent, 2.5 per cent and 3.0 per cent respectively.(7) At the other end of the rankings, Wide Bay (Qld), Cowper (NSW) and Fairfax (Qld) had unemployment rates of 11.8 per cent, 12.2 per cent and 12.3 per cent, respectively. At this same time the national unemployment rate was 6.2 per cent.

Fairfax takes in the Sunshine Coast of Queensland; Wide Bay sits directly to the north of Fairfax and includes Maryborough, Hervey Bay and Fraser Island; and Cowper is situated on the north coast of NSW. Apart from having high unemployment levels, these areas are all rural electorates that also have high proportions of retired people. The combination of these factors would help explain their low levels of average taxable income.

Commonwealth electoral divisions ranked by total net tax

Table 5, Commonwealth electoral divisions ranked by total net tax, shows the total net individual income tax paid on the total taxable income in each electorate.

This table is not comparable with the similar table in the 1998 99 publication because the net tax category published by the ATO now includes imputation credits.(8) This particularly affects the electorates at the top of the table which have high levels of imputation credits reflecting the levels of share ownership by the higher income groups.

North Sydney (NSW), at the top of the table, paid nearly $1.8 billion in tax in 2000 01, Lingiari (NT), at the bottom, paid under $210 million. The effect of marginal tax rates(9) is evident here because North Sydney only has 3.0 times the taxables of Lingiari yet has 5.6 times the taxable income and pays 8.7 times net tax. The average taxable income in North Sydney (see Table 4) attracts the top marginal tax rate of 48.5 per cent in 1996 97, its average taxable income attracted the second top marginal rate of 44.7 per cent while the average taxable income in Lingiari attracts a marginal rate of 31.5 per cent (the electorate of Lingiari did not exist at the 1996 election).(10) This result is further emphasised when looking at the net tax ratio (or average rate of tax) shown in Table 7.

Commonwealth electoral divisions ranked by mean net tax

Table 6, Commonwealth electoral divisions ranked by mean net tax, shows the average tax paid by the taxable individuals in each electorate. This varied from $5810 in Wide Bay (Qld) to $23 550 in Bradfield (NSW), with the tax paid in the middle-ranking electorates of inner metropolitan Wills (Vic) and outer metropolitan Hotham (Vic) of just over $8000.

Commonwealth electoral divisions ranked by net tax ratio

Table 7, Commonwealth electoral divisions ranked by net tax ratio (previously called effective rate of tax), shows the average (mean) rate of tax paid on the taxable income. At the top of the rankings 33 per cent, or a third, of income is paid in tax compared with the bottom where 20 per cent, or a fifth, of income is tax.

Endnotes

  1. It is possible for a valid postcode not to be a valid residential postcode, e.g. post office box postcodes. Also, for confidentiality reasons, postcodes with fewer than 100 taxpayers (non-taxables plus taxables) are also classified as unallocated.
  2. The totals shown for NSW and ACT differ from those published by the ATO. The ATO includes the information for the postcode 2619 (Jerrabomberra, NSW) in its totals for the ACT; the figures in this paper include 2619 in NSW.
  3. After the Northern Territory, Tasmania has the smallest electorates in the country with an average enrolment of nearly 66 350 electors. The two Northern Territory electorates have an average of just over 55 500 compared with the average enrolment in Australia in 2001 of 84 725.
  4. At the 2001 Federal election, the numbers of electors enrolled for these electorates were Canberra 108 959 and Fraser 112 225. The average enrolment of the other top ten electorates was 87 549 Melbourne Ports (Vic) and Higgins (Vic) are included because they remained unchanged after the 2003 redistribution.
  5. This can only be done for those electorates whose boundaries were not redistributed in 2003. A list of electorates and the number of electors enrolled at the 2001 election can be found in Commonwealth Election 2001 (see the bibliography).
  6. Australian Taxation Office, Taxation Statistics, 1996 97, A Summary of Taxation, Superannuation and Child Support Statistics, p. 15.
  7. Estimates of unemployment rates by electoral division are produced by the Statistics Section of the Parliamentary Library from data published in Small Area Labour Markets by the Department of Employment, Workplace Relations. For more information on the methodology involved in producing the unemployment rates for electorates see A. Kopras and T. Kryger, Estimated Unemployment Rates by Electorate, December Quarter 1997 , Research Note, no. 46, Information and Research Services, Department of the Parliamentary Library, Canberra, 1997 98. The unemployment rate data can be found on the Parliamentary Library intraNet available only to Members and Senators at http://libiis1/Library_Services/electoralatlas/electorate/SmallArea.htm#division. The unemployment rates are shown on the 2001 and 2003 electoral boundaries.
  8. The imputation credit is included because dividends received by taxpayers from companies are assessable income, and although tax has already been paid by the companies, this amount of tax would have been payable by the taxpayers. Dividends that are taxed at the company level and then distributed to taxpayers are also accompanied by an imputation credit equal to the amount of tax paid. Since dividends are assessable income but the dividends received are net dividends, i.e. net of tax, the amount of dividend that is assessed as income (or added to any existing taxable income) is the net dividend plus the imputation credit. Tax is calculated on the total taxable income and then reduced by the amount of imputation credit.
  9. The marginal rate of tax is the rate of tax that is paid on the last dollar earned. For the 2000 01 income tax rates scale, see the Glossary.
  10. These marginal rates include the Medicare Levy of 1.5 per cent of taxable income (1.7 per cent in 1996 97).


Bibliography

Australian Taxation Office, Taxation Statistics, 2000 01, on ATO website http://www.ato.gov.au/taxprofessionals/content.asp?doc=/content/37484.htm.

S. Barber and A. Kopras, Taxable Income and Tax Paid in Commonwealth Electoral Divisions, 1996 97 , Current Issues Brief, no. 13, Information and Research Services, Department of the Parliamentary Library, Canberra, 1998 99.

S. Barber and A. Kopras, Taxable Income and Tax Paid in Commonwealth Electoral Divisions, 2000 01 , Current Issues Brief, no. 9, Information and Research Services, Parliamentary Library, Canberra, 2003 04.

S. Bennett, G. Newman and A. Kopras, Commonwealth Election 2001 , Research Paper, no. 11, Information and Research Services, Department of the Parliamentary Library, Canberra, 2001 02.

A. Kopras, Postcodes in Electoral Divisions (2003 Electoral Boundaries) , Research Paper, no. 11, Information and Research Services, Parliamentary Library, Canberra, 2003 04.

G. Newman and A. Kopras, 2002 03 Redistribution of Commonwealth Electoral Boundaries , Current Issues Brief, no. 13, Information and Research Services, Parliamentary Library, Canberra, 2003 04.

Taxpayers Australia Inc., Tax Summary, 2001 & 2002.

For copyright reasons some linked items are only available to Members of Parliament.


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