Private Health loss of Rebate for some

[Deleted member]

The headline marginal tax rates have not increased (if you ignore the so-called flood levy) but the government has done things that have exactly the same economic effect as a tax increase, e.g. removal or reduction of the PHI rebate for higher income earners. If you look at the net contribution higher income taxpayers make (ie tax minus benefits) then this has increased both in absolute and relative terms.

The economic effect of the PHI rebate changes are clear for the Federal Goverment - it saves money by reducing or removing it and at the same time shifts the additional costs (increase use of public hospitals and increased PH insurance premiums) onto others, namely the state governments and the privately insured as a group. Whether or not it's economically positive, neutral or negative depends on whether those costs end up exceeding the savings.



I don't understand this point. The 9% super employees receive is in reality part of the overall remuneration they receive for providing their services. The difference from ordinary pay is that it receives a different taxation treatment. Instead of being treated as being part of an employee's income and taxed at marginal rates its instead taxed to the fund at a special rate of 15%. Absent those special rules it would satisfy the classic definition of income and be taxed as such.

Exactly. That's how it was devised and ow it should be seen. Not as some additional impost

 

[Deleted member]

Try reading back in the thread of an example of someone who basically said wage - tax - 9% = what they get in their hand. WRONG!!!

As for your situation, you've neatly blurred the lines between your roles as business owner and employee. All of your employees get paid a wage and they also get paid 9% super on top of that wage. While that 9% does come out of the business profits it does not come out of your wage. Wage + super equals total package and of course there is a balance between the 2 but for the time being they are separate.


Sent from the Throne

Yep. There are employers that still see super as an impost. It is and was designed to be a deferred income component.

 

[Moopere]

> It exists because Govt is aware that they cannot continue to pay pensions

It won't make any difference, not a jot in the scheme of things. With inflation taken into consideration the vast sea of retiring taxpayers will only be able to survive on their own for a few years... the only way this forced savings scheme can work at all, to relieve future government of paying pensions is to ship all pensioners off to a third world country where their stored nest egg is likely to last hopefully a few more years.

Mind that if we ship too many of the poor old buggers to any specific 3rd world country then you likely generate localised inflation and the problem starts all over again.

If your not independently wealthy, by the standards of the day you retire, then you've hardly got a hope of self funding the next (hopefully) 20-30 years.

In the meantime, the forced super thing funds jobs in the industry, taxation is raised on contributions and earnings, etc. Its a gravy train essentially, that won't do a lot for the poor super holder.

 

[dfcatch]

Well just finished ironing my shirts for the rest of the week. Just wanted to get on and let all the taxpayers know that they are still getting a return on the taxes that were committed to my training 20 odd years ago. Talk about the gift that keeps on giving.

Can you iron mine too please?

OH&S regulations state that I should not engage in such hazardous activities as I don't hold the proper certification and haven't received a safety induction.

Also - I just don't like ironing

 

[rechoboam]

Can we move on to the topic of mythical moon landings now?

Over the past 2 decades the top marginal tax rate has reduced, a consumption tax has been introduced, and the tax-free threshold has been increased. These have all flattened the tax take from the government but to listen to the grinch's on here you'd think economic armageddon will occur if the rich have to pay 1 cent more.

I have never heard of a wealthy person saying "If the government takes more than 50 cents in the dollar I am going to take a wage cut. That'll show 'em!" What I am more willing to accept is that those sort of people who believe that taxation should stop when it suits them, will use every trick in the book to minimise/avoid paying tax. "Stimulates the economy" they cry to the rabble they have just stolen from, and disappear off to buy a new luxury car from overseas.

So the government rather than pumping the economy as fast as they could via the BER, Insulation Scheme, etc. should have just handed back revenue to the rich who would have saved the economy without us needing to go into debt? If you believe that then Joe Hockey is in trouble.

Anyway - apart from legalising euthanasia (and making it compulsory) how exactly can we fund the health-care sector properly without raising more revenue? Increasing the age of retirement has been one method, but frankly I would happily pay more tax now if it meant I could enjoy time with my grandkids later.

As I have said before I don't work more than 40 hours per week because after 50% tax it's not worth it. That is me ie a real person, and I would spend another 10-20 hours adding value to the community if I could take 20% more of my income home (and my total tax bill would still be higher than it is now).

Edit : back in the real world professionals like me have NO significant way of avoiding tax and legal partners etc often pay 6 figure sums to the ATO. Your idea of untaxed fat cats is a myth for individuals at least. And if you think the insulation scheme was such a great idea perhaps you would like to pay my share as I would have preferred to use it to give my kids a start in life..
Btw my tax rate has gone up I think not down due to the various new charges which are of course definitely not taxes in any way...

 

[medhead]

As I have said before I don't work more than 40 hours per week because after 50% tax it's not worth it. That is me ie a real person, and I would spend another 10-20 hours adding value to the community if I could take 20% more of my income home (and my total tax bill would still be higher than it is now).

Except it does not go over 50%.

Frankly, I find this whole attitude a bit strange. If I took that view I would still be in my last job. But I still think I'm better off now that my current net pay is the about the same as my previous gross pay. The extra cash in hand is more important than the extra tax, IMO.

Sent from the Throne

 

[drron]

Of course personal income tax is merely 1 of the taxes we pay.According to the Treasury there are at least 115 of them in Australia.
The ABS defines a tax as-"compulsory,unrequited transfers to the Government sector."
Architecture of Australia's tax and transfer system

 

[medhead]

But then in terms of a disincentive to work more hours income tax takes primacy.


Sent from the Throne

 

[rechoboam]

Except it does not go over 50%.

Frankly, I find this whole attitude a bit strange. If I took that view I would still be in my last job. But I still think I'm better off now that my current net pay is the about the same as my previous gross pay. The extra cash in hand is more important than the extra tax, IMO.

Sent from the Throne

That's a different issue, if I could get a different job that paid more that's one thing. But I'm in a position where I can work the whole weekend if I want and at some point 50? 80? 90%? marginal tax it's not attractive.

 

[medhead]

That's a different issue, if I could get a different job that paid more that's one thing. But I'm in a position where I can work the whole weekend if I want and at some point 50? 80? 90%? marginal tax it's not attractive.

You previously said that PHI rebate is the only government handout you get. So your marginal tax rate is 47.5% plus whatever the rebate works out to be, but a rough guess of no more than 1%. Therefore a marginal tax rate of no more than 48.5%. As I said not more than 50%.

Really it is the same thing regardless of whether I earn double from working double hours or from getting a new job.


Sent from the Throne

 

[wmetz]

If anyone is paying 50% plus, then GET A NEW ACCOUNTANT

Also you should double check on the ATO website. So e.g. You only pay the highest rate for every dollar over 180K (45cent tax),
from 80k to 180k u pay only 37cent.. from 37k to 80k you pay only 30 cent etc etc (It scaling system, so no one pays 45cent tax per dollar on all there income.

So Im willing to take your 180K wage and pay for my own health cover (which still get rebate up to 250k) and swap for my 50 cent I earn a year.

 

[cove]

Wmetz why did you leave out the Medicare levy and the flood levy??

 

[Stephen65]

It's over 50% when you consider the self-employed also have to remit 1/11th of all income as GST. If you're running a professional practice or business and considering whether or not to work more then the relevant fact is that once you're over $180K then for every extra $100 you charge you end up with about $48.60 in your hand. This year it's slightly worse because of the so-called "flood levy".

 

[medhead]

It's over 50% when you consider the self-employed also have to remit 1/11th of all income as GST. If you're running a professional practice or business and considering whether or not to work more then the relevant fact is that once you're over $180K then for every extra $100 you charge you end up with about $48.60 in your hand. This year it's slightly worse because of the so-called "flood levy".

May I suggest you read up on the GST, because that is not how GST works at all. That 1/11th is not paid by the self employed taxpayer; they collect it from the person who pays for their services and transfer it to the ATO. GST is additional to their fee pure and simple.


Sent from the Throne

 

[rechoboam]

Thanks for the explanation of the progressive tax system, but I think we all grasp that by now.

I could employ Ben Bernanke to do my taxes but it wouldn't make any difference. There is super, with a cap, and tax-deductible cars or travel (to a point) but there is simply no way to legally hide large sums of money from the ATO for a self-employed professional or a fulltime employee. Nothing, nada, zip. If you know of some secret legal system unknown to any accountant, PM me. But you won't. Look I'm reasonably content/resigned to my tax bill overall and don't have any interest in setting up in a tax haven (also illegal!) but it does annoy me that people keep insinuating that people on a high wage are all scheming with dodgy accountants not to pay tax - we pay piles of tax!

 

[drron]

May I suggest you read up on the GST, because that is not how GST works at all. That 1/11th is not paid by the self employed taxpayer; they collect it from the person who pays for their services and transfer it to the ATO. GST is additional to their fee pure and simple.


Sent from the Throne

True but then I am now contracting out my services.Until this year it was $X + GST.With the economy going downhill it is now $X Inclusive of GST so certainly my marginal tax rate CF last year is above 50% in practical though not technical terms.
Then of course there is PAYG-provisional tax by another name.The ATO always assumes there will be an uplift in your income.You need to be sure if you want to challenge their assumptions.Now I will get that uplift back but at least a year down the track.

 

[serfty]

... The ATO always assumes there will be an uplift in your income.You need to be sure if you want to challenge their assumptions.Now I will get that uplift back but at least a year down the track.

Ahh well, at least one can garner some offset in CC based point/mileage earn ... done properly, the fee is deductible.

 

[medhead]

Thanks for the explanation of the progressive tax system, but I think we all grasp that by now.

I could employ Ben Bernanke to do my taxes but it wouldn't make any difference. There is super, with a cap, and tax-deductible cars or travel (to a point) but there is simply no way to legally hide large sums of money from the ATO for a self-employed professional or a fulltime employee. Nothing, nada, zip. If you know of some secret legal system unknown to any accountant, PM me. But you won't. Look I'm reasonably content/resigned to my tax bill overall and don't have any interest in setting up in a tax haven (also illegal!) but it does annoy me that people keep insinuating that people on a high wage are all scheming with dodgy accountants not to pay tax - we pay piles of tax!

Ok so you get the tax system, but it is hard to see that through comments about marginal tax rates of greater than 50% or 80 or 90%. I actually ran some numbers on the effective tax rate:

[TABLE="width: 500"]
[TR]
[TD]Gross pay[/TD]
[TD]effective tax rate (ETR)[/TD]
[TD]super 9%[/TD]
[TD]ETR with super[/TD]
[/TR]
[TR]
[TD]150k[/TD]
[TD]31%[/TD]
[TD]13.5k[/TD]
[TD]30%[/TD]
[/TR]
[TR]
[TD]200k[/TD]
[TD]34%[/TD]
[TD]18k[/TD]
[TD]32%[/TD]
[/TR]
[TR]
[TD]250k[/TD]
[TD]37%[/TD]
[TD]22.5k[/TD]
[TD]35%[/TD]
[/TR]
[TR]
[TD]300k[/TD]
[TD]38%[/TD]
[TD]27k[/TD]
[TD]36%[/TD]
[/TR]
[TR]
[TD]350k[/TD]
[TD]40%[/TD]
[TD]31.5k[/TD]
[TD]38%[/TD]
[/TR]
[/TABLE]

Increasing the pay upwards those ETRs increase asymptotically to 47.5% (including medicare and flood) and 44.8% when super is added. Basically, they tend towards the marginal tax rate. If your in the region of totally losing the PHI rebate, that is the only other factor and that is no more than 1% extra.

A self employed professional has much greater scope to ensure they are properly structure compared to an employee. that is the key to this - structure. For example as an employee I spend vast sums that are directly related to me getting paid, non-deductible. Self-employed those expenses are deductible. It's not going to reduce my marginal tax rate, but it would reduce my tax bill.

 

[Stephen65]

May I suggest you read up on the GST, because that is not how GST works at all. That 1/11th is not paid by the self employed taxpayer; they collect it from the person who pays for their services and transfer it to the ATO. GST is additional to their fee pure and simple.

I understand exactly what GST is and how it works. That's why I referred to every "extra $100 you charge" because as a general rule all quotes and charges must be inclusive of GST. If a self-employed taxpayer quotes say $250 per hour and bills for say 44 hours then the total charge rendered to the client will be $11,000. Of that $11,000, $1000 must be accounted for as GST, and of the remainder he or she will keep $5,350, which is 48.6% of the total charged.

 

[Stephen65]

A self employed professional has much greater scope to ensure they are properly structure compared to an employee. that is the key to this - structure. For example as an employee I spend vast sums that are directly related to me getting paid, non-deductible. Self-employed those expenses are deductible. It's not going to reduce my marginal tax rate, but it would reduce my tax bill.

Out of curiosity what are some examples of those vast sums that are not deductible to you as an employee but which would be deductible to you if you did the same work on a self-employed basis? I can think of only a handful of cases where the self-employed get a deduction that is denied to the employed.

The effective rate you pay is certainly lower than your marginal rate (mathematically it has to be no matter how much you earn) but it's the marginal rate that operates as the disincentive to do extra work so it's the relevant factor in this discussion not the effective rate.