The top 1% of earners pay roughly 40-45% of all income tax.
That’s not true, though it’s a common misconception. To account for 40% of all income tax, you’d need to incorporate the top 5% of earners. Top 1% vs. top 5% doesn’t sound significant, but it truly is. Someone in the top 1% makes roughly twice the amount someone in the top 5% makes. We’re actually talking about different things and the same things all at the same time. It’s confusing, but bear with me and I’ll hopefully get us onto the same page.
Income streams are logarithmic in nature. This is why we always talk about “median salary” when discussing the topic. If we use the “average” salary (mean), then that would come out to roughly $106,000. However, if you are earning this amount, you’re in the top 25% of earners in Australia. The median salary sits at around $68,000. That number amazes me, since our rent alone is $41,600. I have no clue how people are surviving on the median, let alone half the nation on less than that.
Someone in the top 20% is making $128,000.
Someone in the top 10% is making $165,000. Not a massive jump in salary, this seems reasonable.
Someone in the top 5% is making $195,000. Again, that’s only a $30k jump to account for a decent chunk of the population.
Someone in the top 1% is making $385,000. Roughly double the amount for someone in the top 5%. To speak to your point, their increase in take-home pay is only about $100,700, because yes - they pay 45% tax.
Someone in the top 0.5% is making over $550,000.
Now that we have these numbers out of the way, here’s why we’re talking about different things: Someone in the top 0.5% of earners still likely doesn’t have $3m in super. Or if they do, it’s just barely.
Someone in this salary bracket doesn’t hit it at 20. They usually hit it in their late 40’s to 50’s. At that point, they only have 20ish years of work left before they retire. If we assume our top earner is depositing $50,000 into their super fund at 5% growth, it’ll take them 28+ years to attain $3m. They just don’t have time to get to the point where they are affected by this policy. Or if they are super lucky and have managed to attain say $3.1m, they’re only taxed 30% on the earnings of $100k - not the earnings of the remaining $3m.
So, like I said: We’re talking about different things. The top 0.5% earners are not the same as the top 0.5% super fund holders. The top 0.5% super fund holders are not getting there from regular income. They are rich. They probably don’t work, because they don’t need to. They probably don’t pay much income tax, because they don’t need to work. You probably pay more income tax than these people.
The top 1% of earners pay roughly 40-45% of all income tax. Did you seriously not know this?
Also……you don’t get an accountant to do your taxes? You’ve never used a financial advisor?
That’s not true, though it’s a common misconception. To account for 40% of all income tax, you’d need to incorporate the top 5% of earners. Top 1% vs. top 5% doesn’t sound significant, but it truly is. Someone in the top 1% makes roughly twice the amount someone in the top 5% makes. We’re actually talking about different things and the same things all at the same time. It’s confusing, but bear with me and I’ll hopefully get us onto the same page.
Income streams are logarithmic in nature. This is why we always talk about “median salary” when discussing the topic. If we use the “average” salary (mean), then that would come out to roughly $106,000. However, if you are earning this amount, you’re in the top 25% of earners in Australia. The median salary sits at around $68,000. That number amazes me, since our rent alone is $41,600. I have no clue how people are surviving on the median, let alone half the nation on less than that.
Someone in the top 20% is making $128,000.
Someone in the top 10% is making $165,000. Not a massive jump in salary, this seems reasonable.
Someone in the top 5% is making $195,000. Again, that’s only a $30k jump to account for a decent chunk of the population.
Someone in the top 1% is making $385,000. Roughly double the amount for someone in the top 5%. To speak to your point, their increase in take-home pay is only about $100,700, because yes - they pay 45% tax.
Someone in the top 0.5% is making over $550,000.
Now that we have these numbers out of the way, here’s why we’re talking about different things: Someone in the top 0.5% of earners still likely doesn’t have $3m in super. Or if they do, it’s just barely.
Someone in this salary bracket doesn’t hit it at 20. They usually hit it in their late 40’s to 50’s. At that point, they only have 20ish years of work left before they retire. If we assume our top earner is depositing $50,000 into their super fund at 5% growth, it’ll take them 28+ years to attain $3m. They just don’t have time to get to the point where they are affected by this policy. Or if they are super lucky and have managed to attain say $3.1m, they’re only taxed 30% on the earnings of $100k - not the earnings of the remaining $3m.
So, like I said: We’re talking about different things. The top 0.5% earners are not the same as the top 0.5% super fund holders. The top 0.5% super fund holders are not getting there from regular income. They are rich. They probably don’t work, because they don’t need to. They probably don’t pay much income tax, because they don’t need to work. You probably pay more income tax than these people.