Tax system favours older Australians over younger, report finds

The tax burden on working-age Australians is increasing. (Unsplash: Elisa Ventur) A new report shows people with the same incomes, but who are different ages, get taxed very differently in Australia. A 30-year-old and a 71-year-old Australian, both with the same gross income of $100,000, end up with net incomes of $85,700 and $128,100 respectively after taxation, government spending and transfers have been accounted for. The core question of the report is whether spending by age is sustainable and if it is maintaining a "fair intergenerational balance" in Australia. Link copiedShareShare articleAustralia's tax policy settings are leading to vastly different outcomes for people who have the same gross incomes but are simply different ages, a new report shows. The report, from the Actuaries Institute, the peak body for actuaries in Australia, is raising questions about intergenerational equity. The report provides the example of two Australians with the same gross income of $100,000. One is aged 30, and other is 71. According to research from the Actuaries Institute, inequality between the younger and older generations is widening and could reach record levels within years. It says after accounting for taxation, government spending and transfers, the 30-year-old's net income drops to around $85,700, while the 71-year-old's net income increases to $128,100. That's a difference in net income of $42,400. The report says current tax settings are treating similar incomes differently depending on age, rather than means. The core question of the report is whether spending by age is sustainable and if it is maintaining a "fair intergenerational balance" in Australia. "Some of that $42,400 difference reflects genuine need, particularly higher healthcare spending for older Australians," Dr Hugh Miller, a co-author of the report, said. "But a significant part also reflects differences in eligibility for benefits and taxation settings." Actuaries are people who calculate risk and opportunity for pension funds and insurance companies, including the age at which people are expected to die. The report shows that older Australians have on average seen stronger growth in incomes over the last 20 years than younger people. "Higher income and receipt of more [government] spending means that older people have had material gains per person," it says. People aged 20 to 30 are notable as the only age group in Australia not to benefit from changes in net income over the past two decades. (Source: Actuaries Institute) It says over the last 20 years, government spending has risen faster than taxes and the impacts have been distributed differently across age groups, with large spending increases on children and on people aged 80 and over. But taxation has also risen, with working-age Australians bearing the brunt of the tax increases with higher income tax contributions. The Albanese government is reading the room when it comes to intergenerational equity. It says an average 30-year-old with total gross income of $100,000 is earning reduced net income of $85,700 because their income taxes are more than outweighing any direct spending and income transfers they receive from government. In contrast, an average 71-year-old with the same total gross income of $100,000 is receiving $128,100 net income because the direct spending and income transfers they receive from government are more than offsetting the taxes they pay. The graphic below shows how prime working-age Australians, who are still trying to accumulate wealth, are experiencing net income losses from the tax and transfer system. Age groups with very similar gross income end up with very different levels of net income, after taking taxation, government spending and transfers into account. (Source: Actuaries Institute) According to the report, the heavy taxation of income from wages and salaries and the lighter taxation of income from assets is a dominant part of the story. It says working-age people, who have fewer assets, are more heavily taxed than older people, while older people have greater eligibility for government benefits and experience different applications of taxation. Superannuation and housing taxes are also more focused on working-age Australians, even though wealth from those assets may continue to accumulate at older ages. (Source: Actuaries Institute) It says income and payroll taxes should obviously align with those who are working, because those people have the greatest ability to pay those taxes. But it is noteworthy that superannuation and housing taxes are also more focused on working-age Australians, even though wealth from those assets may continue to accumulate at older ages. "In the case of housing, the emphasis on stamp duty when people are buying property occurs more frequently and at higher values during working ages aligned with changes in family and household structures," it says. Despite working full-time hours, some pr

Tax system favours older Australians over younger, report finds

Key takeaways

Also covered by

Tax system favours older Australians over younger, report finds

Key takeaways

Also covered by

More in international