There’s some useful scenarios to look at on the beehive’s tax site. They show how we all pay less tax, even after GST, and somehow the government also gets more tax. I love maths like that.
But some of them seem to have something missing, so I thought I’d correct a couple of them…
1. Average income household
Mark and Emma are in their late 30s and jointly earn the average household wage of $76,000 – Mark works full-time earning $50,000 a year and Emma works part-time, earning $26,000. They have two children and also receive Working for Families. They pay $300 a week in rent, and save what they can, in the desperate hope they might make it onto the poperty ladder some day. Under Budget 2010 changes, Mark and Emma get a household tax cut of $45.85 a week and pay an extra $21.14 in GST. But their landlord had to put the rent up $20 to cover his closed tax loophole, and their pre-schooler’s 3 days at childcare just went up $15 per day, as the government cut $400m in ECE funding.
| Mark and Emma weekly income | Before | After |
|---|---|---|
| Regular income | $1461.54 | $1461.54 |
| Total taxable income
|
$1461.54 | $1461.54 |
| Income tax | $265.77 | $222.88 |
| Working for Families | $55.60 | $58.56 |
| Disposable income
|
$1251.37 | $1297.22 |
| Change in disposable income due to tax changes | $45.85 | |
| Extra GST | $21.14 | |
| Extra rent | $20.00 | |
| Extra childcare | $45.00 | |
| Change in net income
|
-$40.29 | |
| Annual change in net income
|
-$2095.08 | |
13. Unemployment beneficiary
Scott is 25. He lost his job last year and receives the Unemployment Benefit. He pays $80 a week rent as he lives in a shabbier flat than the government suggests because he can’t get by on $130 for all his food and bills. Under Budget 2010 changes, he gets a $3.92 a week increase in his benefit, but pays GST on all his non-rent income, plus the $10 he borrows from his money so pays an extra $4.10 in GST. Overall, he would only be slightly worse off. Except he also spends on the never-never, contributing to the country’s large private-sector debt, getting him in trouble with credit companies, and yes, paying more in GST. Oh, and his landlady can’t get her tax rort anymore, and has to get her money from somewhere, so his rent’s gone up $10.
| Scott weekly income | Before | After |
|---|---|---|
| Net Benefit | $194.12 | $198.04 |
| Accommodation Supplement | $36.00 | $36.00 |
| Disposable income | $230.12 | $234.04 |
| Change in disposable income due to indexation | $3.92 | |
| Extra GST | $4.10+ | |
| Extra Rent | $10.00 | |
| Change in net income | -$10.18+ | |
| Annual change in net income | -$529.36+ | |
Oh, and there seemed to be one that was missing:
16. CEO
John lives with his wife and two children and runs a company that pays him $400,000 per year. His wife Bronwyn doesn’t work and they have paid off their mortgage. He doesn’t pay any more GST than the $120,000 example because he finds it difficult to buy much more that isn’t an investment. In fact he buys shares and companies, and as we don’t have any capital gains tax, joins Sam Morgan in not paying much tax on a big slice of income – only paying on the dividends.
| Peter and Jane weekly income | Before | After |
|---|---|---|
| Income | $7692.30 | $7692.30 |
| Income tax | $2722.11 | $2363.84 |
| Disposable income | $4970.19 | $5328.46 |
| Change in disposable income due to tax changes | +$358.27 | |
| Extra GST | $31.64 | |
| Net change | +$326.63 | |
| Total per year | +$16984.76 | |
.
As an aside, most of the examples in the press seemed to presume you spent a fix portion of your income, and thus we are all hit equally by GST. This is not true. Those on the lowest incomes were paying 14.5% of income in GST as they spend more than their incomes – that’ll now rise to 17.4%. Those on high incomes only spend about 6-7% on GST (that’ll now be 7-8%). GST is a very regressive tax – the poor pay a higher percent than the rich. This can be reduced by exemptions on basic needs like food, or counter-balanced by a very progressive income tax system – something we sadly no longer have.
Bunji
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