• Quoc Ngu Vu, Ann Harding, Richard Percival
• National Centre for Social and Economic Modelling

Read the full text

25 August 2008This study shows that there has been rapid change in many of the
characteristics of households in the top decile group of the Australian
income distribution over the decade to 2005-06. Compared to ten years
earlier, the heads of households at the top
of the income spectrum are now very much more likely to hold tertiary
degrees, be in white collar jobs, be employees, and be home purchasers
with a mortgage (rather than outright home owners). They are also
likely to be childless and to draw an
increasing proportion of their total income from investments. The
impact of structural population ageing is now showing up clearly in the
composition of the top decile, with a 50 per cent increase in the
proportion of top decile household heads
that are aged 60 years and over compared with ten years earlier. While
the tightly targeted Australian cash transfer system became even more
tightly targeted over the 10 years, with a commensurate decline in the
proportion of cash transfers accruing to the top decile, changes in the
income tax system favoured high income earners. The average tax rate
(showing income tax paid as a percentage of gross income) declined from
29.4 per cent for top decile households in 1995-96 to 25.8 per cent by
2005-06. This was a sharper fall than that notched up by the average
Australian household, whose average tax rate fell from 19.6 per cent to
18.3 per cent over the same 10 year period. This shift in the income
tax burden away from taxpayers at the top of the income spectrum and
towards the remainder of Australia was also confirmed by examining
trends in the disposable incomes of a range of ‘typical’ Australian
families. Overall, the slightly faster growth in the ‘market’ or
‘private’ incomes of the top decile, allied with the decline in their
share of the tax take, resulted in the share of national income
accruing to the top decile group increasing over the ten years to
2005-06.

This paper was prepared for the 30th General Conference of the International Association for Research on Income and Wealth, Portoroz, Slovenia, 29 August 2008.