It seems paying tax is not a requirement for some millionaires. Half their luck.
According to tax records from the Australian Tax Office (ATO), 70 Australians earning more than $1 million a year each in 2010/11 paid no income tax at all.
Fairfax media reports that the 70 earned a total of $194 million in income, but after deductions and rebates, that had been reduced to less than $20,000 of taxable income between them. It seems much of their tax liability was wiped out by deducting tax losses from previous years. In 2010/11, $118 million was claimed in prior tax losses, with another $360 million left to carry over in future years.
Accountants and lawyers must be onto a good thing too, with 30 of the millionaires claiming deductions for tax advice and between them paid out $33 million, more than $1 million for each millionaire.
The data also shows that 2,320 people who earned more than $100,000 in income also ended up paying no tax. Despite earning $75 million in wage and salary income – they spent the same amount on tax advice. Their total income of $652 million, after deductions and rebates, was reduced to just $604,000 of taxable income or $260 each.
Getting back to the millionaires. 10 of them that run farms claimed losses of over $200,000 each, while the 5 with negatively geared investment properties lost an average of $260,000 each on their rental investments. They will likely be hoping that property values go up, in order to recoup their losses.
Of course the 70 millionaires are in the minority, with 99.3% of Australia's millionaires paying tax in 2010/11. In fact, the majority of them paid a lot of tax – $8.7 billion in total, or almost 10% of all income tax.
Foolish takeaway
Paying for tax advice may save you much more than the cost of the advice – and it's tax deductible to boot.
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The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned.
