Home / Business and Economy / Tax System Favors Investors Over Workers, Study Finds
Tax System Favors Investors Over Workers, Study Finds
14 May
Summary
- Private sector wage growth slowed to 3.2% annually, below inflation.
- Real wages have fallen since 2021, impacting purchasing power.
- Tax system significantly benefits non-wage earners over salary earners.
Private sector wage growth in Australia has slowed considerably, with the annual increase to March reaching just 3.2%. This figure falls below the current inflation rate of 4.6%, meaning real wages have effectively declined since 2021. The Reserve Bank Governor's concerns about wage-price spirals appear unfounded, given this trend.
The recent government budget introduced a Working Australia Tax Offset (WATO) of $250, specifically for wage and salary earners. However, this measure does not extend to income derived from investments.
Further analysis from Treasury reveals that Australia's tax system heavily favors non-wage earners. The richest 1% benefit from tax concessions like the capital gains tax (CGT) discount and negative gearing to a vastly greater extent than median earners. The CGT discount, in particular, has incentivized investment in rental properties over shares, contributing to soaring house prices.
Historically, the introduction of the CGT discount in 1999 is linked to increased benefits for non-wage earners and a rise in property investment. This has contributed to a decline in homeownership rates among younger Australians, with fewer than half of those in their early thirties owning a home.
The government's recent budget measures, including changes to the CGT discount and discretionary trust tax rates, signal an attempt to rectify this imbalance. The aim is to ensure that income from investments is taxed more similarly to wage income, promoting greater fairness in the tax system.
