Overall estimates and trends
For 2022–23, we estimate a net income tax gap for high wealth groups of $1,205 million or 7.2%. This means we expect to collect almost 93% of the total theoretical income tax.
High wealth groups population
High wealth individuals and their associated private groups are Australian resident individuals who, together with their associates, control wealth of more than $50 million. To estimate the gap, we include:
- registered individuals linked to a high wealth private group
- companies where ownership by the head individual is 40% or more.
Companies with total business income greater than $250 million annually are included in the large corporate groups income tax gap.
Where income earned from trusts and partnerships is distributed to companies or individuals in the high wealth private groups population, we recognise the tax effect here.
The high wealth income tax gap forms a part of our overall tax performance program. For more information see tax gaps and the latest gaps available.
Overview of the latest estimates
The net tax gap estimates have remained generally stable over time as shown in Table 1.
Table 1: Income tax gap – high wealth private groups 2017–18 to 2022–23
|
Element |
2017–18 |
2018–19 |
2019–20 |
2020–21 |
2021–22 |
2022–23 |
|---|---|---|---|---|---|---|
|
Population (individuals) |
9,891 |
11,393 |
13,641 |
14,906 |
19,816 |
15,879 |
|
Population (companies) |
19,392 |
21,385 |
23,461 |
26,963 |
32,685 |
28,839 |
|
Gross gap ($m) |
937 |
1,192 |
1,240 |
1,422 |
1,579 |
1,440 |
|
Amendments ($m) |
204 |
352 |
141 |
293 |
253 |
235 |
|
Net gap ($m) |
733 |
840 |
1,098 |
1,129 |
1,326 |
1,205 |
|
Expected collections ($m) |
10,565 |
10,626 |
11,359 |
14,479 |
19,184 |
15,608 |
|
Theoretical liability ($m) |
11,298 |
11,466 |
12,458 |
15,608 |
20,511 |
16,813 |
|
Gross gap (%) |
8.3% |
10.4% |
10.0% |
9.1% |
7.7% |
8.6% |
|
Net gap (%) |
6.5% |
7.3% |
8.8% |
7.2% |
6.5% |
7.2% |
Figure 1 shows the gross and net gap as a percentage over the same period. Given revisions to data, the high wealth income tax gap estimates can take some time to tend towards a central and stable estimate. Gap analysis is therefore more useful for identifying the trend over time – rather than focusing on the absolute gap value for each or any year. This is consistent with the positioning of tax gap estimates for other taxes and is the approach adopted in international tax gap reporting programs. Accordingly, care needs to be taken when looking at individual year tax gap estimates.
While the latest year shows an increase in the overall high wealth income tax gap, the estimates for the last 3 years remain below those for the 2019–20 year.
Figure 1: Gross and net tax gap (percentage) – high wealth private groups, 2017–18 to 2022–23
What is driving the high wealth income tax gap
When business owners and wealthy individuals make mistakes, it is usually in how they interpret tax law or because they don't understand or are failing to comply with their tax obligations.
Broadly, risks and issues that we see driving the high wealth income tax gap specific to the tax system include:
- misreporting or omitting transactions and income
- capital versus revenue misclassification
- incorrectly recognising the tax consequences of transactions or structures when doing succession planning
- failing to meet Division 7A requirements and trust distribution requirements
- tax outcomes inconsistent with the intent of the tax law
- choosing not to comply, or regularly taking controversial interpretations of the tax law
- claiming tax deductions on related party transactions and private use of business funds or assets
- poor governance and risk-management systems
- not participating or selectively participating in the tax system
- inappropriately accessing concessions or refunds
- structuring to minimise or avoid tax
- using cross-border transactions or structures to minimise or avoid tax.
A small number of high wealth individuals seek to avoid paying the right amount of tax. They take advantage of closely held structures and use artificial and non-commercial arrangements intentionally designed to avoid and, in some circumstances, evade tax. Where we detect deliberate tax evasion, we apply correction strategies such as prosecution.
What attracts our attention includes further information on what we focus on more broadly.
For previously published tax gap figures, see Australian Tax Gaps - Data.gov.auOpens in a new window