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Latest estimates and trends

Compare the 2020–21 high wealth income tax gap to trends from previous years.

Published 30 October 2023

For 2020–21, we estimate a net income tax gap for high wealth individuals of $1,078 million or 7.1%. This means we expect to collect 93% of the total theoretical income tax.

High wealth individuals 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. Find out more about the concept of tax gaps and the latest gaps available.

Overview of the latest estimates

The net tax gap estimates have remained relatively steady as shown in Table 1.

Table 1: Income tax gap – high wealth private groups 2015–16 to 2020–21

Element

2015–16

2016–17

2017–18

2018–19

2019–20

2020–21

Population (individuals)

7,836

7,738

9,874

11,355

13,520

14,491

Population (companies)

14,596

14,656

19,316

21,202

23,153

26,001

Gross gap ($m)

879

884

1,063

1,073

1,121

1,222

Amendments ($m)

165

85

278

147

207

144

Net gap ($m)

714

799

786

926

914

1,078

Expected collections ($m)

7,013

6,987

10,235

10,267

11,127

14,056

Theoretical liability ($m)

7,892

7,871

11,298

11,340

12,247

15,134

Gross gap (%)

11.1%

11.2%

9.4%

9.5%

9.2%

8.1%

Net gap (%)

9.0%

10.1%

7.0%

8.2%

7.5%

7.1%

Figure 1 shows the gross and net gap as a percentage over the same period. The trend shows an improvement in gross tax gap, a measure of voluntary compliance, as more high wealth private groups are correctly reporting their tax at lodgment.

Figure 1: Gross and net tax gap (percentage) – high wealth private groups, 2015–16 to 2020–21

Figure 1 shows the gross and net gap in percentage terms, as outlined in Table 1.

What is driving the gap

When business owners and wealthy individuals make mistakes, it is usually in how they interpret tax law or because they don't understand their tax obligations.

The most common issues we see from taxpayers include:

  • lack of documented governance processes and procedures
  • incorrectly recording or not reporting transactions outside the normal course of business.

Issues with the reporting of treatment of:

  • loans or payments to shareholders, directors and associates
  • tax deductions and tax losses
  • trust distributions
  • tax treatment of property disposals
  • not accounting for private use of business funds or assets
  • omitting domestic or foreign-sourced income.

A very small number of high wealth individuals seek to evade paying the right amount of tax. They take advantage of closely-held structures and use artificial and non-commercial arrangements intentionally designed to evade tax. Where we detect deliberate tax evasion, we apply correction strategies such as penalties and prosecutions.

 

 

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