6537.0 - Government Benefits, Taxes and Household Income, Australia, 2015-16 Quality Declaration 
Latest ISSUE Released at 11:30 AM (CANBERRA TIME) 20/06/2018   
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INCOME REDISTRIBUTION

In 2015-16, households received, on average, $76 more in total government benefits (social assistance benefits in cash and social transfers in kind) than they paid in taxes. This resulted in an average final income of $2,107 per week, compared to average private income of $1,871 per week.

The effects of different benefits and taxes vary with the level of household income. Graph 1 presents the distribution of private and final incomes, adjusted to take into account household size and composition. Once the impact of government benefits and taxes are been taken into consideration, more people in households have equivalised incomes between $500 and $1,500 per week, and fewer people in households having incomes outside this range. The net effect of government benefits and taxes is to increase the average income of households in the lower income groups, and decrease the average income of households in the higher income groups.


Graph 1 - DISTRIBUTION OF EQUIVALISED HOUSEHOLD PRIVATE AND FINAL INCOME(a), 2015-16

Distribution of Equivalised Household Private and Final Income

(a) Persons with an income between $25 and $2,775 are shown in $50 ranges on the graph.


The redistribution of income from high to low income households can also be seen through the analysis of equivalised private income quintile groups (Graph 2, see here for more information on income distributional measures).

The net effect of benefits and taxes was to increase the average income of households in the three lower quintiles and decrease the average income of households in the two higher quintiles. In the lowest quintile, average equivalised private income was $168 per week and average equivalised final income was $808 per week. In the highest quintile, the average equivalised private income was $2,863 per week and average equivalised final income was $2,168 per week.

Graph 2. EQUIVALISED PRIVATE AND FINAL INCOME, BY EQUIVALISED PRIVATE INCOME QUINTILE, 2015-16

Equivalised Private and Final Income by Equivalised Private Income Quintile


The various income measures shown in Graph 3 below, demonstrate the relative impact of the benefits and tax system on households in each income quintile (for an explanation of each income measure see the What is a Fiscal Incidence Study? section). For example, the difference between the private and gross income measures reflect the impact of government pensions and allowances on households’ private income. The lowest equivalised private income quintile received the highest amount of social assistance benefits in cash ($517 per week, on average) with the highest income quintile receiving the least ($28 per week). The differences between gross income measures and the disposable income measure reflect the impact of taxes on income. The highest quintile paid the most income tax ($1,172 per week, on average), decreasing their gross income and bringing it closer to the disposable incomes of other household groups.

Graph 3 - AVERAGE EQUIVALISED PRIVATE INCOME TO FINAL INCOME, BY EQUIVALISED PRIVATE INCOME QUINTILES, 2015-16

Average Equivalised Private Income to Final Income, by Equivalised Private Income Quintiles
(a) Includes imputed rent net of social transfers in kind for housing.


Within the lowest equivalised private income quintile, the share of income received by households increased from 3% using the equivalised private income measure to 13% using the equivalised final income measure. For households in the highest quintile, the income share decreased from 47% for equivalised private income to 35% for equivalised final income.

Table 1. DISTRIBUTION OF HOUSEHOLD INCOME, BENEFITS AND TAXES, BY EQUIVALISED PRIVATE INCOME QUINTILE

EQUIVALISED PRIVATE INCOME QUINTILE

Lowest quintile
Second quintile
Third quintile
Fourth quintile
Highest quintile
All households(a)
%
%
%
%
%
%
Equivalised private income
3
10
16
24
47
100
Equivalised Benefits
Social assistance benefits in cash
57
24
11
6
3
100
Social transfers in kind
28
23
19
16
14
100
Total
37
23
17
13
11
100
Equivalised Taxes
Taxes on income
1
5
13
22
60
100
Taxes on production
13
16
19
22
31
100
Total
5
9
15
22
50
100
Equivalised final income
13
14
17
21
35
100


Both social assistance benefits in cash and social transfers in kind decreased as levels of household income rose. The people in households in the lowest equivalised private income quintile received 57% of all social benefits in cash and 28% of social transfers in kind (after adjustment of benefits for household size and composition). By comparison, the people in households in the highest quintile received 3% of social assistance benefits in cash and 14% of social transfers in kind.

The payment of taxes on income and, to a lesser extent taxes on production, increased with income. Households in the lowest quintile paid 1% of total taxes on income while households in the highest quintile paid 60% (also after adjustment of taxes for household size and composition). For taxes on production (for example GST), households in the lowest quintile paid 13% while households in the highest quintile paid 31%.

NET BENEFITS

Net benefits represent the total amount a household either pays or receives after the allocation of benefits and taxes to private income. On average, Australian households received $76 more in benefits than they paid in taxes. Around 27% of households paid between $50 and $550 more per week in taxes than benefits received. By comparison, 18% of households received benefits ranging between $50 and $550. Around 6% of households had a net benefit close to $0 per week (that is, a net benefit ranging between minus $50 and $50 per week).

Graph 4 – DISTRIBUTION OF NET BENEFITS TO HOUSEHOLDS(a), 2015-16

Distribution of Net Benefits to Households
(a) Income quintiles are based on equivalised private household income.



INEQUALITY

The distribution of income across households becomes more equal once the impacts of government benefits and taxation have been taken into consideration. One measure of this is the Gini coefficient which is an internationally accepted measure of inequality, with values ranging between zero and one, where a value closer to one implies greater inequality. In 2015-16, the Gini coefficient reduced from 0.442 for equivalised private household income to 0.249 for equivalised final household once the impact of benefits and taxes is taken into consideration.

There has been no change in inequality, either before or after the allocation of government benefits and taxes between 2009-10 and 2015-16.

Table 2 – GINI COEFFICIENT BY EQUIVALISED INCOME(a)

2003-04
2009-10
2015-16
Change from 2009-10 to 2015-16
no.
no.
no.
%

Equivalised private household income
0.434
0.446
0.442
-0.9%
Equivalised gross household income
0.335
0.357
0.361
1.1%
Equivalised disposable household income
0.292
0.320
0.316
-1.3%
Equivalised disposable household income including social transfers in kind
0.217
0.243
0.241
-0.8%
Equivalised final household income
0.228
0.252
0.249
-1.2%

(a) Net imputed rent for owner occupied dwellings and subsidised housing is included in all estimates of income. Government benefits for housing are allocated as part of social transfers in kind.