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4 This publication forms part of the Australian Bureau of Statistics' (ABS) ongoing program to increase the range of regional statistics available, particularly through the use of administrative information collected by other government agencies. The ABS particularly wishes to acknowledge the ATO which provided the valuable data used to compile the statistics presented in this release.
CHANGES IN THIS ISSUE
5 This edition uses a six year time series of data from the ATO. The data is collated by the ATO from individual tax returns and employer payment summaries that have been lodged for the financial years of 2010-11 to 2015-16 inclusive.
6 The geographic boundaries have been updated to the latest LGA 2017 boundaries. This has meant that some regions have changed either name or their boundary since the last publication. The six year time series of data are all produced on the same boundaries for ease of comparability across years. ASGS geographic regions remain on 2016 boundaries.
7 Data cubes for the Other income category that have previously featured within this publication have not been created for this release. Other income is still included as a component of Total income estimates in this release.
SCOPE AND COVERAGE
8 The main functions and responsibilities of the ATO are to administer taxation legislation and to collect a wide variety of taxes. The ATO therefore collects data from its reporting population as part of its processes to calculate income tax liability for those persons who are required to lodge an income tax return.
9 The ATO database covers all individuals who submit an individual income tax return and includes persons with income from one or more of a range of sources, such as wages and salaries, own unincorporated business, superannuation and annuities, investments and Government pensions, benefits or allowances. The scope of the ATO statistics presented in this release are data items relating to income standards the ABS uses for its income surveys. However the scope of the ATO statistics presented in this release exclude Government pensions, benefits or allowances.
10 All data presented are gross income before deductions; before tax, Medicare levy or other tax measures (such as the temporary budget repair levy) are applied. The amounts shown are nominal, they have not been adjusted for inflation.
11 The statistics are geocoded using the location data from income tax returns, payment summaries and the ATO client register.
12 The income presented in this publications has been categorised into income types, these categories have been devised by the ABS to closely align to ABS definitions of income:
13 Employee income is the total (or gross) income received as a return to labour from an employer or from a person's own incorporated business (when they are employed by this business). The data used in deriving employee income comes from both individual tax returns and payment summaries (where an individual has not lodged a individual tax return). This income category includes the following data items from the payment summary and/or individual income tax return:
Own unincorporated business income
14 Own unincorporated business income is the profit or loss that accrues to owners of, or partners in, their own unincorporated businesses. Profit or loss is the value of the gross output of the enterprise after the deduction of operating expenses, including reportable superannuation contributions, depreciation and operating costs, but before income tax is taken out. Losses occur when operating expenses are greater than receipts and are treated as negative income. This category includes the following data items from the individual income tax return:
15 The data excludes distributions from trusts for non-primary production activities as this may include aspects of investment income. It also excludes the income of working directors/owners of incorporated businesses who are classified as employees; consequently their income is included under Wage and salary income.
16 "Net personal services income" does not include income a person received as an employee, making it different from "Attributed personal services income".
17 Investment income includes the following data items on the individual income tax returns:
Superannuation and annuity income
18 Superannuation and annuity income includes the following data items on the individual income tax returns:
19 A change to legislation relating to superannuation, taking effect from 1 July 2007, meant that people aged 60 years and over who receive superannuation income in the form of a lump sum or income stream (such as a pension) from a taxed source, receive that income tax free. Therefore, if a person has no other income, or their total income is below the tax-free threshold, or any tax payable is mitigated by a tax offset (such as Senior Australian Tax Offset), then this person is not required to lodge a tax return.
20 Due to such changes, the superannuation estimates (persons, income) published in this publication are regarded as partial, subject to under-coverage. A more comprehensive snapshot of superannuation income (at aggregate state/territory level) can be obtained from the ABS Survey of Income and Housing - see Household Income and Wealth, Australia, 2015-16.
Other income (included in Total income)
21 Other income comprises income items reported on the individual income tax return that were not allocated to one of the above categories. For example, Other income can include transfer or trust income, controlled foreign company income, net foreign pension and annuity income, and foreign investment and life insurance income. Other income is not published separately as it does not provide a reliable view of the category. It is included in total income. Other income includes the following data items on the individual income tax returns:
22 Total Income is the sum of all reported income derived from Employee income, Own unincorporated business, Superannuation and annuities, Investments and Other income, as defined above. Total income does not include the non-lodger population.
23 Government pensions, benefits or allowances are excluded from the ABS income data and do not appear in Other income or Total income. Pension recipients can fall below the income threshold that necessitates them lodging a tax return, or they may only receive tax free pensions or allowances. Hence they will be missing from the personal income tax data set. Recent estimates from the ABS Survey of Income and Housing (which records Government pensions and allowances) suggest that this component can account for between 9% to 11% of Total income.
INCOME DISTRIBUTION INDICATORS
24 Taken together, the simple measures of income distribution such as mean, median, percentile ratios and income shares can provide an indication of differences in the income distributions of two separate regions. However, none of the simple measures comprise a single statistic that summarises the whole income distribution in a way that directly considers the individual incomes of all regions. In this publication, the Gini coefficient is used to compile a single statistic of inequality by summarising the distribution of income across the population in each region.
25 The Gini coefficient is provided here for Total income (excluding Government pensions and allowances). This is a single statistic that lies between 0 and 1 and is a summary indicator of the degree of inequality in income between members of the tax form lodging population. Values closer to 1 represent greater inequality.
26 The Gini coefficients shown in this publication can be regarded as indicative but not definitive. They should not be directly compared with other ABS published Gini coefficients. The Gini coefficients presented in this publication are calculated from gross personal income and not from equivalised disposable income as presented in Household Income and Wealth, Australia, 2015-16. There is also an acknowledged under-coverage of certain income groups in taxation data due to tax exemptions, and people being under the tax free threshold. For instance, persons aged 60 years and over who are mostly dependent on superannuation income and those mostly reliant on government pensions and allowances may be missing from the tax data.
27 Personal income data derived from the taxation dataset are presented in percentiles. When all persons in the tax form lodging population are ranked from the lowest to the highest based on a common characteristic such as total income, they then can be divided into equal sized groups. Division into 100 groups gives percentiles. For example, the highest value in the twentieth percentile is denoted P20. The median or top of the 50th percentile is denoted as P50. Similarly, the highest values in the 20th and 80th percentiles are denoted by P20 and P80, respectively.
28 Percentile ratios summarise the relative distance between two points in a distribution. To illustrate the spread of an income distribution, percentile ratios often present points near the extremes of the distribution, for example a P90/P10 ratio. For personal income tax data, the P80/P20 ratio is thought to provide a good illustration of the magnitude of the range within which the income of the majority of people fall. The P80/P50 and P50/20 ratios focus on comparing the ends of the income distribution with the midpoint.
29 Median income is that level of income which divides the units in the reference population into two equal parts, one half having incomes above the median and the other half having incomes below the median.
Australia quartile ranges
30 Quartiles are groupings that result from ranking all persons who lodged tax returns in ascending order according to total income, and then dividing them into four equal groups, each comprising 25% of the reference population. Australia's quartile ranges are used to compare the income distributions of regions to the income distribution for Australia.
31 Income share (percentage of income held by the top 1%, 5% and 10% of all earners, per region) has also been produced. The aggregate income of the units in each percentile is divided by the overall aggregate income of the entire population to derive income shares.
Main source of income
32 Main source of income is the source from which a person derives most of their income. In this publication, main source of earners is presented as a proportion of the population in that region.
33 If a region is particularly reliant on one source, it may be susceptible to policy or economic changes that affect that income type, hence the inclusion. Where persons receive exactly the same amount across multiple sources of income, they have been excluded from the derivation of this indicator. Persons with negative or nil total income have also been excluded.
Median age of earners
34 Median age by income type has been provided for all geographies in this publication. See paragraph 29 for explanation of medians.
Counts of individuals
35 Individuals may receive income from a number of sources. Also, net income from a specific source may be positive or negative. For example, an individual may have positive income from Employee income yet negative net income from Investments. The number of individuals for each income source includes all persons with either positive or negative net income from that source.
36 Readers should note that the total number of individuals in receipt of income from at least one source cannot be calculated as the sum of the individuals in each income category, since people can have more than one source of income in any given year. For example, an individual could derive income from multiple sources such as Employee income, Investment income and income from their own unincorporated business and thus contribute to the regional person count in all three income categories.
37 Generally, the ATO considers someone to be an Australian resident for tax purposes if they have either always lived in Australia or have come to Australia to live permanently, or they have been in Australia for more than half of the financial year (unless their usual home is overseas and they don't intend to live in Australia), or they have been in Australia continuously for six months or more and for most of that time have been in the one job and living in the same place, or they are an overseas student enrolled in a course of study for more than six months duration.
38 For the purposes of providing statistical measures for the entire population, the ATO database has some limits to its coverage. As indicated previously, persons who receive an income below certain levels are not necessarily required to lodge a tax return. This can include persons who derive their income from Government pensions and allowances. Consequently, the coverage of low income earners, including people receiving government pensions and allowances, is incomplete in ATO records. In addition, some Commonwealth of Australia Government pension, benefit and allowance payments are exempt from income tax and are therefore do not need to be reported in tax returns. As such, the ATO data should be regarded as an indicative though not complete picture of all individual income earned in Australia.
39 Some individuals may not lodge a tax return. This population may have income that is in scope of this publication and as such their absence should be taken into consideration. ABS accesses de-identified data from payment summaries. The payment summaries data is cross checked against income tax returns to see if the data has been declared. If it has not been declared, the data from the payment summary is added to the aggregate Employee income figures for each individual region, and is also used in calculating mean and median employee incomes. Non-lodgers are not included in the Total income category and income distribution items.
40 As payment summaries only contain limited data, it can only be used as a component of Employee income. The payment summary data is not used where certain demographic or employment characteristics are needed e.g. occupation, age, and sex. Hence, non-lodgers data are not included in the cross classified data cubes:
Processing of tax returns
41 The data presented in this publication were compiled before the processing of all income tax returns for any given year may have been completed. Data provided to the ABS by the ATO are from returns processed up to 31 October, 16 months after the end of the financial year. Any returns lodged after this date are not included. For example, returns processed after 31 October 2017 are not included in the estimates for the 2015-16 financial year presented in this publication.
42 Because of the late lodgement of tax returns in any tax reference year, the data provided in this report underestimates the total taxable income for any given financial year. It is estimated that up to 6 per cent of tax returns for any reference year are lodged after the 16 month cut off date after the financial year is applied to the data.
Changes in taxation policy
43 Users of the data should note that there may be taxation policy changes that will influence the lodging of tax returns, as well as the amounts declared. One change that impacted the data was the increase of the tax-free threshold of $6,000 to $18,200 for the 2012-13 financial year, this appeared to result in less people needing to lodge a tax return. The ABS strongly encourages users of the data to research policy changes that may impact in the comparability of the data year to year. For more information on taxation policy change, the ATO publishes changes in their Taxation Statistics publications.
44 All individual income tax statistics have been provided by the ATO in de-identified form and then geocoded to Statistical Area Levels 1, 2, 3 & 4 and Local Government Areas. Personal information or historically linked details of individual taxpayers have not been released to the ABS.
45 To minimise the risk of identifying individuals in aggregate statistics, a confidentialisation process called perturbation has been applied to the data. Perturbation involves small random adjustment of the statistics and is considered the most satisfactory technique for avoiding the release of identifiable statistics while maximising the range of information that can be released. These adjustments have a negligible impact on the underlying pattern of the statistics. Some cells have also been suppressed due to low counts.
46 Apparent outlier values are treated to ensure more coherent data (less skewed values) at the regional level. Other additivity features (e.g. totals may not exactly match the sum of components) also reduce the risk of deducing real values.
COMPARISON WITH OTHER ABS INCOME DATA
47 The ABS Survey of Income and Housing (SIH) collects information on sources of income, amounts received and the characteristics of persons aged 15 years and over resident in private dwellings throughout Australia. Some data on income earned by children is also captured. Since 2003-04, SIH has been conducted biennially, with the most recent snapshots being 2011-12, 2013-14 and 2015-16 income years. Additional SIH estimates of annual income are produced for the survey gap years. Hence, SIH produces both estimates of current income as well as estimates of annual income with respect to the previous financial year. For further information about the concepts, definitions, methodology and estimation procedures used in SIH, please refer to Survey of Income and Housing, User Guide (cat. no. 6553.0).
48 SIH employee income includes all payments received by individuals as a result of their current or former involvement in paid employment. In addition to the regular and recurring cash receipts captured by SIH, employee income also includes non-cash benefits, bonuses, termination payments and payments for irregular overtime. Details of the composition of employee income derived from ATO sources are provided in Explanatory Note 14 (above).
49 Table 1 below presents a selection of reasonably comparable income data items, sourced from ATO and the SIH, for 2011-12, 2013-14 and 2015-16.
TABLE 1. SELECTED SOURCES OF INCOME, EoPI AND SIH DATA, 2011-12, 2013-14 and 2015-16 AUSTRALIA
1Estimates from the Survey of Income and Housing were collected in 2013-14 and then adjusted to estimate the 2011-12 year.
50 Differences in collection methodologies, data collection/extraction periods, definitions, scope/coverage etc., can all contribute to variations between EoPI and SIH income data. Also, as mentioned before, SIH presents data for low income households whereas the EoPI series may be missing some individuals with low incomes (for example those earning under the $18,200 tax free threshold) because they may not need to lodge tax returns. Please see the Quality Declaration in the publication for more information about coherence.
51 Since changes were applied to the reporting of superannuation income in 2007 (see paragraphs 18-20), the SIH estimate is thought to provide a more accurate, complete indication of the level of income derived from Superannuation and annuities. However, the SIH estimates only include superannuation pension streams and not superannuation lump sum payments.
52 All geographic variables are based on the individual's residential address as stipulated on the income tax return, or for non-lodgers, the address listed on the payment summary.
53 The Australian Statistical Geography Standard (ASGS), July 2016, is used by the ABS for the collection and dissemination of geographically classified statistics.
54 The ASGS is an essential reference for understanding and interpreting the geographic context of statistics published by the ABS and its use enables comparability across datasets. The ASGS has been implemented by the ABS, in part, to obtain more consistency in population size across similar region types, to achieve more data stability and continuity and thereby minimise the need for annual geographic review and change.
55 Further information, including access to ASGS boundaries which underpin the data presented in this publication, can be accessed from Australian Statistical Geography Standard (ASGS): Volume 1 - Main Structure and Greater Capital City Statistical Areas, July 2016 (cat. no. 1270.0.55.001).
56 The statistics in this release are presented according to the Australian Statistical Geography Standard (ASGS), July 2016. Data is also provided on Local Government Areas 2017 boundaries. Under this classification, statistical areas are defined as follows:
57 Further information regarding the ASGS regions, including the detailed classification, metadata, maps and downloadable boundary files, can be accessed from the ABS Statistical Geography Portal on the ABS website.
58 Details of income earners from regions unknown (not stated or indeterminate), or who are lodging returns from overseas, have been classified as such and included in the totals shown. Therefore, the totals shown for Australia may not necessarily be the sum of all state and territory totals.
59 The sum of sub state geographies (GCCSA, SA4, SA3, SA2 and LGA) may not equal the state estimates due to some records having inadequate address information to be geocoded. Where a record was unable to be geocoded to an SA2, it has not been included in totals for SA2 right through to GCCSA. However, where possible, these records have been included in the state and Australia totals.
60 Confidentiality rules have been applied to the estimates to ensure there is no likely risk of individuals in the aggregate statistics presented in this publication. Therefore, the sum of sub-state estimates may also not equal state estimates due to some regions being suppressed through the confidentialising process.
61 The ABS acknowledges the continued support provided by the ATO in compiling these statistics.
62 For further information about these and other statistics, please contact the National Information and Referral Service on 1300 135 070.
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