Top fifth of Aussie households foot benefits bill of lowest earners: Study

New figures have revealed that the wealthiest 20 per cent of Aussie households are funding the benefits of the bottom 60 per cent, as the findings show that the lowest earners are being paid more in government benefits than they are contributing in tax.

According to the report, published by the Centre for Independent Studies, almost half of all Australian households received a greater amount in taxpayer-funded benefits between 2015 and 2016, than they paid into the public purse through means of taxation.

The study defines benefits to include ‘in kind’ benefits such as health and education, as well as cash benefits such as pensions, while taxes include income tax and a range of indirect taxes such as GST and excise tax.

“When the number of public sector employees is added, there is a clear majority of voters benefiting more from government than they contribute,” report author Robert Carling said.

He added: “If the population of households is divided into quintiles (slices 20 per cent each) from lowest to highest income, not only the first and second quintiles are net beneficiaries but also the third (middle) quintile.

“Even the fourth quintile is close to receiving as much in benefits as it pays in taxes.”

Overall, the data obtained from the Australian Bureau of Statistics (ABS) found, on average, that households received $76 more per week in total benefits than they paid in taxes. These figures have reduced slightly since a previous study, carried out between 2009-2010, which revealed a difference of $99 per week.

According to the ABS, Tasmanians came out on top receiving a whopping $360 on average per week in benefits after tax. While unfortunately for those in the ACT, they ended up paying $79 more in taxes than the benefits received. 

And perhaps surprisingly, the highest earning Aussies aren’t the ones benefitting the most, with the richest 20 per cent of households receiving less benefits across the board and forking out the most in taxes, particularly income tax.

ABS Chief Economist Bruce Hockman added: “This report, Government Benefits, Taxes and Household Income, Australia, 2015-16, found that once you adjust for the size and make-up of the household, the poorest 20 per cent of the population earned 3 per cent of all private incomes [sum of all income earned with the exception of Australian government pensions and allowances]. After receiving benefits and paying taxes, their share of income increased 13 per cent.”

While for the richest group the share of private income reduced to 35 per cent from 47 per cent after benefits and taxes.

“This is an illustration of how skewed the tax system is, with the top 20 per cent doing most of the heavy lifting,” Carling said.

“It also shows why balancing the budget has become so difficult.”

What are your thoughts on this data?