Australian Baby Boomers have it easier when it comes to income taxes, new data shows. Working-age Australians are underwriting government services today much more than Baby Boomers did for their parents back then.
Older Australians pay less tax than the younger generation even on the same income. The tax share of households over 65 years old has halved over the past two decades to just 17% today, leaving the bulk to younger households.
In fact, the Grattan Institute research reveals young Australians today are in danger of being the first generation in the country to have lower living standards than their forebears.
The institute notes that living standards of younger Australians have barely improved since 2004. On the other hand, older people’s wealth has grown by more than 50 per cent over the same period.
Older Australians today have higher income and greater wealth than Australians three decades ago, while poorer young Australians are predicted to have less wealth than the older generation. The generation today is also less likely to own a home.
In other words, while house prices are rising, wage growth is stagnating, and under-employment is getting worse, the older people are less affected because they are more likely to have their own home already or paid their mortgage and have other sources of income– not to mention superannuation assets that are growing.
The research points to generous superannuation tax concessions to older people as one of the factors causing the problem.
That is, the taxes the poor younger generation are paying underwrite the living standards of the “comfortably off” older generation.
Older households are wealthier, yet younger households get the lion’s share of the fund for government services for the elderly.
The problem is compounded by the fact that the population is ageing. The government is spending more on health, aged care, and pensions.
But the bigger problem is that there are fewer working-age Australians today to pay for every retired Australian. The ratio is 4.4 working-age Australian to 1 retired Australian in 2014-2015. In the 1970s, it was 7.4:1. The figure is still expected to go down to 3.2:1 in 2054-2055.
The generational wealth gap is growing with housing and superannuation being the big wealth drivers.
The Grattan Institute researchers identified tax reforms to wind back age-based tax breaks and changes in planning rules to encourage people to live in low-density suburbs that will lead to housing affordability, as some of the points this government must address.
Because while it is morally right to make sure Baby Boomers are assisted as they age, it does not diminish the fact that Gen Xers and Millennials are shouldering a greater burden per person, than did the Baby Boomers whose sheer superior demographic number ensures a significantly smaller contribution for each.
Historically, each generation turned out financially better than the last at the same age. It is now doubtful whether this will still hold true for Gen X, Y, and Z.
Do you need tax accountants for you and your business? Contact a Chan & Naylor accounting specialist today! We’re here to help!
Don’t forget to check all the accounting and advisory services we offer to help you achieve greater financial success.
If you like this post, “Your Parents Paid Less Income Tax Than You,” please subscribe to our newsletter and stay in touch with us by liking our main Chan & Naylor Facebook page, as well as our Linkedin, Instagram, and Twitter pages.
The Chan & Naylor Group has national offices in South West Sydney, Sydney, Pymble and Parramatta in New South Wales, Wheelers Hill, Melbourne, Moonee Ponds and Hawthorn in Victoria, Brisbane and Capalaba in Queensland, and East Perth in Western Australia that can assist you with your accounting needs. Contact us here today.