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Income inequality, with respect to total, taxable and post-tax income, has increased in Australia over the period from 1991 to 2019. Gini coefficients are highest for taxable income followed by gross total income, a produced figure, with the lowest levels of income inequality amongst post-tax income. In 2019, these results were 0.4849, 0.4812 and 0.4303; an increase from their 1991 levels of 0.4321, 0.4186 and 0.4010. While the income inequality from these income classifications has increased over time, the reduction in the Gini coefficient, between taxable to post tax income, has increased. This implies the progressive tax system does more than in the past to reduce income inequality.
Horizontal equity metrics show that capital income is a key component to different post tax income results amongst those with similar total incomes. Cohort analysis indicates that an increase in income inequality occurs within each age bracket and within each generation over time. Share analysis shows that approximately 29% of all recorded capital income is now held by those in the top 1% of gross incomes. Finally, income mobility, measuring the movement in income level between years indicates that one is most likely to remain at their current income decile in subsequent years.
Brendan Fugate works as an economist for the ATO and was seconded to ANU throughout 2022. His primary interests are tax research and the use of admin data. At the ATO, he works in the tax gap area, whose goal is to calculate the amount of tax not collected by the ATO.