Why billionaires often pay less tax than wage earners
Billionaires grow wealth through unrealised capital gains on assets, which escape annual income tax entirely until the asset sells, unlike wages.
Most Australians earn money as wages or salary, taxed each year. Billionaires grow wealth differently: their assets rise in value.
If you own a share worth one dollar and it becomes three dollars, that two-dollar gain is real wealth. But billionaires don't pay tax on that gain each year.
They only pay tax when they sell the asset. If they never sell, they never pay tax on those gains.
This deferral is one reason billionaires face lower tax rates than wage earners. Solutions include a wealth tax on ultra-high net worth or taxing unrealised gains annually.
Why it mattersIt explains why Australia's richest people can avoid paying their fair share and what could be done about it.
Corroborated bycrikey.com.au
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