Federal Politics

Hidden taxes the public's secret burden

Ever feel like you are paying more tax than appears on your annual tax return?

Your intuition is dead right. It is likely you are paying much more, even before Prime Minister Tony Abbott ups income tax rates with his so-called "deficit tax".

In fact, the average taxpayer ends up paying about two-thirds more tax than they pay through their income tax, according to new figures verified by Deloitte Access Economics.

For starters, Australians pay a small excise whenever they buy things such as beer and tobacco, or clothing and footwear. They pay customs excises and luxury car taxes.

And the goods and services tax costs Australians thousands of dollars a year each.

But taxpayers can often forget about these so-called "indirect taxes".


Figures from the Australian Tax Office and federal government show the average Australian can expect to pay about $4600 in indirect taxes this financial year, which is the equivalent of $8150 for the typical taxpayer.

(Given that less than half the population submits a tax return, the $4600 figure becomes $8150 for the typical taxpayer).

And those indirect taxes come on top of their personal income tax, which costs $12,700 for the typical Australian submitting a tax return.

Economists say some of these "hidden" taxes are worthy but others can be "rotten".

"Politicians like indirect taxes because people don't know that they're paying them, but there's also a good economic case for some of them," said Chris Richardson, director of Deloitte Access Economics.

"The GST is a great tax, for instance. But the way we tax alcohol is rotten because we should be taxing alcohol by alcoholic content, not by the strength of political lobbying."

The exact number of taxes is "difficult to determine" and "may be higher than these estimates"

Personal income tax gets the most attention because it is "in your face" when you do your tax return and it is the biggest single tax the average person pays, Mr Richardson said.

"But taxpayers pay a hell of a lot of other taxes and a lot of them are less visible," he said.

"You know that there's a GST but you forget there's a petrol tax and a beer tax. And you don't remember that, for some people, employers are paying their fringe benefits taxes for them, which would otherwise be affecting their wage."

Roughly half of the indirect taxes Australians pay are thanks to the GST.

The Henry Tax Review, which reviewed Australia's taxation system after the global financial crisis, found Australians pay "at least" 125 taxes each year.

Of these, 99 are levied by the federal government, 25 by the states and one by local government (council rates).

But the exact number of taxes is "difficult to determine" and "may be higher than these estimates", the report said.

"This reflects ambiguity in distinguishing when a payment to government represents a separate tax or part of a broader tax and whether a payment is a tax rather than a fee for service."

Last month, Treasurer Joe Hockey said Australians might have to pay more for health services in the future because "nothing is free – someone always pays".

But taxpayers are already paying for more things than they realise.