Here’s how Australian millionaires set themselves up to pay no tax

The latest statistics from the Australian Tax Office highlight the widening gap between the nation's rich and poor people.

And the media is having a field day with these figures telling is thinks like, in the 2016-17 tax year:

• 69 Australian millionaires reduced their taxable income to zero by claiming millions in deductions. Each claimed millions in deductions, primarily for the "cost of managing tax affairs", but also for "gifts or donations". This was up from 62millionaires who paid no tax the year before. Some also managed to claim back franking credits from their share investments.
• 60 people who declared total incomes above $1 million reported taxable incomes below $6,001, two posted taxable incomes between $6,001 and $10,000, and eight declared taxable incomes between $10,001 and $18,200, putting them all below the tax-free threshold. Not one of them paid the Medicare levy.
• 1.3 million property investors claimed negative gearing losses totalling $12.3 billion on their rental properties
• 8.8 million people claimed $21.98 billion in work-related expense deductions

1.3 million Australians negatively gear their investment properties

Here's what the newly released stats show us about property investors:

• 13.9 million individuals filed tax returns for the 2016-17 income year.
• 2.15 million were property investors earning rental income totalling $44.1 billion. This is up slightly from 2.09 million reporting income of $42.1 billion the year before.
• 1.3 million people made a combined loss of $12.3 billion on their rental properties.
• 855,975 property investors were positively or neutrally geared.
• Interest on mortgage loans was by far the biggest expense. Negatively geared investors claimed deductions for $18 billion in interest payments.

• There were 20,357 investors with six or more properties, 19,504 with five, 46,460 with four, 125,915 with three, 407,971 with two and 1.54 million with one.

The ATO will target property investors

The Australian Taxation Office (ATO) announced that it is ramping up its enforcement activities and will undertake 4,500 audits of taxpayers it considers are "high risk" because they overclaim or don't declare income relating to rental properties.

They explained that 

ATO assistant commissioner Adam Kendrick cited errors in claims made for capital improvements.

He said people were making claims for items in the same year as the expense occurred for items that should be claimed at 2.5 per cent over 40 years.

"Say you have to replace hot water system, or washing machines — those are things you have to depreciate over the effective life of the asset," he said.

About Michael Yardney Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media.