The Tax Avoidance Game: When Following the Rules Feels Like Cheating
The discussion around tax reform has been heating up lately, and frankly, it’s about bloody time. When you hear that 91 people earning over a million dollars paid absolutely zero income tax last financial year, something’s clearly broken in the system. Not bent - broken.
What really gets my goat isn’t necessarily that these ultra-wealthy individuals are breaking the law. Most aren’t. They’re just playing a game where the rules are so skewed in their favour that the rest of us are left wondering how we ended up with such a wonky system in the first place. It’s like watching someone win at Monopoly because they convinced everyone else that collecting $200 for passing Go only applies to properties they don’t own.
The trust fund shenanigans are particularly galling. Someone in the discussion mentioned how easy it is to spread a million-dollar income across five family members, dropping the effective tax rate from 41% to 28%. Meanwhile, those of us earning regular wages through PAYG have about as much flexibility in our tax arrangements as a tram on Collins Street - we’re locked into the tracks, paying our fair share whether we like it or not.
The resource extraction debate hits close to home here in Australia. We’re sitting on some of the world’s largest mineral deposits, yet somehow companies are paying sweet FA in royalties while shipping our wealth overseas. Norway’s sovereign wealth fund shows what’s possible when a country actually values its natural resources. Each Norwegian is effectively a millionaire thanks to their oil fund, while we’re left arguing about whether a 40% petroleum resources rent tax is too harsh on poor multinational corporations.
The suggestion to remove corporate tax loopholes by focusing on higher commodity royalties makes sense to me. It’s much harder to play accounting tricks with physical tonnes of iron ore leaving Port Hedland than it is to shuffle intellectual property through Irish subsidiaries. But here’s where my IT background kicks in - trying to tax foreign tech companies on Australian revenue? Good luck with that. These companies have armies of tax lawyers who make our local accountants look like they’re still using abacuses.
What’s particularly frustrating is that the Australian Taxation Office apparently already has the tools to crack down on dodgy trust arrangements and other tax minimisation schemes. They just need the resources and political will to use them. But when politicians themselves benefit from these arrangements - with their six-year capital gains tax exemptions conveniently matching senate terms - why would they rock the boat?
The irony isn’t lost on me that while we debate whether to tax family homes through some convoluted imputed rent scheme, we’re letting genuine high earners slide through loopholes you could drive a mining truck through. It’s like trying to plug a dam by putting your finger over a small leak while ignoring the massive crack in the wall.
Teaching tax literacy in schools could help, but let’s be honest - by the time people are earning serious money, they’ve either forgotten their year 10 economics or they’re getting advice from professionals whose job it is to minimise their tax burden. The real issue is that our system has become so complex that following the rules and dodging your social responsibility have become practically the same thing.
The wealth tax debate is interesting, but Norway’s experience shows that simply slugging the rich doesn’t work if they can pack up and leave. What we need is smarter policy that makes it harder to avoid tax in the first place, rather than trying to chase people after they’ve already gamed the system.
Looking forward, the focus should be on closing loopholes, properly taxing resource extraction, and ensuring that those who benefit most from Australian infrastructure and society actually contribute to maintaining it. The current system where a PAYG worker pays more effective tax than a millionaire trust beneficiary isn’t just unfair - it’s unsustainable.
We don’t need revolutionary change, just some basic fairness. When your accountant’s biggest challenge is finding legitimate deductions rather than navigating elaborate avoidance schemes, we’ll know we’re getting somewhere.