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Scott Morrison’s income tax reform package is worth about $140 billion. Photo: Attila Csaszar

Tax shift may improve ledger

Western Australians paid federal taxes of $16.5 billion in the year to June 2017 that were spent outside the state, according to WA Treasury data, with the latest numbers suggesting WA would be the biggest winner from federal moves to cut company and income taxes.

Hidden deep in every state budget are numbers compiled annually by WA’s Department of Treasury looking at the amount of tax paid by WA residents to the Commonwealth and the level of federal spending or grants allocated to the state (including adjustments for defence).

Western Australians paid $52.5 billion in federal taxation, while spending directed to the state was just $36 billion, the 2017 financial year estimates show.

One major takeaway from the data is that despite the debate about the GST distribution, WA’s most significant contribution is actually through the personal income tax system.

Treasury estimated about $3.8 billion was gathered through the GST allocation formula, but nearly $5 billion headed east through excess income tax payments.

The numbers mean Western Australians pay about $1,900 per capita through income tax which ends up being spent in other states.

That would concur with data suggesting WA taxpayers earn, on average, higher incomes than those in most other regions of the country.

Household income data for the 2017 financial year from the Australian Bureau of Statistics, for example, found per capita gross income in WA was $67,778, the highest of any state (although lower than both the Nortern Territory and ACT).

The numbers imply WA pays about $16,400 per capita in income tax, while an average individual in NSW pays $15,300.

Tasmanians pay $10,300 per capita.

The data’s release comes just days after the federal government’s tax reforms proposed in Treasurer Scott Morrison’s recent budget, which call for taxpayers earning between $40,001 and $200,000 to pay a marginal rate of 32.5 per cent.

The idea is that fewer tax brackets reduces bracket creep and lowers the tax burden for overtime or second incomes.

Continuing drain

WA’s net contribution to other states by way of company tax was $3 billion in the 2017 financial year.

When all taxes and federal spending are considered, WA’s contribution to other states was about $77 billion in the four years to June 2017.

That big redistribution was despite WA suffering more than two years of consecutive quarterly falls in state final demand.

There is one silver lining in the data however.

Business News reported last year that WA’s contribution had been as much as $90 billion in the four years to June 2016, suggesting the imbalance is improving.

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