INSTITUTIONAL ENVIRONMENT

These estimates of personal income published by the ABS are sourced from the Australian Taxation Office (ATO). The ATO collects personal income tax information from the lodgement of personal income tax returns as part of their role to 'manage and shape tax, excise and superannuation systems that fund services for Australians' [Source: http://www.ato.gov.au 'About Us'] .

The ATO compiles a range of data from this collection for release on the ATO website. An extract of personal income tax is provided to the ABS on an annual basis under a Memorandum of Understanding (MOU) between the ABS and the ATO.

All individual income tax statistics are provided to the ABS by the ATO in aggregated form only, at the Statistical Local Area (SLA) level. Information about individual taxpayers has not been released to the ABS.

For information on the institutional environment of the ABS, including the legislative obligations of the ABS, financing and governance arrangements, and mechanisms for scrutiny of ABS operations, please see ABS Institutional Environment.


RELEVANCE

Personal income data are produced at regional (small area) level to provide valuable information about regional economies and the income of individuals resident in regions. This annual regional level income data is not available from existing ABS censuses and surveys.

The scope of the personal income tax data includes individuals who submit an individual income tax return to the Australian Tax Office.
Data items for individuals include number of 'taxable' and 'non-taxable individuals', and 'taxable income'.

The main statistical releases from ATO personal income tax data are:

1. Counts of taxable and non-taxable individuals, and amount of taxable income;
2. Number of persons and amount of income from Wages and salaries, Own unincorporated business, Investment, Superannuation and annuities, Other income (excluding Government pensions and allowances), Total income (excluding Government pensions and allowances);
3. Number of Wages and salary earners, income earned and Average Wage and salary income by various cross-classifications (age, sex, occupation and income range).

Data for income categories in 2. and 3. above are aggregated from items in the individual income tax return, and are selected to conform as closely as possible to ABS Income Standards.

These statistical releases are presented at the following levels of geography as in the Australian Standard Geographical Classification (ASGC): Statistical Local Area; Statistical Subdivision; Statistical Division; Local Government Area; state/territory, Australia.

Occupation data for Wage and salary earners is presented using the Australian and New Zealand Standard Classification of Occupations (ANZSCO).


TIMELINESS

Individuals may lodge income tax returns in respect of each financial year (1 July to 30 June). Personal income tax data is provided to the ABS approximately 22 months after the income year. Data are taken from an annual extraction from the ATO database as at 31 October each year (16 months after the income year). For example, data for the 2008-09 financial year was extracted as at 31 October 2010 and provided to the ABS in April 2011. Data are released annually by the ABS.


ACCURACY

Personal income tax data is derived from information contained in personal income tax returns lodged with the Australian Taxation Office. For the purposes of providing statistical measures for the entire population, the ATO database has some limitations in its coverage. Persons who receive less than the taxable income threshold are not necessarily required to lodge a tax return. This can include persons who derive their income from government pensions and allowances. Consequently, the coverage of low income earners, including people receiving government pensions and allowances is not complete in ATO records. In addition, a number of Commonwealth of Australia government pension, benefit and allowance payments are exempt from income tax and are therefore not required to be included in tax returns.

Data is provided by the ATO before the processing of all income tax returns for any given year may have been completed. Data provided to the ABS by the ATO are from returns processed up to 31 October, 16 months after the end of the financial year. It is estimated that approximately an additional 3% of taxpayers lodge their income tax returns in the twelve months after the initial processing cut off each year and approximately 5% of taxpayers lodge their income tax returns in the three years following the processing cut off. This means that data provided to the ABS slightly under-estimates the number of income earners and the total income earned.

Prior to being provided to the ABS, the statistics have also been subjected to a confidentiality process that randomly adjusts table cells with small values. This includes altering some small cells to zero. Caution should therefore be exercised in deducing that there are no people in an area with certain types of income and, in general, no reliance should be placed on table cells with small values.


COHERENCE

Personal income tax statistics can be impacted by changes to Tax legislation. The ATO outlines any such changes in their annual release of 'Taxation Statistics' on the ATO website.

Data for income categories described above (see Relevance) are aggregated from items in the individual income tax return, and are selected to conform as closely as possible to ABS Income Standards. There have been several changes, reflected in data released for 2001-02 to 2005-06, and for 2003-04 to 2008-09:

Release	Reference periods	Changes to Wages and salaries
6524.0 and 6524.0.55.001 5673.0 and 5673.0.55.001	1995-96 to 2000-01	Gross wage and salary income Allowances, commissions, tips etc.
6524.0.55.002 5676.0.55.003	2001-02 to 2005-06	Gross wage and salary income Allowances, commissions, tips etc. Attributed personal services income
6524.0.55.002 5673.0.55.003	2003-04 to 2006-07 2003-04 to 2007-08 2003-04 to 2008-09	Gross wage and salary income Allowances, commissions, tips etc. Attributed personal services income Lump sums Eligible termination payments

Breaks in Series

Changes in taxation policy can occur in any income year and can, for example, influence whether an individual needs to lodge a tax return, and what is required to be reported on the tax form.

There are a number of breaks in series. One break in series was associated with the introduction of a one-off tax bonus introduced as part of the Economic Stimulus Package in response to the Global Financial Crisis. This one-off tax bonus was available to all individuals whose 2007-08 taxable income was $100,000 or less, whose adjusted tax liability was greater than zero and who had filed their 2007-08 tax return by 30 June 2009. The Australian Taxation Office has reported in their Taxation Statistics publications that there was a 7.1% increase in individual tax lodgements for the 2007-08 financial year, in part due to individual lodgements being brought forward to access the tax bonus. This was followed by a fall of 2.8% in individual tax lodgements in 2008-09. In the ABS series, total income rose by $52.1 billion from 2006-07 to 2007-08, but rose by only $12.3 billion from 2007-08 to 2008-09. The number of individuals in the ABS series fell from 12.4 million in 2007-08 to 12.0 million in 2008-09.

Other breaks in series were associated with a change to taxation legislation regarding superannuation which took effect from 1 July 2007. This change means that people aged 60 years and over who receive superannuation income in the form of a lump sum or income stream (such as a pension) from a taxed source, will receive that income tax free. Therefore, if a person has no other income, or their total income is below the tax-free threshold, or any tax payable is mitigated by a tax offset (such as Senior Australian Tax Offset), then this person will not be required to lodge a tax return. In the ABS income series for superannuation and annuities, fewer persons reported income from this income source for the 2007-08 income year onwards. The break affects all Superannuation series (persons, income and average income).

Further information about these breaks in series can be obtained from the Explanatory Notes in the 2008-09 issue of this release.

Changes in Occupation Classification in 2008-09

In addition to the break in series associated with the introduction of the one-off tax bonus, there has been a change in the classification used by the ATO to code occupation data. In 2009 the ATO moved from using the Australian Standard Classification of Occupations (ASCO) to the Australian and New Zealand Standard of Occupations (ANZSCO). The occupation categories for 2008-09 presented in this issue are not therefore comparable to those featured for 2003-04 to 2007-08 in previous issues of this product.


Other ABS Data

Other ABS sources of income data are:

• the Survey of Income and Housing;
• the Survey of Average Weekly Earnings
• the Census of Population and Housing

The ABS Survey of Income and Housing (SIH) collects information on sources of income, amounts received and the characteristics of persons aged 15 years and over resident in private dwellings throughout Australia. Data collected from SIH can be compared to ATO personal income tax data published in Estimates of Personal Income for Small Areas (cat no. 6524.0.55.002) and Wage and Salary Earner Statistics for Small Areas (cat no. 5673.0.55.003) at the Australia level. Small area estimates are not released from the SIH. Comparison of these series for Australia can provide a means of assessing trends, establishing whether counts are of an expected magnitude and whether the distribution of income across the various sources is similar. The ATO personal income tax data contained in this release is generally consistent in magnitude with the estimates derived from the ABS Survey of Income and Housing at the Australia level.

The Survey of Average Weekly Earnings (AWE) is a quarterly sample survey of employing businesses. It collects data on average weekly earnings for full-time adult employee jobs, average weekly total earnings for all employee jobs, and average weekly ordinary time earnings for full-time adult employee jobs. Small area estimates are not released from AWE. The ATO Average Wage and Salary income as presented in Wage and Salary Earner Statistics for Small Areas (cat no. 5673.0.55.003) can be compared at the Australia level with the 'average weekly total earnings for all employees jobs' from the survey of Average Weekly Earnings. These two series items are generally consistent in magnitude at the Australia level.

Income data is also available every five years in the Census of population and housing. The Census provides total income for households and individuals. Data are available for a range of small areas.


INTERPRETABILITY

Taxable income is calculated on the personal income tax as total income or loss minus total deductions.

Personal income tax data releases all contain detailed Explanatory Notes that provide information on scope and coverage, confidentiality, changes to the data over time, geographical presentation of the data, classifications and other technical aspects associated with these statistics.


ACCESSIBILITY

All personal income tax data provided to the ABS from ATO, is released to the ABS website in:

• National Regional Profile (contains Taxation Statistics, income estimates by source and Wage and salary earners statistics in html web pages, excel spreadsheets, SuperTABLE datacubes and a .csv file)
• Estimates of Personal Income for Small Areas (cat no: 6524.0.55.002) - contains a summary main features, excel spreadsheets and SuperTABLE data cubes.
• Wage and Salary Earner Statistics for Small Areas (5673.0.55.003) - contains a summary main features, excel spreadsheets and SuperTABLE data cubes.