Personal Income in Australia methodology

Each person file contains data for all persons who either submitted an ITR or who were identifiable on a payment summary in the reference year. Each record includes de-identified demographic and geographic data, and aggregate income information.

Employed persons may be either employees (including owner manager of incorporated enterprises or OMIEs), OMUEs, or both. Employees are identified by the presence of aggregate employee income and at least one linked employee job.

Employees who have not submitted an ITR but who have provided their Tax File Number to their employer are imputed from PAYG payment summary data.

OMUEs are identified by the presence of any of the own unincorporated business income types and a linked OMUE job.

Tax lodgers who are not employees or owner managers are included on the person file to support statistical analysis that requires a more complete view of the tax lodger population.

In the LEED, an employer is identified when a job has been linked to any legal entity in the non-profiled population or any type of activity unit in the profiled population.

The business file contains business units present in BLADE that could be linked to a job, as well as unincorporated entities. Some unincorporated entities are identified in personal income tax data and are not otherwise included in BLADE or cannot be identified in BLADE. Industry and several other employer variables are not available for these unincorporated entities, except for the ones in 2017-18 or later year data who reported industry information in their ITR.

The jobs file is a complete list of the job relationships held at any time during the reference year. It is constructed primarily from PAYG payment summary data. PAYG payment summaries describe the payments made to an individual by an employer within a financial year. Conceptually, payment summary data should include most employee/employer job relationships. OMUE jobs are derived from ITR data and added to the jobs file, some of these link to businesses in BLADE.

The LEED jobs file does not capture voluntary jobs and unpaid contributing family worker jobs.

Synthetic records

In some cases, a synthetic employee job record has been created based on information in the person file. This has occurred when a person has recorded wage or salary information that cannot be identified in payment summary data. Sometimes, an employee job may not be able to be linked to an employing organisation due to reporting errors or missing information. 

Multiple job holding

A person can hold several jobs during the year, either concurrently (as a multiple job-holder) or consecutively. For a person who is an employee of several employers, each relationship is listed as a separate job. Due to data limitations, only one self-employment job can be recorded for any OMUE even if a person owns an manages more than one enterprise. An OMUE can hold other jobs as an employee. 

Data on multiple job holders can also be found in the Labour Account Australia, however there are a number of differences between the two sources. For a full description of these differences, see Multiple Job Holders. 

Job treatments

PAYG payment summary start and end dates are used to

• determine the start and end of a job relationship,
• identify concurrent job-holding, and
• determine the duration of the job.

These dates are known to have high measurement error rates, which are likely to inflate job and concurrent job counts. Some of this error may be due to misinterpretation and recording errors, but it is also expected that payroll system and report design have an influence.

Some treatments have been applied to address over counts of jobs or concurrent job-holding, including: 

• In cases where a person has received several PAYG payment summaries from the same employer, and the time between the end of the first payment summary and the start of the next payment summary is 31 days or less, this is counted as a single job.
• In cases where a person has received several PAYG payment summaries from different employers, they are only considered to be concurrent if they overlap by more than 31 days.
• In cases where a person has more than 10 jobs, those within the same industry sub-division (2-digit ANZSIC industry) are counted as a single job in the 2011-12 to 2016-17 data. From 2017-18 reference year, a lower level of industry classification - those within the same industry class (4-digit ANZSIC industry), was used to collapse jobs. This change has improved data quality  but has brought in a negligible increase to the number of total jobs reported compared with reported numbers in the old approach. 

These treatments are aimed at minimising the impact of administrative errors while also reflecting a reasonably accurate view of differing job structures.

Employee income is the total (or gross) income received as a return for labour from an employer or from a person's own incorporated business (when they are employed by this business). The data used in deriving employee income comes from both ITRs and payment summaries (where an individual has not lodged an ITR).

Employee income includes the following data items from the payment summary and /or the ITR:

• Salary or wages
• Allowances, earnings, tips, director's fees
• Employer lump sum payment amount A
• Employer lump sum payment 5 per cent
• Employment termination payments taxable component
• Attributed personal services income
• Employee share schemes total assessable discount
• Total reportable fringe benefit amount
• Reportable employer superannuation contributions
• Exempt foreign employment income
• Other net foreign employment income

Own unincorporated business income (or OMUE income) is the profit or loss that accrues to owners of, or partners in, their own unincorporated businesses. Profit or loss is the value of the gross output of the enterprise after the deduction of operating expenses, including reportable superannuation contributions, depreciation and operating costs, but before income tax is taken out. Losses occur when operating expenses are greater than receipts and are treated as negative income.

Own unincorporated business income includes the following data items on the ITR:

• Net income or loss from business primary production
• Net income or loss from business non primary production
• Distribution from trusts primary production
• Net personal services income
• Distribution from partnerships less foreign income non primary production
• Distribution from partnerships primary production

These data exclude distributions from trusts for non-primary production activities as this may include aspects of investment income. It also excludes the income of working directors/owners of incorporated businesses who are classified as employees; consequently their income is included under Wage and salary income.

"Net personal services income" does not include income a person received as an employee, making it different from "Attributed personal services income".

Own unincorporated business income is conceptually consistent with OMUE income published in Jobs in Australia.

Investment income includes the following data items on the ITR:

• Gross interest
• Dividends unfranked amount
• Dividends franked amount
• Dividends franking credit
• Share of net income from trusts less net capital gains and foreign income non primary production
• Franked distributions from trusts - non-primary production
• Australian franking credits from a New Zealand company
• Net foreign rent
• Net rent 

Superannuation income includes the following data items on the ITR:

• Australian annuities and superannuation income streams taxable component taxed element
• Australian annuities and superannuation income streams taxable component untaxed element
• Australian annuities and superannuation income streams lump sum in arrears taxable component taxed element
• Australian annuities and superannuation income streams lump sum in arrears taxable component untaxed element
• Australian superannuation lump sum payments taxed element
• Australian superannuation lump sum payments untaxed element
• Bonuses from life insurance companies and friendly societies
• Assessable First home super saver (FHSS) released amount (from 2018-19) 

From 1 July 2007, 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, 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), this person is not required to lodge a tax return.

Due to the above reason, the superannuation statistics (persons, income) included in this release are regarded as partial, subject to under-coverage. A more comprehensive snapshot of superannuation income (at aggregate state/territory level) can be obtained from the ABS Survey of Income and Housing - see Household Income and Wealth, Australia.

Other income comprises income items reported on the individual income tax return that were not allocated to one of the above categories. For example, Other income can include transfer or trust income, controlled foreign company income, net foreign pension and annuity income, and foreign investment and life insurance income.

Other income is not published separately as it does not provide a reliable view of the category. It is included in total income.

Other income includes the following data items on the ITR:

• Foreign source income net foreign pension or annuity (without Undeducted Purchase Price)
• Foreign source income net foreign pension or annuity (with Undeducted Purchase Price)
• Foreign entities controlled foreign company income
• Foreign entities Transfer or trust income
• Foreign source income other net foreign source income
• Other income category 1
• Other income category 2

Total Income is the sum of all reported income derived from Employee income, Own unincorporated business, Superannuation, Investments and Other income, as defined above. Total income does not include the non-lodger population.

Government pensions, benefits or allowances are excluded from the ABS income data and do not appear in Other income or Total income. Pension recipients can fall below the income threshold that necessitates them lodging a tax return, or they may only receive tax free pensions or allowances. Hence they will be missing from the personal income tax data set. Recent estimates from the ABS Survey of Income and Housing (which records Government pensions and allowances) suggest that this component can account for between 9% to 11% of Total income.

Age of person as at 30 June of the reference year.

Annuities are guaranteed regular and recurring receipts, generally from an insurance company, the right to which was purchased with a lump sum or regular contributions at some point in the past. Annuities are included in Superannuation income.

An entity of a financial or non-financial nature, owned by the household or its members, and from which economic benefits may be derived by holding or use over a period of time.

Gross income less income tax, the Medicare levy and the Medicare levy surcharge i.e. remaining income after taxes are deducted, which is available to support consumption and/or saving. Disposable income is sometimes referred to as net income.

Dividends may be the main source of income for people who run their own incorporated business. They can be:

• 'franked' which are shares of company profit paid or credited by an Australian resident public company from profits on which Australian company tax has been paid, or
• 'unfranked' which are those shares of company profit paid by an Australian resident company from profits on which Australian company tax has not been paid.

Persons (including children) who receive income (either positive or negative) from an income type.

Persosn who works for an employer and receive pay in the reference period in the form of wages or salaries, a commission while also receiving a retainer, tips, piece rates or payments in kind. In this release, persons who operated their own incorporated enterprises are also included as employees.

An employee's total remuneration, whether monetary or in kind, received as a return to labour from an employer or from a person's own incorporated business. It comprises wages and salaries, bonuses, amounts salary sacrificed, non-cash benefits such as the use of motor vehicles and subsidised housing (where valued over a certain threshold), and termination payments.

An asset whose value arises not from its physical existence (as would a building, piece of land, or capital equipment) but from a contractual relationship. Financial assets are mostly financial claims (except for shares and value of own unincorporated business). Financial claims entitle the owner to receive a payment, or a series of payments, from an institutional unit to which the owner has provided funds. Examples include accounts held with financial institutions (including offset accounts), ownership of an incorporated business, shares, debentures and bonds, trusts, superannuation funds, and loans to other persons.

A summary measure of inequality of income distribution. It is a single statistic that lies between 0 and 1 and is a summary indicator of the degree of inequality in income between members of the tax form lodging population. Values closer to 1 represent greater inequality.

Income support payments from government to persons under social security and related government programs. Included are pensions and allowances received by aged, disabled, unemployed and sick persons, families and children, veterans or their survivors, and study allowances for students.

GCCSAs are designed to represent the functional extent of each of the eight State and Territory capital cities. They include the people who regularly socialise, shop or work within the city, but live in the small towns and rural areas surrounding the city. GCCSAs are not bound by a minimum population size criterion. GCCSAs are built from SA4s.

Income from all sources, whether monetary or in kind, before income tax, the Medicare levy, the Medicare levy surcharge, and the temporary budget repair levy are deducted.

Income share is the percentage of total income held by the top 1%, 5% and 10% of all earners in a region. The aggregate income of the units in each percentile is divided by the overall aggregate income of the entire population to derive income shares.

Also described as income source.

This describes the income based on the source from which it is received. The income types are as follows: total income, employee income, investment income, own unincorporated business, superannuation, other.

The annual tax return submitted by individuals to the Australian Taxation Office.

Income received as a result of ownership of assets. It comprises returns from financial assets (interest, dividends), and from non-financial assets (rent).

A LEED is any dataset that integrates information about employers and their employees. The LEED used to compile this release includes cross-sectional employer, person and job files that integrate personal income tax data with employer information from the Business Longitudinal Analytical Data Environment.

These areas are the spatial units which represent the geographical areas of incorporated local government councils. LGAs include sub categories such as Cities (C), NSW Local Government Areas (A), Boroughs (B), Rural Cities (RC), Towns (T), Shires (S), District Councils (DC), Municipalities (M), SA Municipal Councils (M), SA Regional Councils (RegC) and Qld Regional Councils (R). Data are presented for LGA boundaries at 2018.

The income source from which a person derives most of their (positive) income. For a stated income type, this measure reflects the proportion of all persons in a region for whom the income type is their main source of income. 

The Medicare levy is a specific tax based on individual income.

The Medicare levy surcharge is a levy, or an additional tax, on some Australian taxpayers.

Income may be negative when a loss accrues to an individual as an owner or partner in unincorporated businesses, rental properties or other investment income. Losses occur when operating expenses and depreciation are greater than gross receipts.

A persons who did not lodge an Individual Tax Return (ITR) but who received income from at least one source. Non-lodger employees are identified in the Linked Employer-Employee Dataset (LEED) and accounted for in this release.

Income other than employee income, own unincorporated business income, investment income and superannuation income. This includes other current receipts from sources such as child support, royalties, workers' compensation and scholarships.

The profit/loss that accrues to persons as owners of, or partners in, unincorporated businesses. Profit/loss consists of the value of gross output of the business after the deduction of operating expenses (including depreciation). Losses occur when operating expenses are greater than gross receipts and are treated as negative income.

An aggregate term for tax paid by individuals. PIT data includes information collected from Individual Tax Returns (ITR) and PAYG payment summaries, as well as information on the Australian Taxation Office's Client Register.

The annual summary provided by an employer to the Australian Taxation Office with respect to an employee, as part of the Pay As You Go taxation system. It records job level information reported by employers about the payments made to an employee. This is the primary component of the Linked Employer-Employee Dataset (LEED) job file and is used to identify, and as a source of information about, non-lodgers.

Percentile ratios summarise the relative distance between two points in a distribution. They are expressed as the value of the quotient (the left percentile divided by the right percentile). For example a P80/P20 ratio of 2.3 means that persons in the 80th percentile have 2.3 times the income of persons in the 20th percentile.

Ratios near the extremes of the distribution (e.g. P80/P20) illustrate the full spread of the income distribution, while those near only one extreme (e.g. P80/P50) compare one ends of the income distribution with the midpoint.

Percentiles are a measure of the distribution of a variable. When all persons in the population are ranked from the lowest to the highest on the basis of the variable (such as total income), they can then be divided into 100 equal sized groups. The highest value in each group is reported as Px, where x is the percentile number. For example, the highest value of total income in the twentieth percentile is denoted P20. The median, or the top of the 50th percentile, is denoted P50.

Personal income consists of all annual receipts that are received by an individual and refers specifically to income received by persons, not businesses. Personal income is categorised into several income types. 

The distribution of income tends to be asymmetrical, with a small number of people having relatively high incomes and a larger number of people having relatively lower incomes. The greater the asymmetry, the greater the difference there will be between the mean and the median, and the more positively skewed the income distribution is said to be.

Groupings that result from ranking all people in the population in ascending order according to some characteristic such as their personal income and then dividing the population into four equal groups, each comprising 25% of the estimated population.

The self reported sex of a person as recorded by the Australian Tax Office. Binary coding to female and not female is undertaken for privacy and confidentiality purposes.

A share is a contract between the issuing company and the owner of the share which gives the latter an interest in the management of the corporation and the right to participate in profits. The "value of shares" excludes the value of shares held by individuals in their own incorporated business. Such shares are included in "value of own incorporated business".

The smallest geographical region used in this release. SA2s regions aim to represent a community that interacts together socially and economically. They are generally designed to be within the population range 3,000 to 25,000 persons, and on average have a population of approximately 10,000 persons.

Geographical areas built from whole SA2s, which are designed for statistical output purposes and to provide a regional breakdown of Australia. SA3s regions create a standard framework for the analysis of ABS data at the regional level that have similar regional characteristics, administrative boundaries or labour markets. SA3s generally have populations between 30,000 and 130,000 persons.

Geographical areas built from whole SA3s, SA4 regions are specifically designed to reflect labour markets within each state and territory within population limits. In regional areas, SA4s tend to have lower populations (100,000 to 300,000), while in metropolitan areas, SA4s tend to have larger populations (300,000 to 500,000).

Superannuation is a long-term savings arrangement which operates primarily to provide income for retirement.

Superannuation income includes income from annuities and private pensions such as allocated pensions.

In 2014-15, the government introduced a temporary budget repair levy. Individual taxpayers with a taxable income of more than $180,000 per year have additional tax payable.

Any type of managed fund which involves the pooling of investors' money in order for a trustee or professional manager to administer that fund. Examples include; listed and unlisted public unit trusts, cash management trusts, property trusts and family trusts used only for investment purposes.

A business in which the owner(s) and the business are the same legal entity, so that, for example, the owner(s) are personally liable for any business debts that are incurred. The business may be registered (in their own state) as a sole trader, partnership or firm; however they are not registered with the Australian Securities and Investments Commission and are not legally a company.