So what is the middle income for Australians?

Each year, the ATO’s taxation statistics provide insight into this topic, and this year’s release is particularly pertinent because it covers the 2023-24 financial year – the same one in which the government made changes to the stage-three tax cuts.

Six years ago, then opposition leader Anthony Albanese suggested that he did not “regard someone who’s earning $200,000 a year as being from the top end of town”.

At the time, such a statement was pretty extraordinary from a Labor leader, given that in 2019-20, earnings of $200,000 would have put you in the top 4 per cent of income-earners in Australia.

But what about in the most recent figures? Is $200,000 still at the top end, or has it become common? After all, in January 2024, Albanese announced changes to the stage-three tax cuts that would increase the top tax threshold to $190,000 and lift the 30 per cent threshold to $135,000.

Where is middle Australia in all of this?

It might surprise people to realise just how little a majority of Australians earn.

We are often told about average earnings and even average full-time earnings. But averages are not “the middle”. They are merely the sum of all earnings by all people working in Australia divided by the number of those workers.

The old line is that if you had five people in a room, each earning $50,000, and a person came in who earned $6 million a year, then on average everyone in the room would be a millionaire ($6.25 million/6 = $1.042 million average).

We also know (as I wrote about here) that men earn a higher average salary in 96 per cent of all occupations in Australia. This mean the average earnings of men is higher than the average earnings of women, and the same goes for full-time.

But the median earnings is the amount at which half earn less than, and half earn more than. In the previous example, the median earnings remain $50,000, regardless of whether the person earning $6 million is in the room or not – half earn $50,000 or less, and half earn $50,000 or more in both scenarios.

To work out the median, the ATO divides all 13.239 million Australians who paid tax in 2023-24 into 100 blocks – called percentiles.

The 132,399 Australians who earned the least amount are in the first (or lowest) percentile, and the 132,399 who earned the most are in the 100th (or top) percentile.

From this, we can work out where lies “middle Australia”.

In 2023-24, the median income was $72,794. Earning $169,664 put you in the top 10 per cent and as for $200,000, that still had you earning more than 95 per cent of all Australians.

Pointedly, 25 per cent earned less than $47,302, which was just above the full-time minimum wage of $45,905 for that year.

But the story doesn’t end there. Because men earn more than women, there are more men in the higher-earning percentiles than there are women (and vice versa).

What this means is that half of women are below the 43rd income percentile and half of men are below the 58th percentile. In effect, if you are a woman and you earned the median income of $72,794 you earned more than most women, but a man earning that amount earned less than most men.

The end result is that for 2023-24, these are the following average and median earnings:

So, always be aware that when you hear a politician talk about average Australians, that is probably not a majority of them.

This article was first published on The Point. Read the original here.