FactCheck Q A: are 'almost 60%' of small business owners paid '$50,000 or less'?

  • Written by Janine Dixon, Economist at Centre of Policy Studies, Victoria University

The Conversation fact-checks claims made on Q&A, broadcast Mondays on the ABC at 9.35pm. Thank you to everyone who sent us quotes for checking via Twitter using hashtags #FactCheck and #QandA, on Facebook or by email.

Excerpt from Q&A, February 5, 2018.

Almost 60% of small business owners in this country are paid $50,000 or less.

– Australian Chamber of Commerce and Industry chief executive James Pearson, speaking on Q&A, February 5, 2018

The Turnbull government is seeking parliamentary support to cut the company tax rate to 25% over the coming decade, arguing that cutting the rate will increase business investment, drive jobs growth and lift wages in Australia.

During an episode of Q&A, Australian Chamber of Commerce and Industry chief executive James Pearson said small business owners would benefit from a company tax cut in Australia. He said it would “help them be profitable”, allowing them to grow their businesses, employ more people and pay those workers more.

Pearson said “almost 60% of small business owners in this country are paid $50,000 or less”.

Is that right?

FactCheck Q A: are 'almost 60%' of small business owners paid '$50,000 or less'? Checking the source When asked for sources and comment to support James Pearson’s statement, a spokesperson for the Australian Chamber of Commerce and Industry provided The Conversation with the following graph. It draws on unpublished Australian Taxation Office data and relates to the 2014-15 income year: FactCheck Q A: are 'almost 60%' of small business owners paid '$50,000 or less'? Chart from the Australian Small Business and Family Enterprise Ombudsman using unpublished Australia Taxation Office data for the 2014-15 financial year. The data relate to individuals with a non-zero amount at any of the following labels on their 2014-15 tax return: distribution from a partnership or trusts (primary production or non-primary production) and/or net income or loss from business (primary production or non-primary production). The figures were produced to approximate the distribution of small business owners. The spokesperson said: We combined the data for those earning less than $25,000 and those earning $25,000 to $50,000, to come up with the under $50,000 assessment of 58.1% earning less than $50,000. The spokesperson added “we understand the percentages we raised publicly are percentages of all business owners” – as opposed to small business owners. However: We don’t think it makes much of a difference. The overwhelming majority of Australian businesses are clearly small and medium-sized enterprises, and the majority of business owners are small business owners. Verdict James Pearson’s statement that “almost 60% of small business owners in this country are paid $50,000 or less” is in the ballpark. Based on Australia Taxation Office data from the 2014-15 financial year and Census 2016 data, it’s reasonable to say that between 50% to 60% of small business owners or managers earned less than $50,000 in those years. However, Pearson used this information in the context of company tax rate cuts, arguing that small business owners “want a tax cut that will help them be profitable”. In reality, due to the way Australia’s tax system works, it’s the small business owner’s personal income tax rate that is more relevant for the profitability of their business. Calculating small business owner salaries There’s more than one definition for ‘small business’ in Australia, and there’s no perfect data set against which to test Pearson’s statement. But we can assess the Australian Taxation Office data Pearson’s office provided, and we can also look at Census 2016 data. Pearson’s spokesperson provided The Conversation with a graph based on unpublished Australian Taxation Office data for the 2014-15 financial year. The Conversation verified the information in the graph with the Australian Taxation Office. The graph shows that in 2014-15, 58.1% of the business owners listed earned less than $50,000. But the data aren’t specific to small business owners, and don’t include taxable income people received through companies – only through partnerships, trusts or as sole traders. A spokesperson for the Australian Taxation Office told The Conversation the “figures were produced to approximate the distribution of small business owners”. Now let’s look at Census 2016 data. According to the Australian Securities and Investments Commission, “many regulators have informally adopted the definition of ‘small business’ used by the Australian Bureau of Statistics” – which is a business that employs fewer than 20 people. If we look at Census 2016 data using that measure, then we see that 50% of small business owners were paid less than $1,000 per week in 2016 – or $52,000 per year or less. FactCheck Q A: are 'almost 60%' of small business owners paid '$50,000 or less'? Putting Pearson’s statement in context In making his statement, Pearson described the financial struggles facing some small business owners. Pearson said these people “want a tax cut, they want a tax cut that will help them be profitable”. They’ll employ more people, they’ll offer longer hours, more people will have jobs, more people will be paid more. That’s how it works. Pearson added that when small business owners “see more productivity in their workforce, they can take the risk and grow their business”. But the reality is, when an Australian resident is trying to decide whether to invest in their small business, it’s their personal income tax rate, not the company tax rate, that really matters. Why? Because company tax paid by Australian businesses on income earned in Australia acts as a ‘pre-payment’ of personal income tax when that income is distributed to shareholders in the company (or the owners of the company) via franked dividend payments. Australian Taxation Office statistics show that in the 2014-15 financial year, more than 95% of dividends paid to Australian households were franked. The fact that Australian business owners can claim back any tax paid by their businesses when they lodge their personal tax returns makes their personal income tax rate the more relevant concern to the potential profitability of their business. In addition, Pearson argued that company tax cuts would lead to higher wages, a statement supported by the Australian Treasury. The Treasury modelling shows that the wage hike would be the result of greater foreign investment in Australia, leaving the owners of small businesses needing to pay higher wages to attract or retain workers. Small business owners who receive their income via franked dividends won’t receive any tax relief to cover this expense. So it’s possible that cuts to the company tax rate could hinder small businesses, rather than benefit them. – Janine Dixon and Jason Nassios Blind review This verdict finds a reasonable level of support from the available data. Research from the University of Western Sydney published in 2014, based on HILDA data and Australian Bureau of Statistics data, found that business owner households (as opposed to individuals) reported an average weekly income of $1,975 in 2010. That’s around $103,000 per household. If there were two adults per household, this would equate to $51,500 per person. Also, because the ‘average’ is skewed upwards by high income earners, 50% of earners would earn less than the average, which lends further support to Pearson’s statement. Information published by an American company called PayScale suggests the average salary for a small business owner/operator in Australia is around $67,000 per year, and the median salary is $62,000. If true, this would not be consistent with the claim that almost 60% of small business owners earn less than $50,000 per year. However, this information is based on a survey with a relatively small sample size. This source is a private sector consulting firm, and no other detail on their data source is provided. – Ross Guest FactCheck Q A: are 'almost 60%' of small business owners paid '$50,000 or less'? The Conversation FactCheck is accredited by the International Fact-Checking Network. The Conversation’s FactCheck unit is the first fact-checking team in Australia and one of the first worldwide to be accredited by the International Fact-Checking Network, an alliance of fact-checkers hosted at the Poynter Institute in the US. Read more here. Have you seen a “fact” worth checking? The Conversation’s FactCheck asks academic experts to test claims and see how true they are. We then ask a second academic to review an anonymous copy of the article. You can request a check at checkit@theconversation.edu.au. Please include the statement you would like us to check, the date it was made, and a link if possible.

Authors: Janine Dixon, Economist at Centre of Policy Studies, Victoria University

Read more http://theconversation.com/factcheck-qanda-are-almost-60-of-small-business-owners-paid-50-000-or-less-91328

Australia Today

could someone take ownership of a planet or a moon?

Melissa de Zwart, Professor, Adelaide Law School, University of Adelaide

This is an article from I’ve Always Wondered, a series where readers send in questions they’d like an expert to answer. Send your question to alwayswondered@theconversation.edu.auI have always wondered, in a distant future when humanity is able to settle permanently on a distant body (su...

Read more

Fewer Australian university students than ever before believe in creationism

Mike Archer, Professor, Pangea Research Centre, UNSW

The dominant belief among Australian university students now is that God had no hand in creating or developing humans.www.shutterstock.comAustralian university students appear to give far more credit to the science of human evolution and far less to creationism or divine guidance than the previous g...

Read more

Are Australian bridges safe, and can we do better?

Colin Caprani, Senior Lecturer, Structural Engineering, Monash University

There are more than 50,000 public bridges in Australia. (The Sea Cliff bridge is one Australia's newer bridges, built in 2005).from shutterstock.comAfter the tragedy in the Italian city Genoa, where a highway bridge collapsed killing more than 40 people, nations seem to be taking stock of the mainte...

Read more

Research shows 'merit' is highly subjective and changes with our values

Sue Williamson, Lecturer, Human Resource Management, UNSW Canberra, UNSW

Selection panels interrupt women more than men and ask them more follow-up questions, subtly questioning their competence.Andrey Popov/ShutterstockWho is meritorious, what constitutes merit, and how merit and gender targets can operate together are widely misunderstood questions, as our new research...

Read more

Fierravanti-Wells resigns from ministry, accusing Turnbull of ignoring Liberal party's conservative base

Michelle Grattan, Professorial Fellow, University of Canberra

The Minister for International Development and the Pacific, senator Concetta Fierravanti-Wells, has quit the frontbench, delivering a swingeing attack on Malcolm Turnbull for ignoring the Liberals’ conservative base.In her resignation letter to the Prime Minister, Fierravanti-Wells reminded hi...

Read more

Labor now does politics better than the Liberals

Geoffrey Robinson, Senior Lecturer, School of Humanities and Social Sciences, Deakin University

Happy days: Opposition Leader Bill Shorten in parliament.AAP/Mick TsikasThe obverse of the current crisis in Australian conservative politics is the resilience of the Australian left.The Labor Party has twice climbed off the canvas after dramatic political setbacks: the Rudd-Gillard civil war and th...

Read more

Holidays & Travel

Guide to Travel Necessities for 2018

Sure, it sounds like quite an adventure to hit an open road with nothing but a one-way ticket and an open mind, but the harsh reality is – you won’t...

Top Sightseeing Spots in New Zealand

New Zealand is one of the most fascinating locations for anyone to visit in the world. After all, it’s a place with a variety of unique landscapes, but it isn’t...

Must-Pack Items for a Travel Blogging Boss

As a travel blogger, you get to see and explore so many wonderful destinations and meet various interesting people, but before you embark on a new adventure you need to...

Luxury Camping Adventures Around the World

Perhaps in direct response to the dominance of technology in the modern world, many travelers are feeling a strong draw towards nature. While some are able to fully embrace their...

Dredging works underway Plantation Island

Tourists and workers travelling to popular tourist destination Plantation Island, Fiji, are set to benefit from safer access when marine channel dredging is completed at the end of June 2018...

Top 5 Tips for Traveling With Dogs

Travelling with your dog can be thrilling, but sometimes it can turn into a real nuisance. Unless you know how to properly restrain the pooch, whether it’ll be able to...

Top Island Destinations for 2018

When we picture island destinations in our minds, we often imagine a tropical beach of white sand, a sun lounger laid out in the shade of a line of palm...

Why Car Rental Excess Insurance is a Smart Choice

Some car rental agencies include basic damage cover in the standard rental fee, with the option to add on liability reduction, or excess insurance. The addition of excess insurance normally...

More Than a Third of Australians Feel 'Too Busy' With Work to Take a Holiday

New research from InterContinental Hotel & Resorts has unveiled a large number of Australians (32 percent) are simply too busy with work to take some much-needed rest and relaxation. Almost...

Fashion & Beauty

Groom To Do List

Sorry Aussie Men, you no longer just pay for the alcohol, flowers and marriage license. Times have certainly changed. Wedding Expert shares what Australian Grooms are now expected to do before...

Simple Secrets To A More Confident Smile

We all know just how important first impressions are. After a handshake, what’s one of the first things people will notice about you? It’s your smile. A friendly smile is...

Improve Your Body Confidence and Feel Great

No matter how good you feel about yourself, sometimes you just can’t help but see a few little flaws that seem gigantic to you and make you feel self-conscious. Whether...

First-Timer Tips For Your First Lip Filler Appointment

Getting injectable lip fillers can be a quick and effective way to plump up your smile with minimal drama. They’re a cost-effective and safe way to boost the natural shape...

The Most Common Skin Conditions and How to Deal with Them

We often underestimate the importance of our skin, but as the largest organ in our body, and our primary layer of defense, it is constantly affected by many environmental factors...

Beach Babe Basics: Everything You Need to Look Stylish at the Beach

Summer is right around the corner, and this year, we all should make the best of it. Right now, it is not just about looking stylish on the streets, it...

HEALTH

National Action Plan For Endometriosis Is A Game-Changer For Australian Women

Heba Shaheed, The Pelvic Expert, shares her personal story and expert tips for living with endo... First National Action Plan For Endometriosis Is A Game-Changer For Australian Women   The announcement of the first...

Pre - summer pampering: Australian women are detoxifying themselves in the most “kind-Ly” fashion!

In today’s society we are completely exposed to materials, products and chemicals which we unfortunately have no clue if it’s origins, meaning and purpose. Getting back to basics...

Eye Health Dos and Don'ts

Most people take their eyes for granted and spend little to no time thinking about their eye health until they notice something wrong. This leads to plenty of common and...

Non-invasive Cosmetic Treatments

In a world where everyone is chasing perfection, plastic surgeries have become more and more common to the point where it’s odd if you don’t get one during your life...

My Health Yoga

Carrie-Anne Fields of My Health Yoga has taken her Gold Coast yoga teacher training worldwide. She started her health business 20 years ago aged 22 and has grown into a...

Fit Body 101 - Increase Your Fitness Effectiveness

You have to find some space for physical exercise in your weekly schedule in order to live a good life. Embracing this way of life is very beneficial because it...

LIFE STYLE

Add a little colour to your move - and life!

How a little ‘colour’ and planning can take your Move, and make it a more enjoyable one Colour plays a huge role in our lives, it can take us up, or...

6 Simple Rules for Redesigning Your Kitchen

How do you feel about your kitchen? Well, if you feel like your home needs a bit of lifting up, one of the best and most effective places to start...

Dog Flea Allergy

Severe itchy skin disease in dogs causes Flea bite hypersensitivity. The itch is as a result of an allergic reaction to the saliva of the flea which is injected into...

5 Ways to Turn Your Bedroom into a True Zen Retreat

The bedroom should be our little sanctuary where we come to relax after a long day of work. However, in order to be able to unwind all the accumulated stress...

Things to Consider when Deciding on your Wedding Flowers for the Big Day

Choosing the wedding flowers is a complicated process where you have to take into account many elements, from the wedding dress to the wedding theme. You can discover in this...

Renovating tips for your house

There are very few property owners who move into a house where they don’t want to make any changes. Alterations are almost inevitable every time you move-house, but alterations can...

FOOD & DINING

Morning greens: the breakfast skincare regime

It’s safe to assume that most Aussies fail to eat enough greens. Although this was momentarily resolved with the rise and popularity of the green juice movement, the lack of...

Best Hidden Gem Hong Kong Restaurants

You finally find yourself enjoying the endless beauties of China and this fascinating city. In a place with so much variety, all your senses will be wide awake, and your...

JOHNNY DI FRANCESCO NAMED OFFICIAL AMBASSADOR OF EAT STREET MELBOURNE

Johnny Di Francesco, world champion pizzaiolo and owner of Melbourne’s Gradi Group of restaurants, is excited to announce he has been named official ambassador for Eat Street Melbourne 2018. As Ambassador...

The best Mother's Day gift EVER!

Whether it’s to celebrate a special occasion, or just wind down at the end of a long day, there’s nothing much better than pouring yourself a glass (or two…) of...

Sing for Your Supper at Chargrill Charlie’s

To celebrate the final curtain call of the Barden Bellas, Chargrill Charlie’s is giving you the chance to Sing for your Supper! Show off your best acapella vocals to win...

MAKE IT WINE TIME, ANY TIME

Whether it’s to celebrate a special occasion, or just wind down at the end of a long day, there’s nothing much better than pouring yourself a glass (or two…) of...