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Australia's wealthy population shrinks, still ATO target

Nicki Bourlioufas  |  19 Oct 2016Text size  Decrease  Increase  |  

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While the slump in commodity prices from mid-2015 onward proved punishing for the ultra-wealthy in Australia, the ATO continues to have an ongoing focus on the group.

 

Australia's ultra-high net worth (UHNW) population shrank last year as the commodities downturn eroded the wealth of the nation's richest people.

But this group still remains a target of the Australian Taxation Office (ATO) for tax avoidance given the still impressive amount of wealth it holds.

The recently released "Wealth-X World Ultra Wealth Report 2015-2016" reveals there were 212,615 ultra-high net worth (UHNW) individuals globally in 2015, holding a combined wealth of US$30 trillion ($40 trillion) in net assets.

The number of UHNW individuals, or those with US$30 million or more in net assets, grew just 0.6 per cent from 2014 while total UHNW wealth increased by 0.8 per cent.

Yet UHNW individuals, who account for just 0.004 per cent of the world's adult population, still control 12 per cent of its wealth, according to the report.

The Asia-Pacific region stood out in terms of the growth of its UHNW population, experiencing a 3.9 per cent rise in the ultra-wealthy due to relatively strong economic growth.

In contrast, Australia's UHNW population dropped significantly to 2,475, a 31 per cent fall from 3,580 in 2014. The group's collective wealth fell to US$295 billion ($388.2 billion), down 33 per cent from US$440 billion in 2014.

"The slump in energy and commodity prices from mid-2015 onward proved punishing for the ultra-wealthy in certain countries, with Russia and Australia experiencing double-digit declines in both UHNW population numbers and total UHNW wealth as a result," the report said.

The ATO categorises high wealth individuals (HWIs) as those who control a net wealth of $30 million or more. This group is being targeted by the ATO to ensure it is meeting all of its tax obligations.

"Given the importance of this group to community confidence in the tax and super systems, we have an ongoing focus on them," the ATO said in May this year.

For the rest of the Australian population, the good news is that its wealth is rising. According to a recent report from the Australian Bureau of Statistics (ABS), Australian household net wealth rose in the June 2016 quarter to a record $8.89 trillion, up from $8.66 trillion in the March 2016 quarter.

"We've seen average levels of wealth rise since the global financial crisis and household wealth is now holding at a record high, driven by gains in property values and the share market," said Savanth Sebastian, an economist with CommSec.

"In contrast, the wealth of the ultra-wealthy has been more flat globally given its link to business activity and the commodities downturn has also driven down the wealth of Australia's ultra-wealthy," he said.

Unlike the UHNW population, ordinary Australians hold most of their wealth in real estate. Net Australian household worth held in property accounted for $6.01 trillion of wealth or around 68 per cent, while $4.44 trillion was held in financial assets such as cash, terms deposits and shares and superannuation.

In per capita terms, CommSec estimates that net household wealth rose to a record $368,945 in the June 2016 quarter, up almost $9000 from the March 2016 quarter.

Across the globe, UHNW global wealth is expected to reach US$46.2 trillion by 2020, forecast to grow at a compound annual growth rate of 9 per cent.

In two out of three cases, wealth is purely self-made rather than inherited, the Wealth-X report says.

While the female UHNW population remained steady at 13 per cent, their share of total UHNW wealth fell from 14 per cent to 11 per cent this year.

Average female high net worth wealth dropped from US$147 million to US$126.3 million.

Male wealth increased 2.4 per cent from US$139.8 million to US$143.1 million, reflecting a greater focus on self-made wealth and a higher-risk asset composition.

Not surprisingly, the oldest people in the UHNW group are also its wealthiest.

UHNW individuals aged 80 or over are seven times wealthier than those under 30 and are worth nearly double that of the average UHNW individual globally.

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Nicki Bourlioufas is a Morningstar contributor.

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