Every Australian will be asked to share the pain when Treasurer Joe Hockey hands down his first budget.
Speculation mounts on how the government will cut spending and whether a deficit tax will be part of budget 2014.
Paying tax ... One in four families do not pay any. Picture: Thinkstock Source: News Limited
HALF of Australian families receive more in welfare than they pay in income tax, new figures reveal.
As the Abbott government sharpens its budget razor on welfare, the figures reveal just how dependent we've become.
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The exclusive modelling for News Corp Australia by the National Centre for Social and Economic Modelling at the University of Canberra reveals 48 per cent of Australia's 12.2 million "income units" pay no net tax. Any tax they do contribute is more than offset by the welfare — pensions, family tax benefits or childcare rebates — they receive.
The analysis also reveals for the first time which family types are most reliant on the public purse.
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The results would shock many in Australia, according to NATSEM principal research fellow, Ben Phillips.
"Most people rightly or wrongly think they pay too much tax and don't receive enough benefits," Mr Phillips said. "So people might be surprised to learn only about half of Australian families pay more tax than they receive back in benefits."
For single parent families, as many as 85 per cent contribute no tax, once welfare benefits are deducted. Among single person households — mostly pensioners — 55 per cent pay no tax.
Single parent families ... As many as 85 per cent contribute no tax, once welfare benefits are deducted. Source: News Limited
About half of couples with no kids pay no tax. For couples with children — where the adults are more likely to be working — one in four families pay no tax.
"I guess you have got to keep in mind that about 3.2 million of these 12.2 million families are not of working age, they're either very young students or the vast majority would be aged pensioners and self-funded retirees — both those groups don't pay tax," Mr Phillips said.
However, a research fellow at the Centre for Independent Studies, Stephen Kirchner, said it beggared belief that half of families needed to be net beneficiaries of government support.
"Traditionally the purpose of the welfare state was poverty alleviation and helping people who can't help themselves," Dr Kirchner said.
"Whereas now we seem to have shifted more to an entitlement mentality where a lot of government expenditure is designed to make life easier for people who can actually care for themselves."
Pension rises should be curbed and Family Tax Benefit Part B abolished in next Tuesday's budget as recommended by the National Commission of Audit, Dr Kirchner said.
"You can actually reduce government spending and put more money back in people's pockets in the form of tax cuts."
On average, Australian families will pay $12,935 in income tax this year, but receive $9,515 in benefits — leaving a net yearly contribution to the public purse of just $3424.
The figures include welfare paid in pensions, family benefits, jobless support and childcare support. They include all income taxes paid, but not indirect taxes, like cigarette excise and state-levied taxes such as the GST.
Both Dr Kirchner and Mr Phillips warned of significant waste from "fiscal churn" — where the government raises money in tax only to handed it back to the same people in benefits.
However, Mr Phillips said much welfare was well-targeted at those most in. Single parents, for example, have to rely on only one income and find it harder to share the demands of childcare.
Of the four family types studied, single parents are the biggest recipients of government benefits, receiving $26,321 in support on average and paying only $4,415 in tax — a net benefit of almost $22,000.
Couples with children pay the highest amount of average tax at $35,369 and receive an average of $8,917 in government benefits a year.
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