Analysis Of Lodgement Method And Age Group Of Australian Tax Payers

Relationship between the age group and lodgement method

The present assignment is a study on the lodgement method of Australian tax payers. Tax payers in Australia can pay their tax either through tax agents or Self-prepare their returns. The Australian taxation department from time to time takes initiatives to educate the tax payers (Chardon, Freudenberg and Brimble 2016).  For the analysis a primary data has been taken from the Australian taxation office. A sample of the data has been selected for the study. In the present study we have analysed the proportion of tax payers based on lodgement methods. We also have compared the data with lodgement method of international students. In addition, we have tried to find relation between lodgement method and age groups. Further, a relation between total income and deductions based on lodgement methods has also been found.

Table 1: First five cases of dataset 1

We have also studied the proportion of lodgement process of international students. Data of lodgement methods from 60 international students was collected. The proportion of students using tax agents was compared with the proportion of Australian tax payers.

Table 2: Proportion of Australian Tax payers according to Lodgement

The data on taxation lodgement of 1000 people of Australia shows that 754 people pay their taxes through tax agents. On the other hand, only 246 people self-prepare their taxes. Hence, it can be inferred that 75.4% of the population pay taxes by hiring agents who have the knowledge of paying taxes.

Table 3: Confidence Interval of Australian tax payers using tax agents

The 95% confidence interval for the proportion of people paying taxes through agents is 72.73%, 78.07%.

The sample dataset from the Australia taxation office shows that 75.4% of the people pay their taxes through Tax agents.  In addition, if another sample dataset is taken then it can be said with 95% confidence that the proportion of people paying their taxes through agents would lie between 72.73% and 78.07%. The above predictions have a 2.67% margin of error.

Table 4: Proportion of International Students according to Lodgement

The study of lodgement method of international students shows that 55% of the students prefer to pay their taxes through tax agents. On the other hand, 45% of the international students would self-prepare their taxes.

Table 5: Confidence Interval of International Students using tax agents

The 95% confidence interval for the proportion of International Students paying taxes through agents is 42.41%, 67.59%. In addition, if another sample of international students is taken then it can be said with 95% confidence that the proportion of students paying their taxes through agents would lie between 42.41% and 67.59%. The above predictions on international students has a 12.59% margin of error.

Numerical summary

In order to compare the proportions of Australian people and International Students who pay their taxes through agents a hypothesis was developed.

Null Hypothesis H₀: The proportion of Australian people and International Students paying their taxes through agents is equal.

Alternate Hypothesis H₁: The proportion of Australian people and International Students paying their taxes through agents is equal.

To test the proportions, 0.05 level of significance is used.

Thus if the p-value for the test is less than 0.05 then we would reject Null Hypothesis, else accept it.

The two sample test for proportions is used to test the proportions.

Table 6: Two-Sample test for proportion

From the testing of proportions, it is found that p-value for the test is 0.0004.

Since p-value for the test is less than the level of significance, hence we reject Null Hypothesis. Thus, there are differences in the proportions of Australian people and International students who pay their taxes through agents.

Table 7: Description of Age group and Lodgement Method

The above table shows the relationship between Lodgement methods on the basis of age of Australian tax payers. From the table it can be seen that the frequency of people using the services of tax payers is higher to Self-preparers. The highest number of people who used the services of tax agent is in the age group of 50 to 54 years. The lowest number of people who paid self-prepared tax were in the age group of 60 to 64 years. In addition, the maximum and minimum number of people (from sample dataset) who paid their taxes were in the group of 25 to 29 years and less than 20 years respectively. 

In order check whether lodgement methods is associated with age group, the Chi-square test for association is used. The hypothesis developed is:

Null Hypothesis H₀: There is no association between Age group of tax payers and Lodgement method

Alternate Hypothesis H₁: There is association between Age group of tax payers and Lodgement method

The hypothesis was tested at 0.05 level of significance.

Thus if the p-value for chi-squarer test is less than 0.05 then we would reject Null Hypothesis, else accept it.

Table 8: Chi-square test for Association

The Chi-square results shows that p-value is 0.000.

Since p-value < a-value, hence we reject Null Hypothesis.

Thus, there is an association between Age group of tax payers and Lodgement method.

Table 9: Descriptive study of Lodgement and Income

Hypothesis test for association

The above table presents a simple descriptive study of the total income of the tax payers. From the table it is seen that people who use the services of a tax agent have a higher average income (62825.9) as compared Self-prepares (46391.3). In addition, the variation in total income of people using tax agents (68626.6) is higher than Self preparers (37874.7)

Table 10: Descriptive Statistics of Lodgement and Income

From the above table it can be said that people who use Tax Agents have a minimum and maximum income of -150 and 869090 respectively. 25% of these people have an income less or equal to 26539. Similarly, 25% of the people using tax agents have an income more than or equal to 75743. The 95% confidence interval of the average income of people using tax agents is 60326.7, 653325. 50% of the persons have an income which is less than 48049. Further, 48 people have an income which is higher than others.   

From the above table it can be said that people who Self-prepare tax have a minimum and maximum income of 0 and 195995 respectively. 25% of these people have an income less or equal to 17418.5. Similarly, 25% of the people Self-preparing tax have an income more than or equal to 65906. The 95% confidence interval of the average income of self-preparers is 43977, 48806. 50% of the persons have an income which is less than 41077. Further, 7 people have an income which is higher than others.

Moreover, the income of both the Lodgement types is skewed to the right. Hence, it can be said that the average income is less than the median income.

Table 11: Relation between income and deductions (Tax agent)

The above table presents the relationship between total income and deductions of the sample of Australian tax payers who use the services of tax agents. From the above table it can be inferred that 17.54% of the deductions can be predicted from total income. In addition, the correlation between total income and deductions is positive and moderate (r = 0.4188).

Further, the deductions of an Australian tax payer using the services of tax agent can be predicted by the equation:

Deductions = 742.9714 + 0.0281*Total Income

For every dollar increase in the income the deductions increases by 0.0281

Table 12: Relation between income and deductions (Self preparers)

The above table presents the relationship between total income and deductions of the sample of Australian tax payers who self-prepare their tax returns. From the above table it can be inferred that 17.18% of the deductions can be predicted from total income (Cortinhas and Black 2014). In addition, the correlation between total income and deductions is positive and moderate (r = 0.4145).

Further, the deductions of an Australian tax payer Self-preparing his taxes can be predicted by the equation:

Deductions = 135.3761 + 0.0217*Total Income

For every dollar increase in the income the deductions increase by 0.0217.

Conclusion

The above report compares the tax returns of Australian people. From the above analysis it can be concluded that most of the Australian tax payers use the services of tax agents. In addition, the proportion of international students would use the services of tax agents is higher than those who prefer to self-prepare their taxes. However, the analysis also finds that the proportion of Australian tax payers using tax agents is higher than international students using tax agents.  Further, there are statistically significant differences in age groups and lodgement methods.

Further, the analysis finds that the total income of Australian tax payers is right skewed, i.e., the average income is higher than the median income.

From the analysis it is also found that the predictability of deductions from income is poor.

In the above analysis, the variation in tax / deductions have not been judged on the basis of gender. Hence, further study on the variations in lodgement method, income and deductions can be considered for gender.

References

Chardon, T., Freudenberg, B. and Brimble, M., 2016, April. Tax literacy in Australia: not knowing your deduction from your offset. In Australian Tax Forum (Vol. 31, No. 2).

Cortinhas, C. and Black, K., 2014. Statistics for business and economics. Wiley Global Education.

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