Rising top-income persistence in Australia: Evidence from income tax data

Abstract

Using income tax administrative data for Australia, we examine levels and trends in the persistence in top-income group membership, focusing on the top 1 percent. Top-income persistence increased markedly between 1991 and 2018, with most of the increase occurring in the mid-2000s and early 2010s. In the mid- to late-2010s, Australian top-income persistence rates were near the top of the range of tax-data estimates for other countries. We decompose the increase into factors associated with (i) changes in the composition of the top-income group and (ii) increases in persistence rates for specific population subgroups. We find that the rise in top-income persistence is accounted for by changes in subgroup persistence rates, notably for individuals aged 35–64, and especially those aged 55–64. We suggest that these effects are partially related to increases in the effective retirement age over the relevant period.