Part 2: Australian Government taxes
The analysis in Part 1 combined the tax systems of all levels of government and used the accrual accounting framework. This section focuses on Australian Government taxes — that is, it excludes taxes imposed by state and local governments — and uses the cash accounting framework.
The Australian Government’s main source of taxation revenue is the taxation of income. These taxes are estimated to represent around 74.4 per cent of total taxation receipts in 2012-13 (Chart 9).
Personal income tax, which is made up of gross income tax withholding, gross other individuals’ income tax and individuals’ refunds, accounts for 47.1 per cent of total taxation receipts.
A further 2.4 per cent is from taxes levied on superannuation funds and 1.2 per cent is from fringe benefits tax (FBT).
Company income and resource rent taxation accounts for 22.6 per cent of total taxation receipts.
The carbon pricing mechanism, introduced on July 1 2012, accounts for 1.2 per cent of total taxation receipts.
Sales taxes, inclusive of the GST, contribute 14.6 per cent. The remaining 11.0 per cent of taxation receipts are mostly accounted for by excise and customs duties.
Chart 9: Australian Government tax mix, 2012-13
Source: 2012-13 MYEFO.
Tax receipts as a proportion of GDP have moved in a relatively small range over the last two decades (Chart 10). Sales taxes have expanded with the introduction of GST in 1999-2000, while total individuals’ income taxes fell.
Taxes as a proportion of GDP steadily increased from the early 1990s peaking in 2004-05 at 24.2 per cent. The tax-to-GDP ratio declined as the global financial crisis reduced receipts sharply. Tax receipts are expected to rebound steadily relative to GDP to average 22.8 per cent over the estimates period.
Chart 10: Major categories of tax receipts as a proportion of gross domestic product
(a) Sales taxes include the GST, the luxury car tax, the wine equalisation tax and the wholesale sales tax.
(b) Other taxes include other indirect taxes, fringe benefits tax and the carbon pricing mechanism.
Source: 2012-13 MYEFO
Personal income tax distribution
The personal income tax system is progressive — the tax share increases for those who earn more, while those individuals who have limited means bear relatively little or no tax liability (Chart 11).
For the 2009-10 income year (the latest year for which tax return data is available from the ATO), 57.5 per cent of personal income tax was collected from the 17.4 per cent of taxpayers earning more than $80,000 (with around 24.0 per cent of personal income tax coming from the 2.3 per cent of taxpayers earning over $180,000).
In comparison, the 30.5 per cent of taxpayers who earned less than $35,000 in taxable income paid only 4.0 per cent of the total net tax payable on income.
The 52.1 per cent of taxpayers in the $35,001 to $80,000 income range paid 38.6 per cent of total net tax payable on income.
Chart 11: Net tax payable by income level, 2009-10
Source: ATO, Taxation Statistics 2009-10.
Company income tax distribution
Most company income tax is paid by a relatively small group of large companies (Chart 12). For the 2009-10 income year, 63.9 per cent of company income tax was collected from the 0.5 per cent of incorporated taxpayers that earned more than $100 million in total income.
Chart 12: Net tax payable by company income size, 2009-10
Source: ATO, Taxation Statistics 2009-10.
The share of indirect taxes in total receipts exhibits a long-term declining trend (Chart 13) as some of the indirect tax bases do not grow as quickly as the income tax bases. Policy decisions taken by governments, such as trade liberalisation and removal of indexation on petroleum excises, have accelerated this trend.
However, with the introduction of the GST in July 2000, the share of indirect taxes in total tax receipts increased from 22.9 per cent in 1999-2000 to 29.9 per cent in 2000-01. In addition, decisions to increase the luxury car tax and to remove the crude oil excise exemption on condensate production increased indirect tax receipts from 2008-09. The carbon pricing mechanism, effective from 1 July 2012, is expected to increase indirect taxes by 1.2 per cent of total tax receipts in 2012-13.
Chart 13: Australian Government indirect taxes
(a) Sales taxes comprise the GST, the luxury car tax, the wine equalisation tax and the wholesale sales tax.
Source: 2012-13 MYEFO.
Tax expenditures provide a benefit to a specified activity or class of taxpayer. They can be delivered as a tax exemption, tax deduction, tax offset, concessional tax rate or deferral of a tax liability. The Government can use tax expenditures to allocate resources to different activities or taxpayers in much the same way that it can use direct expenditure programmes.
The data on tax expenditures reported below includes tax expenditures related to the GST. The data incorporates the impact on tax expenditures of policy decisions up to and including those reported in the 2012-13 MYEFO. Care needs to be taken when analysing tax expenditure data. For a detailed discussion see Chapter 2 of the TES. Chart 14 contains estimates of total tax expenditures for the period 2007-08 to 2015-16. Total tax expenditure as a proportion of GDP is expected to rise slightly to 7.8 per cent in 2012-13, the average across the period shown is 8.5 per cent.
Chart 14: Aggregate tax expenditures 2007-08 to 2015-16
Source: TES 2011 and 2012 13 MYEFO.
A list of the large tax expenditures for 2011-12 is provided in Table 1. Total measured tax expenditures for 2011-12 are estimated to be $113 billion. Housing tax expenditures are expected to comprise around one-third and superannuation tax expenditures comprise around one-quarter of total measured tax expenditures.
Table 1: Large tax expenditures in 2011-12
|Large positive tax expenditures
|Capital gains tax main residence exemption — discount component
|Capital gains tax main residence exemption
|Superannuation — concessional taxation of employer contributions
|Superannuation — concessional taxation of superannuation entity earnings
|GST — Food — uncooked, not prepared, not for consumption on premises of sale
and some beverages
|Capital gains tax discount for individuals and trusts
|GST — Health; medical and health services
|GST — Education
|GST — Financial Supplies; input taxed treatment
|Exemption of Family Tax Benefit, Parts A and B, including expense equivalent
|Concessional taxation of non-superannuation termination benefits
|Exemption from interest withholding tax on certain securities
|Exemption of 30 per cent private health insurance rebate, including expense equivalent
|GST — Financial Supplies; reduced input tax credits
|Philanthropy — Exemption for public benevolent institutions
(excluding public and not-for-profit hospitals)
|Application of statutory formula to value car benefits
|Exemption from the Medicare levy for residents with a taxable income below a threshold
|Concessional rate of excise levied on aviation gasoline and aviation turbine fuel
|GST — Imported services
|Statutory effective life caps
|Philanthropy — Exemption for public and not-for-profit hospitals and public ambulance services
|Large negative tax expenditures
|Higher rate of excise levied on cigarettes not exceeding 0.8 grams of tobacco
|Flood and cyclone reconstruction levy
Source: TES 2011
Appendix A: Description of revenue heads
Part 1: Australia’s tax system compared with the OECD