Statement 5: Revenue (Continued)
Table 4 reconciles the 2012‑13 Budget's total receipts estimates with those at the 2011‑12 Budget and the 2011‑12 MYEFO. Since the 2011‑12 MYEFO, total receipts have been revised down by $18.7 billion in the four years to 2014‑15, reflecting a downward revision of $29.4 billion from parameter and other variations, partly offset by $10.7 billion of policy measures (Chart 5).
Table 4: Reconciliation of Australian Government general government
receipts estimates from the 2011‑12 Budget and the 2011‑12 MYEFO
Since the 2011‑12 MYEFO, tax receipts have been revised down by $6.1 billion in 2012‑13 and $18.4 billion over the four years to 2014‑15. Excluding GST, tax receipts have been revised down by $3.2 billion in 2012‑13 and by $7.4 billion over the four years to 2014‑15.
Chart 5: Revisions to total receipts estimates since the 2011‑12 MYEFO
Source: Treasury estimates.
Effect of parameter and other variations
Variations in receipts can stem from either policy changes or parameter and other variations — that is, recent economic conditions, the updated economic outlook, year‑to‑date collections, and other non‑policy factors. This section discusses variations in receipts from parameter and other variations, while policy changes are covered in the next section.
The receipts forecasts are based on the economic outlook presented in Statement 2, with changes in nominal incomes and spending, including changes in their composition, having consequential impacts on expected tax receipts. The key economic parameters that influence revenue are shown in Table 5. Analysis of the sensitivity of the tax receipts estimates to changes in the economic outlook is provided in Statement 3 (Appendix A).
Table 5: Key economic parameters(a)
(a) Current prices, per cent change on previous years. Changes since the 2011‑12 MYEFO are percentage points and may not reconcile due to rounding.
(b) Compensation of employees measures total remuneration earned by employees.
(c) Corporate GOS is an Australian National Accounts measure of company profits, gross of depreciation.
(d) Property income measures income derived from rent, dividends, and interest.
na not applicable.
Relative to the 2011‑12 MYEFO, parameter and other variations have reduced tax receipts by $5.7 billion in 2011‑12, $7.6 billion in 2012‑13, and $28.0 billion over the four years to 2014‑15 (Chart 6). Parameter and other variations have reduced tax receipts excluding GST by $3.8 billion in 2011‑12, $4.6 billion in 2012‑13, and $16.5 billion over the four years to 2014‑15.
Chart 6: Parameter and other variations to tax receipts since the
Source: Treasury estimates.
Income tax receipts from companies and superannuation funds account for around three‑quarters of the revision to total tax receipts in 2011‑12, with collective downward revisions of $4.2 billion.
- Of this, company tax receipts account for $2.6 billion, reflecting the weakness in CGT as well as weaker‑than‑expected tax collections relating to the 2010‑11 and earlier income years. In addition, the larger‑than‑anticipated losses incurred during the global financial crisis continue to weigh on company tax receipts.
- Superannuation funds' tax receipts are also expected to be lower by $1.6 billion, reflecting lower capital gains.
In contrast, individuals' taxes have been revised up by $1.4 billion, partly reflecting weaker‑than‑expected refunds (which boost tax collections).
Indirect taxes have been revised down by $2.5 billion, largely reflecting a $1.9 billion write‑down of GST and a $1.1 billion downgrade in excise receipts, partly offset by higher customs duties.
Detail on the parameter and other variations to individual heads of revenue in 2011‑12 and in 2012‑13 since the 2011‑12 MYEFO is described below.
- Gross income tax withholding receipts are expected to be around $320 million lower in 2011‑12 and $590 million lower in 2012‑13, reflecting softness in the labour market.
- Gross other individuals' receipts are expected to be $700 million higher in 2011‑12, and $680 million higher in 2012‑13. Stronger non‑wage income, particularly relating to the 2010‑11 income year, is driving the upward revision, partly offset by the slow recovery in asset prices (affecting CGT).
- Stronger incomes relating to the 2010‑11 income year also have resulted in downward revisions to individuals' refunds (which have the effect of increasing total individuals' taxes) by $1.0 billion in both 2011‑12 and 2012‑13.
- Superannuation funds' receipts are expected to be $1.6 billion lower in 2011‑12 and $1.5 billion lower in 2012‑13, reflecting weakness in collections relating to the 2010‑11 income year as well as the sluggish recovery in asset prices (affecting CGT).
- Company tax receipts have been revised down by $2.6 billion in 2011‑12, reflecting weakness in tax collections relating to the 2010‑11 income year, and the tepid recovery in asset prices. Company tax receipts have been revised down by $2.7 billion in 2012‑13, reflecting a weaker capital gains tax outlook, partly offset by stronger corporate profits in 2011‑12.
- Capital gains tax, which is an important component of individuals, companies and superannuation funds' tax, is expected to be lower by $600 million in 2011‑12 and $800 million in 2012‑13, reflecting the sluggish recovery in asset prices.
- Resource rent tax receipts are estimated to be $420 million lower in 2011‑12, reflecting higher investment costs (which lower tax payable) in a number of offshore oil fields. Resource rent taxes are expected to be $850 million lower in 2012‑13, reflecting weaker coal prices and the dampening effect of a higher assumed exchange rate.
- GST receipts have been revised down by $1.9 billion in 2011‑12 and $3.0 billion in 2012‑13, reflecting weakness in year‑to‑date collections, the softer outlook for consumption subject to GST, as well as subdued dwelling investment.
- Excise duties have been revised down by $1.1 billion in both 2011‑12 and 2012‑13. The downgrade is broadly‑based across most excisable products.
- Customs duty receipts have been revised up by $470 million in 2011‑12 and by $250 million in 2012‑13. The increase reflects higher imports of automobiles following increased supply coming on stream following the tsunami in Japan, and the offshore relocation of a major tobacco producer — which has the effect of reducing tobacco excises but raising custom duties.
- The carbon pricing mechanism takes effect from 2012‑13. Estimates of receipts from the mechanism are unchanged from the 2011‑12 MYEFO.
- Non‑tax receipts have been revised down by $820 million in 2011‑12, reflecting lower interest and other receipts. Non‑tax receipts have been revised down by $240 million in 2012‑13, reflecting lower interest receipts and lower sales of non‑financial assets.
Effect of policy decisions
Policy decisions since the 2011‑12 MYEFO are expected to increase receipts by $2.0 billion in 2012‑13, 3.7 billion in 2013‑14, $4.9 billion in 2014‑15 and $6.2 billion in 2015‑16.
The Budget contains decisions not to proceed with (or defer) some previously announced measures that would have otherwise reduced tax receipts. The decisions in this Budget not to proceed with some measures will maintain tax liabilities at present levels. These measures include the following.
- Not proceeding with lowering the company tax rate, from the 2013‑14 income year, nor implementing an early start to the company tax rate cut for small businesses from the 2012‑13 income year. The Government was not able to secure the necessary parliamentary support and for this reason the decision not to proceed with the company tax cut will now help fund initiatives to spread the benefits of the resources boom to help families on low- and middle-incomes and support business investment. This measure will increase estimated tax receipts by $4,600 million over the forward estimates period, including the removal of the growth dividend associated with the company tax rate cut.
- Not proceeding with the standard deduction for work‑related expenses and for the cost of managing tax affairs, which was due to commence on 1 July 2013. This measure is expected to increase tax receipts by $1,612 million over the forward estimates.
- Deferring to 1 July 2014 the increase in the concessional contributions cap for individuals aged 50 and over with superannuation balances below $500,000, increasing tax receipts by $1,430 million over the forward estimates period.
- Not proceeding with the 50 per cent discount for interest income, which was due to commence on 1 July 2013. This measure is expected to increase tax receipts by $795 million over the forward estimates.
The Budget also contains revenue savings measures that better target tax expenditures, including the following.
- Making the superannuation system fairer by reducing the higher tax concession that very high income earners receive on their concessional contributions, so it is more in line with the concession received by average income earners, increasing receipts by $1,030 million over the forward estimates period.
- Further reforming the tax concession for living‑away‑from‑home allowances and benefits, by better targeting it at people who are legitimately maintaining a second home in addition to their actual home for an initial period, increasing receipts by $1,019 million over the forward estimates.
- Reducing the personal allowance for duty free tobacco from 250 cigarettes to 50 cigarettes or 50 grams of other tobacco products from 1 September 2012. This measure is expected to increase receipts by $660 million over the forward estimates.
Table 6: Revenue policy decisions since the 2011‑12 MYEFO (receipts basis)
The Government is also increasing Australian Taxation Office (ATO) resources to undertake tax compliance activities through the following measures.
- Increasing cash receipts by $1,125 million over the four years to 2015‑16 by providing $106 million over four years to the ATO to increase the ATO's collections of outstanding taxation debts and superannuation guarantee charges. This has no impact in fiscal balance terms.
- Increasing cash receipts by $1076.1 million over the forward estimates, including a GST component of $554.1 million that will be paid to the States and Territories, by providing $195.3 million in 2014‑15 and 2015‑16 to continue a range of activities that promote voluntary GST compliance and provide a level playing field for Australian businesses.
- Increasing cash receipts by $210.1 million over the forward estimates period by providing $76.8 million over three years to the ATO and other Project Wickenby agencies to continue the Government's fight against tax evasion, avoidance and related crimes.
There are also a small number of policy measures since MYEFO which reduce tax receipts. The most significant is the introduction of loss carry‑back for companies that allows them to carry back tax losses so they receive a refund against tax previously paid. This will improve their access to tax losses, which will help them invest and innovate. The measure commences in 2012‑13 and is expected to reduce receipts by $700 million over the forward estimates.
Table 7: Personal income tax rates(a)
(a) This table includes legislated changes to tax rates and thresholds, excluding temporary changes such as the Temporary Flood and Cyclone Reconstruction Levy in 2011‑12.
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