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Australian Government Coat of Arms

Budget | 2015-16

Budget 2015-16
Australian Government Coat of Arms, Budget 2015-16

Statement 4 (continued)

Appendix A: Tax expenditures

This appendix contains an overview of Australian Government tax expenditures, as required by the Charter of Budget Honesty Act 1998 (CBHA).

The CBHA also requires the publication of an annual Tax Expenditures Statement (TES). The 2014 TES was published in January 2015 and provides a detailed description of Australian Government tax expenditures and, where possible, the estimated value or order of magnitude of each tax expenditure.

  • A tax expenditure arises where the actual tax treatment of an activity or class of taxpayer differs from the benchmark tax treatment. The choice of benchmark unavoidably involves judgment and may therefore be contentious in some cases. This choice should not be interpreted as indicating a view on how an activity or class of taxpayer ought to be taxed.

Consistent with most OECD countries, estimates of the size of tax expenditures in the TES reflect the existing utilisation of a tax expenditure, similar to Budget estimates of outlays on demand‑driven expenditure programmes.

  • This is known as the 'revenue forgone' approach which, in practice, involves estimating the difference in revenue between the existing and benchmark tax treatments but importantly assuming taxpayer behaviour is the same in each circumstance.

Revenue forgone estimates therefore do not indicate the revenue loss to the Australian Government budget if specific tax expenditures were abolished, as there may be significant changes in taxpayer behaviour were tax expenditures to be removed.

Care needs to be taken when comparing tax expenditures with direct expenditures as they may, for example, measure different things. In addition, estimates from different editions of the TES are generally not comparable because benchmarks may have changed.

The information in Table A1 is derived from the 2014 TES and does not include the impact of decisions in this Budget on tax expenditures. Further information on tax expenditures is available in the 2014 TES.

Table A1: Estimates of large measured tax expenditures
Tax expenditure Estimate $m  
2015‑16 2016‑17 2017‑18 2018‑19
Large positive tax expenditures        
E6 Capital gains tax main residence exemption — discount component 25,500 25,500 26,000 26,500
E5 Capital gains tax main residence exemption 20,500 21,000 21,500 22,000
C3 Concessional taxation of employer superannuation contributions 17,350 18,100 19,050 20,150
C6 Concessional taxation of superannuation entity earnings 16,150 21,600 26,800 30,400
H28 GST ‑ Food 6,700 7,000 7,300 7,600
E11 Capital gains tax discount for individuals and trusts 6,150 6,840 7,600 8,570
H16 GST ‑ Education 4,300 4,700 5,150 5,600
H2 GST ‑ Financial supplies ‑ input taxed treatment 3,750 3,950 4,150 4,350
H19 GST ‑ Health ‑ medical and health services 3,800 4,100 4,400 4,700
C5 Concessional taxation of non‑superannuation termination benefits 1,950 1,900 1,900 1,850
A38 Exemption of Family Tax Benefit payments 2,170 2,110 2,040 2,100
B73 Statutory effective life caps 1,930 1,850 1,745 1,650
B14 Exemption from interest withholding tax on certain securities 1,860 1,860 1,860 1,860
A19 Medicare levy exemption for residents with taxable income below the low‑income thresholds 1,860 1,930 2,000 2,070
A17 Exemption of the Private Health Insurance Rebate 1,690 1,760 1,850 1,940
D10 Exemption for public and not‑for‑profit hospitals and public ambulance services 1,500 1,600 1,700 1,800
D14 Exemption for public benevolent institutions (excluding public and not‑for‑profit hospitals) 1,430 1,510 1,580 1,660
F8 Concessional rate of excise levied on aviation gasoline and aviation turbine fuel 1,310 1,400 1,500 1,580
H20 GST ‑ Health ‑ residential care, community care and other care services 1,190 1,270 1,360 1,460
A54 Philanthropy ‑ deduction for gifts to deductible gift recipients 1,140 1,170 1,190 1,220
H5 GST ‑ Child care services 1,220 1,340 1,470 1,600
B80 Research and development ‑ non‑refundable tax offset 980 960 980 980
H6 GST ‑ Water, sewerage and drainage 1,170 1,290 1,430 1,590
B75 Capital works expenditure deduction 1,005 1,055 1,110 1,160
H3 GST ‑ Financial supplies ‑ reduced input tax credits 940 990 1,050 1,100
Large negative tax expenditures        
F24 Customs duty ‑1,490 ‑1,250 ‑1,230 ‑1,210
F12 Higher rate of excise levied on cigarettes not exceeding 0.8 grams of tobacco ‑2,195 ‑2,555 ‑2,690 ‑2,790