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Table 3 compares revenue estimates by head of revenue for 2001-02 with the corresponding estimates for 2000-01.
Table 3: Detailed estimates of Commonwealth general government revenue
(a) Includes Medicare levy revenue.
(b) Includes the superannuation contributions surcharge.
(c) Includes amounts withheld for failure to quote a Tax File Number (TFN) or an Australian Business Number (ABN).
(d) Indirect taxes exclude surcharge revenue raised by the Commonwealth on an agency basis and paid to the States and Territories as Revenue Replacement Payments (RRPs) in 2000-01. While RRPs were abolished on 1 July 2000, the final RRP liability is collected and paid to the States in 2000-01.
(e) Includes the wine equalisation tax, luxury car tax and the final wholesale sales tax liability.
(f) Consistent with GFS reporting standards, excludes fringe benefits tax collected from Commonwealth government agencies (estimated at $260 million in 2000-01 and $270 million in 2001-02).
In 2001-02 total revenue is expected to decrease by $2.2 billion, while taxation revenue is expected to decrease by $3.9 billion, relative to estimated revenue in 2000-01. These decreases are primarily attributable to the bring forward of company and superannuation tax payments following the introduction of the new Pay As You Go (PAYG) system in 2000-01, which provide a one-off boost to revenue in 2000-01 (see Box 1 in Part I).
The major movements in taxation revenue heads between 2000-01 and 2001-02 include:
The Budget revenue estimates are strongly influenced by forecast growth and the expected composition of economic activity. The 2001-02 revenue estimates are based on the following major economic assumptions:
An analysis of the sensitivity of the revenue estimates to changes in the major economic parameters is provided at Statement 2, Appendix B.
Table 4 provides estimates for 2000-01 and 2001-02 for the various income tax categories applying to individuals.
Table 4: Individuals income tax
Gross PAYG withholding includes all taxes withheld from payments under the PAYG system, aside from amounts withheld because no TFN or ABN has been quoted. The bulk of gross PAYG withholding revenue arises from tax withheld from salary and wage income.
From 1 July 2000, the former Pay As You Earn (PAYE) system, prescribed payments system (PPS) and reportable payments system (RPS) were replaced by the integrated PAYG system.
Under the PAYG system, individuals who were in the PPS and qualified for an ABN could choose to enter into voluntary withholding arrangements. Tax withheld from such individuals (estimated to be around $800 million in 2001-02) is recorded under gross PAYG withholding.
The remaining tax that would have been collected under the PPS is now being collected through the PAYG instalment system or as payment on assessment. These payments (estimated to be around $1.9 billion in 2001-02) are recorded under the gross other individuals head of revenue.
Gross PAYG withholding revenue, inclusive of revenue from the Medicare levy, is expected to increase by around $3.9 billion or 5 per cent in 2001-02, consistent with the combined effect of growth in wages and employment of around 5 per cent.
The gross other individuals category consists of income tax paid by individuals other than that collected through the PAYG withholding system. It comprises:
· PAYG instalments (from individuals); and
· debit assessments on income tax returns (that is, where tax credits are insufficient to meet the tax liability on assessment).
Taxpayers in this category derive their income from a number of sources, including unincorporated businesses, primary production, investments, salaries and wages (when PAYG withholding credits are insufficient) and capital gains.
Under The New Tax System, most gross other individuals revenue is collected through the PAYG instalment system. Individuals who are registered for the goods and services tax (GST) and individuals with tax liabilities of $8,000 or more will generally make quarterly payments. Individuals who are not registered for the GST with liabilities of less than $8,000 have the choice of making quarterly payments or an annual payment in April.
Most tax payments formerly made under the PPS or RPS are now made as PAYG instalments, with the remainder expected to fall under PAYG withholding.
Gross other individuals revenue, inclusive of revenue from the Medicare levy, is expected to increase by $2.2 billion (or 16 per cent) in 2001-02. This is largely attributable to revenue in 2000-01 being temporarily reduced as a result of the introduction of the PAYG system.
Abstracting from the impact of the introduction of the PAYG system, underlying other individuals taxation revenue is expected to increase by around $0.3 billion in 2001-02. (This estimate in part reflects expected growth in small business income of around 2.7 per cent.)
A final assessment of the tax liabilities of individual taxpayers is made on the basis of returns lodged after the end of a financial year. Refunds are made where tax credits exceed the final assessment. Where tax credits are insufficient to meet the final tax liability, taxpayers make an additional payment, which is recorded under the gross other individuals income tax category.
Refunds to individuals are expected to increase by around 1 per cent in 2001-02, a little lower than underlying growth in gross individuals taxation revenue, due to the impact of the substantial personal income tax cuts delivered on 1 July 2000. (Lower income taxes paid by individuals in 2000-01 will begin to impact on refunds in 2001-02 when individuals lodge their tax returns for the 2000-01 income year.)
Revenue from the Medicare levy is expected to rise from $4,605 million in 2000-01 to $4,855 million in 2001-02, mainly reflecting higher taxable incomes of individuals. (In Table 3, this revenue is included in the estimates of gross PAYG withholding, gross other individuals and refunds.)
Table 5 provides estimates for 2000-01 and 2001-02 for company and other income tax categories.
Table 5: Company and other income tax
(a) Includes the superannuation contributions surcharge.
(b) This item includes amounts withheld for failure to quote a TFN or an ABN.
As part of The New Tax System, the general tax rate for companies was reduced from 36 per cent to 34 per cent for the 2000-01 income year, with concessional rates applying to certain income of life insurance companies, registered organisations, pooled development funds, small credit unions and offshore banking units. This rate will fall further to 30 per cent in the 2001-02 income year. The further reduction in the company tax rate is estimated to reduce revenue by around $2 billion per annum from 2001-02.
Commencing in the 2000-01 income year, the new company tax payment arrangements under the PAYG system have brought forward payments of company tax. This has created an overlap of company tax payments relating to obligations for 1999-2000 and PAYG instalments for 2000-01. While the Government has allowed companies to defer some of the liabilities arising from the overlap of the new and existing payment arrangements, the full liability is recorded as having accrued as revenue in 2000-01. Accordingly, the introduction of PAYG results in a one-off boost to company tax revenue in 2000-01.
Abstracting from this one-off factor, forecast growth in company profits is expected to add around $210 million to company tax revenue In 2001-02. Consistent with lower forecast company profit growth, particularly in 2000-01, this increase is lower than forecast at MYEFO.
Superannuation funds are taxed at a concessional rate of 15 per cent in relation to investment income and contributions received. The tax payments of superannuation funds are made according to the schedule that applies to company income tax.
As for company tax, the decline in estimated superannuation tax revenue in 2001-02 largely reflects the bring-forward of superannuation tax payments under PAYG. This aside, expected growth in earnings is expected to add around $30 million to superannuation tax revenue in 2001-02. Consistent with lower expected earnings growth, this increase is lower than forecast at MYEFO.
Other withholding tax is levied on:
Total other withholding tax revenue is expected to increase in 2001-02 by 4 per cent.
Petroleum resource rent tax (PRRT)2 applies to offshore areas other than the North West Shelf production and associated exploration areas, which are subject to excise and royalty arrangements. PRRT is levied at the rate of 40 per cent of taxable profit from a petroleum project. A liability arises when a project's assessable receipts exceed deductible expenditure.
A company involved in a petroleum project is able to deduct exploration expenditure, plant and equipment spending and the direct administration costs associated with the project. (Provisions also allow for exploration expenditure incurred in the development of one project to be offset against the assessable receipts of another PRRT-liable project.)
PRRT revenue is expected to decrease by around 39 per cent in 2001-02. This is primarily due to timing factors relating to the utilisation of deductions, which boost revenue in 2000-01 and reduce revenue in 2001-02. To a lesser extent, the decrease in PRRT revenue also reflects the impact of recent declines in world oil prices and an anticipated decrease in domestic oil production in 2001-02. The world price of crude oil is assumed to be US$26¼ per barrel in 2000-01 and US$22½ per barrel in 2001-02.
Table 6 provides estimates for 2000-01 and 2001-02 for the various categories of indirect taxation.
Table 6: Indirect tax(a)
(a) Excludes surcharge revenue raised by the Commonwealth on an agency basis and paid to the States and Territories as RRPs in 2000-01. While RRPs were abolished on 1 July 2000, the final RRP liability is collected and paid to the States in 2000-01.
(b) Includes aviation gasoline, aviation turbine fuel, fuel oil, heating oil and kerosene.
(c) Customs duty includes duties imposed on imported petroleum products, tobacco, beer and spirits, which are analogous to excise duty on these items.
(d) Estimates of WET revenue include the offsetting revenue effects of the WET rebate for cellar door and other sales.
(e) WST was abolished on 1 July 2000; however, the final liability is recognised in 2000-01.
The major categories of excise revenue include petroleum products excise, crude oil excise, tobacco excise, and excise on certain alcoholic beverages.
Petroleum products excise includes excise on motor spirit (petrol), diesel fuel, aviation gasoline, aviation turbine fuel, fuel oil, heating oil and kerosene. It is imposed at specific rates per litre of product.
The growth in excise revenue from unleaded petrol in 2001-02 of around 10 per cent principally reflects the continued substitution of unleaded petrol for leaded petrol together with the phase-out of leaded petrol.
Leaded petrol has been largely phased out between December 2000 and February 2001 with the introduction of lead replacement petrol. As lead replacement petrol is classified as unleaded petrol, the contribution to excise revenue from leaded petrol is expected to be negligible in 2001-02.
Growth in the consumption of petrol (leaded and unleaded) in 2001-02 is expected to be 2.7 per cent.
Excise revenue from diesel is expected to grow moderately in 2001-02 relative to previous years, reflecting the decision of the Government to abolish excise indexation for petroleum products and the 1.5 cents per litre cut to the rate of diesel excise.
Other petroleum products excise includes excise revenue from aviation gasoline, aviation turbine fuel, fuel oil, heating oil and kerosene. All revenue from the excise duty on aviation gasoline and aviation turbine fuel contribute to the funding of aviation programmes. The rates of excise applying to aviation fuels are adjusted, as necessary, depending on the funding requirements of those programmes.
Crude oil excise includes excise collected from two sources: offshore fields in the North West Shelf production licence areas that are not subject to PRRT, and onshore fields and coastal waters. Crude oil excise is the only excise not to be levied on a volumetric basis (that is, where excise is applied per unit of quantity). Instead, the calculation of crude oil excise is based on both the quantity of crude oil sold and the sale price.
Estimated crude oil excise in 2000-01 has increased since MYEFO, reflecting strong collections this financial year. However, revenue from crude oil excise is expected to fall significantly in 2001-02 relative to 2000-01, due to lower world crude oil prices and lower production.
Other excise is derived from beer, potable spirits and tobacco products. It is imposed:
Wine is exempt from excise and is instead subject to the wine equalisation tax (WET).
Other excise revenue is expected to decrease by around 1 per cent, reflecting the first full year effect of the introduction of the concessional rate of excise for draught beer and an expected decline in tobacco consumption of around 4 per cent.
Estimated excise revenue from tobacco in 2000-01 is broadly consistent with the estimate at MYEFO. However, the tobacco estimate at MYEFO was revised down by in excess of $500 million relative to the 2000-01 Budget. Collections of tobacco excise have been weak since 1 July 2000, which reflects a number of influences including:
There have been some suggestions that higher tobacco prices may have contributed to a growing illicit tobacco market (known as chop-chop). However, the Government has significantly increased the penalties for the sale of illicit product in 2000-01 and, together with increased enforcement activity, these measures have limited the size of any illegal activity.
In the past, the rates of duty for excisable commodities (with the exception of crude oil) have been adjusted each August and February in line with half-yearly consumer price index (CPI) movements.
In March 2001, the Government announced that excise indexation would be abolished for all petroleum products. Beer, spirit and tobacco excise rates will continue to be indexed in line with half-yearly CPI movements.
If the change in the CPI is negative, the excise rate is not reduced but instead the decline is carried forward to offset the next positive CPI movement.
Excise rates since 1 July 2000 are shown in Table 7.
Table 7: Excise rates
Customs duty is imposed either as a percentage of the value of the imported good or on a volumetric basis for excisable-like products (for example, dollars per litre).
Tariffs on passenger motor vehicles, and textile, clothing and footwear account for around one-third of the total duty collected. A further one-third of customs duty is duty imposed on imports of petroleum products, tobacco, beer and spirits, which is analogous to excise duty on these items. Other dutiable goods currently attract a general tariff rate of 5 per cent.
Customs duty revenue in 2001-02 is estimated to grow by around $200 million or around 5 per cent.
Wholesale sales tax (WST) was imposed on a range of goods destined for consumption in Australia and levied at the last wholesale or import point on the wholesale sales value of taxable goods. From 1 July 2000, WST was abolished as part of The New Tax System.
Consistent with the tax liability method of revenue recognition, the 2000-01 WST estimate (see Table 6) reflects the final WST liability.
In the absence of the two specific indirect tax measures outlined below, the abolition of WST would have meant that the price of certain goods would have fallen more than was intended by general indirect tax reform. To counter this, from 1 July 2000, all grape wine, wine products, fruit and vegetable wine, cider, perry, mead and sake became subject to the wine equalisation tax (WET). The WET is levied at a rate of 29 per cent, with tax being paid on the value of the goods at the last wholesale sale, or equivalent value.
Similarly, a luxury car tax (LCT) of 25 per cent was introduced from 1 July 2000. The LCT applies to the GST exclusive price of a car above the LCT threshold ($55,134 in 2000-01). This was put in place to ensure that, when the higher WST rate of 45 per cent was removed from luxury cars and the GST was introduced, the price of luxury cars fell by about the same amount as other cars.
WET revenue is expected to increase by around 19 per cent in 2001-02, to a level reflecting the first full year effect of the tax. Most revenue from the WET is paid upon lodgement of the quarterly Business Activity Statement (BAS), of which there were only three in 2000-01. Luxury car tax revenue is expected to increase by around 16 per cent in 2001-02 for similar reasons.
Fringe benefits tax (FBT) applies to a range of benefits provided by employers to their employees or associates of their employees. Fringe benefits tax revenue is expected to increase by around 6 per cent in 2001-02, largely due to ongoing remuneration growth (see Table 3). FBT revenue is also expected to be boosted in 2001-02 by the modification of the FBT gross-up rate (to ensure neutrality of treatment between fringe benefits and cash salaries following the introduction of the GST on 1 July 2000), which has its first full year effect in 2001-02.
Table 8 shows estimates of agricultural levies and other taxes for 2000-01 and 2001-02.
Table 8: Agricultural levies and other taxes
(a) Includes all other tax revenue collected by Commonwealth agencies.
Total revenue from agricultural levies and other taxes is forecast to increase in 2001-02 by about 4 per cent. This is largely due to an increase in Agricultural production taxes - domestic revenue administered by the Department of Agriculture, Forestry and Fisheries. These taxes are projected to increase from $473 million in 2000-01 to $512 million in 2001-02, largely due to expected growth in collections from the retail milk levy.
Wool tax revenue is estimated to fall in 2001-02 by around 29 per cent, due to the reduction in the wool tax rate. Revenue from Agricultural production taxes - export and non-agricultural levies are forecast to remain broadly unchanged. Broadcasting licence fees are forecast to increase by 5 per cent, due to the increase in mobile telephony licence fees for carriers.
The remaining category of other taxes, which is expected to increase by around 5 per cent, includes the coalmining long service leave levy, child support fees and fines, and a range of levies administered by the Department of Transport and Regional Services including aircraft noise, stevedoring and marine navigation levies.
Table 9 provides estimates for 2000-01 and 2001-02 of the various categories of non-taxation revenue.
Table 9: Non-taxation revenue
(a) Includes all other non-tax revenue collected by Commonwealth agencies.
This category consists of revenue from the direct provision of goods and services by the general government sector.
The expected increase in sales of goods and services in 2001-02 is largely due to an increase in the passenger movement charge from $30 to $38. This will fund the increased cost of inspecting passengers, mail and cargo at Australia's borders to mitigate the risks of introducing foot and mouth disease into Australia.
This category mainly consists of revenue from the States and Territories on General Purpose and Specific Purpose borrowings.
The Commonwealth receives interest payments from the States in respect of General Purpose borrowings made on behalf of the States under the State Governments' Loan Council Programme (and from the Northern Territory in respect of advances made under similar general purpose capital assistance arrangements). Payments relating to these advances are made, in turn, by the Commonwealth to bond holders.
Interest from the States on General Purpose borrowings is declining as a result of the June 1990 Loan Council decision that the States and Territories make additional payments to the Commonwealth each year to facilitate the redemption of all maturing Commonwealth securities issued on their behalf. The reduction in interest revenue from the States and Territories is matched by a reduction in public debt interest expenses.
The Commonwealth also receives interest on Specific Purpose Borrowings to the States, including on advances made under the Commonwealth-State Housing Agreements, States (Works and Housing) Assistance Acts, Northern Territory Housing Advances, and by the Australian Capital Territory on debts assumed upon self-government. Interest from the States on Specific Purpose borrowings will be lower in 2001-02 compared with 2000-01, reflecting the repayment of debt by the States in 2000-01.
Interest from other governments is expected to decrease in 2001-02, due to a reduction in the remaining stock of debt issued by the Commonwealth on behalf of the State and Territory governments.
This item includes interest income on Commonwealth cash balances and on other financial assets. It excludes swap transactions entered into as part of the Commonwealth's debt management strategy, as they are classified as financing transactions under Government Finance Statistics (GFS) standards. The Australian Office of Financial Management (AOFM) is responsible for the management and reporting of the Commonwealth's net debt portfolio.
Interest from other sources is projected to decrease between 2000-01 to 2001-02 by 17 per cent. In part, this reflects a reduction in interest payments from the Snowy Mountain Hydro Electricity Authority, following the decision to corporatise and refinance the Authority.
The main sources of dividends are from the Commonwealth's Government Business Enterprises and the Reserve Bank of Australia (RBA). Dividend payments from the RBA can be volatile, as they are sensitive to movements in interest rates and the exchange rate.
The Royal Australian Mint also provides dividend revenue to the Commonwealth. This includes royalties from numismatic coin sales and annual dividends from profits the Mint makes as the manufacturer of these products.
Total dividends are projected to increase by around 112 per cent in 2001-02, largely due to higher dividends from the RBA.
Petroleum royalties are paid by producers operating in the North-West shelf oil and gas fields off Western Australia.
These royalties are expected to decrease in 2001-02 by around 42 per cent, due to falling petroleum production and a forecast reduction in world oil prices. A substantial proportion of these royalties are paid to the Government of Western Australia.
Other non-tax revenue includes Child Support Trust Revenue (collected by the Child Support Agency) and revenue from the State and Territory governments (to meet the cost to the ATO of administering the GST on their behalf). It also includes revenue from Higher Education Contribution Scheme (HECS) student loans and seigniorage from circulation coin production.
Other non-tax revenue is expected to decline by around 11 per cent in 2001-02. This mainly reflects a reduction in revenue from outstanding HECS debts owed to the Commonwealth and a reduction in revenue received from the States to meet the cost of administering the GST.
2 PRRT is levied under the Commonwealth's Resource Rent Tax Assessment Act 1987.