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Statement 5: Revenue

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Statement 5: Revenue

Contents

Part I: Overview

Total revenue
Variations in revenue estimates

Part II: Estimates of revenue

Detailed revenue estimates
Taxation revenue
Fringe benefits tax and other taxes
Non-taxation revenue

Appendices

Appendix A: Changes in revenue estimates since MYEFO
Appendix B: Forward estimates of revenue
Appendix C: Revenue measures
Appendix D: Tax expenditures
Appendix E: Cash revenue statistics and history

Statement 5: Revenue

Part I: Overview

Relative to the Mid-Year Economic and Fiscal Outlook (MYEFO), the expected revenue outlook for 2000-01 has been revised upwards. This is consistent with recent strong collections of non-GST taxation revenue. Looking ahead, the temporary economic slowdown in 2000-01 is anticipated to result in lower revenue in 2001-02 than previously forecast.

Total revenue

Revenue estimates1 for the period from 2000-01 to 2004-05 are provided in Table 1.

Table 1: Estimates of total Commonwealth general government revenue

Table 1:  Estimates of total Commonwealth general government revenue

(a) As published in the 2000-01 MYEFO on a Government Financial Statistics (GFS) basis. The corresponding estimates reported in the 2000-01 Budget were on an Australian Accounting Standard No. 31 (AAS31) basis.

Over the period from 2000-01 to 2002-03, total revenue as a percentage of gross domestic product (GDP) is projected to fall from 24.0 per cent to 22.1 per cent. Total revenue as a share of GDP remains broadly unchanged from 2002-03 to 2004-05.

Variations in revenue estimates

Table 2 reconciles this Budget's revenue estimates with those at the 2000-01 MYEFO and the 2000-01 Budget in terms of policy decisions, and economic parameter and other variations.

Table 2: Reconciliation of total Commonwealth general government revenue estimates from 2000-01 Budget to 2001-02 Budget(a)

Table 2:  Reconciliation of total Commonwealth general government revenue estimates from 2000-01 Budget to 2001-02 Budget(a)

(a) The changes in the revenue estimates for 2000-01 and 2001-02 since the 2000-01 MYEFO are summarised by head of revenue at Appendix A.

Since MYEFO, estimated total Commonwealth general government revenue has been revised up in 2000-01, largely due to stronger collections of PAYG withholding revenue and company tax revenue. Estimated revenue in 2001-02 and the forward years has been revised down since MYEFO, largely as a result of lower expected profit growth, lower expected excise revenue and policy decisions.

Policy decisions

Policy decisions taken since MYEFO are expected to reduce revenue by around $1.1 billion in 2001-02, growing to around $2.2 billion in 2003-04. The major policy decisions include:

Parameter and other variations

The revenue estimate for 2000-01 has been revised up by around $3.6 billion since MYEFO as a result of economic parameter and other variations. This is driven principally by:

However, this increase to revenue in 2000-01 is partly offset by a lower estimate of petroleum excise revenue, reflecting weaker than expected collections since MYEFO (collections were around $0.4 billion below expectations to end-March 2001).

In 2001-02, economic parameter and other variations have reduced estimated revenue by around $1.2 billion since MYEFO. The major factors contributing to this overall decrease are:

These downwards revisions to forecast taxation revenue in 2001-02 are partly offset by an upwards revision of around $1.8 billion to expected dividend revenue from GBEs and other associated entities.

Furthermore, estimated PAYG withholding revenue in 2001-02 is broadly unchanged from MYEFO, with the positive effect of stronger collections in 2000-01 offsetting the negative impact of lower forecast growth in employment and wages.

Box 1: Cash taxation revenue estimates

A comparison of taxation revenue on cash and accrual bases is provided in the table below.

Total taxation revenue on cash and accrual bases

Total taxation revenue on cash and accrual bases

Accrual estimates are prepared using the Tax Liability Method (TLM) of revenue recognition, under which revenue is recognised when an assessment of a tax liability is made or cash payment is received by the Australian Tax Office (ATO). This method retains some elements of cash revenue recognition, for example, when assessment and payment occur at the same time.

The difference between the cash and accrual estimates of taxation revenue can be largely explained by the deferral of company and superannuation tax payments during the transition to the new PAYG system from 2000-01.

The new PAYG arrangements seek to better align company tax payments with the period in which income is earned. This has created an overlap of company tax payments for business, because payments of tax obligations for 1999-2000 and PAYG instalments for 2000-01 both arise during 2000-01.

  • For a medium-sized company, for example, there would have been six payments due, instead of the usual four. However, the Government has implemented transitional arrangements to assist companies to move to the new system over a number of years.

Continued...

Box 1: Cash taxation revenue estimates (continued)

  • The transitional arrangements reduce the cash impact of this overlap by allowing companies to spread some payments of the 1999-2000 tax obligations over the following 2½ to 5 years.
  • The full amount of the overlap of company tax obligations is reflected in the accrual revenue estimate for 2000-01, as this is the year in which the liabilities are assessed. However, the same overlap is not fully reflected in the cash estimates for 2000-01 since companies do not have to actually pay the entire liability in that year. Companies can spread cash payments of the overlapping liabilities in interest free instalments over the following 2½ to 5 years.

Relative to expectations at MYEFO, there has been a lower take-up of the transitional arrangements to defer company and superannuation tax payments. This has boosted cash estimates of company and superannuation tax revenue in 2000-01 but has reduced cash revenue estimates in 2001-02 and the forward years. However, a lower than expected take-up of the option to defer company and superannuation tax payments has no effect on estimates of accrual revenue.

1 All revenue estimates in this Statement are reported on an accrual basis unless otherwise specified. (Revenue estimates on a cash basis can be found in Box 1 and Appendix E.) The revenue estimates exclude GST revenue, which is collected by the Commonwealth and passed in full to the States and Territories. A discussion of GST revenue can be found in Statement 2 and Budget Paper No. 3.

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