Statement 4: Revenue
This appendix contains an overview of Australian Government tax expenditures, as required by the Charter of Budget Honesty Act 1998 (CBHA).
Tax expenditure estimates should be interpreted with caution as they do not indicate the revenue gain to the Budget if tax expenditures were to be abolished. In addition, the characterisation of a provision of the tax law as a tax expenditure does not indicate a view on how an activity or class of taxpayer ought to be taxed.
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.
Consistent with most OECD countries, estimates of the size of tax expenditures 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 gain 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 measure different things. In addition, estimates from different editions of the TES are generally not comparable because benchmarks may have changed.
The CBHA also requires the publication of an annual Tax Expenditures Statement (TES). The 2015 TES was published in January 2016 and provides a detailed description of Australian Government tax expenditures and, where possible, the estimated value or order of magnitude of each tax expenditure.
The information in Table A1 is derived from the 2015 TES and does not include the impact of decisions in this Budget on tax expenditures. Further information on tax expenditures is available in the 2015 TES.
|Tax expenditure||Estimate $m|
|Large positive tax expenditures|
|E6||Capital gains tax main residence exemption — discount component||30,000||30,500||30,500||30,500|
|E5||Capital gains tax main residence exemption||24,500||25,000||25,000||25,000|
|C3||Concessional taxation of employer superannuation contributions||16,200||16,850||18,750||19,900|
|C6||Concessional taxation of superannuation entity earnings||14,100||15,350||18,050||20,850|
|H28||GST - Food||7,000||7,300||7,600||8,000|
|E11||Capital gains tax discount for individuals and trusts||6,840||7,600||8,570||9,090|
|H16||GST - Education||4,550||4,950||5,350||5,800|
|H19||GST - Health - medical and health services||4,000||4,250||4,550||4,900|
|H2||GST - Financial supplies - input taxed treatment||3,450||3,650||3,850||4,050|
|A35||Exemption of Family Tax Benefit payments||2,220||2,220||2,230||2,180|
|C5||Concessional taxation of non-superannuation termination benefits||1,950||1,900||1,900||1,900|
|A19||Medicare levy exemption for residents with taxable income below the low-income thresholds||1,960||2,040||2,130||2,230|
|B13||Exemption from interest withholding tax on certain securities||1,730||1,730||1,730||1,730|
|A17||Exemption of the Private Health Insurance Rebate||1,610||1,690||1,770||1,910|
|D10||Exemption for public and not-for-profit hospitals and public ambulance services||1,550||1,650||1,750||1,850|
|D14||Exemption for public benevolent institutions (excluding public and not-for-profit hospitals)||1,500||1,600||1,650||1,700|
|A24||Exemption of Child Care Assistance payments||1,550||2,185||2,210||2,240|
|H5||GST - Child care services||1,390||1,670||1,840||2,020|
|A49||Philanthropy - deduction for gifts to deductible gift recipients||1,230||1,280||1,330||1,370|
|F7||Concessional rate of excise levied on aviation gasoline and aviation turbine fuel||1,240||1,310||1,390||1,460|
|H20||GST - Health - residential care, community care and other care services||1,180||1,260||1,350||1,450|
|B73||Capital works expenditure deduction||1,035||1,070||1,105||1,145|
|H6||GST - Water, sewerage and drainage||1,040||1,140||1,240||1,360|
|B78||Research and development - non-refundable tax offset||850||860||850||850|
|Large negative tax expenditures|
|F11||Higher rate of excise levied on cigarettes not exceeding 0.8 grams of tobacco||-2,140||-2,235||-2,290||-2,375|