Australian Government, 2005–06 Budget

Appendix A: Australia’s tax system

Australia’s tax to GDP ratio is the eighth lowest of the 30 OECD countries (Chart A1).

Chart A1: Total tax burden for OECD countries(a)

Chart A1:  Total tax burden for OECD countries(a)

  1. The OECD’s measure of the tax burden is the total taxation revenue of national, state and local governments expressed as a proportion of gross domestic product. For Australia, the data are for the 2002‑03 financial year, the latest year where comparable international data are available.

Source: OECD, Revenue Statistics 1965-2003 (2004 Edition).

While the total tax burden for Australia has been relatively steady over recent years, the tax take of the Australian Government has fallen while the tax burden of the states and territories has increased (Chart A2).

Chart A2: Australian tax burden by level of government

Chart A2:  Australian tax burden by level of government

The share of tax burden between the Australian Government and the states changed with the introduction of The New Tax System in 2000-01. Since then, the tax take of the Australian Government and local governments has been relatively stable, while the tax burden of the states and territories has increased from 8.4 per cent of GDP to 9.1 per cent.

When considering the impact of taxes on Australian households, it is also necessary to take into account the significant increase in assistance going to families from the government, either as offsets to tax or through direct payments.

When this Government came into office in 1996, family assistance totalled around 1.3 per cent of GDP. Since then, the Government has substantially increased the level of assistance provided to families to around 1.7 per cent of GDP in 2004-05, through the introduction of the Family Tax Benefit and the Baby Bonus, and subsequent increases in payments, accompanied by reductions in income test tapers applying to family payments. Elements of this assistance can be accessed through cash payments or reductions in tax.

One way of illustrating the combined effect of cash transfers and tax for families is by showing the change in the real net tax threshold. The net tax threshold is the point at which taxes paid begin to exceed cash transfers received. Table A1 shows that the net tax threshold will have increased by more than 30 per cent in real terms between 1996‑97 and 2006‑07 for a range of families.

Table A1: Increases in real net tax thresholds for families(a), 1996‑97 to 2006-07

Table A1:  Increases in real net tax thresholds for families(a), 1996‑97 to 2006-07

  1. The net tax threshold is the level of private income at which income tax paid first exceeds cash benefits received. Dollar amounts are calculated in 2005‑06 prices.
  2. Families are assumed to have two children — one aged 3 years and the other aged 8 years. The numbers in brackets represent the wages of each working adult in the family, expressed as a proportion of average weekly ordinary time earnings for full-time employees (AWOTE).

Miscellaneous