Appendix H: Tax expenditures
This appendix contains an overview of the cost of tax expenditures provided to taxpayers through the tax system.
Tax expenditures provide a benefit to a specified activity or class of taxpayer. They can be delivered as a tax exemption, tax deduction, tax offset, reduced tax rate or deferral of a tax liability. The Government can use tax expenditures to allocate resources to different activities or taxpayers in much the same way that it can use direct expenditure programmes. For this reason, and noting their direct impact on the fiscal balance, these concessions are generally called tax expenditures.
The data reported in this appendix are consistent with tax expenditure data reported in the 2006 Tax Expenditures Statement published in December 2006. Care needs to be taken when analysing tax expenditure data: see section 2.1 of the 2006 Tax Expenditures Statement for a detailed discussion.
Table H1 contains estimates of total tax expenditures for the period 2003-04 to 2010-11.
Table H1: Aggregate tax expenditures
Table H1 shows that, in the 2006 Tax Expenditures Statement, measured tax expenditures as a proportion of GDP were projected to fall from 4.4 per cent in 2005-06 to 4.0 per cent in 2006-07, mainly as a result of the impact of personal income tax rate reductions on the tax expenditures estimates. The ratio was projected to increase to 4.4 per cent by 2009-10, mainly because of changes in superannuation tax arrangements including the Simplified Superannuation reforms.
Table H2 is a list of the major tax expenditures in 2006-07.
Table H2: Major tax expenditures 2006-07
