Australian Government, 2008‑09 Budget

Appendix G: 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, concessional 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.

The data reported in this appendix are consistent with tax expenditure data reported in the 2007 Tax Expenditures Statement published in January 2008. The data does not include the impact on tax expenditures of decisions made in this Budget, and does not include tax expenditures related to GST (which will be included in the next tax expenditures statement consistent with the Government's move to report GST as an Australian Government tax in this Budget).

Care needs to be taken when analysing tax expenditure data: see Section 2.1 of the 2007 Tax Expenditures Statement for a detailed discussion.

Table G1 contains estimates of total tax expenditures for the period 2004‑05 to 2011‑12.

Table G1: Aggregate tax expenditures

Year Superannuation
Other tax
Tax expenditure
as a proportion
of GDP (%)
2004‑05 (est) 17,353 20,718 38,071 4.2
2005‑06 (est) 23,065 23,376 46,441 4.8
2006‑07 (est) 24,985 25,135 50,120 4.8
2007‑08 (proj) 26,845 24,565 51,410 4.6
2008‑09 (proj) 27,466 25,036 52,502 4.3
2009‑10 (proj) 29,391 27,498 56,889 4.4
2010‑11 (proj) 31,807 29,945 61,752 4.6
2011‑12 (proj) 33,908 31,206 65,114 4.6

Table G1 shows that, in the 2007 Tax Expenditures Statement, measured tax expenditures as a proportion of GDP were projected to fall from 4.8 per cent in 2006‑07 to 4.6 per cent in 2007‑08 and 4.4 per cent by 2009‑10, mainly as a result of the impact of personal income tax rate cuts.

Table G2 is a list of the major tax expenditures in 2007‑08.

Table G2: Major tax expenditures 2007‑08

Tax expenditure Estimate $m
Large positive tax expenditures
Superannuation — concessional taxation of superannuation entity earnings 13,600
Superannuation — concessional taxation of employer contributions 10,150
Capital gains tax discount for individuals and trusts 6,870
Exemption of Family Tax Benefit, Parts A and B, including expense equivalent 2,480
Superannuation — capital gains tax discount for funds 1,550
Application of statutory formula to value car benefits 1,490
Concessional taxation of non‑superannuation termination benefits 1,400
Tax offset for recipients of certain social security benefits, pensions or allowances 1,200
Exemption from interest withholding tax on widely held debentures 1,030
Senior Australians' Tax Offset 1,010
Exemption of certain income support benefits, pensions or allowances 1,000
Exemption of 30 per cent private health insurance refund, including expense equivalent 1,000
Concessional rate of excise levied on aviation gasoline and aviation turbine fuel 905
Deduction for gifts to approved donees 870
Superannuation — deduction and concessional taxation of certain personal contributions 780
Income tax exemption for municipal authorities and other local governing bodies 770
Exemption from excise for 'alternative fuels' 750
Exemption from the Medicare levy for residents with a taxable income below a threshold 670
Large negative tax expenditures
Customs duty ‑3,682
Higher rate of excise levied on cigarettes with less than 0.8 grams of tobacco ‑1,375
Accelerated depreciation allowance for plant and equipment ‑800

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