Statement 5: Revenue (Continued)
Table 4 reconciles the 2013‑14 Budget's total receipts estimates with those at the 2012‑13 Budget and the 2012‑13 MYEFO. Since the 2012‑13 MYEFO, total receipts have been revised down by $47.8 billion in the four years to 2015‑16, reflecting a downward revision of $63.1 billion from parameter and other variations, partly offset by $15.3 billion of policy decisions.
|Receipts at 2012‑13 Budget||368,774||392,544||413,618||438,373|
|Changes from 2012‑13 Budget to 2012‑13 MYEFO|
|Effect of policy decisions||1,821||6,176||2,635||2,209|
|Effect of parameter and other variations||-3,554||-6,125||-6,211||-5,958|
|Receipts at 2012‑13 MYEFO||367,041||392,595||410,042||434,625|
|Changes from 2012‑13 MYEFO to 2013‑14 Budget|
|Effect of policy decisions||-56||255||5,603||9,521|
|Effect of parameter and other variations||-16,575||-16,857||-14,475||-15,215|
|Receipts at 2013‑14 Budget||350,410||375,993||401,171||428,931|
(a) Includes expected Future Fund earnings.
Since the 2012‑13 MYEFO, tax receipts have been revised down by $16.5 billion in 2013‑14 and $46.7 billion over the four years to 2015‑16. Excluding GST, tax receipts have been revised down by $15.8 billion in 2013‑14 and by $43.9 billion over the four years to 2015‑16.
Chart 4: Revisions to total receipts estimates since the 2012‑13 MYEFO
Effect of parameter and other variations
Variations in receipts can stem from either policy changes or parameter and other variations — that is, recent economic conditions, the updated economic outlook, year‑to‑date collections, and other non‑policy factors. This section discusses variations in receipts from parameter and other variations, while policy changes are covered in the next section.
The receipts forecasts are based on the economic outlook presented in Budget Statement 2, with changes in nominal incomes and spending, including changes in their composition, having consequential impacts on expected tax receipts. The key economic parameters that influence receipts are shown in Table 5. Analysis of the sensitivity of the tax receipts estimates to changes in the economic outlook is provided in Budget Statement 3 (Appendix A).
|Revenue parameters at 2013‑14 Budget|
|Nominal gross domestic product (non-farm)||3 1/4||5||5||5 1/4||5 1/4|
|Change since 2012‑13 MYEFO||-1||- 1/2||- 1/4||0||na|
|Compensation of employees (non-farm)(b)||4 3/4||5 3/4||5||5 1/2||5 1/2|
|Change since 2012‑13 MYEFO||- 3/4||3/4||- 1/2||0||na|
|Corporate gross operating surplus(c)||-3||4 1/2||5 1/2||5 1/4||5 1/4|
|Change since 2012‑13 MYEFO||-4 1/4||-2 1/4||3/4||0||na|
|Unincorporated business income||2 1/4||2 3/4||3 3/4||5 1/4||5 1/4|
|Change since 2012‑13 MYEFO||-3 1/2||-2||-1 1/2||0||na|
|Property income(d)||-2 3/4||1 1/4||7||5 1/2||5 1/2|
|Change since 2012‑13 MYEFO||-6 1/4||-5 1/4||1 1/2||0||na|
|Consumption subject to GST||3 3/4||4 1/4||4 1/2||5 1/2||5 1/2|
|Change since 2012‑13 MYEFO||-1 1/2||- 1/2||-1||0||na|
(a) Current prices, per cent change on previous years. Changes since the 2012‑13 MYEFO are percentage points and may not reconcile due to rounding.
(b) Compensation of employees measures total remuneration earned by employees.
(c) Corporate GOS is an Australian National Accounts measure of company profits, gross of depreciation.
(d) Property income measures income derived from rent, dividends, and interest.
na not applicable.
Relative to the 2012‑13 MYEFO, parameter and other variations have reduced tax receipts by $12.9 billion in 2012‑13, $16.6 billion in 2013‑14, and $61.0 billion over the four years to 2015‑16 (Chart 5). Parameter and other variations have reduced tax receipts, excluding GST, by $12.3 billion in 2012‑13, $15.9 billion in 2013‑14, and $58.2 billion over the four years to 2015‑16.
Chart 5: Parameter and other variations to tax receipts since the 2012‑13 MYEFO
- Of this, company tax receipts account for $5.2 billion in 2012‑13, $7.2 billion in 2013‑14 and $24.3 billion over the four years to 2015‑16. This reflects lower than expected company profitability across most sectors of the economy. Lags in the company tax system mean that lower profitability in 2012‑13 will be felt across a number of years.
- Gross resource rent taxes, comprised of the minerals resource rent tax (MRRT) and the petroleum resource rent tax (PRRT), have been written‑down significantly compared to the 2012‑13 MYEFO. Resource rent taxes are expected to be $3.6 billion lower in 2012‑13 and $3.2 billion in 2013‑14. These taxes are highly sensitive to the assumptions regarding production volumes, capital deductions, commodity prices and the exchange rate.
- While MRRT receipts have been much lower than expected in 2012‑13, they are expected to grow over the forward estimates. MRRT receipts will be supported by very strong increases in production volumes as the economy transitions from the investment phase of the mining boom towards a record expansion in resources production and exports (iron ore exports are expected to grow by around 40 per cent from 2012‑13 to 2016‑17). In addition, capital expenditure — which can be immediately written off for MRRT purposes — is expected to be lower than projected at the 2012‑13 MYEFO (see Budget Statement 2, Box 8).
- Net MRRT receipts are expected to be around $1.8 billion lower in 2012‑13 and $1.7 billion lower in 2013‑14.
- PRRT receipts are expected to be weaker across the entire forward estimates, reflecting in part a softening in petroleum prices and lower assumed production levels across a number of relevant fields.
- CGT, which is an important component of taxes on individuals, companies and superannuation funds, is expected to be lower by $1.8 billion in 2012‑13 and $2.9 billion in 2013‑14, reflecting the continuing utilisation of a large amount of capital losses.
Compared to the 2012‑13 MYEFO, carbon pricing mechanism (CPM) receipts are expected to be $140 million higher in 2012‑13, largely owing to lower free permit allocations offsetting reduced carbon emissions. Receipts are expected to be $530 million lower in 2013‑14; largely reflecting downward revisions to forecast emissions, and the lower international carbon price associated with the advance auctions of permits.
Indirect taxes, excluding CPM, have been revised down by around $760 million in 2012‑13, largely reflecting a $515 million write‑down of GST and a $900 million downgrade in excise receipts, partly offset by higher customs duties. Indirect taxes, excluding CPM, have been revised down by around $1.4 billion in 2013‑14 and $5.2 billion over the four years to 2015‑16.
Since the 2012‑13 MYEFO, non‑tax receipts (including Future Fund earnings) have declined by $3.7 billion in 2012‑13, largely reflecting the deferral of receipts relating to the digital dividend and lower interest receipts. The timing of final digital dividend payments was changed in response to industry concern about paying for both the reissue of expiring spectrum licences and spectrum licences won at the digital dividend auction within a short period of time. Non‑tax receipts have been revised down by $224 million in 2013‑14, reflecting lower interest receipts largely offset by higher dividend receipts.
Effect of policy decisions
Policy decisions since the 2012‑13 MYEFO are expected to increase receipts by $255 million in 2013‑14, $5.6 billion in 2014‑15, $9.5 billion in 2015‑16 and $10.1 billion in 2016‑17. These decisions include: increasing the Medicare levy to help fund DisabilityCare Australia, protecting the integrity of the income tax base, improving the sustainability of the superannuation system and better targeting tax expenditures.
The Medicare levy will be increased by half a percentage point from 1 July 2014 to provide strong and stable funding for DisabilityCare Australia. This is expected to increase tax receipts by $11.4 billion over the forward estimates period. All of the monies raised by the additional levy will go directly to the DisabilityCare Australia Fund. This fund is expected to generate $467 million in non‑tax receipts over the forward estimates period. To assist with establishing DisabilityCare Australia, the Government will make a share of the DisabilityCare Australia Fund available to States and Territories.
The Budget also contains measures to protect the integrity of the income tax base and promote better tax compliance, including the following.
- The Protecting the corporate tax base from erosion and loopholes package contains a series of measures to address abuses that take advantage of design flaws, vulnerabilities and unexpected interactions in the corporate tax law from changes made in the early 2000s. This package is expected to increase tax receipts by $4.1 billion over the forward estimates period.
- Providing additional resources to the Australian Taxation Office (ATO) to expand data matching with third party information. This is expected to increase tax receipts by $432 million over the forward estimates period.
- Providing additional resources to the ATO to address risks to the tax system from exploitation of trust structures. This is expected to increase tax receipts by $217 million over the forward estimates period.
Other key revenue measures include the following.
- Deferring the Clean Energy Future personal income tax cuts that were scheduled to commence on 1 July 2015. These tax cuts were designed to assist households with the effects of an increase in the carbon price from $25.40 in 2014‑15 to $29 in 2015‑16. The carbon price in 2015‑16 is now projected to be lower ($12.10) than the fixed price in 2014‑15. As a result, households will not experience the impact of an additional rise in the carbon price and the 2015‑16 tax cuts will be deferred until the carbon price in the Budget is estimated to rise above $25.40. This is currently projected to occur in 2018‑19. Households will receive more assistance than was anticipated to be necessary to assist them with the cost of living impact of the carbon price in 2015‑16. This measure is expected to increase tax receipts by $1.5 billion over the forward estimates period.
- Better targeting support for research and development (R&D) by limiting access to the R&D tax incentive so that it only applies to companies with annual aggregate Australian turnover of less than $20 billion from 1 July 2013. This is estimated to increase tax receipts by $1.1 billion over the forward estimates period.
- Extending the requirement to make monthly pay‑as‑you‑go (PAYG) income tax instalments to include all large entities in the PAYG instalment system, including trusts, superannuation funds, sole traders and large investors. This measure is expected to have a gain to tax receipts of $1.4 billion over the forward estimates period.
- Phasing out the Net Medical Expenses Tax Offset as reforms to aged care are implemented and DisabilityCare Australia is introduced. All existing claimants will be grandfathered for two years, and claims for aged care, disability aids and attendant care will be allowed through until 30 June 2019. This is estimated to increase tax receipts by $968 million over the forward estimates period.
- Restructuring the Import Processing Charge to recover the costs of all import related cargo and trade functions undertaken by the Australian Customs and Border Protection Service. This is expected to increase tax receipts by $674 million over the forward estimates period.
- Simplifying the design and administration of the proposed higher superannuation concessional contributions cap by providing a $35,000 concessional cap to anyone who meets certain age requirements. This is estimated to increase tax receipts by $365 million over the forward estimates period, as the overall receipts cost of providing the higher cap will fall from $1.5 billion to $1.2 billion.
- Better targeting the tax exemption for earnings on superannuation assets supporting retirement income streams, by limiting it to the first $100,000 of annual earnings for each individual, and taxing earnings above that threshold at the concessional rate of 15 per cent. This is expected to increase tax receipts by $356 million over the forward estimates period.
- Indexing tobacco excise to average weekly ordinary time earnings (AWOTE), instead of the CPI. Due to taxpayer confidentiality, this measure has been incorporated into the Budget estimates as a parameter and other variation.
There are also a small number of policy measures since the 2012‑13 MYEFO which reduce tax receipts. These include:
- Providing petroleum resource rent taxpayers with certainty regarding the scope of deductible expenditure, following recent litigation. This is expected to reduce receipts by $120 million over the forward estimates period.
- Making the superannuation excess contributions tax system fairer, by taxing excess concessional contributions at an individual's marginal tax rate plus an interest charge, rather than always taxing them at the top marginal tax rate. This is expected to reduce tax receipts by $55 million over the forward estimates period.
|Personal income tax — increase in the|
|Medicare levy — DisabilityCare|
|Protecting the corporate tax base from erosion and loopholes|
|— addressing aggressive tax structures that seek to shift profits by artificially loading debt into Australia||-||-||190.0||665.0||635.0||1,490.0|
|— targeting the deduction for exploration to genuine exploration activity||-||100.0||400.0||350.0||250.0||1,100.0|
|— closing loopholes in the consolidation regime||-||10.0||110.0||185.0||235.0||540.0|
|— increasing ATO compliance checks on offshore marketing hubs and business restructures||-||-||53.1||120.4||232.5||406.0|
|— closing loopholes in the Offshore Banking Unit regime||-||20.0||100.0||100.0||100.0||320.0|
|— improving the integrity of the foreign resident capital gains tax regime||-||-||20.0||20.0||190.0||230.0|
|Clean Energy Future — deferral of the 2015‑16 tax cuts||-||-||-||820.0||670.0||1,490.0|
|Monthly PAYG instalments — extension to other large entities||-||-||-||900.0||500.0||1,400.0|
|A Plan for Australian Jobs — Research and Development tax incentive — better targeting||-||-||350.0||400.0||300.0||1,050.0|
|Personal income tax — net medical expenses tax offset phase out||-||-2.0||175.0||285.0||510.0||968.0|
|Import Processing Charge — ensuring full cost recovery||-||91.6||188.7||194.2||199.8||674.3|
|Personal income tax — reforms to work-related self-education expenses (b)||-||-||*||250.0||270.0||520.0|
|— improving compliance through third party reporting and data matching||-||-||67.3||162.7||201.7||431.7|
|— ATO trusts taskforce||-||4.4||27.9||67.7||117.1||217.1|
|— higher concessional contributions cap||-||-195.0||105.0||230.0||225.0||365.0|
|— reforming the tax exemption for earnings on superannuation assets supporting retirement income streams||-||-||2.0||152.0||202.0||356.0|
|Carbon unit auction schedule||-||150.0||180.0||-90.0||100.0||340.0|
|Excise and excise-equivalent customs duty — index tobacco excise to AWOTE||-||nfp||nfp||nfp||nfp||nfp|
|Total impact of revenue measures||-55.8||255.2||5,603.4||9,520.8||10,146.8||25,470.5|
(a) Total impact of revenue measures does not include the impact of the tobacco indexation measure which has been incorporated as a parameter variation due to taxpayer confidentiality.
(b) * The nature of the measure is that a reliable estimate cannot be provided.
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