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Australian Government Coat of Arms

Budget | 2014-15

Budget 2014-15
Australian Government Coat of Arms, Budget 2014-15

Part 3: Fiscal Strategy and Outlook (continued)

Attachment C: Tax Expenditures

This attachment provides an overview of the cost of Australian Government tax expenditures, as required by the Charter of Budget Honesty Act 1998.

A tax expenditure arises where the actual tax treatment of an activity or class of taxpayer differs from the benchmark tax treatment. Tax expenditures typically involve tax exemptions, deductions or offsets, concessional tax rates or deferrals of tax liability.

Benchmarks represent the standard taxation treatment that applies to similar taxpayers or types of activity. Benchmarks may also incorporate structural elements of the tax system; for example, the progressive income tax rate scale for individual taxpayers.

Determining benchmarks involves judgment and consequently, the choice of benchmark may be contentious. Benchmarks may also vary over time. The choice of benchmark should not be interpreted as indicating a view on how an activity or class of taxpayer ought to be taxed.

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. Estimates do not indicate the Budget impact if a tax expenditure were to be abolished.

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 should not be compared because, for example, benchmarks may have changed.

The information in Table 3.21 is derived from the 2013 Tax Expenditures Statement (TES) and, consistent with longstanding practice, does not include the impact of decisions taken since the 2013‑14 MYEFO. Further information on tax expenditures is available in the 2013 TES. Updated tax expenditure estimates will be published in the 2014 TES, to be released in January 2015. This will include estimates for any new or modified tax expenditures since the 2013 TES.

Table 3.21: Large measured tax expenditures for 2014‑15 to 2017‑18
Tax expenditure Estimate $m

2014‑15

2015‑16

2016‑17

2017‑18

Large positive tax expenditures        

C6

Superannuation — concessional taxation of superannuation entity earnings

18,450

21,700

24,100

26,950

C5

Superannuation — concessional taxation of employer contributions

17,800

19,150

20,700

22,300

E6

Capital gains tax main residence exemption — discount component

17,500

17,500

17,500

18,000

E5

Capital gains tax main residence exemption

14,000

14,000

14,500

14,500

H29

GST — Food; uncooked, not prepared, not for consumption on premises of sale and some beverages

6,500

6,800

7,100

7,400

E16

Capital gains tax discount for individuals and trusts

5,410

6,970

7,640

8,310

H16

GST — Education

4,050

4,400

4,850

5,300

H19

GST — Health; medical and health services

3,600

3,900

4,150

4,450

H2

GST — Financial Supplies; input taxed treatment

3,450

3,650

3,850

4,050

A42

Exemption of Family Tax Benefit, Parts A and B

2,180

2,240

2,290

2,350

B16

Exemption from interest withholding tax on certain securities

1,820

1,820

1,820

1,820

C3

Concessional taxation of non‑superannuation termination benefits

1,800

1,750

1,750

1,750

B88

Statutory effective life caps

1,795

1,780

1,705

1,605

A19

Exemption from the Medicare levy for residents with a taxable income below a threshold

1,790

1,960

2,040

2,120

A20

Exemption of the private health insurance rebate, including expense equivalent

1,510

1,600

1,650

1,690

Large negative tax expenditures        

F25

Customs duty

‑2,870

‑2,750

‑2,900

‑3,050

F12

Higher rate of excise levied on cigarettes not exceeding 0.8 grams of tobacco

‑2,120

‑2,465

‑2,885

‑3,055