Attachment B: Tax expenditures
This attachment provides information on 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 programs. Estimates do not indicate the Budget impact if a tax expenditure were to be abolished, as there may be significant changes in taxpayer behaviour were tax expenditures to be removed.
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 Tax Expenditures Statement (TES) should not be compared because, for example, benchmarks may have changed.
The information in Table 3.23 is derived from the 2014 TES and, consistent with longstanding practice, does not include the impact of decisions taken since the 2014‑15 MYEFO. Further information on tax expenditures is available in the 2014 TES. Updated tax expenditure estimates will be published in the 2015 TES, to be released in January 2016. This will also include estimates for any new or modified tax expenditures since the 2014 TES.
|Tax expenditure||Estimate $m|
|Large positive tax expenditures|
|E6||Capital gains tax main residence exemption — discount component||25,500||25,500||26,000||26,500|
|E5||Capital gains tax main residence exemption||20,500||21,000||21,500||22,000|
|C3||Concessional taxation of employer superannuation contributions||17,350||18,100||19,050||20,150|
|C6||Concessional taxation of superannuation entity earnings||16,150||21,600||26,800||30,400|
|H28||GST — Food||6,700||7,000||7,300||7,600|
|E11||Capital gains tax discount for individuals and trusts||6,150||6,840||7,600||8,570|
|H16||GST — Education||4,300||4,700||5,150||5,600|
|H2||GST — Financial supplies — input taxed treatment||3,750||3,950||4,150||4,350|
|H19||GST — Health — medical and health services||3,800||4,100||4,400||4,700|
|C5||Concessional taxation of non‑superannuation termination benefits||1,950||1,900||1,900||1,850|
|A38||Exemption of Family Tax Benefit payments||2,170||2,110||2,040||2,100|
|B73||Statutory effective life caps||1,930||1,850||1,745||1,650|
|B14||Exemption from interest withholding tax on certain securities||1,860||1,860||1,860||1,860|
|A19||Medicare levy exemption for residents with taxable income below the low‑income thresholds||1,860||1,930||2,000||2,070|
|A17||Exemption of the Private Health Insurance Rebate||1,690||1,760||1,850||1,940|
|D10||Exemption for public and not‑for‑profit hospitals and public ambulance services||1,500||1,600||1,700||1,800|
|D14||Exemption for public benevolent institutions (excluding public and not‑for‑profit hospitals)||1,430||1,510||1,580||1,660|
|F8||Concessional rate of excise levied on aviation gasoline and aviation turbine fuel||1,310||1,400||1,500||1,580|
|H20||GST — Health — residential care, community care and other care services||1,190||1,270||1,360||1,460|
|A54||Philanthropy — deduction for gifts to deductible gift recipients||1,140||1,170||1,190||1,220|
|H5||GST — Child care services||1,220||1,340||1,470||1,600|
|B80||Research and development — non‑refundable tax offset||980||960||980||980|
|H6||GST — Water, sewerage and drainage||1,170||1,290||1,430||1,590|
|B75||Capital works expenditure deduction||1,005||1,055||1,110||1,160|
|H3||GST — Financial supplies — reduced input tax credits||940||990||1,050||1,100|
|Large negative tax expenditures|
|F24||Customs duty||‑ 1,490||‑ 1,250||‑ 1,230||‑ 1,210|
|F12||Higher rate of excise levied on cigarettes not exceeding 0.8 grams of tobacco||‑ 2,195||‑ 2,555||‑ 2,690||‑ 2,790|