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Australian Government Coat of Arms

Budget | 2015-16

Budget 2015-16
Australian Government Coat of Arms, Budget 2015-16

Part 3: Fiscal Strategy and Outlook (continued)

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.

Table 3.23: Large measured tax expenditures for 2015‑16 to 2018‑19
Tax expenditure Estimate $m
2015‑16 2016‑17 2017‑18 2018‑19
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