Individuals and other withholding taxation
These revenue heads broadly cover all personal income tax. A schedule of the personal income tax rates for the period covered in this Budget is provided in Table B1.
Gross income tax withholding
Gross income tax withholding (ITW) includes all taxes withheld from payments made under the Pay‑As‑You‑Go (PAYG) withholding system and amounts withheld because no Tax File Number or Australian Business Number was quoted. It also includes applicable Medicare levy revenue.
The bulk of ITW revenue arises from taxes withheld from wage and salary income but also includes all other withholding taxes levied on natural resource payments, dividends, interest and royalties paid to non‑residents and payments to aboriginal groups for the use of land for mineral exploration and mining. These taxes are often withheld from companies, rather than individuals, but are not separately identified from other PAYG revenues.
Gross other individuals
Gross revenue from other individuals consists of income tax paid by individuals other than that collected through the PAYG withholding system, and includes applicable Medicare levy revenue. It comprises:
- PAYG instalments paid directly by individuals — that is, not withheld by employers; and
- debit assessments on income tax returns.
Taxpayers in this category derive their income from many sources, including:
- profits from small unincorporated businesses, primary production and investment activities;
- wages and salaries (when PAYG withholding credits are insufficient to meet the tax liability on assessment); and
- capital gains.
Most revenue from other individuals is collected directly from the taxpayer through the PAYG instalment system. Individuals with annual tax liabilities of $8,000 or more and individuals who are registered for the GST will generally make quarterly payments. Individuals who have annual taxation liabilities of less than $8,000 and are not registered for the GST have the choice of making quarterly payments or an annual payment.
Income tax refunds for individuals
A final assessment of the income tax liabilities of individual taxpayers is normally made on the basis of returns lodged after the end of each financial year. Refunds are made where tax credits exceed the final liability on assessment. Tax credits typically accrue from PAYG withholding payments deducted by employers from wages and salaries, and from PAYG instalments made by taxpayers through a Business Activity Statement or Income Activity Statement.
Where tax credits are insufficient to meet the final tax liability, taxpayers make an additional payment (a debit assessment), which is recorded under the gross other individuals head of revenue.
Refunds paid to individual income taxpayers in any year will generally relate to earning activity in the prior year because assessment is made after the conclusion of the year to which it relates.
The Medicare levy forms an integral part of the personal income tax system and, as such, revenue from the Medicare levy is included in the three revenue heads described above.
Table B1: Personal income tax rates(a)*
- These standard income tax rates can be offset by a range of concessional arrangements, including the senior Australians tax offset, the spouse tax offset, the low income tax offset and the mature age worker tax offset.
- These standard Medicare levy rates apply to singles. Different concessional and penalty rates apply in certain circumstances.
* This table has been amended as per the corrigendum.
Companies and other related income taxation
These revenue heads broadly cover all income taxes paid by corporate type entities. A schedule of the company income tax rates for the period covered in this Budget is provided in Table B2.
Table B2: Company and other related income tax rates
Company income taxation
Company income tax includes all income taxes paid by companies, including incorporated and unincorporated associations, limited partnerships and some public unit trusts.
Generally, every resident company that derives assessable income (including capital gains), whether sourced within or outside of Australia, and every non-resident company that derives assessable income from Australian sources, is required to pay company tax.
Company tax has been collected through the PAYG instalment system since the financial year beginning 1 July 2000. This system replaced the provisional tax and company tax instalment systems. Under the PAYG instalment system, most company taxpayers now pay their liability through four quarterly instalment payments and a balancing payment five months after the final instalment, although some small companies are able to make an annual payment.
Superannuation funds taxation
Like companies, superannuation funds are taxed through the PAYG instalment system, but generally at a concessional rate of 15 per cent in relation to taxable contributions received, capital gains and investment income. Only two-thirds of a capital gain is included in assessable income if the asset is held for at least 12 months.
Superannuation surcharge is levied on the surchargeable contributions of a superannuation fund member whose adjusted taxable income exceeds the lower income surcharge threshold in a financial year.
Surchargeable contributions include all employer contributions, certain ‘golden handshakes’ and tax deductible personal contributions made to superannuation funds. Adjusted taxable income includes fringe benefits and surchargeable contributions.
The rate of surcharge levied phases in from the lower income surcharge threshold to an upper income surcharge threshold. The maximum rate of surcharge until 2002‑03 was 15 per cent. This was been reduced to 14.5 per cent for 2003‑04 and 12.5 per cent for 2004-05. The surcharge is being abolished for contributions made after 1 July 2005.
Payments are generally received from superannuation funds, but may also be paid by the member as the liability for the surcharge accrues, or if the surchargeable contributions are in the hands of the member at the time the surcharge liability is assessed.
Petroleum resource rent tax
Petroleum resource rent tax is levied on economic profits in respect of offshore petroleum projects other than some of the North-West Shelf production and associated exploration areas, which are subject to excise (included in excise on petroleum and other fuel products) and royalties. The tax is levied at a rate of 40 per cent of a project’s economic profit. The amount paid is deductible from a company’s total profit when determining its company tax liability.
Excise and customs duty
The major categories of excisable products are petroleum and other fuel products, crude oil, oils and lubricants, tobacco and alcoholic beverages. Equivalent duties on identical imported products are imposed through, and reported under, customs duty.
Petroleum and other fuel excise includes excise on petrol, diesel fuel, biodiesel, aviation gasoline, aviation kerosene, fuel ethanol, fuel oil, heating oil and kerosene. It is imposed at specific rates per litre of product.
- Petrol includes unleaded petrol and lead replacement petrol (which replaced leaded petrol but is taxed at the unleaded petrol rate).
- All revenue from excise duty on aviation gasoline and aviation kerosene contributes to the funding of aviation programmes. The rates of excise applying to aviation fuels are adjusted, as necessary, depending on the funding requirements of those programmes.
Crude oil excise provides a return to the community for the exploitation of its natural resources. There are two sources of excise on crude oil:
- production from offshore fields in the North-West Shelf production licence areas that are not subject to petroleum resource rent tax; and
- production from onshore fields and fields in coastal waters.
The rate of excise varies according to the quantity of crude oil sold, the sale price of the crude oil, and the dates of discovery and development of the oil field.
Other excise is derived from beer, spirits, other alcoholic beverages (other than wine) and tobacco products.
- For beer, spirits and other alcoholic beverages, excise is imposed on the alcohol content. The excise rate on beer in containers greater than 48 litres (draught beer) is lower than for other beer.
- For cigarettes, excise is imposed on a per stick basis for cigarettes that do not exceed 0.8 grams (actual tobacco content) and on a per kilogram basis for other tobacco products.
Wine is not subject to excise, but is subject to the wine equalisation tax.
The excise rates for petroleum products and crude oil are not indexed. The rates of duty for other excisable products are adjusted every August and February in line with half yearly CPI movements (Table B3). If the change in the CPI is negative, the excise rate is not reduced but instead the decline is carried forward to be set off against the next positive CPI movement.
Excise indexation for petroleum products was removed in March 2001.
Table B3: Excise rates
- Biodiesel became subject to excise duty from 18 September 2003.
Customs duty is imposed either as a percentage of the value of the imported good or on a volumetric basis (where duty is applied per unit of quantity) for excise equivalent products.
Tariffs on passenger motor vehicles and textile, clothing and footwear are expected to account for around one-third of the total duty collected. A further one-third of customs duty revenue is expected to be derived from duty imposed on imports of petroleum products, tobacco, beer and spirits, which is akin to excise duty on these items. In general, other dutiable goods attract a general tariff rate of five per cent. The Government is removing the three per cent tariff applying to business inputs imported under a Tariff Concession Order from 11 May 2005.
Table B4: Tariff rates
Wine equalisation tax
All wines, meads, ciders and sakes are subject to a wine equalisation tax of 29 per cent on the wholesale value of the goods. The tax was introduced as part of The New Tax System to maintain the level of taxation on cask wine, subsequent to the removal of the previous 41 per cent wholesale sales tax on wine and the application of the goods and services tax.
Unlike alcohol excises, the wine equalisation tax is an ad valorem tax. It is calculated at a rate of 29 per cent of the final wholesale price or, in certain other permitted circumstances, of a nominal wholesale value calculated as 50 per cent of the retail price, or alternatively at the average wholesale price for identical wine.
From 1 October 2004, a rebate is payable on the first $290,000 in wine equalisation tax paid annually by any producer.
Luxury car tax
The luxury car tax was implemented on 1 July 2000 as part of The New Tax System to maintain the long‑standing policy of successive Australian Governments to have a tax differentiation between luxury vehicles and other vehicles sold in Australia.
Its introduction prevented disproportionate falls in the price of luxury vehicles, compared to standard model vehicles at pricing points just below the threshold, when the goods and services tax rate of 10 per cent replaced the previous wholesale sales tax rate of 45 per cent.
The luxury car tax applies at a rate of 25 per cent for every dollar over the luxury car threshold. The current luxury car threshold is $57,009. The threshold is indexed annually using the motor vehicle purchase component of the CPI, which is composed of observed price movements for new vehicles sold in Australia.
Fringe benefits tax
Fringe benefits tax is paid on non-salary benefits provided by employers to employees, which are provided in place of, or in addition to, the salary and wages of employees.
The tax is payable by employers and is assessed on the value of the fringe benefits provided to employees or their associates. Fringe benefits tax is levied at 48.5 per cent of the grossed-up taxable value of benefits, as calculated under the fringe benefits tax rules.
Instalments are paid by employers (on a Business Activity Statement) for each quarter of the fringe benefits tax year, which runs from April to March. A final balancing payment is due in May, together with the lodgement of a fringe benefits tax return.
Consistent with Government Finance Statistics reporting standards, fringe benefits tax reported at the general government level excludes revenue collected from Australian Government agencies.
Agricultural levies and charges are used to fund industry activities, such as research and development, marketing and promotion, residue testing, and animal health programmes.
The need for a levy is usually identified by the industry itself and the levy is generally collected at the first point of sale of the primary produce or point of further processing.
All levies and charges are paid into the Consolidated Revenue Fund without deduction, and then disbursed to fund the relevant programme.
The major contributor to this category is a levy of around $80 million, imposed on the coal mining industry under the Coal Mining Industry (Long Service Leave Funding) Act 1992. The purpose of the levy is to manage and protect the long service leave entitlements of workers in the industry.
Broadcasting licence fees
Broadcasting licence fees are payable by all commercial radio and television licensees. The licence fees are calculated as a percentage of the licensees’ gross earnings for the previous year.
The major contributor to this revenue head is licence fees payable for the operation of radio communications equipment and telecommunications networks used to provide carriage services to the public. These fees total approximately $185 million.
Other contributors include:
- levies totalling approximately $90 million which are collected by the Department of Transport and Regional Services, including Aircraft Noise Levies, the Stevedoring Levy and the Oil Pollution Compensation Fund levy; and
- other fees totalling approximately $59 million, including Interstate Road Transport registration fees, Territory regulatory fees, taxes and fines, Airport leases — in lieu of land tax, Trade Practices Act 1974 fees, Navigation Act fees and Airport Building Controllers fees.
Sales of goods and services
This category consists of revenue from the direct provision of goods and services by the Australian Government general government sector, including reimbursement of GST administration costs received from the states and territories.
The main sources of dividends are the Australian Government’s business enterprises and the Reserve Bank of Australia (RBA). Dividend payments from the RBA can be volatile, as they are sensitive to movements in interest rates and the exchange rate.
Interest from other Governments
This category mainly consists of revenue from the states for interest on general purpose and specific purpose borrowings.
The Australian Government receives interest payments from the states in respect of general purpose borrowings made on behalf of the states under the State Governments’ Loan Council Programme (and from the Northern Territory in respect of advances made under similar general purpose capital assistance arrangements). Payments relating to these advances are made, in turn, by the Australian Government to bond holders.
Interest from the states on general purpose borrowings is declining as a result of the June 1990 Loan Council decision that the states and territories make additional payments to the Australian Government each year to facilitate the redemption of all maturing Australian Government securities issued on their behalf. The reduction in interest revenue from the states is matched by a reduction in public debt interest expenses.
The Australian Government also receives interest on specific purpose borrowings to the states, including on advances made under the Commonwealth-State Housing Agreements, States (Works and Housing) Assistance Acts, Northern Territory Housing Advances, and by the Australian Capital Territory on debts assumed upon self-government.
Interest from other sources
This item includes interest income on Australian Government cash balances and on other financial assets. It excludes swap transactions entered into as part of the Australian Government’s debt management strategy, as they are classified as financing transactions under Government Finance Statistics standards. The Australian Office of Financial Management is responsible for the management and reporting of the Australian Government’s net debt portfolio.
Other sources of non-taxation revenue
Other non-taxation revenue includes petroleum royalties paid by producers operating in the Timor Sea and the North-West Shelf oil and gas fields, Child Support Trust Revenue (collected by the Child Support Agency) and seigniorage from circulation coin production.