2017-18 Budget Paper 1 - Chapter 5 - General Government Revenue (Word Accessible)

5General Government Revenue

Key Issues

1. Total General Government Sector revenue is estimated to be $5874.0million in 201718, an increase of $300.3million above the 201617Budget estimate of $5573.7million.

1. Key components of General Government Sector revenue in 201718 include:

GST Revenue is estimated to be $2387.4 million, an increase of $88.2 million above the 2016-17 Budget of $2 299.2 million;

Australian Government Payments for Specific Purposes are estimated to be $1251.6million, an increase of $30million above the 2016-17 Budget of $1221.6 million; and

Taxation Revenue is estimated to be $1128.5 million, an increase of $72.9 million above the 2016-17 Budget of $1055.6 million.

1. Tasmania's share of revenue from Grants, including GST and Australian Government Grants for Specific Purposes, equates to 62.7percent of total General Government sector revenue.

Total Revenue

This chapter provides an overview of Revenue for the 201718 Budget and Forward Estimates. Table5.1 lists the major General Government Sector revenue sources.

Table 5.1:General Government Sector Revenue

2016-17))

Budget)

2017-18

)Budget)

2018-19)Forward)

Estimate)

2019-20)Forward)

Estimate)

2020-21)Forward)

Estimate)

$m)

$m)

$m)

$m)

$m)

Grants

3 634.6)

3682.9

3673.5

3735.4

3748.3

Taxation

1 055.6)

1128.5

1147.4

1173.0

1198.9

Sales of Goods and Services

352.9)

408.0

417.0

424.8

428.7

Fines and Regulatory Fees

96.5)

98.9

99.3

100.3

101.6

Interest Income

16.5)

19.6

17.6

16.0

17.2

Dividend, Tax and Rate Equivalent Income

263.8)

358.4

338.2

370.1

390.4

Other Revenue

153.8)

177.7

170.1

165.2

163.5

5 573.7)

5874.0

5863.0

5984.8

6 048.7

In 201718, Total General Government Sector revenue is forecast to be $300.3million higher than the 201617 Budget.

Tasmania's most significant source of funding is Grants revenue (including GST and Australian Government Grants), which comprises 62.7percent of total revenue in 201718. State OwnSource Revenue accounts for 37.3percent of total revenue.

Chart5.1 shows the composition of Total General Government Sector revenue over time.

Major revenue risks and sensitivities are discussed in chapter 1 of this Budget Paper. The major variances in revenue compared to the 201617Budget are discussed in the Policy and Parameter Statement in chapter4 of this Budget Paper.

Chart 5.1: Composition of Total Revenue, 200708 to 2020211

Notes:

Data reflects actual outcomes for 200708 to 2015-16 and the original Budget estimates for 201617.

Other Australian Government Grants includes Specific Purpose Payments and National Partnership Payments.

Other includes: Sales of Goods and Services; Fines and Regulatory Fees; Interest Income; Dividend, Tax and Rate Equivalent Income; Other Revenue; and Other Grants and Subsidies.

Grants

Grants primarily reflect transfers of funding from the Australian Government and are estimated to be $3682.9million in 201718. This is an increase of $48.3million above the 2016-17Budget of $3634.6million.

Table 5.2:Grants

2016-17

Budget

2017-18

Budget

2018-19Forward

Estimate

2019-20Forward

Estimate

2020-21Forward

Estimate

$m

$m

$m

$m

$m

General Purpose Payments (Untied Funding)

)

)

)

)

GST Revenue

2299.2

2 387.4

2 467.0

2 508.8

2 577.5

Payments for Specific Purposes (Tied Funding)1

Specific Purpose Payments2

To the State

629.4

658.1

676.9

656.1

672.4

Through the State

237.7

253.9

263.3

272.7

282.4

867.1

912.0

940.3

928.9

954.9

National Partnership Payments

To the State

283.2

266.6

140.9

174.6

91.1

Through the State

71.3

73.0

74.7

77.2

79.7

354.5

339.6

215.6

251.8

170.8

Total Payments for Specific Purposes

1221.6

1 251.6

1 155.9

1180.7

1 125.7

Other Grants and Subsidies3

113.8

43.9

50.7

46.0

45.2

Total

3634.6

3 682.9

3 673.5

3 735.4

3 748.3

Notes:

1. Estimates of Specific Purpose Payments and some National Partnership Payments may differ from those published in the Australian Government's 2017-18Budget due to the need to finalise State estimates before the release of the Australian Government Budget.

Specific Purpose Payments include National Health Reform and Students First education reforms funding.

Other Grants and Subsidies primarily relate to payments to the State for Commonwealth Own Purpose Expenditure.

In accordance with the Intergovernmental Agreement on Federal Financial Relations (IGA), transfers from the Australian Government fall into two categories:

General Purpose Payments (GPPs), which are 'untied' payments that can be used at the State's discretion. The GST distribution is the only GPP received by Tasmania in 2017-18; and

conditional (tied) funding in the form of Payments for Specific Purposes, including Specific Purpose Payments (SPPs), Reform Funding and National Partnership Payments (NPPs). These payments must only be spent for purposes as agreed with the Australian Government.

The Australian Government also provides payments directly to State agencies through Commonwealth Own Purpose Expenditure (COPEs). Most of these payments are made to the Department of Health and Human Services and the Tasmanian Health Service.

These payments reduce by $69.9 million in 2017-18, largely due to the agreement by the Tasmanian Government to resume ownership of the Mersey Community Hospital in exchange for a significant one-off Australian Government payment of $730.4 million which is expected to occur by 30 June 2017. This payment is included in the 2016-17 Estimated Outcome (see Appendix 3 of this Budget Paper).

The Australian Government Mersey Community Hospital payment will be transferred to the Tasmanian Public Finance Corporation (Tascorp) as a one-off equity contribution and will be invested by Tascorp with any returns to be retained in the Mersey Community Hospital Fund. The Government will introduce legislation to require Tascorp to pay each year a dividend equal to the operating costs of the Mersey Community Hospital, escalating at 3.5 per cent each year until cessation of the Fund. This dividend is shown in Table 5.9.

GST Revenue

GST Revenue is the largest single source of revenue for Tasmania representing 40.6percent of Total General Government Sector revenue in 201718.

In accordance with the Intergovernmental Agreement on Federal Financial Relations, all GST Revenue collected by the Australian Government is distributed amongst the states and territories. Each state's GST entitlement is dependent on three factors: national GST collections, the state's per capita relativity and the state's share of the national population.

The Commonwealth Grants Commission (CGC) makes annual recommendations to the Australian Government Treasurer regarding each jurisdiction's relativity.

Tasmania has been assessed as having a higher per capita GST need than all other jurisdictions, except the Northern Territory, and is a major beneficiary of the equalisation process, receiving $1.1billion, or approximately 81percent, more GST revenue in 201718 than its per capita share. This reflects the relatively higher cost of service provision in the State and the below average capacity to raise revenue. Tasmania has the second lowest assessed fiscal capacity and Western Australia has the strongest assessed fiscal capacity.

Further detail on the CGC's methodology is provided in the Guide to the Budget (available on the Treasury website), and the Report on GST Revenue Sharing Relativities - 2017 Update (2017 Update Report), which can be found on the CGC website at www.cgc.gov.au.

For the 2017-18 Budget, Treasury has used its own financial model to forecast GST revenues, as was the case for the 201617 Budget. The model incorporates the latest CGC assessments and recommended relativities, Australian Government forecasts of the GST pool and state populations, and state and territory ownsource revenue estimates.

Chart 5.2 below illustrates Tasmania's relativities since the introduction of the GST. The chart shows Tasmania's forecast relativities returning to trend after rising rapidly until 2015-16, primarily as a result of the additional royalty revenue generated in Western Australia and the other mining states during the mining boom.

Chart 5.2:Tasmanian GST Revenue Sharing Relativities, 2000-01 to 2020211

Note:

1.CGC calculation of relativities prepared on a consistent basis, with healthcare grants (pre 2009-10) treated by inclusion and five year averaging of single year relativities (prior to 2010-11) replaced with the current