Australia’s current tax system

Taking a look in five slides

April 2015

Financing government activities

1

Australia’s current tax system raises over $400 billion for public services

like health, social security payments, education, infrastructure and

defence

Major sources of tax revenue

2

In Australia, most tax revenue is

raised through personal and

corporate income taxes and

taxes on consumption

(particularly the GST and fuel

taxes), but there are many other

taxes in the system.

In 2012-13:

• the federal Government

collected around 81% of taxes

• states and territories collected

around 15% of taxes

• local governments collected

around 3% of taxes

Taxation revenue by type of tax, 2012-13

Source: ABS, Taxation Revenue, Australia.

Percentages may not sum to 100 per cent because of rounding.

Personal income tax

39%

Company tax19%

Fuel taxes4%

Other federal taxes7%

GST12%

Payroll taxes5%

Stamp duties and insurance taxes

5%

Other statetaxes

5%

Local govtrates3%

3

Australia relies more heavily on personal and corporate income taxes than most other developed

countries, and some regional competitors

Unlike most other developed countries, Australia does not have any ‘social security contributions’

levied on individual earnings. But states and territories levy payroll tax on employee remuneration

(above a threshold).

Taxes on income and social security contributions plus payroll taxes as a percentage of total taxation

OECD and selected Asian economies, 2012 1

Source: OECD, Revenue Statistics; OECD, Revenue Statistics in Asian Countries; Treasury estimates using IMF, Government Finance Statistics and Centre for Monitoring

the Indian Economy database.

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20

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India

Per cent of taxPer cent of tax

Personal and company income taxes Social security contributions and payroll taxes

Direct taxes on income, earnings and payroll

Australia’s reliance on personal and company income taxes has remained

largely unchanged since the 1950s, despite significant changes to the

economy.2

4

The composition of Australia’s taxes over time

Personal income tax

34%

Company tax 15%

Other federal taxes37%

State and local taxes

14%

1950s

Source: RBA, Australian Economic Statistics 1949-50 to 1994-95; ABS, Taxation Revenue.

Personal income tax

39%

Company tax 19%

Other federal taxes11%

GST12%

State and local taxes

19%

2012-13

State taxing and spending responsibilities

5

State and territory government expenses and own source revenue, 2013-14 3

Source: Treasury calculations based on state and territory 2013-14 final budget outcomes (or equivalent) and state and

territory 2014-15 budgets.

In Australia, the federal

Government raises more

revenue than it spends on

its own programmes, whilst

the states and territories

raise less revenue than they

need to fund their

programmes. This gap is

referred to as vertical fiscal

imbalance (VFI).

About 45 per cent of state

and territory revenue

comes from the federal

Government, including the

GST.

Australia’s degree of VFI is

high by international

standards.

Other expenses

Health

Education

Transport and communications

Public order and safety

Own source tax revenue

Sales of goods and services

Other revenue

Royalties

0

50

100

150

200

250

0

50

100

150

200

250

State expenses by function State own-source revenue

$billion

Th

ou

san

ds

$billion

Vertical

fiscal

imbalance

Notes

1. Taxes on income are based on the OECD (series 1000) and IMF classifications (series 11). Direct taxes include

personal and corporate income taxes (OECD series 1000), social security contributions (OECD series 2000) and

payroll and workforce taxes (OECD series 3000), but does not include other compulsory non-tax payments (such as

the Superannuation Guarantee). Estimates for China, Hong Kong and Singapore have been prepared using the

IMF’s Government Finance Statistics, while estimates for India have been prepared using the CMIE database. These

estimates are not directly comparable to OECD statistics. Unlike the OECD, the IMF does not classify social security

contributions as a tax. To improve comparability with OECD statistics, direct and total taxation estimates are

prepared using IMF data but inclusive of social security contributions. Statistics for China are for 2011 and for India

are for 2011-12.

2. The RBA (1950s) and ABS (2012-13) data sources used to construct the state and local shares have some very

minor differences, mainly relating to the coverage of ‘Stamp duties’ and ‘All other’ taxes.

3. ‘Sales of goods and services’ includes user charging on state provided services. For the purpose of this chart the

distribution of GST revenue is not considered state own source revenue. ‘Own source tax revenue’ includes stamp

duties on conveyances, land tax, other property taxes, and payroll tax, among other state taxes.