Tax revenue is government income that is collected from individuals, corporate entities and some other sources. Payment of tax is compulsory and, importantly, there is no direct link between the payment made to the government and the provision of goods or services by the government to the payee. All tax revenue is paid into the Consolidated Revenue Fund.
Tax revenue makes up more than 90% of all Australian Government revenue, with the remaining amount made up of non-tax revenue. The government publishes tax revenue forecasts at each budget update, such as in Budget Paper No. 1, Statement 4: Revenue of the 2022-23 Budget. Figure 1 shows the major components of tax revenue.
Figure 1: Australian Government tax revenue, 2022-23
Source: 2022-23 Budget
The majority of tax revenue is from personal income tax. Under Australia’s personal income tax system, an individual’s income is taxed via a series of tax rates that increase with income. Apart from taxes on individuals and companies, the majority of remaining Australian Government tax revenue is from taxes on consumption, such as the goods and services tax (GST), and excise and customs duties on specific goods, including alcohol, tobacco, and fuel.
The ‘other taxes’ category includes cost recovery levies. These are imposed when a good, service or regulation is provided to a group of individuals or organisations (eg an industry sector) rather than to a specific individual or organisation. The funds collected are ‘earmarked’ to fund activities provided to the group that pays the levy.
Taxes do not include payments from an entity to the government in exchange for the provision of goods or services at a market price (or cost of provision). Fees for goods, services or regulation may be treated as a tax if the level of the fee is well in excess of the market value or cost of providing the good, service or regulation concerned.
From time to time, revenue sources are reclassified from tax revenue to non-tax revenue and vice versa due to changes in accounting standards. For example, in 2015 most visa application charges were reclassified from non-tax revenue to tax revenue, “to reflect a sustained change in the nature of revenue” (see the 2015-16 Mid-Year Economic and Fiscal Outlook).
The government’s fiscal strategy usually includes an element relating to tax. For example, the 2022-23 Budget included a target of “maintaining a sustainable tax burden consistent with a tax-to-gross domestic product (GDP) ratio at or below 23.9% of GDP” (Budget Paper No. 1, page 77).
The terms tax and non-tax revenue are accrual accounting concepts. The equivalent cash accounting concepts are tax and non-tax receipts.
For further information on personal income taxes and the related topic of bracket creep see the PBO explainer no 1/2021 Bracket creep and its fiscal impact.
Related terms in the PBO glossary: accrual accounting, cash accounting, Consolidated Revenue Fund, non-tax revenue, receipts, revenue