Australian Local Government Association

Who's got the dollars?

Taxation Revenue in Australia

A distinctive feature of the Australian federal system is that the Australian government levies and collects all income tax, from individuals as well as from enterprises. It also collects a portion of other taxes, including taxes on the provision of goods and services.

The revenue base of state governments consists of taxes on property, on employer's payrolls, and on the provision and use of goods and services. The sole source of taxation revenue for local government is taxes on property.

Total taxation revenue collected in Australia continues to grow and rose by 8% between 2002-03 and 2003-04.

Taxes on income comprise 55.3% of total taxation revenue and increased by $10,789 million between 2002-03 and 2003-04.

Taxes on the provision of goods and services (including the GST) rose by $3,574 million and equate to 27.2% of total taxation revenue. The GST component of this category represents 13.3%

Local government property taxes are 3% of total taxation revenue.

Commonwealth taxation revenue is 81.5% of total taxation revenue for all levels of government.

State government taxation revenue (excluding GST revenue - which is recorded in the Government Finance Statistics as a grant from the Commonwealth to the states - but including the taxes from other levels of government and public corporations) increased 11% in 2003-04. Taxes on property were the single largest taxation revenue source (41.3%) for state governments in 2003-04, followed by employer's payroll taxes (26.8%).

The following graph (Chart 1) shows the changing proportions of the different taxation revenue categories to total taxation revenue for the state governments since the introduction of accrual accounting in 1998-99.

Chart 1: Different sources of revenue as a a percentage of total state revenue

What this graph shows is:

• the proportion of the different taxation revenue categories to total taxation revenue for state governments has changed dramatically
• the reliance on taxes on property has increased from 30.2% to 41.3%
• taxes on the provision of goods and services has remained steady at around 18% whilst taxes on use of goods and performance activities has decreased from around 28.5% to below 13.9%
• taxes on property increased across all states by 17.8 % with 90% of this increase being due to an increase in stamp duty on conveyances

This demonstrates that state governments are relying more heavily on taxes on property than ever before.

Local government's sole source of taxation revenue is property taxation and it grew by 6.2% from 2003-04.

Property taxes as a proportion of local government expenditure have become less significant. In 1961-62 the figure was 57%, and by 2003-04 this figure stood at 42%.

Local government's expenditure makes up 6.2% of total government tax-funded expenditure.

Total taxation revenue as a percentage of gross domestic product (GDP) increased from 31.3% to 31.6%. Taxation revenue for the Australian government as a percentage of GDP remained unchanged at 25.7%, while total taxation revenue from states grew. Total revenue from local government rates on property as a proportion of GDP is now below 1%.

Chart 2: Taxation Revenue as a Percentage of GDP