Surging tax receipts and tweaks to existing programs will swell revenue by $134.8bn over the five years to 2026-27 compared with forecasts in Labor’s first budget seven months ago.
Of that, personal income taxes will contribute $74.1bn, buoyed by higher wages and more people in work. Companies will pay $52.7bn extra, thanks to higher commodity prices and a better-than-predicted outlook for non-financial firms, according to the budget.
Other policy changes will funnel $19.1bn more into revenue, with a boost to GST compliance lifting receipts by $7.6bn. The Australian Taxation Office will receive almost $589m over four years to fund the efforts.
The government will also crack down on illicit tobacco and increase tobacco excise by 5% annually for three years from 1 September. That will lift receipts by $3.3bn and GST revenue by $290m over five years from 2022-23, the budget papers show.
“These changes to tobacco excise are part of the government’s response to the National Tobacco Strategy and related initiatives on vaping and smoking prevention and cessation, and an enhanced regulatory approach to vaping,” the budget papers say.
The implementation of a global minimum tax and a domestic minimum tax on multinationals will increase receipts by $370m and increase payments by $111m over the five years from 2022-23.
Applying to firms with annual global revenue of about $1.2bn or more, a minimum of 15% tax on earnings is aimed at preventing a “‘race to the bottom’ on corporate tax rates, and protects our corporate tax base”, the budget papers say. “A domestic minimum tax would give Australia first claim on top-up tax for any low-taxed domestic income.”
As previously reported, the government will cap deductions by LNG exporters to 90% of their income under the petroleum resource rent tax, increasing receipts by an estimated $2.4bn over five years from 2022-23. Critics have panned the changes for bringing in too little amid record industry profits and merely bringing forward taxes rather than increasing them.
Also announced earlier was the reduction in tax concessions available to individuals with a total superannuation balance exceeding $3m. The changes, to start from 1 July 2025, will affect about 80,000 people, or about 0.5% of super account holders.
The move will increase receipts by $950m in the five years from 2022-23. “In 2027-28, the first full year of receipts collection, the measure is expected to increase receipts by $2.3bn,” the government said.
One move that will cut receipts is the temporary increase in the instant asset write-off threshold to $20,000 from 1 July 2023 until 30 June 2024 for small businesses with annual turnover of less than $10m. Firms can instantly write off multiple assets, in a measure estimated to reduce receipts by $290m over the five years from 2022-23.
Another move that will shave revenue is the promotion of new build-to-rent projects where construction starts after the release of the budget.
The government will increase the rate for the capital works tax deduction to 4% a year and cut the final withholding tax rate on eligible fund payments from managed investment trust investments from 30% to 15%.
“This measure will apply to build-to-rent projects consisting of 50 or more apartments or dwellings made available for rent to the general public,” the budget papers say. “The dwellings must be retained under single ownership for at least 10 years before being able to be sold and landlords must offer a lease term of at least three years for each dwelling.”
Receipts will fall by $30m over five years from 1 July, with payments increasing $4.3m.
One area where spending will also drop below forecasts will be in aged care. By “temporarily reducing” the residential aged care provision ratio from 78 places to 60.1 places per 1,000 people aged over 70 years, the government expects to cut payments by $2.2bn over three years from 2024-25. The move reflects “the increasing preference of older Australians to remain in their homes”, the government said.
Reinvesting in health and aged care funding to deliver “new or expanded health and aged care services” is also expected to reduce payments by $1.7bn over four years from 2023–24, it said.
