Tax “expenditures”

The yearly “tax expenditure statement” has been released (http://www.treasury.gov.au/PublicationsAndMedia/Publications/2016/TES-2015). What is a tax expenditure? Its a negative tax. Effectively it is a tax concession so that certain income is taxed less than the “norm”.

For example, super is taxed at 15% generally, which is less than most marginal tax rates.

So what are the big tax expenditures?

Capital gains tax main residence exemption cost $54 billion in revenue each year.

Concessional taxation of  superannuation contributions and superannuation entity earnings cost $30 billion in revenue each year.

GST discounts and exemptions cost $21 billion in revenue each year.

Capital gains tax discount for individuals and trusts  costs $6 billion in revenue each year.

Concessional taxation of non-superannuation termination benefits costs $2 billion each year.

My favourite three are growing with the car fringe benefit statutory method aproaching $1 billion, Division 43 capital deductions costing $1 billion and the R&D tax incentive $850 million each year.

But remember we need to find $40 billion in savings to balance the budget. We are not going to find this by playing with tax concessions alone…

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About Ken Mansell

As a stay at home Dad most of the week this is my way of pretending I am still the tax counsel of ASX and SEC listed companies, working at big 4 firms, working at the Federal Treasury, on the Henry Review and at Parliament House for the previous government.
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