5General Government Revenue

Key Issues
  • Total General Government Sector revenue is estimated to be $5874.0million in 201718, an increase of $300.3million above the 201617Budget estimate of $5573.7million.
  • Key components of General Government Sector revenue in 201718 include:
–GST Revenue is estimated to be $2387.4 million, an increase of $88.2 million above the 2016-17 Budget of $2 299.2 million;
–Australian Government Payments for Specific Purposes are estimated to be $1251.6million, an increase of $30million above the 2016-17 Budget of $1221.6 million; and
–Taxation Revenue is estimated to be $1128.5 million, an increase of $72.9 million above the 2016-17 Budget of $1055.6 million.
  • Tasmania's share of revenue from Grants, including GST and Australian Government Grants for Specific Purposes, equates to 62.7percent of total General Government sector revenue.

Total Revenue

This chapter provides an overview of Revenue for the 201718 Budget and Forward Estimates. Table5.1 lists the major General Government Sector revenue sources.

Table 5.1:General Government Sector Revenue

2016-17)
)
Budget) / 2017-18
)
Budget) / 2018-19)
Forward)
Estimate) / 2019-20)
Forward)
Estimate) / 2020-21)
Forward)
Estimate)
$m) / $m) / $m) / $m) / $m)
Grants / 3 634.6) / 3682.9 / 3673.5 / 3735.4 / 3748.3
Taxation / 1 055.6) / 1128.5 / 1147.4 / 1173.0 / 1198.9
Sales of Goods and Services / 352.9) / 408.0 / 417.0 / 424.8 / 428.7
Fines and Regulatory Fees / 96.5) / 98.9 / 99.3 / 100.3 / 101.6
Interest Income / 16.5) / 19.6 / 17.6 / 16.0 / 17.2
Dividend, Tax and Rate Equivalent Income / 263.8) / 358.4 / 338.2 / 370.1 / 390.4
Other Revenue / 153.8) / 177.7 / 170.1 / 165.2 / 163.5
5 573.7) / 5874.0 / 5863.0 / 5984.8 / 6 048.7

In 201718, Total General Government Sector revenue is forecast to be $300.3million higher than the 201617 Budget.

Tasmania's most significant source of funding is Grants revenue (including GST and Australian Government Grants), which comprises 62.7percent of total revenue in 201718. State OwnSource Revenue accounts for 37.3percent of total revenue.

Chart5.1 shows the composition of Total General Government Sector revenue over time.

Major revenue risks and sensitivities are discussed in chapter 1 of this Budget Paper. The major variances in revenue compared to the 201617Budget are discussed in the Policy and Parameter Statement in chapter4 of this Budget Paper.

Chart 5.1: Composition of Total Revenue, 200708 to 2020211

Notes:

  1. Data reflects actual outcomes for 200708 to 2015-16 and the original Budget estimates for 201617.
  2. Other Australian Government Grants includes Specific Purpose Payments and National Partnership Payments.
  3. Other includes: Sales of Goods and Services; Fines and Regulatory Fees; Interest Income; Dividend, Tax and Rate Equivalent Income; Other Revenue; and Other Grants and Subsidies.

Grants

Grants primarily reflect transfers of funding from the Australian Government and are estimated to be $3682.9million in 201718. This is an increase of $48.3million above the 2016-17Budget of $3634.6million.

Table 5.2:Grants

2016-17
Budget / 2017-18
Budget / 2018-19
Forward
Estimate / 2019-20
Forward
Estimate / 2020-21
Forward
Estimate
$m / $m / $m / $m / $m
General Purpose Payments (Untied Funding) / ) / ) / ) / )
GST Revenue / 2299.2 / 2 387.4 / 2 467.0 / 2 508.8 / 2 577.5
Payments for Specific Purposes (Tied Funding)1
Specific Purpose Payments2
To the State / 629.4 / 658.1 / 676.9 / 656.1 / 672.4
Through the State / 237.7 / 253.9 / 263.3 / 272.7 / 282.4
867.1 / 912.0 / 940.3 / 928.9 / 954.9
National Partnership Payments
To the State / 283.2 / 266.6 / 140.9 / 174.6 / 91.1
Through the State / 71.3 / 73.0 / 74.7 / 77.2 / 79.7
354.5 / 339.6 / 215.6 / 251.8 / 170.8
Total Payments for Specific Purposes / 1221.6 / 1 251.6 / 1 155.9 / 1180.7 / 1 125.7
Other Grants and Subsidies3 / 113.8 / 43.9 / 50.7 / 46.0 / 45.2
Total / 3634.6 / 3 682.9 / 3 673.5 / 3 735.4 / 3 748.3

Notes:

  1. Estimates of Specific Purpose Payments and some National Partnership Payments may differ from those published in the Australian Government's 2017-18Budget due to the need to finalise State estimates before the release of the Australian Government Budget.
  1. Specific Purpose Payments include National Health Reform and Students First education reforms funding.
  2. Other Grants and Subsidies primarily relate to payments to the State for Commonwealth Own Purpose Expenditure.

In accordance with the Intergovernmental Agreement on Federal Financial Relations (IGA), transfers from the Australian Government fall into two categories:

  • General Purpose Payments (GPPs), which are 'untied' payments that can be used at the State's discretion. The GST distribution is the only GPP received by Tasmania in 2017-18; and
  • conditional (tied) funding in the form of Payments for Specific Purposes, including Specific Purpose Payments (SPPs), Reform Funding and National Partnership Payments (NPPs). These payments must only be spent for purposes as agreed with the Australian Government.

The Australian Government also provides payments directly to State agencies through Commonwealth Own Purpose Expenditure (COPEs). Most of these payments are made to the Department of Health and Human Services and the Tasmanian Health Service.

These payments reduce by $69.9 million in 2017-18, largely due to the agreement by the Tasmanian Government to resume ownership of the Mersey Community Hospital in exchange for a significant one-off Australian Government payment of $730.4 million which is expected to occur by 30 June 2017. This payment is included in the 2016-17 Estimated Outcome (see Appendix 3 of this Budget Paper).

The Australian Government Mersey Community Hospital payment will be transferred to the Tasmanian Public Finance Corporation (Tascorp) as a one-off equity contribution and will be invested by Tascorp with any returns to be retained in the Mersey Community Hospital Fund. The Government will introduce legislation to requireTascorpto pay each year a dividend equal to the operating costs of the Mersey Community Hospital, escalating at 3.5 per cent each year until cessation of the Fund. This dividend is shown in Table 5.9.

GST Revenue

GST Revenue is the largest single source of revenue for Tasmania representing 40.6percent of Total General Government Sector revenue in 201718.

In accordance with the Intergovernmental Agreement on Federal Financial Relations, all GST Revenue collected by the Australian Government is distributed amongst the states and territories. Each state's GST entitlement is dependent on three factors: national GST collections, the state's per capita relativity and the state's share of the national population.

The Commonwealth Grants Commission (CGC) makes annual recommendations to the Australian Government Treasurer regarding each jurisdiction's relativity.

Tasmania has been assessed as having a higher per capita GST need than all other jurisdictions, except the Northern Territory, and is a major beneficiary of the equalisation process, receiving $1.1billion, or approximately 81percent, more GST revenue in 201718 than its per capita share. This reflects the relatively higher cost of service provision in the State and the below average capacity to raise revenue. Tasmania has the second lowest assessed fiscal capacity and Western Australia has the strongest assessed fiscal capacity.

Further detail on the CGC's methodology is provided in the Guide to the Budget (available on the Treasury website), and the Report on GST Revenue Sharing Relativities - 2017 Update (2017 Update Report), which can be found on the CGC website at

For the 2017-18 Budget, Treasury has used its own financial model to forecast GST revenues, as was the case for the 201617 Budget. The model incorporates the latest CGC assessments and recommended relativities, Australian Government forecasts of the GST pool and state populations, and state and territory ownsource revenue estimates.

Chart 5.2 below illustrates Tasmania's relativities since the introduction of the GST. The chart shows Tasmania's forecast relativities returning to trend after rising rapidly until 2015-16, primarily as a result of the additional royalty revenue generated in Western Australia and the other mining states during the mining boom.

Chart 5.2:Tasmanian GST Revenue Sharing Relativities, 2000-01 to 2020211

Note:

1.CGC calculation of relativities prepared on a consistent basis, with healthcare grants (pre 2009-10) treated by inclusion and five year averaging of single year relativities (prior to 2010-11) replaced with the current three year averaging method.

Table 5.3 shows GST Revenue estimates for the national pool and Tasmania.

Table 5.3: Tasmanian GST Revenue Estimates

2017-18
)
Budget / 2018-19
Forward
Estimate / 2019-20
Forward
Estimate / 2020-21
Forward
Estimate
) / ) / ) / )
National GST Collections ($m)1 / 62 340 / 65 590 / 67 670 / 71 540
Tasmania's GST Share (%)2 / 3.83 / 3.76 / 3.71 / 3.61
Tasmania's GST Revenue ($m)2 / 2 387 / 2 467 / 2 509 / 2 577

Notes:

  1. The National GST Collections are preliminary 2017-18 Australian Budgetestimates provided by the Australian Government, due to the need to finalise State estimates before the release of the Australian Government Budget.
  2. 201718 Budget is based on the actual relativity that will apply in 201718 as recommended by the CGC.

GST payments to Tasmania are expected to be $2387.4million in 201718. The growth in GST revenue over the Forward Estimates to Tasmania reflects GST pool growth, offset by a gradual reduction in Tasmania’s GST relativity and lower than average population growth.

After rising during the mining boom, Tasmania's GST relativity is forecast to return towards the long-term trend over the Forward Estimates as a result of:

  • comparatively weaker own-source revenue growth forecast in Western Australia and other resourcerich states;
  • slow population growth compared to the national average, which reduces the CGC’s assessment of Tasmania’s need to invest in infrastructure; and
  • a slightly higher share of Commonwealth payments.

Chart5.3 below illustrates the difference between the 2016-17 and 2017-18 State Budget estimates of GST revenue to Tasmania over the Forward Estimates. The compound annual growth rate of GST revenue from 201718to 202021 is 2.6percent.

Tasmania's share of the GST pool has increased slightly from approximately 3.79percent in 201617 to 3.83percent in 201718.

Chart 5.3:GST Revenue to Tasmania, 200708 to 202021

Note:

  1. The 2017-18 Budget includes the 2016-17 Estimated Outcome for GST Revenue.

Commonwealth Payments for Specific Purposes

Specific Purpose Payments and Reform Funding

SPPs are an ongoing funding arrangement between the Australian Government and the States for service delivery in a particular sector. There are currently three SPPs in operation: the National Skills and Workforce Development SPP; the National Disability Services SPP; and the National Affordable Housing SPP.

Reform funding arrangements, namely the National Health Reform Agreement and the Students First education reforms, replaced the former Health and Education SPPs as of July 2012 and January 2014 respectively.

In 2017-18, Tasmania will receive an estimated $912.0million in SPPs and national health and education reform agreement funding. This is an increase of $44.9million above the 2016-17 Budget estimate of $867.1million. The growth in SPPs and reform funding primarily reflects an increase in National Health Reform and Students First education reform funding. The National Disability Services SPP ceases on 30 June 2019 with the commencement of the National Disability Insurance Full Scheme on 1 July 2019.

It is noted that estimatesof SPPs and some National Partnership Payments may differ from those published in the Australian Government's 2017-18Budget due to the need to finalise State estimates before the release of the Australian Government Budget.

National Partnership Payments

National Partnership Payments (NPPs) are provided to each State through National Partnership Agreements and Project Agreements. The agreements are usually timelimited and aim to support the delivery of projects, facilitate reforms within the State or reward the State for delivering on national reforms.

In 2017-18, Tasmania will receive an estimated $339.6million of funding in NPPs, a decrease of $14.9million from the 2016-17 Budget of $354.5million.This primarily reflects the scheduled expiry of the Improving Health Services in Tasmania and Building Australia’s Future Workforce - National Partnership on skills reform NPPs at the end of 2016-17, and a smaller 2017-18 Redevelopment of the Royal Hobart Hospital payment. These decreases are partially offset by increases in funding under the Land Transport Infrastructure Projects and the Natural Disaster Relief and Recovery Arrangements NPP in response to the 2016 fire and flood events.

Table5.4 details the Payments for Specific Purposes that Tasmania will receive from the AustralianGovernment in 2017-18 and over the Forward Estimates period.

Table 5.4:Commonwealth Payments for Specific Purposes1

2016-17
)
Budget / 2017-18
)
Budget / 2018-19
Forward
Estimate / 2019-20
Forward
Estimate / 2020-21
Forward
Estimate
$m / $m / $m / $m / $m
Specific Purpose Payments / )
Health
National Health Reform2 / 359.1 / 379.7 / 389.5 / 399.2 / 409.0
Education / )
Students FirstGovernment Schools / 178.8 / 185.8 / 191.1 / 196.5 / 203.0
Students FirstNonGovernment Schools / 237.7 / 253.9 / 263.3 / 272.7 / 282.4
Total Education Specific Purpose Payments / 416.5 / 439.7 / 454.4 / 469.2 / 485.4
National Skills and Workforce Development / 31.3 / 31.4 / 34.4 / 31.5 / 31.5
)
National Disability Services / 31.7 / 32.4 / 33.1 / .... / ....
National Affordable Housing / 28.5 / 28.8 / 28.8 / 28.9 / 29.0
Total Specific Purpose Payments / 867.1 / 912.0 / 940.3 / 928.9 / 954.9

Table 5.4:Commonwealth Payments for Specific Purposes1(continued)

2016-17
)
Budget / 2017-18
)
Budget / 2018-19
Forward
Estimate / 2019-20
Forward
Estimate / 2020-21
Forward
Estimate
$m / $m / $m / $m / $m
National Partnership Payments
Health
Health and Hospitals Fund
Redevelopment of theRoyal Hobart Hospital / 25.0 / 15.0 / 10.0 / .... / ....
Improving Health Services in Tasmania
Reducing elective surgery waiting lists in Tasmania / 7.5 / .... / .... / .... / ....
John L Grove LGH / 5.0 / .... / .... / .... / ....
Essential vaccines / 2.9 / 2.8 / 2.8 / 2.8 / 0.2
Expansion of the BreastScreen Australia Program / 0.4 / .... / .... / .... / ....
Public dental services for adults / .... / 2.4 / .... / .... / ....
Other3 / …. / 0.4 / 0.2 / 0.2 / ....
Total Health National Partnerships / 40.9 / 20.6 / 13.0 / 3.0 / 0.2
Education
Universal access to early childhood education / 8.6 / 6.1 / .... / .... / ....
National School Chaplaincy Program / 2.2 / 2.2 / .... / .... / ....
Independent Public Schools Initiative / 0.6 / .... / .... / .... / ....
National quality agenda for early childhood education and care / .... / 0.3 / .... / .... / ....
Online Safety program in schools / .... / 0.1 / .... / .... / ....
Total Education National Partnerships / 11.4 / 8.7 / .... / .... / ....
Skills and Workforce Development
Building Australia's Future Workforce-National Partnership on skills reform / 11.6 / .... / .... / .... / ....
Total Skills and Workforce Development National Partnerships / 11.6 / .... / .... / .... / ....
Community Services (including Disability) / )
DisabilityCare Australia Fund4 / 4.1 / 4.2 / 12.0 / 102.1 / 23.3
Transitioning Responsibilities for Aged Care and Disability Services / 10.1 / 10.5 / 10.8 / .... / ....
Pay Equity for the Social and Community Services Sector / 4.3 / 5.4 / 6.6 / .... / ....
Total Community Services (including Disability) National Partnerships / 18.5 / 20.1 / 29.4 / 102.1 / 23.3

Table 5.4:Commonwealth Payments for Specific Purposes1 (continued)

2016-17
)
Budget / 2017-18
)
Budget / 2018-19
Forward
Estimate / 2019-20
Forward
Estimate / 2020-21
Forward
Estimate
$m / $m / $m / $m / $m
Affordable Housing
Homelessness / 2.8 / .... / .... / .... / ....
Total Affordable Housing National Partnerships / 2.8 / .... / .... / .... / ....
Infrastructure
Land Transport Infrastructure Projects
Road Component5 / 107.5 / 102.3 / 34.8 / 60.0 / 60.0
Rail Component / 20.4 / 13.8 / 14.4 / .... / ....
Off-Network Projects Road / 15.5 / 39.6 / 18.8 / 2.1 / ....
Black Spot Projects / 8.3 / 4.9 / 1.6 / .... / ....
Bridges Renewal program / 0.7 / 1.9 / 1.2 / .... / ....
Heavy Vehicle Safety & Productivity Program / 1.1 / 1.0 / 0.8 / .... / ....
Asset Recycling Fund New Investments / 2.0 / 2.4 / .... / .... / ....
Interstate Road Transport / 0.4 / 0.4 / 0.4 / 0.4 / 0.4
Developing demand driverinfrastructure for the tourism industry / 0.8 / 1.6 / .... / .... / ....
Total Infrastructure National Partnerships / 156.6 / 167.7 / 72.0 / 62.5 / 60.4
Environment
Sustainable Rural Water Use and Infrastructure Program / 18.7 / 19.0 / 14.0 / .... / ....
Management of the World Heritage Values of the Tasmanian Wilderness / 1.8 / 1.7 / .... / .... / ....
Other6 / .... / 0.1 / 0.1 / .... / ....
Total Environment National Partnerships / 20.5 / 20.8 / 14.1 / .… / .…
Other Services
Financial assistance to local governments - Financial Assistance Grant program / 71.3 / 73.0 / 74.7 / 77.2 / 79.7
Legal Assistance Services / 5.7 / 5.9 / 5.9 / 5.9 / 6.0
Natural Disaster Relief and Recovery Arrangements7 / 13.0 / 21.7 / 5.4 / .... / ....
Community Legal Centres / 1.5 / 1.1 / 1.1 / 1.2 / 1.2
Bushfire Mitigation / 0.4 / .… / .... / .... / ....
Provision of Fire Services / 0.3 / …. / …. / .... / ....
Total Other Services / 92.2 / 101.6 / 87.1 / 84.3 / 86.9
Total National Partnership Payments / 354.5 / 339.6 / 215.6 / 251.8 / 170.8

Table 5.4:Commonwealth Payments for Specific Purposes1 (continued)

2016-17
)
Budget / 2017-18
)
Budget / 2018-19
Forward
Estimate / 2019-20
Forward
Estimate / 2020-21
Forward
Estimate
$m / $m / $m / $m / $m
TOTAL PAYMENTS FOR SPECIFIC PURPOSES / 1 221.6 / 1 251.6 / 1 155.9 / 1 180.7 / 1 125.7
Total to the State / 912.6 / 924.7 / 817.8 / 830.8 / 763.5
Total through the State / 309.0 / 326.9 / 338.0 / 349.9 / 362.1
1 221.6 / 1 251.6 / 1 155.9 / 1 180.7 / 1 125.7

Notes:

  1. Estimates of Specific Purpose Payments and some National Partnership Payments may differ from those published in the Australian Government's 2017-18Budget due to the need to finalise State estimates before the release of the Australian Government Budget.
  2. From 201718 to 2019-20, the Australian Government has agreed to continue funding for Public Hospital services using activity based funding, capped at 6.5percent per annum nationally. However, given there is uncertainty with the quantum of funding under the new arrangements, funding based on previous growth trends has been assumed.
  3. Includes funding for OzFoodNet andNational Bowel Cancer Screening - participant follow-up function.
  4. Estimates of DisabilityCare Australia Fund payments included in the 201718 Budget and Forward Estimates reflect the Australian Government’s initial offer as set out in the bilateral transition agreement Tasmania signed in December2015.
  5. Provision included in 201920 and 202021 for future road funding on the expiry of the current agreement.
  6. Includes funding for the National Whale Stranding Action Plan andManaging established pest animals and weeds.
  7. Includes $36000 funding for 2017-18 under the Natural Disaster Relief - Fire agreement.

State Taxation

State Taxation revenue is the main source of own-source revenue and comprises 19.2percent of total revenue in 2017-18.

In 201718, State Taxation revenue is forecast to be $72.9million higher than the 201617 Budget, primarily due to increases in Conveyance Duty and Land Tax. The increase in Conveyance Duty is driven by growth in residential property prices and transaction volumes while the increase in Land Tax reflects a net increase in land values across the State, system enhancements leading to improvements in debt management and targeted compliance efforts.

State Taxation revenue is forecast to grow by $70.4million (or by a compound annual growth rate of 2.0percent) from 201718 to 202021, due mainly to growth in tax bases for Payroll Tax and Land Tax (there is no change in the rate structure of either tax).

Table5.5 provides details of the components of the State Taxation estimates. Definitions of the State taxes, including relevant legislation, can be found in the Glossary section of the Guide to the Budget.

Table 5.5:State Taxation

2016-17 / 2017-18 / 2018-19 / 2019-20 / 2020-21
Budget / Budget / Forward Estimate / Forward Estimate / Forward Estimate
$m / $m / $m / $m / $m
Payroll tax / 331.1 / 338.7 / 349.2 / 360.3 / 371.0
Taxes on property
Land tax / 93.8 / 105.2 / 107.9 / 111.4 / 114.8
Fire service levies1 / 59.4 / 60.3 / 62.6 / 65.1 / 67.6
Government guarantee fees / 21.5 / 16.9 / 18.2 / 16.8 / 16.7
Conveyance duty2 / 191.2 / 246.8 / 241.6 / 244.0 / 246.3
365.9 / 429.2 / 430.3 / 437.3 / 445.4
Taxes on the provision of goods and services
Gambling taxes
Casino tax and licence fees / 56.4 / 54.9 / 55.0 / 55.2 / 55.6
Betting exchange taxes and levies3 / 3.4 / .... / .... / .... / ....
Lottery tax / 30.6 / 30.4 / 30.9 / 31.4 / 32.0
Totalizator wagering levy / 7.3 / 7.3 / 7.5 / 7.7 / 7.8
Insurance duty / 84.7 / 87.3 / 89.6 / 92.0 / 94.5
182.5 / 179.9 / 183.0 / 186.3 / 189.9

Table 5.5:State Taxation (continued)

2016-17 / 2017-18 / 2018-19 / 2019-20 / 2020-21
Budget / Budget / Forward Estimate / Forward Estimate / Forward Estimate
$m / $m / $m / $m / $m
Taxes on the use of goods and services
Vehicle registration fees / 40.4 / 42.1 / 43.4 / 44.7 / 46.0
Motor vehicle fees and taxes
Motor vehicle duty / 42.9 / 42.9 / 42.9 / 42.9 / 42.9
Motor tax / 85.0 / 87.7 / 90.0 / 92.4 / 94.8
Motor vehicle fire levy / 7.8 / 8.0 / 8.5 / 9.0 / 9.0
176.1 / 180.7 / 184.8 / 189.0 / 192.7
TOTAL STATE TAXATION / 1 055.6 / 1 128.5 / 1 147.4 / 1 173.0 / 1 198.9

Notes:

  1. Fire service levies are reported as a tax for the purposes of the Uniform Presentation Framework. However, all revenues go directly to the State Fire Commission.
  2. Conveyance duty is forecast to reduce slightly in 2018-19 due to an expected return towards trend levels of large commercial property transactions, which have been higher than usual in 2016-17 and are forecast to remain at elevated levels in 2017-18.
  3. The reduction in Betting exchange taxes and levies from 2017-18 reflects the surrender by Betfair of its Tasmanian Gaming Licence.

Chart5.4 shows that the 2017-18 Budget and Forward Estimates have increased compared to the levels forecast in the 201617 Budget. This increase has been largely driven by Conveyance Duty due to growth in residential property prices and transaction volumes.

Chart 5.4:State Taxation Revenue, 200910 to 202021

Note:

  1. This includes the 2016-17Estimated Outcome for State Taxation Revenue. The increase in the 2016-17 Estimated Outcome compared to the 2016-17 Budget is due mainly to higher than expected revenue from Conveyance Duty and Land Tax.

Tax Expenditure Statement

This statement provides an estimate of the revenue the Government has forgone, or the financial benefit obtained by taxpayers, through concessions, benefits and incentives the Government provides through the tax system. Tax expenditures have been estimated for the main revenue lines of payroll tax, land tax and conveyance duty.

Methodology

Tax exemptions, rebates and concessions are measured based on the revenue foregone approach, where the value of the revenue that would have been received if the standard rate of tax had been applied is estimated.

The methodology does not allow for any behavioural changes that may result if an exemption, rebate or concession was removed. The approach also does not allow for potential tax rate changes that may result if a tax exemption, rebate or concession were removed.

Where thresholds are removed, the resulting measure of expenditure is labelled a tax free threshold in the table below. The tax expenditure, or revenue foregone, associated with providing tax free thresholds has been calculated for payroll tax.