The Commonwealth Treasury


Tax Expenditures Statement - 2007

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6.2 Income tax benchmark

Personal income

Tax expenditures for general public services

A1 Deduction for expenses incurred by election candidates
General public services - Legislative and executive affairs ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
2 2 2 2 2 2 3 3
Tax expenditure type:
Deduction
2006 TES code:
A2
Commencement date:
Introduced before 1985
Expiry date:
-
Legislative reference:
Section 25-60 Income Tax Assessment Act 1997
Section 74A Income Tax Assessment Act 1936 (local government provisions)

Certain expenses incurred by candidates contesting federal, state and territory government elections are deductible. Expenses of up to $1,000 per election incurred by candidates contesting local government elections are also deductible. Candidates are eligible for the deduction irrespective of whether they successfully contest the election.

A2 Exemption of official salaries and certain other income of the Governor-General and Governor of any State
General public services - Legislative and executive affairs ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
.. .. .. .. .. .. .. ..
Tax expenditure type:
Exemption
2006 TES code:
A1
Commencement date:
Introduced before 1985
Expiry date:
No longer available for appointments after 28 June 2001
Legislative reference:
Section 51-15 Income Tax Assessment Act 1997

The ordinary and statutory income of the Governor-General and State Governors derived from a source outside Australia, along with their official salaries, were exempt from income tax. This exemption is not available for appointments made after 28 June 2001.

A3 Exemption of income earned by Australians from working on approved overseas projects
General public services - Foreign affairs and economic aid ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
430 420 450 490 500 520 540 570

Note: estimates include tax expenditures A3 and A4

Tax expenditure type:
Exemption
2006 TES code:
A5
Commencement date:
Introduced before 1985
Expiry date:
-
Legislative reference:
Section 23AF Income Tax Assessment Act 1936

Income earned by Australians from working on certain overseas approved projects for a continuous period of 91 days or more may be exempt from income tax. To be approved, projects must be considered to be in the national interest by the Minister for Trade (or the Minister’s delegate).

A4 Exemption of income earned by Australians working in a foreign country
General public services - Foreign affairs and economic aid ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
Included in A3
Tax expenditure type:
Exemption
2006 TES code:
A6
Commencement date:
1986
Expiry date:
-
Legislative reference:
Section 23AG Income Tax Assessment Act 1936

Foreign earnings derived while engaged in foreign service for a continuous period of 91 days or more may be exempt from income tax. This exemption does not apply where the foreign earnings are exempt from income tax in the foreign country for certain reasons.

A5 Exemption of income of certain visitors to Australia
General public services - Foreign affairs and economic aid ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
1 1 1 1 1 1 1 1
Tax expenditure type:
Exemption
2006 TES code:
A4
Commencement date:
Introduced before 1985
Expiry date:
-
Legislative reference:
Section 842-105 Income Tax Assessment Act 1997

The earnings of certain non-residents and visitors to Australia are exempt from income tax.

This exemption generally includes income earned by non-residents:

A6 Exemption of official salary and emoluments of officials of prescribed international organisations
General public services - Foreign affairs and economic aid ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
* * * * * * * *
Tax expenditure type:
Exemption
2006 TES code:
A3
Commencement date:
Introduced before 1985
* Category
1+
Expiry date:
-
Legislative reference:
International Organisations (Privileges and Immunities) Act 1963

The official salary and emoluments of officials of prescribed international organisations may be exempt from income tax as part of the privileges and immunities required under the terms of certain international agreements. Prescribed international organisations include the United Nations organisations, the OECD, the International Court of Justice and the International Atomic Energy Agency.

A7 Exemption from income tax and Medicare levy of residents of Norfolk Island
General public services - General services ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
8 8 8 7 7 7 7 8
Tax expenditure type:
Exemption
2006 TES code:
A7
Commencement date:
Introduced before 1985
Expiry date:
-
Legislative reference:
Sections 23F and 24G and sections 251T and 251U Income Tax Assessment Act 1936

Income earned by residents of Norfolk Island is exempt from income tax and the Medicare levy.

Tax expenditures for defence

A8 Exemption from the Medicare levy for Australian Defence Force members and their relatives and associates
Defence ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
40 40 45 50 50 55 55 60
Tax expenditure type:
Exemption
2006 TES code:
A16
Commencement date:
Introduced before 1985
Expiry date:
-
Legislative reference:
Sections 251T and 251U Income Tax Assessment Act 1936

Income earned by Australian Defence Forces personnel (or people who are entitled to free medical treatment because they are relatives of, or individuals otherwise associated with, Australian Defence Force personnel) is generally exempt from the Medicare levy.

A9 Exemption of certain allowances and bounties and the value of certain rations and quarters to Australian Defence Force personnel
Defence ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
18 13 8 7 18 18 17 16
Tax expenditure type:
Exemption
2006 TES code:
A9
Commencement date:
Introduced before 1985
Expiry date:
-
Legislative reference:
Section 51-5 Income Tax Assessment Act 1997
Regulation 51-5.01 Income Tax Assessment Regulations 1997

Certain allowances and bounties payable to Australian Defence Force personnel are exempt from income tax. These include the following allowances — separation, living out, living away from home, child education, scholarship, retention of lodging, disturbance, transfer and deployment allowances — and re-engagement bounties.

In the case of living away from home allowances and living allowances paid to Australian Defence Force personnel, the benchmark treatment is compensation for the actual additional cost faced by employees in living away from their homes. Accordingly, this tax expenditure relates solely to that part of the allowance that is in excess of this compensation.

The market value of rations and quarters supplied without charge to Australian Defence Force personnel is exempt from income tax.

A10 Exemption of compensation for loss of deployment allowance paid to Australian Defence Force members
Defence ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
.. .. .. .. .. .. .. ..
Tax expenditure type:
Exemption
2006 TES code:
A12
Commencement date:
1996
Expiry date:
-
Legislative reference:
Sections 51-5 and 51-32 Income Tax Assessment Act 1997

Australian Defence Force personnel may receive compensation for the loss of deployment allowance where the deployment allowance ceases to be paid upon repatriation to Australia due to injuries sustained in a warlike situation. Such compensation payments are exempt from income tax.

A11 Exemption of compensation for loss of pay and allowances paid to Australian Defence Force Reserve personnel
Defence ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
.. .. .. .. .. .. .. ..
Tax expenditure type:
Exemption
2006 TES code:
A11
Commencement date:
1996
Expiry date:
-
Legislative reference:
Sections 51-5 and 51-32 Income Tax Assessment Act 1997

Australian Defence Force Reserve personnel who are forced to resign due to injuries sustained whilst employed by the Reserves may receive compensation for the loss of pay and allowances. Such compensation payments are exempt from income tax.

A12 Exemption of pay and allowances earned by members of the Australian Defence Force in operational areas
Defence ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
17 23 29 49 50 50 50 50
Tax expenditure type:
Exemption
2006 TES code:
A13
Commencement date:
Introduced before 1985
Expiry date:
-
Legislative reference:
Sections 23AC and 23AD Income Tax Assessment Act 1936

Pay and allowances made to Australian Defence Force personnel during a period of service in an operational area are exempt from income tax.

A13 Exemption of pay and allowances earned in Australia by foreign forces
Defence ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
.. .. .. .. .. .. .. ..
Tax expenditure type:
Exemption
2006 TES code:
A10
Commencement date:
Introduced before 1985
Expiry date:
-
Legislative reference:
Section 842-105 Income Tax Assessment Act 1997

Pay and allowances earned in Australia by foreign forces are exempt from income tax. This does not apply if the Australian Government makes the payment.

A14 Exemption of pay and allowances for part-time Australian Defence Force Reserve personnel
Defence ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
25 35 35 40 35 35 35 35
Tax expenditure type:
Exemption
2006 TES code:
A8
Commencement date:
Introduced before 1985
Expiry date:
-
Legislative reference:
Section 51-5 Income Tax Assessment Act 1997

The pay and allowances of part-time Australian Defence Force Reserve personnel are exempt from income tax.

A15 Exemption of some payments to Australian Federal Police and civilian personnel in service with an armed force of the United Nations
Defence ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
.. .. .. .. .. .. .. ..
Tax expenditure type:
Exemption
2006 TES code:
A14
Commencement date:
Introduced before 1985
Expiry date:
-
Legislative reference:
Section 23AB Income Tax Assessment Act 1936

Australian Federal Police and civilian personnel contributed by Australia to an armed force of the United Nations may receive compensation in respect of death, impairment or incapacity resulting from their service. Such compensation payments are exempt from income tax. The estate of a deceased civilian who has performed United Nations service may also receive relief from unpaid tax in respect of pay and allowances. In addition, a partial income tax exemption applies to living allowances paid to civilians who died during periods of United Nations service.

A16 Tax offsets for Australian Defence Force personnel serving overseas and for Australian Federal Police and civilians serving with United Nations forces
Defence ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
Included in A48
Tax expenditure type:
Offset
2006 TES code:
A15
Commencement date:
Introduced before 1985
Expiry date:
-
Legislative reference:
Section 79B Income Tax Assessment Act 1936 and
Section 23AB(7) Income Tax Assessment Act 1936

Australian Defence Force personnel who serve overseas and civilian personnel contributed by Australia to an armed force of the United Nations may be eligible for a tax offset. Personnel or civilians qualify for the full offset amount if their total period of overseas service is more than half the income year or if they die while on service. Personnel or civilians who serve for less than half the income year receive a proportion of the full amount. The offset is made up of a base amount with additional entitlements for individuals who maintain dependants.

Tax expenditures for education

A17 Denial of deductibility for certain self-education expenses
Education ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
* * * * * * * *
Tax expenditure type:
Denial of deduction
2006 TES code:
A19
Commencement date:
1989
* Category
1-
Expiry date:
-
Legislative reference:
Section 26-20 Income Tax Assessment Act 1997

Course fees and interest repayments for a Higher Education Contribution Scheme Higher Education Loan Programme (HECS-HELP) place funded by the individual are not tax deductible, even for the proportion that relates to income earning activities.

Self-education expenses would otherwise be deductible to the extent that the self-education is to maintain or improve skills or knowledge which the taxpayer uses in income earning activities.

A18 Exemption of income from certain educational scholarships, payments to apprentices or similar forms of assistance
Education ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
9 10 12 15 17 17 16 16
Tax expenditure type:
Exemption
2006 TES code:
A17
Commencement date:
Introduced before 1985
Expiry date:
-
Legislative reference:
Sections 842-105 and 51-10 Income Tax Assessment Act 1997

Income derived by way of scholarships, bursaries or other educational allowances to a student receiving full-time education at a school, college or university may be exempt from income tax. Income derived as part of an Australian Government scheme to assist secondary education or the education of isolated children is exempt from income tax, excluding federal education or training payments or education entry payments provided under the Social Security Act 1991.

Income derived by way of scholarships, allowances, bursaries or other education allowances provided by the Australian Government to an overseas student may also be exempt from income tax.

Grants from the Australian American Educational Foundation (that is, Fulbright Scholarships) are exempt if they are from funds made available to the Foundation under the agreement establishing it.

Commonwealth Trade Learning Scholarships are also exempt. These are payments of $500 which are made to eligible new apprentices on successful completion of the first and second years of a new apprenticeship in a skill shortage trade, from 1 July 2005.

A19 Threshold for the deductibility of self-education expenses
Education ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
-10 -9 -10 -9 -9 -9 -9 -9
Tax expenditure type:
Denial of deduction
2006 TES code:
A18
Commencement date:
Introduced before 1985
Expiry date:
-
Legislative reference:
Section 82A Income Tax Assessment Act 1936

Self-education expenses are deductible if the purpose of the self-education is to maintain or improve skills or knowledge which the taxpayer uses in income earning activities. In certain circumstances taxpayers may have to reduce their allowable self-education expenses by $250, which may reduce the deduction that they can claim for self-education expenses. Self-education expenses that are non-deductible, such as child care costs and non-deductible travel expenses which relate to self-education, can be offset against the $250 threshold.

Tax expenditures for health

A20 Deduction for payment of United Medical Protection Limited support payments
Health ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
- .. .. 1 .. - - -
Tax expenditure type:
Deduction
2006 TES code:
A25
Commencement date:
2003
Expiry date:
-
Legislative reference:
Section 25-105 Income Tax Assessment Act 1997

From 2003-04, a specific tax deduction is available for all medical practitioners (including retirees) who are required to pay United Medical Protection Limited (UMP) support payments, equal to the full amount of the payment. UMP support payments are required of medical practitioners to fund the Australian Government’s assumption of certain medical indemnity liabilities from medical defence organisations.

A21 Exemption from the Medicare levy for residents with a taxable income below a thresholds
Health ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
530 560 580 650 670 690 700 710
Tax expenditure type:
Exemption
2006 TES code:
A20
Commencement date:
1986
Expiry date:
-
Legislative reference:
Section 7 Medicare Levy Act 1986

The Medicare levy generally applies at a flat rate to a taxpayer’s whole taxable income. Residents whose taxable income falls below a threshold are exempt from the Medicare levy, with the levy phased in once the taxpayer’s income exceeds the threshold.

A22 Exemption of 30 per cent private health insurance refund, including expense equivalent
Health ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
740 810 900 980 1000 1040 1110 1180
Tax expenditure type:
Exemption
2006 TES code:
A23
Commencement date:
1998
Expiry date:
-
Legislative reference:
Section 52-125 Income Tax Assessment Act 1997

Taxpayers can receive a 30 per cent refund on the costs of private health insurance either as a refundable tax offset, direct payment or through reduced premiums. These payments are exempt from income tax.

From 1 April 2005, the refund has been increased from 30 per cent to 35 per cent for individuals aged between 65 and 69 years, and to 40 per cent for individuals aged 70 years and over.

A23 Medical expenses tax offset
Health ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
220 250 300 355 385 425 460 510
Tax expenditure type:
Offset
2006 TES code:
A21
Commencement date:
Introduced before 1985
Expiry date:
-
Legislative reference:
Section 159P Income Tax Assessment Act 1936

A tax offset is available to a taxpayer whose net medical expenses in the income year exceed a certain threshold. Qualifying medical expenses may relate both to resident taxpayers and any resident dependants but are net of available reimbursements, such as Medicare and private health insurance refunds. The value of the offset is currently 20 per cent of the excess of net medical expenses above a threshold of $1,500.

A24 Medicare levy exemption for non-residents, repatriation beneficiaries, blind pensioners and foreign government representatives
Health ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
65 60 70 80 85 95 100 110
Tax expenditure type:
Exemption
2006 TES code:
A22
Commencement date:
1986
Expiry date:
-
Legislative reference:
Sections 251T and 251U Income Tax Assessment Act 1936

The income of non-residents, repatriation beneficiaries, blind pensioners and foreign government representatives is exempt from the Medicare levy.

A25 Medicare levy surcharge lump sum payment in arrears offset
Health ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
- - - .. .. .. .. ..
Tax expenditure type:
Offset
2006 TES code:
A26
Commencement date:
1 July 2005
Expiry date:
-
Legislative reference:
Subdivision 61 L Income Tax Assessment Act 1997

From 2005-06, concessional Medicare levy surcharge treatment has been provided to eligible taxpayers who receive certain lump sum payments in arrears. This measure allows taxpayers who have a Medicare levy surcharge liability, or an increased liability, as a result of certain lump sum payments in arrears to receive concessional treatment in respect of their surcharge liability.

A26 Medicare levy surcharge on income earners who do not hold private health insurance
Health ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
-150 -190 -260 -330 -410 -490 -570 -640
Tax expenditure type:
Increased rate
2006 TES code:
A24
Commencement date:
1997
Expiry date:
-
Legislative reference:
Sections 8B to 8D Medicare Levy Act 1986
A New Tax System (Medicare Levy Surcharge - Fringe Benefits) Act 1999

Individuals and couples who do not have private health insurance and whose income exceeds a threshold are subject to an increased Medicare levy. The Medicare levy surcharge of 1 per cent is payable by single individuals with total taxable income for surcharge purposes in excess of $50,000 and couples and families with combined taxable income for surcharge purposes in excess of $100,000. The surcharge has applied since 1 July 1997 and is a negative tax expenditure.

Tax expenditures for social security and welfare

A27 Child care tax rebate
Social security and welfare ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
- - - - - -115 -120 -130
Tax expenditure type:
Exemption
2006 TES code:
New
Commencement date:
1 July 2007
Expiry date:
-
Legislative reference:
Section 52-150 Income Tax Assessment Act 1997

From 1 July 2007 families will receive the Child Care Tax Rebate soon after the financial year in which they incur child care costs, as a direct payment. Families will still receive a rebate for out-of-pocket costs incurred in 2005-06 under the previous arrangements. Families with out-of-pocket costs for both 2005-06 and 2006-07 will receive two rebates in 2007-08 – one through the tax system and one as a direct payment. The new direct payment will be exempt from tax. See also the related tax expenditure, tax offset for child care.

A28 Exemption of the Baby Bonus
Social security and welfare ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
5 125 135 185 190 220 220 220
Tax expenditure type:
Exemption
2006 TES code:
A27
Commencement date:
1 July 2004
Expiry date:
-
Legislative reference:
Section 52-150 Income Tax Assessment Act 1997

The Baby Bonus (previously known as the Maternity Payment) is exempt from income tax. The Baby Bonus is available in respect of children born or adopted from 1 July 2004. See also the related tax expenditure exemption of the first child tax offset (Baby Bonus).

The Maternity Immunisation Allowance is also exempt from income tax.

Tax concessions for certain taxpayers

A29 Deduction for tax agent fees for Family Tax Benefit claims lodged through Centrelink
Social security and welfare ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
- - - - - - - -
Tax expenditure type:
Deduction
2006 TES code:
A34
Commencement date:
2003
Expiry date:
2004
Legislative reference:
Section 25-7 Income Tax Assessment Act 1997

A tax deduction was available for tax agent fees for Family Tax Benefit claims relating to the 2001-02 income year lodged through Centrelink between 1 July 2003 and 30 June 2004.

Claims made in 2003-04 relating to the 2001-02 income year could only be lodged through Centrelink, not the Australian Taxation Office.

A30 Release from particular tax liabilities in cases of serious hardship
Social security and welfare ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
14 9 12 21 * * * *
Tax expenditure type:
Exemption
2006 TES code:
A33
Commencement date:
Introduced before 1922
* Category:
2+
Expiry date:
-
Legislative reference:
Division 340 in Schedule 1 to the Tax Administration Act 1953

An individual taxpayer can be released from a tax liability where payment of the liability would cause serious hardship. This release from tax liability acts like a tax exemption.

A31 Senior Australians' Tax Offset
Social security and welfare ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
1510 1630 1570 1160 1010 900 920 830
Tax expenditure type:
Offset
2006 TES code:
A30
Commencement date:
1996
Expiry date:
-
Legislative reference:
Sections 160AAAA and 160AAAB Income Tax Assessment Act 1936

The Senior Australians’ Tax Offset (SATO) may be available to taxpayers who are eligible to receive the age pension or a veterans’ benefit, pension or allowance. This includes individuals who qualify for but do not receive a benefit (for example, because they do not meet the means testing criteria).

A32 Tax offset for child care
Social security and welfare ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
- - - 290 345 15 - -
Tax expenditure type:
Offset
2006 TES code:
A36
Commencement date:
2004
Expiry date:
2007
Legislative reference:
Subdivision 61-IA Income Tax Assessment Act 1997

Taxpayers who receive Child Care Benefit (CCB) for approved child care and meet the CCB work/training/study test (or are otherwise eligible for up to 50 hours of CCB) have been eligible for a 30 per cent rebate for out of pocket expenses, up to a maximum of $4,000 per child per year until the 2005-06 income year. Taxpayers could claim the rebate in the tax year after child care expenses had been incurred. This program is now covered by the related tax expenditure child care tax rebate.

A33 Tax offset for recipients of certain social security benefits, pensions or allowances
Social security and welfare ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
1140 1220 1100 1150 1200 1260 1330 1400
Tax expenditure type:
Offset
2006 TES code:
A29
Commencement date:
Introduced before 1985
Expiry date:
2007
Legislative reference:
Section 160AAA Income Tax Assessment Act 1936

Taxpayers who receive certain social security benefits, pensions or allowances may be eligible for a tax offset (the beneficiary or the pensioner tax offsets). Qualifying government payments include:

A34 Tax offsets for dependent spouse, child-housekeeper and housekeeper who cares for a prescribed dependant
Social security and welfare ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
380 390 420 430 450 560 570 580
Tax expenditure type:
Offset
2006 TES code:
A31
Commencement date:
Introduced before 1985
Expiry date:
-
Legislative reference:
Sections 159J and 159L Income Tax Assessment Act 1936

A taxpayer may be entitled to claim one of the following tax offsets:

A35 Tax offsets for taxpayers supporting a parent, parent-in-law, or invalid relative
Social security and welfare ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
15 15 20 35 45 50 50 55
Tax expenditure type:
Offset
2006 TES code:
A28
Commencement date:
Introduced before 1985
Expiry date:
-
Legislative reference:
Sections 159J Income Tax Assessment Act 1936

A taxpayer who contributes to the maintenance of one or more dependants may be entitled to a tax offset. Dependants must be Australian residents and be either an invalid relative or a parent (or parent-in-law).

A36 Mature Age Worker Tax Offset
Other economic affairs - Total labour and employment affairs ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
- - 440 510 480 490 450 440
Tax expenditure type:
Offset
2006 TES code:
A35
Commencement date:
2004
Expiry date:
-
Legislative reference:
Subdivision 61-K Income Tax Assessment Act 1997

Workers aged 55 years and over may be entitled to a tax offset, based on the amount of their net income from working. The offset applies from the 2004-05 income year. A maximum offset amount of $500 is payable on assessment.

A37 Asian Development Bank – income tax exemption for Australian staff
Other economic affairs - Other economic affairs, nec ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
- - .. .. .. .. .. ..
Tax expenditure type:
Exemption
2006 TES code:
A37
Commencement date:
17 September 2005
Expiry date:
-
Legislative reference:
Regulation 7 of the Asian Development Bank (Privileges and Immunities) Regulations 1967

The income of Australian resident officers of the Asian Development Bank (ADB) is exempt from tax. This exemption is part of the broader arrangement with the ADB that facilitates the day-to-day running of the Australian office which services the needs of the Pacific Island countries.

A38 International taxation – foreign income exemption for temporary residents
Other economic affairs - Other economic affairs, nec ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
- - - - 35 35 40 40
Tax expenditure type:
Exemption
2006 TES code:
A38
Commencement date:
1 July 2006
Expiry date:
-
Legislative reference:
Subdivision 768-R Income Tax Assessment Act 1997

The majority of foreign source income of temporary residents is exempt from income tax and capital gains on only some Australian assets are taxed. Gains or losses made on employee shares or rights are disregarded unless they relate to employment in Australia. Interest paid to foreign lenders by temporary residents is exempt from withholding tax.

Tax exemptions for certain government income support payments

A39 Exemption of certain income support benefits, pensions or allowances
Social security and welfare ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
980 990 940 970 1000 1040 1080 1120
Tax expenditure type:
Exemption
2006 TES code:
A39
Commencement date:
Introduced before 1985
Expiry date:
-
Legislative reference:
Subdivision 52-A Income Tax Assessment Act 1997

Certain social security pensions, benefits and allowances and certain repatriation pensions paid under the Social Security Act 1991 and the National Health Act 1953 are exempt from income tax.

Certain amounts of Commonwealth education or training payments and certain parts of payments under the Abstudy scheme are exempt from income tax.

A40 Exemption of certain pensions, annuities or allowances paid for persecution
Social security and welfare ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
Included in A41
Tax expenditure type:
Exemption
2006 TES code:
A46
Commencement date:
Introduced before 1985
Expiry date:
-
Legislative reference:
Section 768-105 Income Tax Assessment Act 1997

From 2001-02, certain foreign source World War II payments are exempt from income tax. This applies where the payment is in connection with:

suffered as a result of:

Prior to 2001-02, certain pensions, annuities and allowances paid by the Federal Republic of Germany and the Kingdom of the Netherlands, as compensation for persecution or disability arising during World War II, were exempt from income tax.

A41 Exemption of certain war-related payments and pensions
Social security and welfare ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
300 320 280 240 240 190 190 190

Note: estimates include tax expenditures A41 and A40

Tax expenditure type:
Exemption
2006 TES code:
A45
Commencement date:
Introduced before 1985
Expiry date:
-
Legislative reference:
Subdivisions 52-B and 52-C Income Tax Assessment Act 1997

Repatriation pensions, or pensions, allowances and payments of a similar nature, and certain war-related payments and pensions are exempt from income tax.

A42 Exemption of Child Care Benefit
Social security and welfare ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
345 365 385 400 380 410 420 440
Tax expenditure type:
Exemption
2006 TES code:
A42
Commencement date:
2000
Expiry date:
-
Legislative reference:
Section 52-150 Income Tax Assessment Act 1997

Child Care Benefit paid by the Australian Government is exempt from income tax.

Child Care Benefit can be paid directly to child care service providers to reduce the fees charged. Alternatively, the payment can be made directly to parents as a lump sum at the end of the income year.

On 1 July 2007, Child Care Benefit increased by 10 per cent in addition to normal Consumer Price Index indexation.

A43 Exemption of Family Tax Benefit, Parts A and B, including expense equivalent
Social security and welfare ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
2590 2390 2560 2510 2480 2320 2390 2450
Tax expenditure type:
Exemption
2006 TES code:
A40
Commencement date:
2000
Expiry date:
-
Legislative reference:
Section 52-150 Income Tax Assessment Act 1997

Taxpayers can receive the Family Tax Benefit either as a direct payment or as a refundable tax offset. Payments are exempt from income tax regardless of delivery method.

A44 Exemption of rent subsidy payments under the Commonwealth/State mortgage and rent relief schemes
Social security and welfare ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
13 13 12 11 11 11 12 12
Tax expenditure type:
Exemption
2006 TES code:
A41
Commencement date:
Introduced before 1985
Expiry date:
-
Legislative reference:
Section 51-30 Income Tax Assessment Act 1997

Rent subsidy payments received by renters and paid under the Mortgage and Rent Relief Scheme by an Australian Government agency are exempt from income tax.

A45 Exemption of the first child tax offset (Baby Bonus)
Social security and welfare ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
21 31 32 26 19 10 3 1
Tax expenditure type:
Exemption
2006 TES code:
A44
Commencement date:
2002
Expiry date:
Children born (or legal responsibility gained) on or before 30 June 2004
Legislative reference:
Subdivision 61-I Income Tax Assessment Act 1997

First child tax offset (Baby Bonus) payments are exempt from income tax. The first child tax offset is available to parents who gained legal responsibility for a child between 1 July 2001 and 30 June 2004. See also the related tax expenditure exemption of the Baby Bonus.

A46 Exemption of Utilities Allowance and Seniors’ Concession Allowance
Social security and welfare ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
- - 15 30 40 15 15 16
Tax expenditure type:
Exemption
2006 TES code:
A43
Commencement date:
2004
Expiry date:
-
Legislative reference:
Sections 52-10 and 52-65 Income Tax Assessment Act 1997

Utilities Allowances and Seniors’ Concession Allowances payable to senior Australians are exempt from income tax.

Tax expenditures for housing and community amenities

A47 Exemption of payments made under the First Home Owners Grant Scheme
Housing and community amenities ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
295 250 245 315 320 320 330 335
Tax expenditure type:
Exemption
2006 TES code:
A49
Commencement date:
2000
Expiry date:
-
Legislative reference:
A New Tax System (Commonwealth State Financial Arrangements) Act 1999 Appendix D, Intergovernmental Agreement on Commonwealth State Financial Relations, Appropriation Act (No. 2) 2001-02 (for the additional grant) and relevant state legislation

Payments made under the First Home Owners Grant Scheme are exempt from tax. Eligible applicants purchasing or building their first home from 1 July 2000 are entitled to $7,000 assistance to compensate for the impact of the GST and tax reform on the price of houses. The Australian Government announced an additional $7,000 grant where a first homeowner built their first home or purchased a new, but previously unoccupied home, between 9 March 2001 and 31 December 2001. From 1 January 2002 until 30 June 2002 inclusive, the additional grant was reduced to $3,000.

A48 Zone tax offsets
Housing and community amenities ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
185 190 195 200 200 195 190 185

Note: estimates include tax expenditures A48 and A16

Tax expenditure type:
Offset
2006 TES code:
A48
Commencement date:
Introduced before 1985
Expiry date:
-
Legislative reference:
Section 79A Income Tax Assessment Act 1936

Taxpayers who live in prescribed remote areas of Australia are eligible for a tax offset.

Tax expenditures for recreation and culture

A49 Exemption of certain prizes
Recreation and culture ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
- - - - .. .. .. ..
Tax expenditure type:
Exemption
2006 TES code:
New
Commencement date:
1 July 2006
Expiry date:
-
Legislative reference:
Not yet legislated

The Prime Minister's Prize for Australian History and Prime Minister’s Prize for Science will both be exempt from income tax from 1 July 2006.

A50 Income averaging for authors, inventors, performing artists, production associates and sportspersons
Recreation and culture ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
8 7 8 7 8 8 8 9
Tax expenditure type:
Concessional rate
2006 TES code:
A50
Commencement date:
1987
Expiry date:
-
Legislative reference:
Division 405 Income Tax Assessment Act 1997

Authors (including composers and artists), inventors, performing artists, production associates and sportspersons can be subject to significant fluctuations in their income. These taxpayers may be eligible for an income averaging scheme that provides concessional rates of tax for abnormal receipts above average income.

Tax expenditures for other economic affairs

A51 Deductibility of union dues and subscriptions to business associations
Other economic affairs - Total labour and employment affairs ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
* * * * * * * *
Tax expenditure type:
Deduction
2006 TES code:
A53
Commencement date:
Introduced before 1985
*Category:
1+
Expiry date:
-
Legislative reference:
Section 25-55 Income Tax Assessment Act 1997

Union dues and subscriptions to trade, business or professional associations are specifically tax deductible up to a maximum amount of $42. This deduction is available in addition to any work related expense deduction.

A52 Deferral of tax and exemption for share discounts on qualifying employee share acquisition schemes
Other economic affairs - Total labour and employment affairs ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
* * * * * * * *
Tax expenditure type:
Exemption, Deferral
2006 TES code:
A55
Commencement date:
1995
*Category:
3+
Expiry date:
-
Legislative reference:
Section 26AAC and Division 13A Income Tax Assessment Act 1936

Discounts on shares (or rights to acquire shares) acquired under an employee share acquisition scheme are generally included in the taxpayer’s assessable income in the year in which the share or right was acquired. A taxpayer may defer the inclusion of discounts on qualifying shares or rights for up to 10 years. Alternatively, the taxpayer may elect to bring the discount on qualifying shares or rights to assessment in the year of acquisition and benefit from an exemption on the first $1,000. These concessions apply under certain conditions, in particular the share or right must be acquired after 28 March 1995. The concessions also apply to stapled securities that include an ordinary share and are listed on the Australian Stock Exchange with effect from 1 July 2006. Certain other shares or rights acquired before 28 March 1995 were eligible for an exemption on the first $200 of the discount.

A53 Tax deferral advantage arising from return of after-tax contributions to a pension or annuity
Other economic affairs - Total labour and employment affairs ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
* * * * * * * *
Tax expenditure type:
Deferral
2006 TES code:
A51
Commencement date:
Introduced before 1985
*Category:
na
Expiry date:
-
Legislative reference:
Section 27H Income Tax Assessment Act 1936

The value of a pension or annuity may partly consist of contributions towards the income stream from the recipient’s after-tax income. This part of the income stream is not taxed again when it is returned in the form of pension or annuity payments. A tax expenditure arises because the tax free part of a pension or annuity is apportioned evenly over the term of the income stream, providing a tax deferral advantage.

A54 Denial of deductions for illegal activities
Other economic affairs - Other economic affairs, nec ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
* * * * * * * *
Tax expenditure type:
Deduction
2006 TES code:
A56
Commencement date:
1 July 1999
*Category:
1-
Expiry date:
-
Legislative reference:
Sections 26-52, 26-53 and 26-54 of the Income Tax Assessment Act 1997

Deductibility is denied for a loss or outgoing that is a bribe to a public official, including a foreign public official.

From 30 April 2005, deductions are also denied for expenditure to the extent it is incurred in the furtherance of, or directly in relation to, activities in respect of which the taxpayer has been convicted of an indictable offence. Indictable offences are those punishable by imprisonment for at least one year.

A55 Distributions to charitable funds
Other economic affairs - Other economic affairs, nec ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
- - - * * * * *

Note: estimates include tax expenditures A55, A56 and A59

Tax expenditure type:
Exemption
2006 TES code:
A57
Commencement date:
1 July 2005
*Category:
2+
Expiry date:
-
Legislative reference:
Sections 50-5 and 50-60 Income Tax Assessment Act 1997

Charitable funds can claim income tax exemptions where they provide money, property and benefits solely to charities based in Australia, or solely to charitable deductible gift recipients, or to a combination of these.

A56 Income tax exemption for funds that distribute to certain entities
Other economic affairs - Other economic affairs, nec ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
Included in A55
Tax expenditure type:
Exemption
2006 TES code:
A58
Commencement date:
1 July 2005
Expiry date:
-
Legislative reference:
Section 50-20 Income Tax Assessment Act 1997

Non-charitable public ancillary funds and prescribed private funds that provide money, property and benefits solely to income tax exempt deductible gift recipients will qualify for income tax exemptions where the Commissioner of Taxation has endorsed these funds as being eligible for tax exemptions.

A57 Increased tax rates for certain minors
Other economic affairs - Other economic affairs, nec ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
-27 -25 -22 -18 -14 -11 -8 -6
Tax expenditure type:
Increased rate
2006 TES code:
A52
Commencement date:
Introduced before 1985
Expiry date:
-
Legislative reference:
Division 6AA Income Tax Assessment Act 1936

Higher rates of taxation apply to the ‘unearned income’ of certain minors. ’Unearned income’ includes dividend, interest, rent, royalties and other income from property. The special rates do not apply to minors classed as being in a full-time occupation.

A58 Part-year tax free threshold
Other economic affairs - Other economic affairs, nec ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
-20 -35 -40 -40 -40 -40 -45 -45
Tax expenditure type:
Increased rate
2006 TES code:
A54
Commencement date:
1986
Expiry date:
-
Legislative reference:
Sections 16 to 20 Income Tax Rates Act 1986

Taxpayers who become an Australian resident for the first time, or cease to be an Australian resident, receive a pro-rated tax free threshold. This corresponds to the number of months that the taxpayer is an Australian resident.

Prior to the 2006-07 income year, a student who ceased full-time education for the first time received a pro-rated tax free threshold, corresponding to the number of months that the student was not enrolled in full-time education.

A59 Refund of franking credits for eligible funds
Other economic affairs - Other economic affairs, nec ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
Included in A55
Tax expenditure type:
Rebate
2006 TES code:
A59
Commencement date:
1 July 2005
Expiry date:
-
Legislative reference:
Subdivision 207-E Income Tax Assessment Act 1997

Non-charitable public ancillary funds and prescribed private funds that provide money, property and benefits solely to income tax exempt deductible gift recipients can claim a refund on franking credits where the Commissioner of Taxation has endorsed these funds as being eligible for tax exemptions.

Concessions under the substantiation provisions for employment-related expenses

A60 A reasonable overtime meal allowance
Other economic affairs - Total labour and employment affairs ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
* * * * * * * *
Tax expenditure type:
Deduction
2006 TES code:
A60
Commencement date:
1987
*Category:
0
Expiry date:
-
Legislative reference:
Section 8-1 and 900-60 Income Tax Assessment Act 1997

A taxpayer is able to claim a deduction for a ‘reasonable’ overtime meal allowance expense payable under an industrial instrument.

A61 Alternatives to the logbook method of substantiating car expenses
Other economic affairs - Total labour and employment affairs ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
* * * * * * * *
Tax expenditure type:
Deduction
2006 TES code:
A62
Commencement date:
1987
*Category:
1+
Expiry date:
-
Legislative reference:
Division 28 and Subdivision 900-C Income Tax Assessment Act 1997

Three alternative methods to the logbook method (which is based on actual expenditure) are available to value car expense deductions:

A62 Certain travel expenses in and outside Australia
Other economic affairs - Total labour and employment affairs ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
* * * * * * * *
Tax expenditure type:
Deduction
2006 TES code:
A61
Commencement date:
1987
*Category:
0
Expiry date:
-
Legislative reference:
Sections 8-1, 900-50 and 900-55 Income Tax Assessment Act 1997

A taxpayer is able to claim a deduction in relation to a travel allowance for reasonable expenses on accommodation, meals and incidental costs of travel in Australia, and meals and incidental costs of travel outside Australia.

Miscellaneous tax expenditures

A63 Tax offset on certain payments of income received in arrears
Other economic affairs - Total labour and employment affairs ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
5 4 4 3 3 3 3 3
Tax expenditure type:
Offset
2006 TES code:
A63
Commencement date:
1986
Expiry date:
-
Legislative reference:
Sections 159ZR to 159ZRD Income Tax Assessment Act 1936

Individual taxpayers that receive lump sum payments of certain income that accrued in earlier income years may be entitled to a tax offset. Income that qualifies for the tax offset includes certain back payments of salary or wages, lump sum payments of workers’ or accident compensation, and social security and other benefits, received on or after 1 July 1986.

A64 Deduction for contributions with an associated minor benefit
Other economic affairs - Other economic affairs, nec ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
- - 3 3 5 9 9 9
Tax expenditure type:
Deduction
2006 TES code:
A65
Commencement date:
1 July 2004
Expiry date:
-
Legislative reference:
Division 30 Income Tax Assessment Act 1997

Individual taxpayers may claim an income tax deduction for the net amount of contributions made to a deductible gift recipient even though the taxpayer receives an associated minor benefit (subject to certain conditions). The deduction available is the contribution less the market value of the minor benefit.

From 1 January 2007, the thresholds of the minor benefits provision will be changed to improve the measure’s accessibility and allow a larger benefit to be received. The minimum contribution an individual must make to be eligible for a deduction is reduced from $250 to $150, and the value of the benefit that can be received is increased from 10 to 20 per cent of the contribution. The maximum capped benefit allowed for each contribution is increased from $100 to $150.

A65 Deduction for donations to prescribed private funds
Other economic affairs - Other economic affairs, nec ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
25 70 85 160 350 190 185 185
Tax expenditure type:
Deduction
2006 TES code:
A66
Commencement date:
2001
Expiry date:
-
Legislative reference:
Division 30 Income Tax Assessment Act 1997
Income Tax Assessment Regulations 1997

Donations of $2 or more to approved prescribed private funds are tax deductible. Complying funds are prescribed in regulations under the Income Tax Assessment Act 1997.

Prescribed private funds allow businesses, families and individuals to establish and donate to a charitable or discretionary trust, for the purpose of disbursing funds to a range of other deductible gift recipients.

A66 Deduction for gifts to approved donees
Other economic affairs - Other economic affairs, nec ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
540 560 710 710 870 950 1010 1110
Tax expenditure type:
Deduction
2006 TES code:
A64
Commencement date:
Introduced before 1985
Expiry date:
-
Legislative reference:
Division 30 Income Tax Assessment Act 1997

Gifts of cash and property (subject to certain conditions) of a value of $2 or more to certain approved recipients are tax deductible. Eligible recipients are listed in tables in Subdivision 30-B of the Income Tax Assessment Act 1997.

A67 Exemption for structured settlements and structured orders
Other economic affairs - Other economic affairs, nec ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
3 4 5 6 7 8 9 10
Tax expenditure type:
Exemption
2006 TES code:
A69
Commencement date:
2001
Expiry date:
-
Legislative reference:
Section 54 Income Tax Assessment Act 1997

Certain annuities provided to personal injury victims under structured settlements and structured orders are exempt from income tax. These provisions allow personal injury victims who would be eligible to receive large tax free lump sum compensation payments to receive all or part of their compensation in the form of a tax free annuity or annuities.

A68 Exemption of post-judgment interest awards in personal injury compensation cases
Other economic affairs - Other economic affairs, nec ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
2 2 2 2 2 2 2 2
Tax expenditure type:
Exemption
2006 TES code:
A67
Commencement date:
1992
Expiry date:
-
Legislative reference:
Section 51-57 Income Tax Assessment Act 1997

Interest may accrue on a judgment debt arising in personal injury compensation cases relating to the period between the original judgment and when the judgment is finalised. Such interest is exempt from tax.

The provisions, introduced in 1999-00, apply to compensation paid in the 1992-93 and later income years.

A69 Immediate deduction for low-value depreciating assets not used in business
Other economic affairs - Other economic affairs, nec ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
* * * * * * * *
Tax expenditure type:
Deduction
2006 TES code:
A70
Commencement date:
2001
*Category:
3+
Expiry date:
-
Legislative reference:
Sections 40-25 and 40-80 of the Income Tax Assessment Act 1997

An immediate deduction is available for depreciating assets costing $300 or less where those assets are used predominantly for the purpose of producing assessable income and where that income is not income from carrying on a business.

A70 Tax offset of interest on certain government securities
Other economic affairs - Other economic affairs, nec ($m)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
.. .. - - - - - -
Tax expenditure type:
Offset
2006 TES code:
A68
Commencement date:
Introduced before 1985
Expiry date:
-
Legislative reference:
Section 160AB Income Tax Assessment Act 1936

Taxpayers are entitled to a tax offset equal to 10 cents for each dollar of interest on certain government or semi-government securities issued before 1 November 1968.

 

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Chapter 6.1: Tax Expenditures
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