Tax outlook

Table 2 reconciles the 2016‑17 Budget estimates of tax receipts with the 2015‑16 Budget and the 2015‑16 MYEFO estimates. Since the 2015‑16 MYEFO, tax receipts, including new policy, have been revised down by $3.7 billion in 2015‑16, $6.4 billion in 2016‑17 and $14.7 billion over the four years to 2018‑19.

Since the 2015‑16 MYEFO, forecast tax receipts, excluding new policy, are lower by $4.6 billion in 2016‑17 and $13.5 billion over the four years to 2018‑19. This represents a 0.8 per cent reduction in tax receipts over the four years to 2018‑19, which is a small revision by historical standards.

The largest contribution to the lower expected tax receipts is from gross income tax withholding, consistent with weaker‑than‑expected total wages. Wage growth has been low by historical standards and is forecast to be lower in 2015‑16 and 2016‑17 than at the 2015‑16 MYEFO. The recent recovery in some key commodity export prices — particularly iron ore — has led to higher expected mining profits since the 2015‑16 MYEFO. However, this has been partly offset by a weaker outlook for non‑mining business profits, consistent with weaker domestic prices and activity compared to the 2015‑16 MYEFO. For more details on the economic outlook, see Budget Statement 2.

The downgrade to total wages has contributed to individuals tax being reduced by $12 billion over the four years to 2018‑19. In addition, superannuation fund tax has been revised down by $5.5 billion over the four years to 2018‑19, primarily as a result of weaker‑than‑expected collections in 2015‑16. These revisions have been partly offset by increased indirect taxes of $4.1 billion over the four years to 2018‑19. The revision to forecast total tax receipts is affected by the shift in composition of the economic forecasts away from wages to mining gross profits.

The Government's ten year enterprise tax plan will deliver benefits for Australians by encouraging greater investment and higher wages. Over the forward estimates, the ten year enterprise tax plan decreases tax receipts by $9.2 billion. The tax integrity package encompasses measures to reinforce the corporate tax base, and will increase tax receipts by $2.4 billion over the forward estimates. Superannuation reforms that better target superannuation concessions will contribute $3.1 billion to tax receipts over the forward estimates. Excluding the tax integrity measures, the Government is reducing the tax burden by around $1.9 billion over the forward estimates. More information is available in Budget Statement 1 and in Budget Paper 2.

The 2015‑16 MYEFO made provisions for the Trans‑Pacific Partnership Agreement and the Environmental Goods Agreement, which were still subject to finalisation at the time. The provision for the Trans‑Pacific Partnership Agreement has been removed as it is included as a measure in the 2016‑17 Budget. As is standard practice, the Environmental Goods Agreement, which removes tariffs on environmental goods such as solar panels and wind turbines, will be published as a measure once the agreement has been formally signed.