1 This publication presents the results of a study of the effects of taxation and government expenditure on the distribution of income among private households in Australia in 2015–16, referred to as a ‘Fiscal Incidence Study’. The results show how the allocation of benefits and taxes differ between households depending on characteristics such as household composition, life cycle stages, household size and income.
2 One of the major data sources used in this study is the Household Expenditure Survey (HES). This study is therefore currently undertaken every six years in conjunction with the HES. Information relating to the collection and compilation of the HES (e.g. scope and coverage, sample design, processing methodology, etc) can be found in Household Expenditure Survey and Survey of Income and Housing, User Guide, Australia (cat. no. 6503.0).
3 Other major data sources used in this study are the ABS Government Finance Statistics (GFS) and Input-Output tables from the Australian System of National Accounts (ASNA). Revisions to the ASNA should be taken into account when interpreting differences between studies, noting changes to standards, benchmarking, source data and methods applied to the ASNA between study years. Information on recent ASNA changes can be found in Information Paper: Changes to the 2016-17 release of the Australian System of National Accounts (cat. no. 5220.127.116.11).
4 Previous studies were conducted in relation to 1984, 1988–89, 1993–94, 1998–99, 2003–04 and 2009–10.
Changes in this issue
5 Income quintile tables in this issue feature an adjusted low income quintile. The adjusted measure excludes the bottom two percentiles to remove the undue impact of households with very low incomes which may not accurately reflect levels of economic wellbeing. For more information refer to the chapter on Summary Indicators of Income and Wealth Distributions in Household Expenditure Survey and Survey of Income and Housing, User Guide, Australia (cat. no. 6503.0)
6 In this publication, net imputed rent estimates for owner occupied dwellings and privately subsidised rental accommodation have again been included as a component of private income. The ABS implemented revised methodologies for imputed rent in the 2015-16 Survey of Income and Housing (SIH) and HES. HES estimates for 2003-04 and 2009-10 shown in the time series tables and analyses reflect the revised method.
7 For more information on the revised methodologies for household level imputed rent estimates, see Estimates of Imputed Rent, Australia (cat. no. 6525.0).
8 Estimates presented in this publication for 2009-10 have been corrected to amend a small error in the allocation of taxes on production. The correction of this error increases the total amount of taxes on production allocated by around $3 per household. The categories of taxes on production affected were Clothing and Footwear, Ownership of Dwellings, and Other Goods and Services.
Changes in the contents of this issue
9 The following changes have been made to the content of this publication:
- taxes on production on communication and education are now presented separately in this release. Previously these were included as part of taxes on production on other goods and services.
- additional new tables featuring the taxable income of the household reference person and housing costs as a proportion of gross income
- re-structured tables featuring life cycle groups and family composition of household are presented in data cube 11.
Concepts and definitions
Income and distributional measures
10 The concepts and definitions relating to all measures of income and government benefits and taxes are described in the ‘What is a Fiscal Incidence Study?’ chapter of this publication. Other definitions are included in the glossary. More detailed explanation of income concepts and definitions can also be found in Household Expenditure Survey and Survey of Income and Housing, User Guide, Australia (cat. no. 6503.0).
11 Concepts and definitions relating to household level data, equivalisation, imputed rent and net worth can also be found in the User Guide. The User Guide also provides a more detailed explanation on the allocation of social transfers in kind.
Data source for taxes on production
12 Input-Output tables form part of the ASNA and provide a means of undertaking detailed analysis of the process of production, the use of goods and services (products) and of the income generated in that production. They show, for the economy as a whole and for groups of products, the total resources in terms of domestic output and imports, and the uses of goods and services in terms of intermediate consumption, final consumption, gross capital formation and exports.
13 The estimation of the incidence of taxes on production to households is based on extensive use of these Input-Output tables. Australian National Accounts: Input-Output Tables (cat. no. 5209.0.55.001) includes the supply-use tables with detailed explanatory notes on the data sources, content and methods of construction used.
Unit of analysis
14 The household is the basic unit of analysis in this publication. A household consists of one or more persons, at least one of whom is at least 15 years of age, usually resident in the same private dwelling. The persons in a household may or may not be related.
15 The household is adopted as the basic unit of analysis because it is assumed that sharing of the use of goods and services occurs at this level. If smaller units, say persons, are adopted, then it is difficult to know how to attribute to individual household members the use of shared items such as food, accommodation and household goods. Intra-household transfers are excluded. For example, if one member of the household were to pay board to another member of the same household then this is not considered as an increase in the amount of income or housing costs of the household.
Benefits and taxes allocated
16 The aim of the study is to allocate only those benefits and taxes relatable to particular types of households. No attempt has been made to allocate the whole of government expenditure and revenue.
17 In many cases, the decision to allocate or not to allocate was guided by the availability of data for appropriate allocation to the household level. For social assistance benefits in cash, allocation of government expenses relating to these cash payments was restricted to cash payments covered by the HES income questionnaire. Taxes on income not allocated include taxes not directly relevant to the household sector such as corporate taxes, and taxes relating to some household receipts, such as capital gains tax.
18 Many social transfers in kind were not allocated because:
- there was no clear conceptual basis for allocation
- they related to segments of the population not covered by HES
- target groups could not be identified within HES data
- expenditure on target groups could not be isolated in GFS data.
19 Taxes on production were calculated by applying intermediate and final tax rates derived from the Australian National Accounts: Input-Output Tables,(cat. no. 5209.0.55.001) to household expenditure. Because household expenditure does not account for the full amount of production and consumption recorded in the Input-Output tables, only a proportion of taxes on production was allocated to households.
Comparison with National Accounts
20 Aggregate estimates of household income are published in Australian System of National Accounts (cat. no. 5204.0) and taxation revenue are published in Taxation Revenue, Australia (cat. no. 5506.0). These data allow estimates for the household sector as a whole to be compared with the estimates compiled in this study.
Social assistance benefits in cash
21 According to the ASNA, Australian households received $132,198 million social assistance benefits in cash in 2015-16. By comparison, in this study $100,655 million social assistance benefits in cash were allocated to households. The difference between the estimates is partly due to the inclusion in the ASNA of some payments that have been classified as social transfers in kind in this study ($9,263 million). These include the Child Care Rebate (CCR) and Private Health Insurance Rebate (PHIR). Additionally, some other one-off or irregular payments made by various state and Commonwealth agencies may not have been fully captured in the HES. Other reasons for the lower allocation of social assistance benefits in cash in this study include scope exclusions in the HES. The HES estimates do not include pensions and allowances received by people living in non-private dwellings (e.g. nursing homes), nor by people living in very remote areas of Australia.
Social transfers in kind
22 ASNA estimates of social transfers in kind to Australian households were $192,973 million in 2015-16. In this study, $207,224 million of social transfers in kind were allocated to households. The main reason for the difference is the classification of government expenditure on CCR and the PHIR as social transfers in kind in this study, but as social assistance benefits in cash in the ASNA. Additionally, the ASNA estimate includes expenditure on residential aged care that is excluded from this study due to the exclusion of non-private dwellings, such as nursing homes, from the scope of the HES.
Taxes on income
23 Total income taxes levied on individuals were $192,054 million (Taxation Revenue, Australia (cat. no. 5506.0)). In this study, $178,640 million taxes on income (93%) were allocated to households. The main reasons for the difference in taxes on income in this study are:
- taxes on wealth, such as capital gains tax, were out of scope
- the exclusion of non-private dwellings in the HES.
Taxes on production
24 Government revenue from total taxes on production less subsidies was $171,389 million. Net taxes on production on Household Final Consumption Expenditure (HFCE) (a national accounts concept measuring net expenditure on goods and services by households and non-profit institutions serving households) account for approximately 75% of total taxes on production. Therefore, at best, 75% of this revenue would be allocated by the study. The study allocated $93,467 million or 55% of total taxes on production. Less than 75% of taxes on production were allocated because:
- HES excludes some of the population
- household expenditures were, to a degree, understated, particularly for highly taxed items such as alcohol, tobacco and gambling.
Special data services
25 The ABS offers specialist consultancy services to assist clients with more complex statistical information needs. Clients may wish to have the unit record data analysed according to their own needs, or require tailored tables incorporating data items and populations as requested by them. Tables and other analytical outputs can be made available electronically or in printed form. However, as the level of detail or disaggregation increases with detailed requests, the number of contributors to data cells decreases. This may result in some requested information not being able to be released due to confidentiality or sampling variability constraints. All specialist consultancy services attract a service charge, and clients will be provided with a quote before information is supplied.
Unit record file
27 For clients who wish to undertake more detailed analysis of the survey data, a confidentialised unit record file (CURF) will be available following the release of this publication. The 2015-16 HES CURF has been revised by appending the study estimates to each household record. All clients wishing to access the HES 2015-16 CURF should refer to the How to Apply for Microdata web page. Clients should familiarise themselves with the User Manual: Responsible Use of ABS CURFs and other related microdata information which are available via the Microdata web pages, before applying for access through MiCRO.