The ATO administers the GST on behalf of the Australian states and territories, who then reimburse the Commonwealth for the ATO’s cost of administering GST. Our obligations to the states and territories are set out in the GST Administration Performance Agreement (Performance Agreement) between the ATO and the Council on Federal Financial Relations (per the Intergovernmental Agreement on Federal Financial RelationsExternal Link).
The cost of administering GST is calculated by using the ATO’s strategic costing framework (SCF). This is a cost attribution model consistent with the Australian Government’s accrual-based outcomes and programs costing framework. It calculates the proportion of the ATO’s total operating expenses that relate to GST administration activities on a full-cost basis.
GST administration costs are monitored throughout the year, with oversight provided by the ATO GST Product Committee. The GST costs are endorsed by the Chief Finance Officer and are subject to an annual independent audit by the Australian National Audit Office (ANAO). Costs are reported against the Program Framework Deliverables set out in Schedule B of the Performance Agreement.
The ATO prepares a Schedule B estimate for consideration by the states and territories ahead of each financial year. Once agreed, the estimate serves as the initial intended cost of GST administration for the upcoming financial year. The SCF maps GST activities to program deliverables to capture the direct costs to administer the GST. The percentage of direct costs is applied to the ATO’s indirect costs to calculate the GST portion of indirect costs. The direct ($343.8 million) and indirect ($309.2 million) costs are then added together to derive the full cost of administering the GST.
The Schedule B estimate is calculated well before the financial year commences and prior to the ATO’s final budget for the financial year is settled. As such, there is an expected difference between the endorsed Schedule B estimate and eventual actual costs.
The full-year actual cost for 2021–22 was $653.0 million, which is $22.7 million below the agreed Schedule B estimate, but is an increase of 21.3% from 2020–21. This increase in costs is a result of the ATO’s planned return to more usual work types following support of the COVID-19 stimulus measures.
Figure 5: Administration costs
Figure 6: Program framework deliverables 2021–22
Cost of collection
The cost of collection measures the cost of collecting every $100 of cash.
The cost of collection is often used as a broad measure of a tax administration’s efficiency and effectiveness. Movements in the ratio from year-to-year may reflect variations in efficiency and effectiveness. However, the ratio can also be influenced significantly by factors such as:
- changes in tax rates
- fluctuations in tax revenues due to economic factors
- new administrative expenditure programs that are non-discretionary, or that may have a medium or longer-term impact on efficiency and effectiveness (for example, investment in new technology).
For these reasons, variations in the cost of collection ratio from year–to–year need to be assessed carefully.
The cost to collect $100 of GST increased to $0.87 in 2021–22, compared with $0.71 in 2020–21. This significant increase is a return towards pre-pandemic ratio levels, and reflects the increased costs associated with the ATO’s planned return to normalised GST-related activity levels.
|
2017–18 % |
2018–19 % |
2019–20 % |
2020–21 % |
2021–22 % |
|---|---|---|---|---|---|
Cost of collection as a percentage of revenue (cash) |
1.07 |
1.01 |
0.92 |
0.71 |
0.87 |