3. GST administration expenditure

Cost of administering GST

The ATO administers the GST on behalf of the Commonwealth, states and territories. The states and territories then reimburse the Commonwealth for our cost of administering GST.

Our obligations to the states and territories are set out in the GST Administration Performance Agreement between ATO and Council on Federal Financial Relations (as in the Intergovernmental Agreement on Federal Financial RelationsExternal Link).

The cost of administering GST is calculated by using our 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 our 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 our GST Leadership Group. The GST costs are endorsed by the Chief Finance Officer and subject to an annual independent audit by the Australian National Audit OfficeExternal Link (ANAO). Costs are reported against the Program Framework Deliverables set out in Schedule B of the GST Administration Performance Agreement.

We prepare 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 and indirect costs are then added together to derive the full cost of administering the GST.

The Schedule B estimate is calculated before the financial year commences and before our 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 2023–24 was $617.7 million, a decrease of 5.4% from 2022–23, and $101.8 million (or 14.1%) below the agreed Schedule B estimate.

The direct cost of the GST Compliance Program increased from $101.8 million in 2022–23 to $109.0 million in 2023–24. This is due to additional strategies being introduced in the 2023–27 GST Compliance Program.

Table 3.1: Variation of GST administration costs from agreed budget (%)

Type of measure	2019–20	2020–21	2021–22	2022–23	2023–24
Variation of GST administration costs from agreed budget (total administration budget)	-10.9	-13.4	-3.4	-3.5	-14.1

Notes: GST Performance Agreement Schedule A 9a. This measure reflects the percentage that the actual GST product cost varies from the agreed budget, as specified in Schedule B. It is reported retrospectively.

Schedule B: GST budget and administration activities

Table 3.2 addresses our performance in relation to Schedule B. The GST administration cost statement is a special purpose financial report prepared using statements of accounting concepts and on an accrual basis.

Table 3.2: Framework deliverables ($m)

Number	Category	2023–24 actual	2023–24 Schedule B	2024–25 endorsed estimate
1.1.1	Policy advice and forecasting	4.0	4.5	4.3
1.1.2	Design and build administrative solutions	38.3	53.3	45.3
1.1.3	Input into law design	1.7	1.0	0.9
1.1.5	Law assurance	0.9	0.7	0.7
1.1.6–1.1.7	Cross-agency support and government and stakeholder relations	1.9	1.6	1.5
1.2.1	Registrations	34.2	23.9	24.3
1.2.2	Processing and accounts	14.9	24.7	17.3
1.2.3	Customer service	28.1	41.5	42.1
1.2.4	Manage payment and debt	59.6	123.9	122.6
1.2.5	Interpretative assistance	28.8	26.5	26.6
1.3.1	Marketing and communication	11.5	12.3	11.8
1.3.4	Client engagement (ATO)	248.7	262.5	266.9
1.3.4	Client engagement (Home Affairs)	58.4	58.4	59.8
1.3.5	Compliance intelligence and risk management	38.7	39.8	38.9
1.5.1	Resolve disputes	33.3	24.1	26.2
1.5.2	Prevent disputes	2.5	4.4	2.0
Program 2	Tax Practitioners Board	1.9	1.3	2.2
Program 3	Australian Business Register	10.4	14.9	15.5
Total	n/a	617.7	719.4	709.0

The strategic costing framework is our primary costing attribution method across all of our activities.

Figure 3.1: Framework deliverables 2023–24

Figure 3.2: Administration costs

Cost of collection

Table 3.3 below reports the cost of collecting every $100 of GST and 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:

• 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 decreased from $0.78 in 2022–23 to $0.70 in 2023–24. The large decrease in this ratio is due to:

• a 6% reduction in administration costs, driven by lower indirect costs from GST information technology projects and recruitment limitations.
• a 4% increase in GST revenue, driven by growth in consumption subject to GST.

Table 3.3: Cost as a percentage of GST revenue (%)

Type of measure	2019–20	2020–21	2021–22	2022–23	2023–24
Cost of collection as a percentage of revenue (cash)	0.92	0.71	0.87	0.78	0.70

Note: GST Performance Agreement Schedule A 8a.

Table 3.4: Cost per GST registrant ($)

Type of measure	2019–20	2020–21	2021–22	2022–23	2023–24
Cost per GST registrant	198	176	201	197	181

Notes: GST Performance Agreement Schedule A 8b. The collection is based on total administration costs divided by the total active GST registrants.

Table 3.5: Costs as a percentage of total administration costs (%)

Category	2019–20	2020–21	2021–22	2022–23	2023–24
Total client engagement costs	52.9	57.8	59.7	60.3	56.0

Notes: GST Performance Agreement Schedule A 9b. The percentage is calculated as compliance costs divided by total GST administration costs. GST Compliance Program costs only include operating funding.

Table 3.6: Costs as a percentage of total administration costs (%)

Category	2019–20	2020–21	2021–22	2022–23	2023–24
GST Compliance Program operating funding	20.2	21.5	18.0	17.7	23.8

Notes: GST Performance Agreement Schedule A 9b. The percentage is calculated as compliance costs divided by total GST administration costs. GST Compliance Program costs only include operating funding. The GST Compliance Program operating funding is included in the total client engagement costs.