Overview
Total revenue effects is one indicator we use to monitor and understand how our engagement activities impact the performance and operation of the tax and super systems. It's a measure of the impact our activities have on improving taxpayer compliance.
Total revenue effects is a combination of revenue from:
- correct reporting of compliance activities
- preventative actions
- incorrect claims stopped
- audit activities
- sustained compliance
- lodgment compliance activities
- lodgment actions
- sustained lodgment compliance.
Preventative actions
Preventative actions is the estimated additional tax paid voluntarily by clients as a result of the preventative activities we undertake to improve compliance without corrective action. For example, prompts we make to clients to help them understand and meet their reporting obligations before lodgment.
When we measure preventative actions, we ensure there is a clear connection between our activity and the change in taxpayer behaviour. This connection and our assumptions that underpin it must be reasonable and defensible.
Audit actions and incorrect claims stopped
Audit actions is the collection of liabilities, including penalties and interest, directly connected to adjustments we make after the client has lodged to ensure the right amount of tax and super is assessed and paid.
Incorrect claims stopped is the value of overpayments that we stopped or reduced through our audit activities after a client has lodged, and before the return is processed and a refund is issued.
Sustained compliance
Sustained compliance is the estimated additional tax paid voluntarily by clients in the reporting periods following an initial audit action (that occurs after the client has lodged). This additional tax paid is due to improvements in voluntary compliance.
When measuring sustained compliance, we ensure there is a clear connection between our activity and the change in taxpayer behaviour. This connection and our assumptions that underpin it must be reasonable and defensible.
Lodgment compliance
Lodgment compliance is revenue associated with our lodgment activities. We undertake these activities to improve or enforce the lodgment of due returns and statements. Sustained lodgment compliance then measures the impact of future lodgment compliance following these interventions.
Note: All revenue categories are reported on a cash rather than accrual basis. This recognises the impact of our activity when the additional revenue is paid by the taxpayer.
Method
Our current methods are designed to:
- estimate the revenue effects of improvements to compliance over time
- follow our engagement with taxpayers and their registered tax or BAS agents (including corrective and preventative work)
- exclude outlier cases, which include mistakes or deliberate fraud of such high value that our automated risk detection processes stop them – these figures are excluded to avoid distorting the true impact of our discretionary action.
Subtract from the annual overall total revenue effects figure any significant refunds paid during the year because of the resolution of litigation or objection activity where it is:
- in the client's favour
- can be linked to a prior year specific compliance outcome
- the revenue effect was counted within total revenue effects in a previous year.
Results
In 2023–24, the total revenue effects from our engagement activities totalled $18.6 billion, against our target of $15.7 billion. We also refunded around $100 million relating to two cases which were counted as a component of total revenue effects in a previous year, resulting in a net total revenue effect of $18.5 billion.
|
All taxes |
2021–22 |
2022–23 |
2023–24 |
|---|---|---|---|
|
Total Revenue Effects |
$14.9b |
$20.3b |
$18.5b |
|
Audit actions and incorrect claims stopped |
$7.9b |
$7.7b |
$8.6b |
|
Preventative actions and sustained compliance |
$1.7b |
$6.6b |
$3.3b |
|
Lodgment compliance |
$4.2b |
$4.4b |
$4.8b |
|
Sustained lodgment compliance |
$1.1b |
$2.2b |
$1.9b |
|
Significant refunds due to objections/litigation |
− |
-$0.5b |
-$0.1b |
|
TRE PBS Target |
$15b |
$15b |
$15.7b |
Limitations
Measuring total revenue effects is complicated. There are technical limitations involved in establishing defensible causal connections between our engagements with taxpayers and any improvements to compliance.
Even when we establish a causal connection, it can be difficult to understand and identify where our activities resulted in a revenue effect outcome or an unrelated external factor.
Some of our estimates rely on the use of statistical methods which have inherent variability, and we work to improve the reliability of our methods over time.
We do not estimate a revenue effect for several compliance strategies and treatments where we are yet to develop reliable methods.
Changes
Statistical methods we use to estimate components of the total revenue effects may be subject to revision or improvement because of new or refined methods. We continually review our methods to better understand our impact on improving voluntary compliance and sustainably reducing the tax gap.
When models are substantially revised or new models are developed, we will detail the changes here.
While there have been no material changes to the underlying calculations and methods used to measure total revenue effects, the categories that make up the measure changed for reporting purposes from 2021–22.
Prior to 2021–22 reporting, total revenue effects were reported as audit yield and wider revenue effects. These categories have been expanded to demonstrate the different types of compliance activities and their impact on revenue performance. The underlying work programs and activities that result in revenue outcomes counted as part of total revenue effects has not changed.