The latest estimates indicates an increase in the estimated net tax gap to $7.9 billion in 2022–23 (9% of theoretical GST) up from $4.4 billion (5.5%) in 2021–22. This means that expected collections from businesses and organisations are likely to be around 91% of theoretical GST. The increase in the net gap reflects stronger growth in GST liabilities (11.8%) than in tax expected to be paid (7.8%). The net gap estimates incorporate our best current estimates of mature non–pursuable debt for each year, including the impact of COVID-19 and Operation Protego.
As the economy recovered from the COVID-19 recession, the estimated GST base recorded 2 years of strong growth in 2021–22 (9.8%) and 2022–23 (11.8%). Growth in the GST base outperformed growth in tax expected to be paid in both 2021–22 (8.4%) and 2022–23 (7.8%). The weaker growth in tax expected to be paid partly reflects the relatively large estimates of non-pursuable debt for both years. As a result, the net gap is estimated to have increased in both 2021–22 and 2022–23.
The estimated gross gap is measured before the impact of ATO compliance activities are considered. The gross gap is estimated to have risen sharply from $10.8 billion in 2021–22 before a more moderate increase to $11.2 billion in 2022–23. As a share of theoretical GST the gross gap fell from 13.6% in 2021–22 to 12.6% in 2022–23, reflecting the strong growth in the GST base. The large increase in 2021–22 reflected a record high level of amendments of $6.4 billion – around $3.7 billion of which related to Operation Protego. Significantly lower amendments associated with Operation Protego in 2022–23 returned aggregate amendments for that year to more normal levels and moderated the uplift in the gross gap (relative to the net gap).
Given the nature of the fraud we assume that the ATO's ability to recover these refunds is lower than other GST debt. This results in an uplift in estimated non-pursuable debt which is contributing to the lower growth in revenue expected to be paid.
We seek to incorporate the latest available information into our gap estimates including revisions to previously published estimates. This updated information comes from internal sources as well as from external sources such as the Australian Bureau of Statistics (ABS) which provides important information supporting our estimate of the GST base and theoretical GST.
This gap forms a part of our overall tax performance program. Find out more about the concept of tax gaps and the latest gaps available.
|
Element |
2017–18 |
2018–19 |
2019–20 |
2020–21 |
2021–22 |
2022–23 |
|---|---|---|---|---|---|---|
|
Gross gap ($m) |
8,056 |
8,200 |
6,573 |
6,146 |
10,798 |
11,206 |
|
Amendments ($m) |
2,662 |
2,855 |
2,200 |
3,016 |
6,404 |
3,268 |
|
Net gap ($m) |
5,394 |
5,345 |
4,373 |
3,130 |
4,395 |
7,938 |
|
Expected collections ($m) |
63,610 |
64,852 |
64,499 |
69,127 |
74,913 |
80,721 |
|
Theoretical liability ($m) |
69,004 |
70,197 |
68,872 |
72,257 |
79,308 |
88,659 |
|
Gross gap (%) |
11.7 |
11.7 |
9.5 |
8.5 |
13.6 |
12.6 |
|
Net gap (%) |
7.8 |
7.6 |
6.3 |
4.3 |
5.5 |
9.0 |
Figure 1 displays the gross and net gap as a percentage of theoretical liability over the same period.
Figure 1: Gross and net GST gaps; as percentage of theoretical GST, 2015–16 to 2022–23
The GST base and theoretical GST recorded consecutive years of record strong growth in both 2021–22 (9.8%) and 2022–23 (11.8%). This reflects:
- Compositional shifts in consumer spending towards goods and services which attract GST resulted in GST-able consumer spending (up 13.5%) growing significantly faster than non-GST-able consumer spending (up 9.9%). This continues to reverse the experience through the COVID-impacted years where spending that did not attract the GST (especially on more non-discretionary items such as housing, health and education) outperformed.
- The dwelling investment component of the GST base also recorded 2 years of strong growth by historical comparison − increasing by 12.2% in 2021–22 and by 9.4% in 2022–23.
- International tourism is largely GST-free and has rebounded strongly as international travel resumed post-COVID. The reduction in the estimated GST base due to the removal of international tourism nevertheless remains well below historical levels in 2022–23.
Expected GST collections grew strongly in both 2021–22 (8.4%) and 2022–23 (7.8%). This reflected:
- Excluding the impact of non-pursuable debt, aggregate GST revenue grew by 10.2% in 2021–22 and by 6.4% in 2022–23. This was driven mainly by GST revenues collected by the ATO; with Customs-related revenue relatively flat.
- As highlighted above, the sharp increase in non-pursuable debt, largely associated with Operation Protego, constrained revenues for both 2021–22 and 2022–23.
- After an extended period of modest growth, expected voluntary collections increased by 13.1% in 2022–23. Expected voluntary contributions represented around 87.4% of theoretical GST in 2022–23; above the share reported for 2021–22 (86.4%) but below the shares reported in the COVID-impacted years.
- Underlying amendments have been relatively stable across 2020–21 through 2022–23. Amendments associated with Operation Protego spiked in 2021–22 pushing total amendments to an historical high (around $6.4 billion).