Economy
Taxation and Revenue
In 2006-07, taxation was the second most important source of revenue in New South Wales, representing 37% of total revenue.
In Australia there is a fiscal division of responsibility between the Commonwealth government and State and Territory governments. The Commonwealth government collects all income tax and taxes on goods and services (the GST). Commonwealth taxation accounts for over 80% of taxation revenue in Australia. State and Territory governments collect property and payroll taxes and levy charges on
some services.
State and Territory governments provide a range of services including education, health, housing, transport, public order and safety, welfare and general public services. The discrepancy between the taxation revenues of the State and Territory governments and their greater responsibility for service provision is referred to as vertical fiscal imbalance. The States and Territories are dependent on the Commonwealth for dispersion of revenue in the form of grants, including GST revenue.
Commonwealth grants account for approximately 40% of State and Territory revenue. Around 60% is in the form of general purpose grants that can be used by the States for any purpose, while the remainder are tied grants that can only be used for specific purposes, such as education or health.
Since the introduction of the Goods and Services Tax (GST) in 2000, the Commonwealth collects the goods and services tax and distributes it to the States and Territories. States and Territories receive the greater of the actual GST receipts or a Guaranteed Minimum Amount that is an estimate of the funding that each State would have received in the absence of tax reform and the introduction of GST. NSW, Victoria and Western Australia receive a share of GST that is less than their share of population,
while the remaining States and Territories receive a share greater than their share of population. In 2006-07, NSW received $10.938b in GST revenue.
In 2006-07 total revenue for the NSW government was over $47b. The major source of revenue was current grants and subsidies which comprised 41% of total revenue. The proportion of revenue from grants and subsidies for NSW was significantly lower than for the smaller states of South Australia (48%), Tasmania (60%) and the Northern Territory (75%).
Taxation was the second most important source of revenue representing 37% of total revenue, which was the highest proportion of all States and Territories. Sales of goods and services, interest income and other sources contributed 8%, 3% and 11% respectively.
State government expenditure predominantly relates to the provision of services to the public. The two major expenditure items for the NSW government in 2006-07 were education and health which accounted for 26% and 25% respectively. NSW expenditure on transport and communication was the highest in Australia as a proportion of total expenditure at 13%. For the other states expenditure on transport and communication ranged from 5% in Tasmania to 11% in Queensland. NSW expenditure on public order and safety of 10% of total expenditure was lower than in Western Australia (12%), the Northern Territory (12%) and Victoria (11%), but higher than the other States and the ACT.
Expenditure on housing, recreation and culture amounted to 6% of total expenditure and was lower only in Queensland, where it accounted to 6% of total expenditure. In the other States and Territories expenditure on these services ranged from 8% to 11% of total government expenditure.
Social security and welfare accounted for 7% of expenditure in NSW in 2006-07, which was higher than other States and Territories, with the exception of Victoria, where expenditure reached 8%.
The maps showing the average tax paid per taxpayer in 2006-07 by Local Government Areas (LGAs) in NSW exhibit a distinct pattern of spatial clustering. Average taxation ranged from $6,714 in Tenterfield to $54,739 in Mosman. There is a clear division between Sydney, which has a higher average amount of tax paid, and the remainder of the State, where LGAs are mainly in the lower tax bands. The LGAs with the highest average taxation are all located in Sydney in the Northern, Eastern and Inner Western suburbs. LGAs in the highest average tax band of $32,620 to $54,739 are Hunters Hill, Mosman and Woollahra.
LGAs in Northern Sydney, the Northern Beaches and Leichhardt in the Inner West are located in the second highest tax band, $17,895 to $32,619. Within Sydney LGAs in the outer western and south-western suburbs are predominantly in the second lowest range of average tax paid, $8,931 to $12,352. The LGAs with the lowest average tax paid per taxpayer, $6,714 to $12,352, are almost all located outside Greater Sydney. The exceptions are the Sydney suburbs of Auburn, Fairfield and Canterbury, and Wyong on the Central Coast.
Professor Bill Mitchell, University of Newcastle and Mr Michael Flanagan, University of Newcastle
