Australia’s Tax Revenue Hits 19-Year High

Booming migration, strong employment growth and unexpected mining profits are driving Australia’s tax revenue to its highest level in nearly two decades. With the government set to collect a record share of GDP from tax, economists are warning that continued reliance on income tax could put pressure on workers and future spending.

Australia’s workforce has expanded significantly, with nearly 500,000 people finding jobs in the past year as migration fuels population growth. This has contributed to higher-than-expected income tax revenue, with workers projected to pay a record $350 billion this financial year. In addition to strong employment figures, company tax collections are also exceeding forecasts, primarily due to the mining sector's resilience amid global commodity price shifts.

Despite previous expectations of a decline in tax receipts following stage-three tax cuts, higher wages and bracket creep are ensuring continued growth in income tax revenue. With tax thresholds remaining fixed, more income is being pushed into higher brackets, increasing the average tax rate paid by workers. Overall, total tax collections are forecast to reach $661.9 billion in 2024-25, marking a significant rise from previous estimates.

The government’s budget plans include $35 billion in new spending commitments, from Medicare and infrastructure projects to the National Broadband Network. However, experts argue that government spending has become less targeted, with in-kind benefits such as aged care and childcare growing rapidly. With the stage-three tax cuts failing to offset bracket creep, Australia’s reliance on tax revenue looks set to continue in the coming years.

Sources: Australian Financial Review, CEIC, TradingEconomics, BusinessQLD