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 Office (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 2024–25 was $674.4 million, an increase of 9.2% from 2023–24 and $34.6 million (or 4.9%) below the agreed Schedule B estimate.

Our 2024–25 direct GST costs aligned with the Schedule B estimate. The increase over 2023–24 costs was due to full resourcing of staffing and the impact of pay rises.

Indirect costs increased due to the flow on impact from changes to direct costs, causing changes in the assumptions used to calculate the Schedule B estimate.

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

Type of measure	2020–21	2021–22	2022–23	2023–24	2024–25
Variation	-13.4	-3.4	-3.5	-14.1	-4.9

Note: 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 ($ million)

Number	Category	2024–25 actual	2024–25 Schedule B	2025–26 endorsed estimate
1.1.1	Policy advice forecasting	4.0	4.3	4.2
1.1.2	Design and build administrative solutions	49.1	45.3	48.0
1.13	Input into law design	0.5	0.9	1.2
1.15	Law assurance	1.0	0.7	0.8
1.1.6–1.1.7	Cross-agency support and government and stakeholder relations	2.9	1.5	1.7
1.2.1	Registration	27.7	24.3	37.7
1.2.2	Processing and accounts	13.1	17.3	17.3
1.2.3	Customer service	28.2	42.1	39.5
1.2.4	Manage payment and debt	73.3	122.6	73.5
1.2.5	Interpretative assistance	26.2	26.6	27.9
1.3.1	Marketing and communications	13.2	11.8	11.8
1.3.4	Client engagement/Improving compliance in the tax and super system (ATO)	279.4	266.9	297.4
1.3.4	Client engagement/Improving compliance in the tax and super system (Home Affairs)	59.2	59.8	60.1
1.3.5	Compliance intelligence and risk management	41.8	38.9	38.1
1.5.1	Resolve disputes	41.1	26.2	28.6
1.5.2	Prevent disputes	2.3	2.0	2.2
Program 2	Tax Practitioners Board	4.4	2.2	3.1
Program 3	Australian Business Register	7.1	15.5	0.0
Total	n/a	674.4	709.0	693.0

Note: From 2025-26, Program 3 will be incorporated into 1.2.1 Registration and 1.3.4 Client engagement will become ‘Improving Compliance in the tax and super system.

Figure 3.1: Framework deliverables 2024–25

Note: *Tax Practitioners Board and Australian Business Register.

Figure 3.2: GST administration costs

Cost of collection

The cost of collection measures 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 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 increased from $0.70 in 2023–24 to $0.73 in 2024–25. The 9% increase in this ratio is due to:

• convergence to full resourcing plans, pay rises and the flow on impact to indirect costs
• a 6% increase in GST revenue.

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

Type of measure	2020–21	2021–22	2022–23	2023–24	2024–25
Cost of collection as a percentage of revenue	0.71	0.87	0.78	0.70	0.73

Note: GST Performance Agreement Schedule A 8a.

Table 3.4: Cost per registrant ($)

Type of measure	2020–21	2021–22	2022–23	2023–24	2024–25
Cost per registrant	176	201	197	181	192

Note: GST Performance Agreement Schedule A 8b. The calculation 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	2020–21	2021–22	2022–23	2023–24	2024–25
Total client engagement costs	57.8	59.7	60.3	56.0	56.4

Note: 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	2020–21	2021–22	2022–23	2023–24	2024–25
GST Compliance Program operating funding	21.5	18.0	17.7	23.8	21.9

Note: 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.