2023–24 GST gap estimate
The latest estimate of the overall net goods and services tax (GST) gap is $8.7 billion in 2023–24, or 9.4% of theoretical total GST. This is higher than the estimate from 2022–23 of $8.1 billion, or 9.1% of theoretical total GST. This means that we expect to collect close to 91% of the total theoretical amount of GST. Being a top-down gap estimate, we use economy-wide information from the Australian Bureau of Statistics (ABS) to estimate the total GST liability and compare that to expected GST collections to determine the difference, which is the 'gap'.
What is driving the gap
The increase in the net GST gap for 2023–24 comes from an increase in consumer spending on things where GST applies but non-compliance is relatively high. For example, we saw spending on overall dwelling construction (subject to GST) increasing by 7.1%, which contributed to an overall 4.2% increase in GST liabilities. Offsetting this, expected GST collections (GST payments from suppliers) have been projected to increase at a lower rate of 3.9%. The difference in the 2 reflects a relatively high level of non-compliance on suppliers passing on GST payments from consumers.
The gross gap represents the estimated GST gap before the impact of ATO compliance activities are included. This year the gross gap is estimated to have decreased in percentage terms, now at 12.5% of the total theoretical GST amount in 2023–24 from 12.7% in 2022–23 and 14.4% in 2021–22. The gross gap was higher in these years due to the impact of the spike in activity statement fraud managed under Operation Protego. The fact that more than half of this fraud was stopped 'pre-issue', together with a level of post-issue recoveries, meant the impact on the net gap was not as high as the effect on the gross gap The effect of the spike in fraud (and fraud related amendments) can be seen in Table 1 where the total amendments for 2023–24, $2.9 billion is closer to the amendments reported in 2020–21.
We incorporate the latest available information into our gap estimates including revisions to previously published estimates. This updated information comes from internal sources and external sources such as the ABS which provides important information supporting our estimate of the GST base and theoretical GST.
Figure 1: Gross and net gaps; as percentage of theoretical GST, 2018–19 to 2023–24
This gap forms a part of our overall tax performance program. Find out more about the concept of tax gaps and the latest gaps available at Australian tax gaps – overview.
The current top-down model doesn’t allow us to estimate the contribution of different market segments to the overall GST gap. Work continues in developing a companion bottom-up GST tax gap model that will provide more market level insights. Our preliminary analysis tells us that the small business market segment is the largest contributor to the GST gap. The estimated share of the small business sector of the GST gap has historically been above 70% in all years.
Table 1 summarises the key GST gap estimates.
|
Element |
2018–19 |
2019–20 |
2020–21 |
2021–22 |
2022–23 |
2023–24 |
|---|---|---|---|---|---|---|
|
Gross gap ($m) |
9,020 |
7,092 |
6,073 |
11,547 |
11,310 |
11,640 |
|
Amendments ($m) |
2,599 |
2,047 |
2,802 |
6,461 |
3,196 |
2,917 |
|
Net gap ($m) |
6,421 |
5,046 |
3,271 |
5,086 |
8,113 |
8,722 |
|
Expected collections ($m) |
64,849 |
64,503 |
69,132 |
74,928 |
81,031 |
84,178 |
|
Theoretical liability ($m) |
71,271 |
69,549 |
72,403 |
80,014 |
89,145 |
92,901 |
|
Gross gap (%) |
12.7 |
10.2 |
8.4 |
14.4 |
12.7 |
12.5 |
|
Net gap (%) |
9.0 |
7.3 |
4.5 |
6.4 |
9.1 |
9.4 |
Trends over time
Given various assumptions made, methodological improvements and revisions to the underlying national accounts data used, the GST tax gap estimates can take some time to tend towards a central and stable estimate. Gap analysis is therefore more useful for identifying the trend over time – rather than focusing on the absolute gap value for each or any year.
When we look at the trend in the GST gap, we see a decline in the gap during the years impacted by COVID-19. There are a number of factors which may have contributed to this trend. During COVID-19, restrictions saw a shift in consumer spending, with less discretionary spending in sectors where we have historically seen higher prevalence of the cash economy and GST non-compliance (for example, cafes and trades). We also saw a compositional shift in spending, with relatively more spent on non-discretionary, GST-free goods and services such as food, health, education and rent. In addition, we saw a rise in GST lodgments in 2020–21 and 2021–22 as taxpayers needed to ensure registration and lodgment information was up to date to access COVID-19-related stimulus measures. The combination of these 3 factors is considered likely to have put downward pressure of the GST gap.
For previously published tax gap figures, see Australian Tax Gaps - Data.gov.auOpens in a new window