Federal budget’s $4 billion surplus due to Australians paying $41 billion extra in tax than Treasury forecast

Treasurer Jim Chalmers has announced the first budget surplus in 15 years - but the $4 billion buffer is thanks to hard-working Aussies paying more in tax.

The Lord giveth and the Australian Tax Office taketh away.

That’s the story of the 2023 budget which delivers a surprise $4 billion surplus that involves Australians paying ten times that amount in extra tax.

Treasurer Jim Chalmers’ budget surplus is banking on Australians paying $41 billion extra in tax than Treasury forecast in October.

“The reason for that is people are working more and earning more,’’ Treasurer Jim Chalmers told news.com.au.

“That’s a good thing.”

The big tax windfall is outlined in Budget Paper No. 1.

“Near record levels of participation and employment, a pick-up in wages growth and sustained high commodity prices are supporting a rapid recovery in receipts following the pandemic,’’ the budget papers reveal.

“Since the October Budget, tax receipts have been revised up by $42.0 billion in 2023–24 and $134.8 billion over the 5 years from 2022–23 to 2026–27.”

Treasurer Jim Chalmers’ budget surplus is banking on Australians paying $41 billion extra in tax than Treasury forecast in October. (Photo by Martin Ollman/Getty Images)

But it won’t last forever, with hopes of a surplus after this year fading fast.

“A majority of this upgrade is concentrated in the near term, underpinned by a strong labour market and higher commodity prices,’’ the budget warns.

“The strong upgrade to tax receipts is expected to moderate after 2023–24 as commodity prices are assumed to return to long-run levels and conditions in the labour market ease.

“Excluding GST and policy decisions, tax receipts have been revised up $41.2 billion in 2023–24 and $114.2 billion over the 5 years from 2022–23 to 2026–27.”

The good news is that has helped deliver an unexpected surplus.

“The Government is returning most of the improvement in tax receipts to the budget,’’ the budget papers state.

“(But) Elevated risks to the global outlook, volatility in commodity prices and uncertainty around the response of households to rising interest rates mean that tax receipts will remain vulnerable to the changing outlook for some time.”

Policy decisions since the October Budget are expected to increase tax receipts by $1.3 billion in 2023–24 and $19.1 billion over the 5 years from 2022–23 to 2026–27.

“Australians have shown resilience in the face of heightened global uncertainty, persistent inflation and higher interest rates, which are combining to slow our economy,’’ the budget papers state.

“The best response to these challenges is a responsible budget that strikes the right balance between fiscal restraint, easing cost-of-living pressures, securing the essential services people rely on and investing in sustainable drivers of growth.

“This Budget achieves this while strengthening our fiscal position, with a budget surplus now forecast in 2022–23, and smaller deficits and lower debt over the forward estimates compared to October. This much stronger fiscal position would not have been achieved without a responsible approach to returning upward revisions of revenue to the budget and continued budget repair.”

Treasurer Jim Chalmers argues the budget can be explained by five main goals.

• providing responsible and targeted cost-of-living relief

• strengthening Medicare

• broadening opportunities in our society and around the country

• investing in a stronger and more secure economy

• managing the budget responsibly.

Originally published as Federal budget’s $4 billion surplus due to Australians paying $41 billion extra in tax than Treasury forecast