Australia's Future Tax System

Architecture of Australia's tax and transfer system

10.4 Other own‑source revenue

In addition to revenue from taxes, the States raised a further $36 billion in 2006‑07 from other own‑source revenue. Use of other own‑source revenue reduces the need for the States to raise tax revenue. Other own‑source revenue includes user charges for services provided by governments, dividends and tax equivalent payments from state owned enterprises, resource royalties and charges, fines, and interest income. The proportion of other own‑source revenue to total state revenue ranges from over 30 per cent in Queensland to around 14 per cent in the Northern Territory, which largely reflects the differing economic structures and relative shares of grants received by jurisdictions.

States levy user charges on a wide range of activities, such as transport, education and environmental services. COAG recognises that well‑targeted user charges can have a significant impact on the use of these services. User charging may encourage the efficient use of publicly provided goods and services (see Box 10.3). Under‑charging may result in overuse of public services compared to the socially optimal level. It also encourages a greater reliance on tax to fund the additional services which can reduce economic activity. However, in some cases under‑charging for the provision of a public good may be used to achieve socially desirable outcomes.