18 December 2023

The Small Model of Australian Representative Taxpayers (SMART) is an experimental analytical tool that allows you to adjust various personal income tax policy settings. The model can be used to estimate the impact of changes to personal income tax settings on the Australian Government budget, as well the distributional impact across taxpayers. The consultation draft of the tool has been built as a Shiny web app using the R statistical software package, and can be accessed by clicking 'Launch web application' above.

You should attribute any analysis undertaken using this tool as "using the Parliamentary Budget Office's analysis tool SMART". Note that the current version of the tool is a consultation draft based upon 2023-24 Budget parameters. It has not been updated for the 2023-24 Mid-Year Economic and Fiscal Outlook published on 13 December 2023.

We would like to hear about your experience using SMART, and suggestions you may have for how it could be enhanced. We're particularly interested in your thoughts about any challenges you encountered using the tool, what you like about it, or ways you think the tool could be improved. 

You can help shape the future of SMART by sending your feedback before the end of February 2024 to feedback@pbo.gov.au.

For further information on how SMART works, read our FAQ below.

Frequently asked questions

SMART is hosted by Shinyapps.io, who will be able to view the user’s IP address. While the PBO collects aggregate usage statistics for the application, it has no visibility of user IP addresses and does not collect any information entered by the user.

As SMART is hosted on an external server, the speed of the web application may be impacted by a number of factors. Typically the model will load within a few seconds, but it may take more time if there are many users attempting to access it at one time. 

In the first instance, please allow additional time for the model to load, or try reopening the model at a later time. Please note that the application will time out automatically if it is inactive for an extended period.

Given the complexity of the model, it's also important to carefully read all the instructions included in the web application, to make sure there are no errors in how policy settings are specified. If problems persist, please let us know via feedback@pbo.gov.au.

SMART is based upon a representative dataset of around 4900 taxpayer groups, each being of taxpayers with similar characteristics. Taxable incomes have been projected forward over the medium-term period using budget parameters. 

Total personal income tax paid is estimated both under current tax settings, and under the tax settings proposed by the user. The change in tax revenue under the proposal is then calculated, and adjusted to account for the timing of tax revenue collections. Note that estimates for the number of individuals affected and the average change in tax paid do not account for the timing of tax collections.

Distributional information on the impact of the proposal by gender, State and  Territory, or age, is then calculated by multiplying total tax paid for each taxpayer group by the share of taxpayers that are within each category. 

SMART is based upon demographic data and projections for taxable income for around 4900 representative taxpayer groups. This underlying dataset has been produced by using clustering algorithms to group together taxpayers from the full set of de-identified personal income tax returns. Each group represents between 20 and 237,000 taxpayers, with group size varying depending upon how common different types of taxpayers are. Individual taxpayers are not identifiable in this dataset.

Taxable incomes for each taxpayer group are then grown over the medium-term period based upon 2023-24 Budget economic forecasts and PBO analysis.

The dataset of tax returns that underpins SMART dates from the 2018-19 financial year, the most recent available complete year of data prior to the COVID-19 pandemic. Later years are affected by the pandemic, both through the economic impacts and the nature of income support payments, such that these years may be less representative of the future. Subsequent updates to the model will incorporate more recent tax return data.

While the methodology behind SMART is consistent with that used for PBO costings, results may not be identical for a number of reasons:

  • PBO costings may in some cases account for behavioural responses to tax changes, whereas SMART does not model such responses
  • PBO costings for some policies may be based upon the full dataset of income tax returns, rather than the clustered dataset that underpins SMART
  • PBO costings may include departmental costs associated with implementing policy proposals, which are not modelled in SMART.

SMART incorporates several features that expand upon the personal income tax model included in the PBO's Excel-based Build your own budget tool. In particular, it makes use of a new underlying dataset of representative taxpayers that is designed to better capture differential growth in the various components of taxable income, and the variation in taxable income across the population of taxpayers. These and other features mean that SMART is generally able to provide more detailed and sophisticated estimates of the financial and distributional impacts of changes to personal income tax policy settings, as compared with those produced by Build your own budget.

While the data behind SMART can be downloaded from our data portal, currently the SMART model is only available as a web application. In future, the PBO intends to publish the full R code for the model, along with additional documentation on how the model works. 

However, you can easily download the results of any policy scenarios you've produced using SMART by clicking 'Download the results as an Excel file' on the Detailed results page of the web application.

SMART is the latest in a series of PBO products and analytical tools that seeks to enrich public understanding of budget and fiscal policy settings. SMART expands upon previously released PBO tools such as Build your own budget and the PDI Calculator by providing users with more detailed information on the distributional impacts of changes to personal income tax settings. The tool also draws upon a range of methodological improvements to provide more sophisticated estimates of the financial impact of such changes.

Publishing SMART is also part of the PBO's agenda to enhance the transparency of the PBO's analysis, by allowing for broader engagement with our models and costing tools. While the results do not constitute a PBO costing, SMART is based upon similar methodology and data to that used to produce PBO costings. We welcome ideas and feedback from the public for how the PBO may be able to increase usability and accuracy of the tool. 

While the results from SMART do not constitute a PBO costing, the methodology and data is similar to that used to produce PBO costings, and so will generally provide similar results for relatively small changes to tax policy. As SMART does not model behavioural responses to tax policy changes, the estimates produced by the model will be less reliable in the case of major changes to tax policy settings that could result in significant behavioural responses from taxpayers.