Chapter 13 The income account

13.1    The national income account shows how gross disposable income is used for final consumption expenditure and the consumption of fixed capital (depreciation), with the balance being the nation's net saving. On the sources of income side, it shows compensation of employees, gross operating surplus, gross mixed income (from unincorporated enterprises) and taxes less subsidies on production and imports. Net secondary income from non-residents is added to derive gross national disposable income.

13.2    Saving is carried forward into the capital account. Saving must be used to acquire financial or non-financial assets of one kind or another, including cash, the most liquid of financial assets, or to reduce liabilities. When saving is negative, the excess of consumption over disposable income must be financed by disposing of assets or incurring liabilities.

13.3    The sectoral income accounts are disaggregations of the national income account, and record for each institutional sector its net income arising both from production and from transfers from other sectors, and its uses of income (disbursements). The difference between income and use of income is net saving (the balancing item). Income accounts are also compiled for selected subsectors. As consumption of fixed capital is not calculated for some subsectors, the balancing item in their subsector accounts is equal to net saving plus consumption of fixed capital (i.e. gross saving). This applies to public and private non-financial corporations subsectors.

13.4    The income accounts for corporations (both financial and non-financial), show income arising from gross operating surplus from the Income from GDP account and property income (such as interest, dividends, reinvested earnings on direct foreign investment and investment funds, property income attributed to insurance policyholders, and rent on natural assets) from other sectors. Total income is used to make various payments (such as interest, dividends, reinvested earnings on direct foreign investment and investment funds, property income attributed to insurance policyholders, and rent on natural assets) to other sectors. The balance is the saving of the respective sectors and is transferred to their capital accounts.

13.5    The following tables are representations of the non-financial and financial corporations income accounts as presented in the ASNA. The subsectoral accounts for private and public non-financial corporations are consistent with the non-financial corporations account.

13.6    The income account of the household sector shows compensation of employees, gross mixed income (on account of unincorporated enterprises) and gross operating surplus on dwellings owned by persons, which are all from the Income from GDP account, as well as property income (interest, dividends, reinvested earnings on investment funds, property income attributed to insurance policyholders and rent on natural assets) from other sectors, social benefits receivable (social insurance benefits – workers' compensation claims and social assistance benefits) and various other forms of secondary income (such as non-life insurance claims, current transfers to NPIs and other current transfers). Use of income shows final consumption expenditure, consumer debt interest and dwellings and other property income payable, income taxes and other current taxes payable, other current transfers, consumption of fixed capital (on account of unincorporated enterprises and dwellings owned by persons) and net saving (the balancing item).

13.7    The following table is a representation of the household income account as presented in the ASNA.

13.8    The general government income account shows receipts from income taxes, other taxes on income, wealth, etc., taxes on production and imports, property income (interest, dividends and rent on natural assets) and gross operating surplus (which is equal to consumption of fixed capital for the general government sector). The use of income side shows final consumption expenditure, property income payable to other sectors, subsidies, social assistance benefits and other current transfers to non-residents and other sectors, consumption of fixed capital and net saving (the balancing item).

13.9    The following table is a representation of the general government income account as presented in the ASNA. The subsectoral accounts for the National and State and Local government accounts are consistent with the general government income account.

13.10    In the core income accounts, social transfers in kind are technically part of government final consumption expenditure because they are produced and purchased by government. However, income redistribution also includes social transfers in kind, that is, social benefits in kind transferred from the government to households. For analytical purposes, it is useful to show the value of these transfers as part of household, rather than government, final consumption expenditure to form a broader aggregate called actual individual consumption. These are represented in the adjusted disposable income accounts as secondary income transfers from the government sector to the household sector with corresponding adjustments to the final consumption expenditures of the two sectors.

13.11    The following tables outline both the general government adjusted disposable income account and the household adjusted disposable income account as presented in the ASNA.

13.12    Income flows are divided into primary income and secondary income. Primary incomes are incomes that accrue to institutional units as a consequence of their involvement in processes of production or ownership of assets that may be needed for purposes of production. Therefore, primary income consists of the components used to derive production, namely compensation of employees, gross operating surplus, gross mixed income and taxes less subsidies on production and imports, as well as property income which accrues by lending or renting financial or natural resources, including land, to other units for use in production.

13.13    Secondary incomes are incomes that are redistributed between institutional units by means of payments and receipts of current transfers. A current transfer is a transaction in which one institutional unit provides a good or service to another unit without receiving from the latter any good or service directly in return as counterpart and does not oblige one or both parties to acquire, or dispose of, an asset.

13.14    In the adjusted disposable income accounts of the general government sector and the household sector, social transfers in kind are shown as part of household rather than government final consumption expenditure to represent actual individual consumption for analytical purposes.

13.15    Therefore, the additional components required to compile the income account are:

• property income;
• current taxes on income, wealth, etc.
• social contributions and social benefits;
• net non-life insurance premiums and non-life insurance claims;
• miscellaneous current transfers; and
• social transfers in kind.