Just a few years after the ‘debt and deficit disaster’, we are apparently rolling in money. Tomorrow night’s budget will have enough personal tax cuts and infrastructure spending to kick-start the federal election campaign in what both sides are calling ‘a referendum on tax’.
The big ticket item is the personal tax cut. The long promised cuts for corporates could now be problematic amidst the misconduct revelations at the royal commission into badly behaving banks and the latest APRA report into the CBA. The Senate appears hesitant to pass any corporate tax cuts, and polling suggests the public is also opposed.
One of the big surprises in the pre-budget leaks has been conservative economists and the business sector agreeing on a $50/week increase in the dole.
In the meantime, here are some highlights of what we know:
- The government will seek to formally lock in a tax limit of 23.9 per cent of GDP into this year’s budget, which will impact the nature’s future fiscal policy.
- Personal income tax cuts – mostly for low income earners – phased in over the decade, prioritising low income families.
- The low income tax offset (LITO) will be adjusted to more than double to $1,000, while the threshold and withdrawal rates may also be altered to target those earning below $87,000.
- A wary Senate and polls saying ‘the rich should pay more’ might sideline corporate tax cuts.
- Last year’s increase to the Medicare Levy to fund the NDIS couldn’t get through the Senate, so has been dropped. Apparently we don’t need it anyway due to the extraordinary increase in revenue.
- Changes to the R&D tax credit. Expect a possible cap of $2m on the scheme.
- More beer headlines to rival smashed avocado with craft brewers and distilleries getting an increase on the excise duty refund.
- A “record spend” ($24.5 billion) for transport infrastructure projects, , including spending on rail links to Melbourne’s Tullamarine airport and for Sydney’s new airport, Perth’s Metronet project, packages to address road congestion in metropolitan areas, and investments into road and highway packages and upgrades in Queensland, Victoria and South Australia. Aside from transport, the government will invest a further $4.5 billion in its Snowy Hydro 2.0.
- The Treasurer ruled out changes to the Petroleum Resources Tax but that hasn’t stopped speculation that oil and gas companies may be faced with an increase of billions of dollars in tax.
- Curbing future “uplift concessions” for energy companies which determine tax deductions associated with exploration.
- More leaks over the weekend about funding high cost medicines hint that we can expect boosts for ‘super’ treatments, including support for pharmacies to stock expensive medications and a sweetener to get health workers in rural and remote regions.
- Extra funds for women’s health including subsidising 3D breast x-rays (already announced).
- Finance Minister says NDIS will be ‘fully funded’. We recall last year’s budget in which the Treasurer made much of his brother-in-law ‘Gary’s’ need for the NDIS.
- Hints are the long list of Australians needing aged care in their homes will get some help in line with Minister Wyatt calling it an ‘absolute priority’.
- Last year’s freeze on the Commonwealth Grants Scheme prompted predictions that higher education funding has effectively been frozen. Victoria’s budget announcement for generous funds to TAFE courses might prompt a ‘me too’ allocation from the Feds.
- Extension of the school chaplains program for another four years.
- Expect a $65m funding package for data privacy related reforms.
- Appointment of a Data Commissioner to drive the cultural change within government agencies.
- Already announced $50m for the much hyped Space Agency with expectations for more from the private sector to develop the space industry.