Australian budget: Winners and losers

The federal budget is politically savvy in that it rewards those who were most disenfranchised by last year’s budget – that is, the people most likely to vote for the opposition.

The losers are very high income earners who are unlikely to swing away from voting for the government.

Citi says this strategy increases the chances of the opposition and minor parties passing the associated legislation through the Senate.

The main initiatives are:

Family support and pensions
A $AU3.5 billion child care assistance package that will subsidise the cost of childcare over five years. The subsidy will cover 85% of the actual fee or benchmark cost, whatever is lower for families earning under $A65,000 a year. The subsidy gradually tapers to 50% for families earning $A170,000 or more. Part funding for this initiative has been linked to the previously stalled cuts to Family Tax Benefit payments that a majority of the independent senators do not support.

Introduction of a $A869 million Child Care Safety Net to assist vulnerable, disadvantaged and additional needs children.

An extra $A843 million will be spent in the 2016 and 2017 calendar years for preschool programmes.

Around $A1 billion is expected to be saved over four years by removing “double- dipping” for parents who have access to a more generous private sector scheme. The change takes effect from July 1, 2016.

The eligibility criteria for asset-wealthy recipients of the part pension will be tightened. Plans to index the age pension to inflation from ordinary time earnings growth have been scrapped. Pension changes are designed to save $A2.4 billion over the next four years.

Jobs and small business
The $A5.5 billion Growing Jobs and Small Business Package includes:

• a 1.5% corporate tax cut worth $A1.45 billion over the next four years; and
• a deduction on assets costing less than $A20,000 bought between Budget night and June 20, 2017, worth $A1.75 billion over the next four years;
• a 5% tax discount of up to $A1000 for unincorporated small businesses, worth $A1.8 billion over the next four years.

There will also be a $A1.2 billion national wage subsidy pool for employers who offer job seekers an ongoing job can receive a wage subsidy with flexible payment arrangements.

The Youth Employment Strategy reduces the waiting period for under-25 year olds to four weeks, and will cost $A331 million.

Taxation changes
Approximately 30 multinational companies that are suspected of shifting profit out of Australia will be required to pay tax for face fines of 100% of unpaid taxes plus interest.

The 10% GST will be extended to digital downloads and other contents. This would deliver $A445 million in extra revenue.

Savings of $A845 million will be made from the overhaul of work-related car expense deductions over four years.

Changes to personal income tax rules for temporary working holiday-makers will deliver $A535 million in extra revenue.

Changes made to the Foreign Investment Framework will add $A651 million in revenue. A new $A55 million (up from $A15 million) screening threshold for foreign investment in agriculture will apply from December 1, 2015.

Left out big ticket items
The following have the potential to provide significant savings over the long-term but have not been tackled – raising the rate of the GST; changing negative gearing arrangements on investment properties; changing taxation arrangements on superannuation; lowering the minimum wage; and dealing with rent-seeking behaviour in the pharmacy and taxi industries, and Australia’s supermarket oligopoly.

------

See more NBR's coverage of the Australian Budget 2015 here: 

Australian budget: Deficit widens to $35bn, surplus by 2020

Australian budget: Winners and losers

Australian budget: What a difference a year makes

Australian budget: Hockey details ‘Netflix tax’, ‘Google tax’

Australian budget: What the experts say

Editor's Insight: Joe Hockey's 'have a go' budget