“Jobs and growth” – three words that were said thirteen times in Treasurer Scott Morrison’s Budget speech and the three words that he hopes will make up the headlines around his first Budget. Incidentally, he would also prefer that it wasn’t called a Budget, but rather an economic plan. Most people will consider it an election platform, with more to be announced in the coming weeks as the election process begins.
Accru’s Daniel Arnephy outlines the key Federal Budget announcements below.
Mr Morrison believes that these are “extraordinary times” and thus this cannot be just another Budget. Whether he suspected it or not, his Budget was certainly delivered on an extraordinary day, with the official cash rate being reduced to its lowest rate in history at 1.75%. Most analysts on the ABC’s post Budget coverage saw this as a statement that the Reserve Bank is not as optimistic on the economy as the Turnbull Government and that this rate cut will do more to stimulate the economy than this ‘Jobs and Growth’ Budget. Time will tell.
This is the third Budget for the Coalition Government, with each one having represented a change of seasons; Tony Abbott started in 2014 by wielding the Hockey Stick and asking everyone to do some heavy lifting. This was followed in 2015 by encouraging everyone “go out and have a go!” to stimulate innovation and growth. Now we have a ten year enterprise tax plan to cut the corporate rate, whilst at the same time attacking multinationals, smokers and the top 4% of superannuants.
The key economic content of the budget was confirmation that the budget deficit is $37 billion, unemployment is just below 6% and real economic growth is expected to be 2.5% for 2016/17, with some analysts suggesting the trumpeted 3% growth ahead will be difficult to achieve. Unlike recent years there were no guarantees on return to surplus and less focus on a ‘Budget crisis’, projecting a deficit of 0.3% of GDP in 2019-20. A case of strange deja vu is likely the reason for this, given that the deficit hasn’t decreased in line with the Coalitions plans since they came in three years ago.
In a taxation context, although holistic and genuine tax reform still eludes us, overall it feels like this Budget is tackling bigger issues and setting the election agenda by confronting superannuation changes and high level corporate tax changes, as opposed to 2015 where the focus was on FBT adjustments and specific deductions.
The Budget has been criticised for being silent on clean energy reforms, although the Government may be hoping that the private sector drives innovation here under their recent innovation initiatives, start up business incentives and small business package in this Budget.
The most relevant super and tax changes affecting individuals, families and companies are covered below.
Companies & Businesses
+ Tax concessions for small businesses
+ Corporate tax rate reduced
+ Div 7A amendment
+ Small business tax discount increased
+ Wine equalisation cap reduced
+ GST on low value goods introduced
+ Incentives for innovation for big businesses
+ Tighter tax avoidance measures targeting multinationals
Individuals & Families
+ Personal tax rate changes – Budget Deficit Levy removed
+ Medicare Levy indexation paused
+ Tobacco excise increased and a ‘Tobacco Strike Team’ funded
+ No new changes for families
Superannuation & Pensions
+ Catch-up concessional contributions
+ No work test for over 65-74 year olds
+ Low income superannuation tax offsets
+ $1.6m transfer balance cap introduced
+ Lifetime cap for non-concessional contributions
+ Div 293 tax threshold