This Budget has been prepared in light of the knowledge that the prime minister, Malcolm Turnbull, will be visiting the Governor-General in the next few days to call a double dissolution election. Given the small window of opportunity available to actually have these measures passed in the two houses of Parliament, this Budget can only be seen as a pitch by the Liberal/National coalition to win the upcoming election.
Having said that, listening to the Shadow Treasurer, Chris Bowen, some of these changes will be supported by the Labor Party.
Now, for the most part, the Budget does nothing to reverse the savage cuts announced in the previous Budgets for Health, Education, Social Security, the Arts, etc.
The Budget also avoids all of the various thought bubbles, floated and then popped, in the last few months. So no changes to GST rates or negative gearing. No significant changes to income tax rates for most people either.
Yes, tax on tobacco will rise significantly for those of you who still smoke (apparently only 13% of the population still do).
As economic managers, the Liberal/National coalition have smashed the myth that they are any better in managing the economy that the Labor Party. They are not (For some pretty good analysis of that, read Tim Dunlop, or Stephen Koukoulas or a whole bunch of others). The Budget stays in deficit for the foreseeable future and we remain a fairly highly taxed nation.
So, on to the announcements. What changes are being proposed?
Small Business Taxation
As per last year some of the biggest announcements are for small businesses.
One of the most surprising is the redefinition of small business. At the moment it is defined by gross revenue and if that is under $2 million you are a small business.
From 1 July 2016 that threshold will increase to $10 million. That's a big jump.
Small businesses will have a number of things going for them:
- A reduction in the company tax rate from 30% to 27.5% in 2017
- A 1 year increase of the measure announced last year to claim as an income tax deduction items of plant and equipment costing under $20,000
- Unincorporated small business (sole traders and partnerships) will get an 8% discount on the tax paid on those profits (though only to a maximum of $1,000 - as per the last Budget)
A word of caution on these company tax cuts. It appears as though whilst the company will be paying less tax the franking credits on the profit distributions will be less, which negates the benefit to most small business owners operating in a company structure. Hopefully this will be clarified when/if the legislation is debated.
Those of you earning over $80,000 per annum are in line for an effective tax cut of about $6 per week as the 32.5% tax threshold rises from $80,000 to $87,000 from 1st July 2016.
I'm going to ignore a lot of the changes announced as they are for very high earners with a lot of money in super. If this describes you, you really need to be paying for an adviser to let you know how these changes will affect you, rather than getting free advice from my blog.
There were some other interesting announcements in the area of super that could be of interest to some people:
- From 1st July 2017 everyone up until the age of 74 will be able to claim a tax deduction for superannuation contributions made personally.
- A low income superannuation tax offset will be introduced for low income earners from 1st July 2017, worth up to $500 per year.
- People on Transition to Retirement pensions, there will be changes to the way your super fund earnings are taxed, also from 1st July 2017.
The Government will attempt to make people pay for GST on all overseas transaction by having overseas businesses register for GST if they sell more than $75,000 worth of goods to Australians per year. Good luck with policing that.
Stop smoking if you want to have enough money to eat.
Public Sector Efficiency
For those of you that need to deal with the Government on a regular basis (including BAS and Centrelink) there will be a big push to get people to deal with the Government electronically. This will mean electronic BAS, and hours spent trying to get the myGov website to actually work. This is all so that the government can employ less people to deal with this stuff. Happy days ahead if/when their systems crash.
Bring on the election.
Want to remind yourself of the horrors of the last 2 budgets? Read my reviews of the 2014 and 2015 Budgets.