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Your five-minute guide to Scott Morrison's first budget:
ECONOMY
- Deficit of $37.1 billion in 2016-17.
- Unemployment rate falls to 5.5 per cent this year, and for each year until 2019-20.
- GDP is expected to grow at 2.5 per cent in both 2015-16 and 2016-17, before picking up to 3 per cent in 2017-18.
- Iron ore forecast to be $US55 a tonne.
Treasury expects households, supported by more jobs and lower petrol prices, will continue to invest and save, and that non-mining investment will pick up. The budget papers also forecast lower inflation over four years, which is one of the reasons that the RBA cut rates. A return to surplus has been pushed further out well into the future.
BUSINESS
- Small business tax rate lowered by 1 per cent to 27.5 per cent from July 1, with the turnover threshold increased from $2 million to $10 million.
- 870,000 more businesses to be taxed at small business rate.
- The threshold will be pushed out to $100 million by 2020, and all businesses, including large firms, to pay 25 per cent company tax within a decade.
Modest small business tax relief will cost $5.3 billion over four years but the Treasurer will happily pay that for the goodwill it will stoke in the sector. Lowering the company tax rate to 25 per cent for businesses big and small will make Australia more competitive.
FAMILIES
- New $40 billion childcare package pushed back to 2018.
- Package involves a new streamlined subsidy system.
- Government to persist with plans to cut the family tax benefit.
- Nanny pilot program extended.
The government remains committed to the popular $40 billion Jobs for Families package included in last year's budget but has pushed its start date back a year to July 2018. That's because it's still trying to pass the family tax benefit cuts necessary to pay for it. It is hoping a more co-operative Senate after July 2 will help it get the changes through.
TAX EVASION
- A diverted-profit tax modelled on Britain's "Google tax" will enforce 40 per cent penalty tax rate on profits shifted offshore.
- 1000 new Australian Tax Office staff to hunt tax dodgers.
- Strengthened protections for whistleblowers.
Scott Morrison says the government has "listened to the people" on corporate tax evasion. Anger among taxpayers is indeed white hot. But actually squeezing the forecast $3.9 billion from companies with records of sidestepping the tax man appears optimistic at best.
DEFENCE AND SECURITY
- Fight against Islamic State continues at full strength for another year, costing $351 million.
- Shipbuilding including 12 submarines, nine frigates and 12 patrol vessels ensuring at least 3600 jobs.
- Australian Federal Police and Crime Commission get a security upgrade costing $153 million.
Jobs and the high-tech economy are the preoccupation of the defence budget narrative now, unlike the past focus on national security and terrorism. Spending is on track to meet the pledges in the defence white paper and to reach 2 per cent of GDP by 2020-21.
EDUCATION
- University fee deregulation scrapped, but a 20 per cent course funding cut remains.
- School funding receives a $1.2 billion boost over three years.
- The government's childcare package will be delayed a year until 2018.
The government has moved to neutralise education – one of Labor's traditional campaign strengths – as an election issue and has largely succeeded. Killing off university fee deregulation will be welcomed by students while an increase in school funding shows the Coalition remains committed to public schools.
HEALTH
- Cutting $1.2 billion funding for complex healthcare at aged-care providers.
- Freezing Medicare Benefits Schedule fees for three years.
- Cutting items on Medicare and Veterans Benefits Schedule.
- Freezing private insurance rebate and Medicare levy surcharges until 2021.
Changes to the funding for aged care residents' complex healthcare under the Aged Care Funding Instrument will deliver the largest saving to the health portfolio, with plans to halve inflation on payments to aged-care providers. The government will also cut or amend a number of items on the Medicare Benefits Schedule that its review has so far declared clinically obsolete.
INCOME TAX
- Income threshold lifted from $80,000 to $87,000 where the marginal rate rises from 32.5 per cent to 37 per cent.
- Change benefits the wealthiest 25 per cent of taxpayers for a maxium $6.04 a week or $315 a year.
- Budget cost is $3.95 billion over four years.
- The 2 per cent deficit repair levy on those earning above $180,000 will be abolished as promised on July 30, 2017.
Defending the modest tax cut, Mr Morrison sheepishly remarked "it's a start". Explaining the decision to target wealthier Australians with tax relief, he said low-income Australians had done well out of carbon tax compensation, which remained in place even after the tax was abolished. This is, at best, a symbolic tax cut, designed to burnish the government's low-taxing credentials before the election.
SUPER
- New $1.6 million cap on super balances eligible for tax-free earnings in retirement.
- Annual cap on concessional contributions lowered from $30,000 to $25,000.
- Super contributions tax doubled for those earning between $250,000 and $300,000 a year.
- Super tax rebate for those earning less than $37,000 a year reborn under another guise.
Overall the changes to super taxes are expected to net the budget an extra $2.9 billion over four years while only hurting the wealthiest 4 per cent. Tougher limits for the rich but more flexibility to encourage middle-income earners to save. A reprieve for low-income earners.
COMMUNICATIONS
- ABC and SBS base funding maintained for another three years.
- The ABC receives an extra $41.4 million for its news services.
- Commercial television licence fees will be reduced by 25 per cent.
The ABC will be pleased to receive top-up funding for investigative journalism and regional news services. And while not as much as they asked for, commercial TV broadcasters will be glad to pocket $163 million in reduced licence fees.
INFRASTRUCTURE
- $3 billion for the first government prepared to build Melbourne's East West Link.
- $857.2 million for the Melbourne Metro rail project, funded through the asset recycling initiative.
- $115 million in the next two years for Sydney's Badgerys Creek airport.
- A $594 million boost to an inland freight rail link through Victoria, NSW and Queensland.
- $2 billion in loans for dams and other water infrastructure.
Victoria once again misses out, getting just 7.8 per cent of the $34 billion set aside for new projects over the four years to 2019-20. There will be plenty of federal money spent on roads throughout Sydney and NSW over the next year, but little of that money will be the result of this budget.
IMMIGRATION
- Four onshore detention centres to close and Christmas Island centre to be mothballed.
- Plane passengers offered a "premium" border clearance experience.
- About $61.5 million spent on offshore detention centres at Manus Island and Nauru.
- New Zealand citizens granted a streamlined path to permanent residency.
The government is seeking to make most efficient use of its onshore detention network by upgrading some centres and closing others, and the budget emphasises the ongoing taxpayer burden of maintaining highly criticised offshore detention camps. Premium border clearance provides a way for airport operators and airlines to differentiate their offerings in the marketplace.
