Well, the Federal Budget was handed down on Tuesday night 2nd April – about a month or so earlier than the usual May date. As we are a Melbourne accounting firm, I’ll focus on the impacts particularly for Victoria and to business and tax payers generally. Prime Minister Scott Morrison stated this as “the first budget surplus in 12 years.” So straight into it; here are the highlights:
- $100 billion has been allocated to infrastructure in this budget. Big winners in this were Western Australia, some areas of Queensland, Sydney (with $3.5 billion for the first page of the Western Sydney North South Rail link. Melbourne also received a pledge of $2 million for a fast rail from Geelong and Melbourne. This is expected to improve travel time, increase train use and ease the congestion on the Prices Highway and West Gate Bridge – which I’m sure we all agree is well needed.
- There is also $700M allocated to duplicate rail lines in the Geelong area – specifically 12.6kms of track between South Geelong and Waurn Ponds. This is in addition to the $2 billion already pledged for the fast rail link as mentioned above. One would presume this will interlink to improve transportation generally in the entire area.
- $550 million has been allocated to regulate banks after the recent royal commission and its findings.
- Permanent migration has been cut from the current cap of 190,000 to 160,000.
- An extra $328 million has been allocated towards combating domestic violence which appears to be an issue that is just growing and growing within Australia.
- Also $527.9 million allocated to the Disability Royal Commission. This is to ensure disabled persons are safe and protected.
- Victoria will receive $496M for a Medical Facility which will go towards cancer treatment, hospital infrastructure, mental health services and general medical research. This research will benefit all Australians.
- An additional $461million will be invested into youth mental health and suicide prevention strategies. $5.5 million over four years will go towards extra mental health services for people in Queensland, Victoria and Tasmania who have been affected by natural disasters. Also incorporated in this is suicide prevention initiatives which are focussed on Aboriginal and Torres Strait Island peoples who are often at high risk.
- $128.8 million to expand the cashless welfare card. This has been expanded to cover all welfare recipients in the Northern Territory as well as some communities in Far North Queensland. It is quite a controversial issue which is not liked by those receiving welfare payments. Many of the welfare recipients say that the cashless welfare card has made their life worse, the social services minister said the report showed the card was effective in reducing alcohol use, illegal drug use and gambling, which of course was its intention.
The biggest news is tax cuts. The Coalition Government is also simplifying the tax system, cutting back to three tax scales. This doesn’t come into play until 2024-25 tax year and in fact, they have said it won’t be passed until after the upcoming Federal election. Essentially, there will be three tax scales, being 19%, 30% and 45%. They will also retain the tax free component of $18,200. The Government state that 24% of Australians earn $37K or less, 70% are in the middle area and the balance 6% are high income earners. This will mean that 94% of Australians pay no more than 30% of tax. Yes, the high income earners have received no relief, but they also have had no increase.
So, based on the Governments analysis, and based on the following levels, this is what Australians can look forward to getting back once the tax cuts come into place:
- Earning up to $37,000 $255 worth of tax relief
- Earning $37K to $48K You’ll get between $255 and $1080 tax relief
- Earning $48K to $90K Your tax relief will be the maximum $1080 per person
- Earning $90K to $126K Your tax relief will reduce from $1080 down to zero.
On top of the above, there is also a once-off payment to go towards electricity bills. If you’re a single, this amount is $75 or $125 for a couple. I should say that it’s only for pensioners, single parents, disabled people, carers, veterans and their dependents. It is not a global payment to one and all.
For those over 65 years old, the Coalition Government have relaxed 65 and 66 years old in respect of making voluntary super contributions. Those two age groups will not be required to meet the current work test. This will come into effect from 2020-21 year and is expected to benefit 55,000 people. The same group of people will also be allowed to make three years of non-concessional contributions (currently capped at $100K a year) to their super funds in one year. At present, this is available only for 65 year olds.
According to the Guardian Australia – the Government intends to increase the age limit for contributions for spouses from the current 69 to 74. At present, people aged over 70 can’t receive any contributions made by someone else on their behalf.
There is also a new $525 million skills package that consists of an additional $55 million of new money as well as unspent money of $463 million taken from Skilling Australia’s Fund. This will include $200 million of incentives for apprenticeship for those trades with skill shortages. This will benefit not only youth, but also businesses who commit to take on apprentices (which usually are youth) and thus creating more jobs for young Australians. There is $67.5 million for school based vocational education to trial ten national training hubs, as well as $62.4 million for numeracy and literacy skills and $20 million to identify emerging skill needs and where the shortfalls might occur in future.
Business & Companies
The Coalition Government have promised to fast track the company tax rate reduction down to 25%. This will be available only for small to medium sized entities which have a turnover of less than $50M.
Also for companies, the small business instant write-off has been increased to $30K. Again, just for small to medium sized business with a turnover of less than $50M. Larger companies with a turnover in excess of $50M will not enjoy these benefits.
Finally, the Government have allocated new funding to the ATO to target tax avoidance by multi nationals, large businesses and the high wealth individuals. Their goal is to ensure everyone pays their fair share and that large or wealthy people don’t avoid their obligations.
I think everyone agrees this budget handed down is a pre-election budget. The Coalition Government states that the net debt will be eliminated by 2030 – based on that Government staying in power. The 2019 Australian Budget is big on tax cuts (possibly the greatest since the Howard Government) and also big on infrastructure. On the whole, the average Australian will be better off from the results of this budget.
If you have any questions about how this might affect you as a business or taxpayer, or for that matter any questions about taxation, business services and accounting services – we would love to hear from you. Our focus is to provide quality accounting, taxation and bookkeeping services to businesses, investors and individuals around Australian and particularly in Melbourne. We offer a range of services, both in person and online to meet the needs of a variety of our clients. If we can help in any way, please contact us on 03 8899 7506.