Treasurer Joe Hockey’s “get out there and have a go” second budget delivers a multi-billion-dollar small business boost, a crackdown on welfare, a revised families package and a tax system focused on “fairness”.
But it also predicts a deficit of $35 billion – below what most observers expected but still more than double what was forecast last year. Indeed, any prospect of a surplus is still years away – Mr Hockey says 2019/20, but most observers believe that’s optimistic.
Small business was the big winner in the budget which, in contrast to last year’s politically unpopular “repair job” was long on positivity and hope for the future. It will inevitably lead to speculation of an early election.
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“You can always look at the dark side of life, you can do that. Not me,” Mr Hockey said, urging people to “look at the glass half full”.
In a stark departure from last year’s references to “lifters and leaners” and warnings of the “pain associated with budget repair”, Mr Hockey described his 2015 effort as “a budget that unleashes our nation’s potential”.
“This is a budget that builds a stronger, safer and more prosperous Australia,” Mr Hockey said. “So now is the time for all Australians to get out there and have a go.”
Small businesses will be able to immediately write off assets worth up to $20,000 as part of the Abbott government’s efforts to encourage them to spend more and grow their operations.
The move is part of a $5.5 billion package aimed at boosting the 96 per cent of Australian businesses with an annual turnover of less than $2 million a year.
“Cars and vans, kitchens and machinery – anything under $20,000 is immediately 100 per cent tax deductible from tonight,” Mr Hockey said in his budget night speech.
And the measure isn’t capped, not that it appeared to worry the Treasurer when questioned on it.
“This is about growing the economy … if there is an exceptional response, I say ‘fantastic!'” he told reporters.
“If you’re a tradie, it might be new tools or a computer for the home office – cars and vans, kitchens or machinery, anything under $20,000 is immediately 100 per cent deductible from tonight.”
The company tax rate for incorporated small businesses will also fall from 30 per cent to 28.5 per cent, with unincorporated businesses receiving a five per cent tax discount of up to $1,000.
The government is also changing Fringe Benefits Tax rules to allow for tax exemptions on multiple portable electronic devices such as smartphones and tablets. Under existing rules, tax exemptions were only provided for one device.
Elsewhere, the budget shows unemployment hovering around six per cent for at least the next four years and employment growth climbing just slightly from 1.5 to two per cent.
Against this background, unemployed people won a reprieve from one of the most contentious measures in last year’s budget – the six-month wait for people under 30 to access benefits.
But people under 25 will still have to wait for four weeks and actively seek work before receiving Newstart.
The Government has also been forced to delay its move to increase the eligibility age for Newstart from 22 to 25 until July next year, at a cost of $171 million.
For people in a job, wages will continue to grow slowly, increasing between two and three per cent until 2018-19, when they may break through to 3.25 per cent.
Underpinning the deficit figure is a revenue write-down of $52 billion over the next four years, driven by plunging iron ore prices and lower income tax receipts.
As it faces a revenue black hole, the Government has sought savings from measures to promote “fairness in tax and benefits”, banking $1.7 billion in savings on welfare “integrity” measures.
Ramping up investigations into welfare fraud and non-compliance, looking into an extra 200 cases a year, and recovering historical debt from 2010 to 2013 will return $1.5 billion to the budget over four years.
Preventing new parents accessing both employer and taxpayer-funded paid parental leave schemes will save the budget $968 million. The Government is also expecting the pro-vaccination policy of “no jab, no pay” to save the budget $500 million over five years, implying many people are expected to continue to be conscientious objectors and not have their child immunised.
The price of streaming a movie, e-books, games and other digital products bought from overseas will go up by at least 10 per cent under the new so-called Netflix tax in what Mr Hockey said was a levelling of an unfair playing field.
The new rules will apply the 10 per cent GST to digital products and services supplied from foreign businesses. It is estimated to raise $350 million over the next four years for the states and territories.
“It is unfair that overseas-based businesses selling services into Australia may not charge GST when local businesses have to charge GST,” Mr Hockey said.
“A local business that employs Australians, pays rent in Australia, pays tax in Australia, and helps build our economy is disadvantaged by the current system.”
Other online companies Airbnb, Uber and Netflix could also be caught in the new tax net.
Foreigners on working holidays in Australia also lost out. They will no longer be eligible for the $18,200 tax-free threshold and will begin paying tax from the first dollar they earn, adding $540 million to the budget. And Australians living overseas will also have to pay back their student loans from next January for both new and existing debts, putting $26 million into federal coffers.
Axing a tax offset for fly-in fly-out workers if they don’t live in a remote area will save $325 million.
The Government also wants to build better infrastructure throughout northern Australia through a concessional loan facility that will initially cost $138 million but may build to $5 billion. It will provide cheaper loans to companies and state governments to build ports, rail and power lines throughout Northern Australia in a policy Mr Hockey said “unleashes the nation’s potential”.
The Government will also spend $254 million on what it has called a “digital transformation agenda” to improve its online service delivery.
Parents will get more than $10 billion a year from taxpayers to help them pay their childcare fees once new subsidies start.
The federal government will spend an extra $3.2 billion on childcare subsidies over the next four years, the budget confirmed.
While Mr Hockey’s second budget drew praise from business, it got a sharp response from the Opposition, which called it a short-sighted attempt to save Prime Minister Tony Abbott’s job.
Shadow treasurer Chris Bowen said the deficit had been doubled by the coalition government within one year and the worst aspects of last year’s budget – the $80 billion cut from hospitals and schools, $100,000 university degrees and cuts to family payments – remained in place.
“The fundamental unfairness of last year’s budget disaster remains tonight,” Mr Bowen said. “This is a short-term budget to fix a short-term political problem and save one man’s job.”
– with ABC and AAP