A FORUM featuring top business identities discussing the rapidly changing nature of jobs into the future will be a highlight of this year’s CareersXpo. The expo at EPIC between August 2 and 3 will be […]
TAXPAYERS will be hit with a rise in the Medicare levy and the big banks face a new tax in a budget that pitches to win back disillusioned voters and to reassure the rating agencies.The government will fully plug the funding hole in the National Disability Insurance Scheme (NDIS) with an increase of 0.5% in the Medicare levy from July 2019, taking it to 2.5%. The increase will raise A$8.2 billion over the budget period.
In the other major tax hike in the budget delivered by Treasurer Scott Morrison on Tuesday night, the five major banks will pay a levy raising $6.2 billion over the forward estimates “to support budget repair”.
Morrison cast the budget as based on the principles of “fairness, security, and opportunity”. It commits to more and better paying jobs, guaranteeing essential services, putting downward pressure on the cost of living, and Australia living within its means.
It is squarely directed at trying to undo continuing damage from the harsh Abbott government 2014 budget. Morrison confirmed a raft of so-called “zombie measures” that have failed to pass parliament have been dropped, at a cost of $13 billion. Morrison called the extra revenue raising needed to cover these measures “a Senate tax for things not going through”.
Among its initiatives directed to avoiding a future “Mediscare” campaign, the budget promises to “guarantee” Medicare, progressively unfreeze the Medicare rebate, and maintain the bulk-billing incentives for pathology and diagnostic imaging services.
A Medicare Guarantee Fund will be established to pay for all expenses of the Medicare Benefits Schedule and the Pharmaceutical Benefits Scheme (PBS). Revenue from the Medicare levy will be put into this fund plus the amount from general income tax that’s needed to cover the total cost. Morrison said this would “provide transparency about what it really costs to run Medicare and the PBS and a clear guarantee on how we pay for it”.
The government is also restoring the pensioner concession card to people that were hit by the pension assets test change this year.
A housing affordability package includes a “first home super savers scheme” that will provide a tax cut for those trying to get a deposit together. They will be able from July 1 to salary sacrifice into their superannuation account, separate from their compulsory superannuation contributions.
The contributions will receive the tax advantages of superannuation, with contributions and earnings taxed at 15% rather than marginal rates. Withdrawals will be taxed at the marginal rates, less 30 percentage points. Contributions will be limited to $30,000 per person and $15,000 per year.
Morrison said this plan would mean “most first-home savers would be able to accelerate their savings by at least 30%”.
Older Australians will be encouraged to downsize by being able to make a non-concessional contribution of up to $300,000 into their superannuation fund from the sale of their home.
While the general provisions of negative gearing are untouched, the government will disallow deductions for travel expenses related to the properties. For properties bought from now it will limit plant and equipment depreciation deductions.
There will be tougher rules for foreign investors in the housing market.
Morrison painted an optimistic picture of the economic outlook, while acknowledging the pain Australians have been feeling, saying that not all people had shared the country’s economic growth and “many remain frustrated at not getting ahead”.
He said there were signs of an improving global economy and “there is clearly the potential for better days ahead”.
The budget forecasts wages growth – which has been around 2% – will increase to as much as 3.75% by the end of the budget period. This is regarded by many economists as very optimistic.
For the coming 2017-18 year, growth is forecast at 2.75% and unemployment at 5.75%.
Morrison said the budget had a “fair and responsible path” back to balance, which is due to be reached in 2020-21, with a projected surplus of $7.4 billion, somewhat higher than previously estimated. The forecast deficit for 2017-18 is $29.4 billion.
The budget contains an extensive infrastructure program, pledging to deliver $75 billion in infrastructure funding and financing over a decade.
The government will inject up to $5.3 billion into the construction of the second Sydney airport. It will provide $8.4 billion in equity into the planned Melbourne-Brisbane inland rail project.
Morrison also said that as well as the intention to further develop the Snowy Hydro, “the Commonwealth is open to acquiring a larger share or outright ownership” of the scheme from the Victorian and New South Wales governments.
The levy on the banks will be 0.06% on their liabilities, starting on July 1. Morrison said it was similar to measures in other advanced countries and “will even up the playing field for smaller banks”.
He indicated that the banks should not pass the levy onto customers, said the Australian Competition and Consumer Commission would monitor the situation, and advised people to switch to one of the smaller banks if they thought they were being shortchanged.
A Financial Complaints Authority will be set up as a one-stop-shop to deal with grievances customers have with banks and other financial institutions.
The chief executive of the Australian Bankers’ Association, Anna Bligh, slammed the plan, saying it was policy on the run, and “reckless”. “They have done it because they think banks are an easy target,” she said.
Welfare recipients have again been in the government’s sights. There will be a drug testing trial for 5,000 new welfare recipients. JobSeeker recipients testing positive would be placed on the Cashless Debit Card.
“We will no longer accept, as an excuse from repeat offenders, that the reason they could not meet their mutual obligation requirements was because they were drunk or drug-affected,” Morrison said.
The disability support pension will be denied for a disability caused solely by a person’s substance abuse.
Shadow Treasurer Chris Bowen said the government had “tried to catch up with Labor but they have failed miserably”. But Labor signalled its agreement with the bank tax.
Business Council president Jennifer Westacott said it was a budget for “a reality world”. It was “practical and workable”.
“We welcome the government’s discipline in restricting real spending growth to 1.9% over the forward estimates,” she said.
But she said “the banking levy effectively represents double-taxation of some of Australia’s most successful companies, which already pay $11 billion in company tax each year”.
The Greens attacked the planned drug testing trial for some new welfare recipients was “a violation” and a “very dangerous precedent”. They would seek advice about its legality.