2016 Federal Budget winners and losers
Last night we saw the first budget from our new treasurer Scott Morrison. The federal government revealed its plans for the next few years, with promised investment in innovation, job creation and defense. How will they afford it? By targeting tax dodgers, welfare cheats and 'inefficient' government commitments.
The 2016 budget promises tax cuts for small and medium sized enterprises. The tax rate for companies will be lowered over time to what Morrison describes as "an internationally competitive level". From July 2016, businesses with an annual turnover of less than $10 million will have a company tax rate of 27.5%. By 2026-27 it will be 25%. Unincorporated businesses with an annual turnover of less than $5 million will have their tax discounts increased by 8%, which will be capped at $1000. This is to reach 16% by 2026-27.
Middle income earners will be cheering the proposed changes to their income tax. The 32.5% income tax threshold will increase from $80K to $87K under the government's new plan, which Morrison says will save 500,000 tax payers from the 37% tax rate.
Prime Minister Malcolm Turnbull's $1.1 billion investment in National Innovation and Science Agenda added 8600 annual extra places for the New Enterprise Incentive Scheme, which aims to teach budding entrepreneurs the basics of self-employment. Jobs were also promised in the defense and infrastructure sectors, with $50 billion promised towards building roads, rail, airports and dams, and a 20 year plan to get our defense manufacturing industry accounting for 2% of GDP. Young job seekers will also be pleased with the new Prepare, Trial, Hire (PaTH) initiative, which incentivises businesses to take on interns. Businesses can also receive up to $10,000 in wage subsidies over six months if they employ an intern.
The government has aimed to bridge the gap between men's and women's superannuation by extending the spouse tax offset. The income threshold for the receiving spouse will be lifted from $10,800 to $37,000, and the contributing spouse will now be eligible for an 18% offset worth up to $540 for contributions made to their spouse's superannuation account.
Large super balances
High income earners will feel the sting in this budget, with Morrison targeting superannuation's "generous"' tax settings. The budget announced a $1.6 million transfer cap on the amount that can be transferred to tax-free retirement phase accounts, and a 30% tax on concessional contributions for those on incomes of more than $250,000. Super account holders were also introduced to new contributions caps, with annual concessional contributions now capped at $25,000, and lifetime non-concession contributions capped at $500,000.
Big multinationals such as Google will now have a tougher time funneling their Australian profits into offshore bank accounts. Morrison's new Diverted Profits Tax introduces a 40% penalty rate of tax on multinationals that attempt to shift their profits offshore. How will they police this? By creating more jobs at the ATO and employing a special team to monitor the activities of big businesses. They also promised greater security for corporate whistleblowers.
If there was ever a better time to quit smoking, it would be now. The government came through on their expected tobacco excise increase, announcing four annual rate rises of 12.5% over four years. Cigarettes are about to get a whole lot more expensive, and restrictions on importing tobacco from overseas are going to get tougher.
Working parents awoke to the disheartening news that new childcare subsidy and the additional child care subsidy would be deferred until July 2018. The government is seeking changes to the family tax benefit, which needs to pass in the senate in order for funding to be made available.
The budget also announced it would extend its freeze on the Medicare Levy Surcharge and Private Health Rebate. The indexation of the income thresholds for both of these items will remain frozen for a further three years from July 2018. For an individual, you will pay no Medicare levy if your taxable income is equal to or less than $21,336. For a couple, this amount will be $36,001.