This update comes to you the morning after Joe Hockey delivered the Abbott Government’s first Federal Budget. By last night most of the headline issues had been telegraphed in leaks to the media over recent days. Here is a link to the detailed budget bulletin released by the Institute of Chartered Accountants and running for 56 pages.
Here I highlight the more important issues from a budget which has taken a hard line in tightening welfare eligibility and raising taxes. This is the first budget from either Conservative or Labour treasurers in over ten years which doesn’t offer tax cuts, welfare increases, or both and whilst electorally popular, those cuts cannot be sustained or funded in an economy cooling in the years following peak spending by the resources sector.
There is a significant cut in long term Federal funding of Health and Education. With State and Territory budgets already strained, the reduction of this Federal funding is likely to push the State Governments into pressuring Canberra for an increase in GST.
1 Temporary Deficits Tax from 1 July 2014 of 2% on incomes over $180,000 will mean the top marginal rate including the Medicare levy which also goes to 2% on 1 July, increase to 49%.
2 A raft of reduced or frozen tax offsets or benefits including a tightening of eligibility to the family tax benefit scheme and abolition of the mature age worker tax offset.
3 Introduction of the option to withdraw excess non- concessional superannuation contributions and the increase in the superannuation guarantee rate to 9.5% from 1 July 2014.
4 More restrictive access to Newstart allowances, Disability support pensions, Commonwealth Seniors Health Card, indexation of pension payments and stronger incentives for participation in the workforce by jobseekers.
There are a myriad of other changes which are detailed in the Institutes special budget link. Overall this appears a fiscally responsible blueprint for the times with everyone in the community expected to take some “medicine”. The big issue for debate is one of social equitability and whether Mr Hockey has got everyone’s dosage fairly measured.