Federal Budget Analysis 2018: A budget about political survival....despite talk of lofty tax cuts

Clearly a modest budget ahead of an election year with virtually no spending cuts.

Thanks largely to a surge in revenue from economic growth both locally and globally, the budget plans to unleash $13.7b in the form of tax cuts for hardworking middle Australia and pensioners.

These are not immediate tax cuts that will put money in the hands of low and middle income earners. The plan is to provide tax relief over a seven year period via tax offsets and changes to the tax brackets for individuals including the removal of the 37% tax bracket entirely. Overall by 2025, the tax system will look slightly flatter, with someone on $41,000 paying the same marginal tax rate up to $200,000.

From 1 July 2018 those earning up to $90,000 will get up to $530 a year benefit. This will phase out to a zero benefit at $125,000 per year. However, you will need to wait until your tax return is lodged to get the benefit as it will be in the form of a tax offset.

At the same time those earning above $87,000 will also benefit from the 32.5% tax bracket being lifted to $90,000 which translates to a maximum of $125 less tax a year.

Not a lot, but not to be sneezed at as a lot of Australians will be affected.

A sigh of relief also with confirmation that the Medicare levy will remain unchanged for all tax payers.

Those with small super balances will benefit from the ATO being given powers to pro-actively reunite workers with inactive super accounts, capping fees on balances less than $6,000 at 3% and banning exit fees when transferring balances.

Pensioners will benefit marginally from being able to earn $300 a fortnight (up from $250) without losing pension payments. Those who are self employed will now be able to access the same benefit for up to $7,800 a year. Additionally, those aged 65-74 will now be able to contribute to superannuation without satisfying the work test but only for those with super balances less than $300,000.

No need for frantic buying of assets by small business ahead of year end with the news of the extension of the immediate asset write off for expenditure less than $20,000.

With a similar focus to last year’s budget on backing businesses to invest and create more jobs, the Government is pushing ahead with cutting the company tax rate to 27.5% for those with turnover between $25-$50m. The Research and Development tax incentives gets some attention with a $4m cap on refunds for those under $20m turnover and lower overall offsets available when the percentage of an entities expenditure on Research and Development is low.

Despite a focus on reducing the deficit, there are some big spending plans for areas such as infrastructure, technology, aged care and mental health services.

Welcome news also to GPs with a commitment to fund general practice training, with the head of the RACGP calling it a “signal the Government is beginning to understand specialist GPs’ fundamental role in Australian healthcare.”

A big cheers to local brewers with an increase in the total alcohol excise refund scheme with the cap lifted from $30,000 to $100,000. Further the concessional excise rates currently available for kegs over 48 litres will be extended down to 8 litre kegs. Perhaps we will get slightly cheaper craft beer, now that should gain some votes.

Despite a focus on reducing the deficit, there are some big spending plans for areas such as infrastructure, technology, aged care and mental health services.

At the same time those earning above $87,000 will also benefit from the 32.5% tax bracket being lifted to $90,000 which translates to a maximum of $125 less tax a year.

Not a lot, but not to be sneezed at as a lot of Australians will be affected.

A sigh of relief also with confirmation that the Medicare levy will remain unchanged for all tax payers.

Those with small super balances will benefit from the ATO being given powers to pro-actively reunite workers with inactive super accounts, capping fees on balances less than $6,000 at 3% and banning exit fees when transferring balances.

Pensioners will benefit marginally from being able to earn $300 a fortnight (up from $250) without losing pension payments. Those who are self employed will now be able to access the same benefit for up to $7,800 a year. Additionally, those aged 65-74 will now be able to contribute to superannuation without satisfying the work test but only for those with super balances less than $300,000.

No need for frantic buying of assets by small business ahead of year end with the news of the extension of the immediate asset write off for expenditure less than $20,000.

With a similar focus to last year’s budget on backing businesses to invest and create more jobs, the Government is pushing ahead with cutting the company tax rate to 27.5% for those with turnover between $25-$50m. The Research and Development tax incentives gets some attention with a $4m cap on refunds for those under $20m turnover and lower overall offsets available when the percentage of an entities expenditure on Research and Development is low.

Despite a focus on reducing the deficit, there are some big spending plans for areas such as infrastructure, technology, aged care and mental health services.

Welcome news also to GPs with a commitment to fund general practice training, with the head of the RACGP calling it a “signal the Government is beginning to understand specialist GPs’ fundamental role in Australian healthcare.”

A big cheers to local brewers with an increase in the total alcohol excise refund scheme with the cap lifted from $30,000 to $100,000. Further the concessional excise rates currently available for kegs over 48 litres will be extended down to 8 litre kegs. Perhaps we will get slightly cheaper craft beer, now that should gain some votes.

 For the full 2018 budget analysis click here.

 

 

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