The Federal Government has released its 2017-18 Budget, forecasting a deficit of $29.4 billion for 2017-18, down from $37.6 billion in 2016-17.
Treasurer Scott Morrison says the government is focused on "living within our means" and "returning the Budget to balance in 2020/21".
There were small wins in the Budget for businesses, including extension of the instant asset write-off and a tax cut for businesses turning over up to $50 million. However, the big focus was on housing affordability, a new levy for the big banks and a crackdown on tax-evading multinational companies
Let's take a closer look.
The 2017-18 Budget is veering away from the investment phase of the mining boom and gearing towards broader-based drivers of economic growth. It also indicates growing signals of strength in the global economy.
Some key announcements surrounding the future state of the Australian economy include:
• The 2017-18 budget deficit is currently $29.4 billion, and is forecast to drop to $21.4 billion in 2018-19, then $2.5 billion in 2019-20. The return to surplus of $7.4 billion will occur by by 2020-21.
• Wage increases are expected to jump from 2 per cent to more than 3 per cent over the next four years.
• Inflation is expected to rise from 2 per cent this year to 2.25 per cent next year, 2.5 per cent in 2019-20 and through to 2020-21.
• A Medicare levy increase will add $8.2 billion to the economy.
Big business was a focus of the 2017-18 Budget, with Mr Morrison revealing that extra funding will be granted for the Tax Office's task force, charged with clawing back $15 billion from the black economy.
The much hyped 'Google tax' - a crackdown on the enormous market power of Facebook and Google - is expected to raise more than $4 billion from big business and multinationals.
The big banks will also be hit with a brand new tax, and will be subject to bigger fines of $50 - $200 million for serious misconduct.
Australia's big four banks will be slapped with a new tax on a majority of their funding.
From July 1, a 0.06 per cent annual levy will be added to certain key funding sources. This will only affect banks with liabilities over $100 billion, including Commonwealth Bank, Westpac, National Australia Bank, ANZ and Macquarie. The big banks will also face a 6 basis-point levy on customer deposits above $250,000, corporate bonds, commercial paper, certificates of deposit and Tier 2 capital instruments.
The new tax will raise $6.2 billion over four years and will be policed by the newly implemented Australian Financial Complaints Authority. Banks will also face fines of as much as $200 million for misconduct.
SMALL-MEDIUM SIZED ENTERPRISES
Small businesses will see an extension of the $20,000 instant asset write-off until 2018. The measure will be opened up to businesses with an annual turnover of up to $10 million.
Mr Morrison also announced that businesses with a turnover of up to $50 million will receive a company tax cut. A summary of tax breaks revealed in this year's Budget include:
• Companies with a turnover of less than $10 million will pay the reduced rate of 27.5 per cent company tax this financial year;
• In 2017-18, the new rate will apply to companies with up to $25 million turnover;
• In 2018-19, the new rate will apply to companies with up to $50 million turnover, and;
• The tax rate will eventually reduce until 2026-27 to 25 per cent for companies with up to a $50 million turnover.
HOUSING AND SUPERANNUATION
From July 1, 2017, young people will have the option of using up to $30,000 in voluntary superannuation contributions to place a deposit on a property. The measure - which is aimed at helping young people gain a start in the property market - is expected to cost the federal government $250 million over the next four years.
First home buyers will be allowed to withdraw any contributions beyond the 9.5 per cent super guarantee to buy property. The maximum withdrawal amount is $30,000 and contributions can be made from July 1, 2017.
The Government confirmed it will not make changes to negative gearing or the capital gains tax discount.
Tougher rules will be implemented in an effort to tighten compliance around foreign investing. Developers will be banned from selling more than 50 per cent of a new project to foreign investors.
Mr Morrison also announced a 'ghost house' tax of $5,000 per annum will be imposed on foreign investors who do not occupy or lease a property for at least six months of the year.
The Government is set to save $2.8 billion over the five years from 2016-17 by reforming education. This includes a 7.5 per cent university tuition fee jump, phased in over four years starting in 2018.
Graduates will be required to start paying back their loans at a lower income threshold of $42,000 instead of $51,957. Those earning over $119,882 will pay 10% of their income instead of eight per cent. The maximum increase for a four year government-subsidised degree will be $3,600, with a maximum total cost of $50,000. A subsidised six year medical degree will cost a maximum of $75,000.
Mr Morrison also announced that there will be a new $1.5 billion four year Skilling Australia Fund which will be used by the Federal and State Governments for projects designed to improve participation in apprenticeships and traineeships.
Medicare will be getting a much needed boost, but this boost will be coming straight out of your hip pocket.
The Medicare levy is expected to increase from 2 per cent to 2.5 per cent of taxable income from July 1, 2019 to fund the National Disability Insurance Scheme. Exemptions will be made for those who have incomes below the threshold of $21,655 for singles, $36,541 for families and $34,244 for pensioners.
The Medicare levy increase will also have an impact on employers, who will have to pay more other taxes linked to the top personal tax rate like fringe benefits tax.
The measure is predicted to make $8.2 billion in revenue for the Government over four years.
For in depth reading download the below reports.
Tax and Accounting Federal Budget Report
Parliament Federal Budget Paper
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From the team at BDH Leaders