A look at the 2015 Federal Budget

Treasurer Joe Hockey has delivered his second and potentially final budget tonight with a focus on small business, reducing the budget deficit, acknowledging the drop in iron ore prices, allocating more money for northern Australia counter-terrorism and helping farmers. In delivering the 2015 Federal Australian Budget, the government has had to deal with pressure from the Australian public after nearly a year of protests and simmering discontent among its own Coalition ranks with nervous backbenchers slowly reflecting on February’s leadership issues.
Multinational corporations and businesses will face tighter controls on shifting profits to foreign tax havens with the introduction of a new anti-tax avoidance legislation. The government has avoided making any changes to superannuation within this term of government although there will be increased means testing from 2017 to be eligible for the aged pension. The asset test for part pensions which will not include the family home will be lowered to $820,000 for couples. The $20 million dollar medical research fund will go ahead with changes to the Pharmaceutical Benefits Scheme to save $3 billion over 4 years. A number of over-the-counter medicines will no longer be subsidised. The government has also announced a major $3.5 billion childcare reform package with direct payments to childcare centres to cut parents’ upfront costs. Families earning over $65,000 with stay-at-home parents will no longer receive childcare subsidies. Centrelink will also receive a $1 billion upgrade to their computer systems to crack down on welfare cheats by improving identity and data matching abilities.

The government’s budget also is cracking down on tax avoidance from multinational corporations as well as ending tax free working holidays for foreigners and expanding the GST for digital goods. Prior to the Treasurer’s budget speech tonight, the government released some details on its policy for business, superannuation, aged pensions, health, childcare and for cracking down on welfare cheats.

Aus Budget 2015

The government expects to return to surplus in 2019/2020. Current GDP Growth is projected to increase 1% over the next 5 years. The ‘nation building’ agenda of the government has remained despite changing from its austerity budget approach last year. The government is trying to move forward from last year’s heavily criticised budget as it continues to attempt to find savings despite a revenue downturn. Net Debt is expected to peak in 2 years at 18% of GDP at $313 billion. The government is encouraging more workplace participation whilst continuing to fight in the Senate over some of last year’s budget measures that have been blocked.  Despite the Treasurer dealing with a $82 billion deficit blowout, Joe Hockey has declared that “Australia’s best days are ahead” in this year’s budget.

Budget 2015: Winners

  • Young Families – $3.5b childcare package if last year’s welfare cuts passed, from 2017 the Child Care Subsidy will be a single benefit contributing to a percentage of costs e.g. families earning $65,000 or less will have a 85% subsidy, families earning $170,000 or more will have a 50% subsidy.
  • Small Business – small business owners with a turnover less than $2 million will have their annual tax rate lowered by 1.5% at a cost to the government of $1.45 billion dollars. Small business can now immediately write off assets under $20,000 and starting or restructuring a business will be made easier with the ability to immediately deduct expenses such as legal fees.
  • National Security and Defence – the government will spend $450 million on improving Australia’s intelligence capabilities, including metadata retention and countering extremist propaganda. Included in this announcement is $50 million for a new Australian Border Force. Combating terrorism such as Islamic State and military operations in the Middle East will also receive a $403 million and a $750 million boost. Some of that money will be spent on training the Iraqi army and an additional $43 million will be spent on fighting piracy off the Middle East coast.
  • Rural and Northern Australia – Many farmers will be better off with a $250 million Drought Concessional Loan Scheme as well as have water facilities and fencing as immediate tax write-offs. Other government spending on rural Australia totals over $100 million will be spent on improving infrastructure, countering pests, and social welfare support in drought affected areas. Northern Australia will receive a $5 billion Infrastructure Facility which Treasurer Joe Jockey says will “unleash our nation’s potential”.
  • Medical Research – With the demise of the much loathed GP co-payment, the government has announced that it will spend $440 million on this scheme to be paid for with a review of medical procedures expected to save the government over a billion dollars.

Budget 2015: Neutral

  • Retirees – The threshold for asset tests for those on the pension will be changed resulting in about 172,000 pensioners will be better off at the cost of 81,000 part-pensioners who will no longer be eligible. Now singles over 65 with assets (excluding the family home) of up to $550,000 will be eligible to claim the part pension. There will also be no change to how pensions are indexed.
  • Young People – Youth unemployment is a focus of the government with $330 million to be spent on a Youth Employment Strategy including a 6,000 place national work experience program and $664 million on apprenticeships. There are also changes to the eligibility for income support for under 21 year old school leavers and to Newstart. Newly unemployed persons under 25 will have a 4 week wait before being eligible to receive the dole. University deregulation has also returned to the agenda but no details are provided in the budget.
  • Health – Savings are to be found by the government from changes to health funding by “rationalising and streamlining” certain programs. A crackdown on unnecessary surgery or medical procedures will also take place although there is an increase in the scope of Medicare rebates and $1.6 billion for new PBS listings including treatments for melanoma.

Budget 2015: Losers

  • The States – Despite recent calls from State Governments for a review of GST allocations and more funding after last year’s budget cuts to health and education, the Federal Government has not committed to making any further changes or re-considerations for such arrangements.
  • Maternity Leave ‘double dippers’ and Stay at Home Parents – In what is a backflip by the government which will save $1 billion, new parents with workforce maternity leave schemes or schemes higher than the government’s will no longer be eligible  for the government’s scheme. The government will now also only meet the gap between an employer’s and government’s scheme if the employer’s scheme is less than that of the government’s. Another sign that government is encouraging more workforce participation is the loss of childcare rebates for stay at home parents.
  • Foreigners – Australia no longer offers tax free working holidays with foreigners now having to pay tax from the first dollar they earn up to $80,000. The government is also taking a tougher stance on foreign investment into the Australian property market with stronger enforcement of penalties. $735 million is expected to the raised from these changes.
  • Multinational Corporations and Online Downloaders – A new anti-tax avoidance legislation is to be introduced targeting multinationals with global revenues of over $1 billion with the outlawing of corporate schemes to avoid tax in Australia. Penalties for breaches will include having to pay back double plus interest. The GST will also now be extended to foreign firms providing digital services for Australians. The ‘NetFlix Tax’ on digital downloads has also arrived with its implementation from mid-2017 which is predicted to rake in $350 million to be divided up among the states.

This article was first published in The Typewriter