On Tuesday 2 April, the Federal Treasurer, Josh Frydenberg, delivered his first Federal Budget and this Government’s last before the May election.
With a Federal election just weeks away, this year’s Budget focused on supporting low and middle-income households and infrastructure investment, boosting consumer confidence and spending, and kick starting the Australian economy.
An optimistic Budget
The Government projected an annual surplus of $7.1bn for 2019-20 – the first in 12 years and surpluses of $45bn over the next 4 years.
There has been a lot of speculation into the Budget forecast. Why is there a surplus when everything seems to be slowing down? The answer may simply be that the nation is receiving more for the sale of iron ore and coking coal, collecting more in tax mainly through taxpayers moving into higher tax brackets and benefiting from the results of positive ATO monitoring and investigations.
Big picture overview
The big picture highlights of this year’s Budget:
- Surplus: Budget surplus of $7.1bn in 2019-20 – the first in 12 years
- Debt: Government debt to be cleared within 10 years
- Economic growth: Annual economic growth of 2.75% projected for 2019-20
- Cap on tax to GDP: Personal tax collected in any one year to be capped at 23.9% of GDP
- Total tax receipts: Total tax receipts (excluding GST) is expected to increase to $399.2bn in 2019-20 – a 4.2% increase over the previous year.
- Reduction in personal tax: An almost immediate reduction in personal tax to those on low and medium incomes with the filing of the 2018-19 tax return
- One-off energy payments: This June, an immediate one-off cash payment to pensioners and those receiving support payments to assist in the payment of power accounts
The big question is: what will be the impact of the Federal election? The Opposition have stated that they will support tax cuts that are responsible and if they win, they will present a second Budget in August or September.
- Health: $496m on cancer treatment; $220m on medical research; $200m to reduce out of pocket costs for scans; $32m for breast cancer subsidised MRIs; $20m for epilepsy support services
- Education: $3.4m to encourage women into science, maths and tech careers
- Children: $22.5m to create a National Centre for the Prevention of Child Sexual Abuse
- Social security: More in-home care places; $78m housing for women and children fleeing family violence; $285m before 1 July as an up-front cash payment to assist in the payment of power bills
- Sports: $190m to upgrade female toilet blocks at sport grounds
- Infrastructure: $5bn for building rail link to Melbourne airport; $2.2bn to fix traffic black spots, potholes and bridges; $253m upgrades to Sydney roads; $40m for 5 new business cases for high-speed railway; $500m for upgrade to Princes Highway; $200m to form a 3rd crossing over the Hawkesbury River
- Security: $570m more for counter-terrorism and anti-espionage operations; $294m to upgrade security at airports
- Online: $25m for privacy watchdog to investigate dodgy tech companies
- Superannuation: $70m removing the work test for those aged 65 and 66 allowing them to make voluntary contributions to superannuation schemes; increase age for spousal contributions from 69 to 74, currently people over 70 cannot receive third party contributions
- Research and development incentive: Cut back by $1.35bn
- Queensland floods and storms grants: Tax exemptions for qualifying grants made to primary producers, small businesses and non-profits affected by the North Queensland floods (those of 29 January 2019) and to the primary producers in the Fassifern Valley for storm damage (October 2018).
Read our complete April 2019 Taxwise Budget Newsletter here