Australia Budget 2018: Winners and Losers
(Bloomberg) -- With elections due within a year, Australia’s government on Tuesday announced modest tax cuts and more support for the elderly in a budget aimed at boosting its flagging poll ratings. At the same time, Treasurer Scott Morrison pledged to continue a crackdown on tax-dodging multinationals as he seeks to balance the books a year early. Here are the winners and losers.
Low and Middle Income Earners
The centerpiece of the budget is a seven-year plan for lower and simpler income taxes. Starting July 1, low and middle income earners will get an annual lump sum of up to A$530 a year. The opposition Labor party has already derided the measure, saying the extra cash of about A$10 a week is only enough to buy a hamburger or a milkshake. In addition, the government is amending tax brackets to offer relief. The 37 percent rate won’t kick in until people start earning A$90,000, instead of the current A$87,000, with the threshold rising to A$120,000 in 2022-23. The next year, the 37 percent bracket will be abolished completely. With a top personal tax rate of 45 percent kicking in after A$200,000 from July 2024, Australians will still pay one of the highest rates in the OECD.
As Australia’s population ages, the government wants to help people stay in the workforce for longer. Morrison on Tuesday announced subsidies of A$10,000 for employers who take on older workers, to help combat age discrimination. It also said the elderly could earn as much as A$300 a fortnight without it reducing their right to a state pension. Meanwhile, the government said it would spend A$1.6 billion over four years to ensure more people can receive aged care in their own homes.
The budget includes A$1.4 billion to ensure medicines to treat spinal muscular atrophy, breast cancer, relapsing-remitting multiple sclerosis and a new drug to prevent HIV can be accessed on the Pharmaceutical Benefits Scheme. The government pledged A$500 million over 10 years to boost genomic research.
Prime Minister Malcolm Turnbull?
The Liberal-National coalition has been trailing Labor in opinion polls almost since it narrowly scraped back into office in July 2016. The modest giveaways, coupled with a commitment to reining in the deficit and safeguarding the nation’s coveted AAA credit rating, could deliver a much-needed bounce to the government. Prime Minister Malcolm Turnbull and his colleagues shouldn’t hold their breath, though. Last year’s budget announcement of a A$75 billion plan to build roads, railways and bridges did little to boost its popularity with voters.
- Small businesses with a turnover of up to A$10 million will continue to get an instant tax write-off against new equipment worth up to A$20,000
- Almost A$536 million to secure the future of the Great Barrier Reef, including improving water quality, coral restoration and funding to combat crown-of-thorns starfish
- A$50 million to help families of people who died on board Malaysian Airlines Flight MH17 in July 2014 seek justice against those responsible for the downing of the aircraft
- Increased funding for the Royal Flying Doctor Service
- Tax relief for craft brewers and distillers
- A$39.5 million to provide whooping cough vaccine to pregnant women
- Continued infrastructure spending, including highway upgrades, new bridges, rail lines and airports
- A$2.4 billion to boost the nation’s technological infrastructure, including funding for a national space agency, better satellite imagery, more accurate GPS and research in artificial intelligence
- An extra A$294 million to boost airport security
- A$550 million to address housing needs for indigenous Australians in remote areas
Like other G-20 members, Australia is continuing its campaign to ensure big, global companies pay their fair share of tax. Morrison said the government would further tighten so-called thin capitalization rules to stop multinationals reducing their tax burden by “fiddling with how they account for debt.” More multinationals will be subject to existing anti-tax avoidance laws, and rules on stapled structures will be tightened to ensure foreign investors pay their fair share. The government will also tighten broader tax concessions for foreign pension funds and sovereign wealth funds. The budget will extend goods and services tax to Australian hotel bookings made through offshore websites.
Last year, the five biggest banks in Australia were hit with a new levy as the government sought to capitalize on public anger against the industry over a string of scandals, including poor financial advice. Morrison said the government would continue to “roll out our stronger penalties, powers and enforcement to take action on misconduct.” The levy will continue, the new Australian Financial Complaints Authority will start on Nov. 1 and the previously announced regime to hold bank executives to account will start on July 1.
The government will limit some fees charged by funds overseeing the nation’s pool of retirement savings, known as superannuation. It will abolish fees for exiting a fund, cap charges on accounts with balances of less than A$6,000 and stop funds from forcing the under-25s to pay for life insurance policies they don’t need.
The Black Economy
The government intends to crack down on criminal gangs, terrorists and tax cheats, by outlawing cash payments greater than A$10,000. It’s creating a special taskforce to tackle the sale of illicit tobacco, known as chop chop.
- The government continues to reject Labor’s 50 percent renewable energy target, saying it will push up electricity prices. Critics say the government must do more to curb emissions that are harming the environment
- Tougher requirements to get research and development tax incentives
©2018 Bloomberg L.P.