The last Federal Budget contained a series of severe cuts. Some of those have passed Parliament and become law while others are pending the outcome of negotiations with the minor parties, while others have died a slow and protracted death. Keeping track of what announcements are now law is difficult. Here’s a quick summary:
Carbon Tax – abolished
Paid Parental Leave Scheme – abolished
Mining Tax – abolished along with the associated business initiatives such as the loss carry back rules, accelerated depreciation for motor vehicles and the instant asset write off.
Superannuation guarantee (SG) – rephased as part of the mining tax repeal. Now, the SG rate will remain at 9.5% until 1 July 2021.
School kids bonus – was to be abolished as part of the mining tax repeal but is now means tested until 31 December 2016, before being abolished.
2% Debt tax – applies between 1 July 2014 until 30 June 2017 to those with annual taxable incomes over $180,000. In line with the debt tax, FBT rates will also increase from 47% to 49% from 1 April 2015 until 31 March 2017.
Biannual indexing of fuel excise - introduced by stealth as a tariff proposal.
There are a series of other announced reforms that have either been rejected or stalled in the Senate. These include:
- Family Tax Benefit reform
- The $7 fee for GP visits
- Increase in the pension age to 70
- 6 month wait for unemployment benefits
- Deregulation of University fees.
The problem for the Government is that national debt is increasing – the mid-year economic review revealed a $10.6bn blowout. Falling commodity prices and sluggish growth mean that the deficit is not going to be plugged any time soon.
To bring debt under control, the Government needs to cut spending somewhere or increase taxes.
At this stage, it’s uncertain what and how this might be achieved. Cutting spending will rely on amending legislation passing the Senate with agreement by the minor parties – something the Government has not been able to achieve to date.
On the tax front, the Government’s Tax White Paper is due out within weeks. The much anticipated review of the tax system is reported to outline the need to change the current system’s reliance on personal and corporate taxes including broadening the base and increasing the rate of GST, and changing how superannuation is taxed.
However, an increase in the GST requires the agreement of the States and as a result, all parties involved will be savaged by voters for any increase. If the Government acts on the reform measures set out in the Tax White Paper they have until mid 2016 to sell the concept to voters (according to the ABC’s Antony Green, the first possible date for a normal House and half-Senate election is 6 August 2016).
So, what does all this mean to you?
The key to survival and growth this year is constant monitoring and adjustment. The environment we started with on 1 July 2014 is already quite different.