The 2016 Federal Budget has been announced, and as always, there are winners and losers, those who will be extremely happy, those who will be extremely disappointed – and, of course, those that will say, “Oh, the Budget has been announced. I didn’t realise.”
So, here are the major highlights (and lowlights) from Scott Morrison’s first Budget as Treasurer.
To put things in context as far as how the economy is currently travelling, the Reserve Bank of Australia reduced the official interest rate to 1.75% on the same day that the Budget was announced. This was a drop of a quarter of a percent and a historically low rate. With an economy that is clearly weak, this was never going to be a Budget filled with high levels of benefits and expenditure, and that proved to be the case.
Possibly the biggest losers on the night were those people looking to build a large superannuation nest egg with additional contributions, either before or after tax, into their fund. The pre-tax (concessional) cap has been reduced from $30,000 to $25,000 per year. Additionally, the after tax (non-concessional) cap has also been altered. Previously, you could make after-tax contributions of $180,000 per year. Now, after-tax contributions will have a lifetime cap of $500,000. The restrictions are eased for those with a balance under $500,000 in their fund, but it seems that the government has drawn a line in the sand at the half-a-million dollar mark for superannuation savings and reduced benefits once that is reached.
Multinational organisations will also lose out if they try to transfer Australian income overseas, with the introduction of a ‘Google Tax’ of 40% on any income being transferred. Whether this has the desired effect of keeping revenue in Australia or simply discourages some multinationals from doing business here remains to be seen.
Small and more specifically small/medium businesses were big winners in the Budget, with the small business tax benefit threshold being increased from a turnover of $2 million per year to $10 million per year and the company tax rate will be reduced from 30% to 25% over the next ten years. The unincorporated small business tax discount, which is currently 5%, will also be increased to 16% gradually over the next ten years.
High, middle and low income individuals will all benefit in varying degrees under the new Budget, with the Medicare Levy thresholds for low income earners being increased, the 37% tax bracket threshold being increased from $80,000 to $87,000 per year and the Temporary Budget Repair Levy of 2% for those earning over $180,000 a year to be removed as promised in 2017.
By Jennifer Lowe