There were tax rises announced tonight, as well as new saving measures, including another crackdown on welfare compliance. There also is the shift of some capital expenditure off Budget, a clever manoeuvre that has allowed the Government to maintain recurrent spending as a share of the economy.
The budget also includes significant changes for the banking sector, with a new big-bank tax and director and executive oversight by APRA.
- The projected deficit for 2017-18 is $29.4 billion (1.6 per cent of GDP), a slight increase on the $28.7 billion forecast in MYEFO. Near-term deficits will be worse than previously expected, before becoming better than previously forecast in 2019-20.
- The timetable for the expected return to surplus remains 2020-21, with a projected surplus of $7.2 billion.
- Government revenue as a share of GDP is projected to be 23.8 per cent of GDP in 2017-18, up from 23.2 per cent in 2016-17 and is forecast to rise to 25.4 per cent in 2020-21 – an increase of 2.2 per cent over the forward estimates.
- The Government's spending share is projected to remain flat over the forward estimates at around 25 per cent of GDP.
- The Government expects to no longer borrow to pay for everyday expenses from 2018-19.
- Treasury has upgraded real GDP to 3 per cent each year from 2018-19. Similarly, nominal GDP has been lifted to 4.75 per cent by the end of the forward estimates.
ECONOMY AND TAXATION
- The Commonwealth has jettisoned $13 billion of "zombie measures" from the 2014-15 and 2015-16 budgets.
- There is $447.2 million in funding for the ATO to tackle the black economy over four years. Other measures to tackle the black economy include extending the taxable payments reporting system to contractors in the courier and cleaning industries and banning technology that allows businesses to falsify sales records.
- Ongoing funding of measures to recoup multinational tax and extension of Multi-national Anti-Avoidance Law to cover corporate structures involving foreign partnerships and foreign trusts.
- Regarding negative gearing, from 1 July 2017, the government will disallow deductions for travel expenses. For properties bought from May 10 2017, the Government will limit plant and equipment depreciation deductions to only those incurred directly by investors.
BANKING AND FINANCE
- In response to the Ramsay review, the Government will establish the Australian Financial Complaints Authority, as a one-stop shop for consumers and small businesses to resolve disputes. ASIC will have expanded powers to oversee the Authority.
- A new Banking Executive Accountability regime will be introduced. Under this regime, senior executives and directors of authorised deposit-taking institutions (ADIs), including all banks, will be required to be registered with APRA. The ADI will have to advise APRA prior to making a senior appointment. This will mean APRA will have visibility of all ADI senior appointments prior to them being made. APRA will also have enhanced powers to remove and disqualify a senior executive or director of an ADI, direct adjustments to banks’ remuneration policies and enforce new obligations on bank conduct with penalties of up to $200 million. Penalties will also be imposed on banks that don’t monitor the suitability of their executives to hold senior positions and new mandatory reporting requirements will also be introduced. A proportion of senior executives ‘at risk’ remuneration will be required to be deferred for at least four years to focus decision-making on long-term outcomes.
- A new bank levy of 6 basis points will be introduced on large banks with liabilities above $100 billion (excluding customer deposits of less than $250,000 and additional capital requirements). This measure is forecast to secure $6.2 billion over the forward estimates to support budget repair.
- Open banking regime from 2018 to give customers power over their own data. The Government will commission an independent review to recommend the best approach to implement the open banking regime to report by the end of 2017.
- The Government has tasked the Productivity Commission to commence a review on 1 July 2017 of the state of competition in the financial system. The Commission is to review competition with a view to improving consumer outcomes, the productivity and international competitiveness of the financial system and economy more broadly, and supporting ongoing financial system innovation, while balancing financial stability objectives. The Productivity Commission will have 12 months to report to Government.
- The Government will make it easier for new innovative digital currency businesses to operate in Australia. From 1 July 2017, purchases of digital currency will no longer be subject to the GST, allowing digital currencies to be treated just like money for GST purposes.
- Extension of the small business instant asset write-off scheme allowing businesses with turnover up to $10 million to immediately write off expenditure up to $20,000 for a further year (originally due to finish on June 30, 2017).
- Through the National Partnership on Regulatory Reform, the Government will provide up to $300 million over two years to States and Territories that reduce red tape for small business.
- Amending the small business capital gains tax concessions to ensure that the concessions can only be accessed in relation to assets used in a small business or ownership interests in a small business.
- Replace current requirements on businesses employing foreign workers with an annual foreign worker levy of $1,200 or $1,800 per worker per year on a temporary work visa and a $3,000 or $5,000 one-off levy for those on a permanent skilled visa. This levy will raise $1.2 billion over four years which will go to the Commonwealth-State Skilling Australians Fund. States and Territories will be able to access this fund when delivering on commitments to train new apprentices.
- Confirmation of the Government’s intention to reduce corporate tax rate to 25 per cent for all businesses.
- Increase the maximum financial penalties under the Australian Consumer Law by aligning consumer penalties with the competition provisions of the Competition and Consumer Act 2010 from 1 July 2018.
- $24 million investment in Rural and Regional Enterprise scholarships.
- $75 billion in infrastructure funding and financing over the next decade, with this budget expanding the use of equity and debt financing to fund infrastructure projects.
- Creation of the Western Sydney Airport Corporation to build and operate the new Western Sydney airport, with an injection of $5.3 billion in equity over the next 10 years into the company.
- $8.4 billion in equity to be provided to the Australian Rail Track Corporation for the Melbourne to Brisbane Inland Rail Project.
- Commonwealth has flagged willingness to purchase larger shares or outright ownership in the Snowy Hydro from NSW and Victoria, subject to the Commonwealth’s conditions.
- Infrastructure funding also includes: $844 million for the Bruce Highway, $1.6 billion in infrastructure funding for Western Australia, and $1 billion to be made available for Victoria regional rail and other infrastructure projects.
- Establishment of a $10 billion National Rail Programme to deliver rail projects.
- Establishment of a $472 million Regional Growth Fund including $200 million in funding to support a further round of the Building Better Regions programme.
- The Federal Government will establish a new Infrastructure and Projects Financing Agency to help assess infrastructure project choices, recruiting people with commercial experience.
- Provision of $28.5 million to establish the Regional Investment Corporation to streamline delivery of $4 billion in concessional loans.
- First-home buyers will be allowed to salary-sacrifice contributions for a home deposit from pre-tax pay into the First Home Super Savers Scheme, using their existing superannuation account and attracting the same tax advantages of superannuation. Contributions will be limited to $30,000 per person and $15,000 per year.
- Establish a $1 billion National Housing Infrastructure Facility to fund ‘micro’ city deals, removing infrastructure impediments to developing new homes.
- From July 1 2018, establish a new National Housing Finance and Investment Corporation to provide long-term, low-cost finance to support more affordable rental housing.
- Increasing CGT discount to 60 per cent for investments in affordable housing.
- Further roll-out of Government's City Deals between all levels of government and the private sector to develop urban areas.
- Those over the age of 65 who downsize will be able to make a non-concessional superannuation contribution of up to $300,000 on the sale of their principal home.
- Annual foreign investment levy of $5,000 on all future foreign investors who leave their properties vacant for at least 6 months per year. Removal of main residence capital gains tax exemption for foreign investors.
- Restore requirements preventing developers from selling more than 50 per cent of new developments to foreign investors.
- $375 million for a permanent extension of homelessness funding to States and Territories.
HEALTH AND NDIS
- The Government will legislate to increase the Medicare Levy by 0.5 percentage points to 2.5 per cent from 1 July 2019 to fully fund the NDIS. The Government will also provide $209 million to establish an independent NDIS Quality and Safeguards Commission.
- $10 billion reinvestment over four years including an increase in hospital funding by an additional $2.8 billion over four years and an additional investment of $115 million in mental health.
- Lifting the freeze on the indexation of the Medicare Benefits Schedule, as well as reversing the removal of bulk-billing for diagnostic imaging and the increase in PBS co-payment and related charges. These changes come at a cost of $2.2 billion over the next four years.
- Introduction of legislation to establish the Medicare Guarantee Fund, funded by proceeds on the Medicare Levy and additional income tax revenue, to pay for all Medicare Benefits Schedule and Pharmaceutical Benefits Scheme expenses.
- The Government will reduce the costs of medicines to achieve savings to taxpayers of $1.8 billion over five years.
- Almost $66 million in disbursements from the Medical Research Future Fund will be used to support preventative health research and clinical trials. An additional $5.8 million will be provided for research into childhood cancer.
- A $165 million mental health package will include $80 million for community psychosocial services, over $50 million to support veterans and $15 million for research initiatives at Orygen, the Black Dog Institute and the Thompson Institute.
- Centrelink recipients who regularly fail to make appointments or job interviews will face escalating financial penalties. A drug-testing trial for 5,000 new welfare recipients will see those who test positive placed on a Cashless Debit Card.
- Expansion of the Government’s Cashless Debit Card to two new sites from 1 September 2017.
- Invest $145.5 million over 3 years from 2016-17 to extend current Income Management arrangements.
- $428 million to extend the National Partnership Agreement on Universal Access to Early Childhood Education for the 2018 school year, which gives preschool children access to 15 hours of teaching a week.
- Expansion of the ParentsNext programme from 13,000 vulnerable young parents to 68,000 in more than 20 new locations, especially those with high Indigenous populations.
- Enhanced current jobactive programme at a cost of $20.4 million over four years to support both mature age and inexperienced job seekers.
- A $350 million funding package expanding support services for veterans, covering expanded mental health services, improved IT systems within Veteran's Affairs, and improved rehabilitation services.
- Total expenses under the foreign affairs and economic aid sub-function are expected to decrease by 16.9 per cent in real terms from 2016-17 to 2017-18, and are forecast to decrease by 3.4 per cent in real terms across the forward years from 2017-18.
- Extra $18.6 billion in school funding over the next decade under the Gonski needs-based model.
- University students will face a 7.5 per cent tuition fee hike, higher repayments on government-provided loans, and will have to begin paying back loans at a lower salary threshold of $42,000.
- Universities will have to meet a 2.5 per cent efficiency dividend, replacing plans to cut university funding by 20 per cent.
- Broadcast licence fees will be abolished and replaced with lower “annual spectrum fee” costing $439.4 million over the forward estimates.
- A more than $300 million investment to boost the Australian Federal Police budget to fund extra covert intelligence operators and forensic specialists.
- Alignment of the tax treatment of roll your own tobacco and cigarettes, expected to generate $360 million over the forward estimates.