Federal Budget 2019: Tax cuts, $7.1 billion surplus in election-eve pitch to middle Australia

The Federal Government has laid the foundations for an election campaign centred on tax relief for middle Australia after handing down a Budget that delivers a $7.1 billion surplus.

• Five-minute guide: Budget at a glance
• SA impact: Billions for roads but SA cops big revenue blow
• Analysis: Giveaways galore but can it avert electoral oblivion?

Treasurer Josh Frydenberg has laid the foundations for an election campaign centred on increased tax relief for households and the Coalition’s economic credentials after handing down a Federal Budget that delivers a $7.1 billion surplus.

However, the Budget was somewhat bittersweet for South Australia, with new infrastructure projects, including $73.6 million to duplicate Victor Harbor Rd from Main South Rd to McLaren Vale, coming at the same time as an unexpected $286 million GST hit over two years, which puts Rob Lucas’s surpluses in jeopardy.

Mr Frydenberg’s first Budget, delivered on the eve of an election in which his party is the underdog and set to call within days, aims to strike a balance between selling the Coalition’s fiscal strengths, while looking after middle Australia.

“For the first time in 12 years our nation is again paying its own way,” Mr Frydenberg said.

“We have made real progress, but we know the job is not done.”

“But let me be clear: the answer to these challenges is not higher taxes.

“The answer is a strong and more competitive economy, with lower taxes and more jobs.”

A centrepiece of the Budget for struggling families is income tax cuts.

An estimated 780,000 South Australians will receive income tax relief of up to $1080 each year.

Treasurer Josh Frydenberg and Prime Minister Scott Morrison. Picture: AAP / James Ross

The cuts, for taxpayers earning up to $126,000 a year, will be almost immediate — available after tax returns for the 2018-19 year are submitted in 13 weeks time.

However, South Australians on income support payments will be nervous.

In a move set to spark Opposition complaints, a crackdown on the overpayment of income support is listed as a major savings measure, from which the Government wants to clawback $2.1 billion over the next four years.

For an estimated 244,000 small and medium-sized South Australian business owners, the popular instant tax write-off will be increased and expanded.

“It will be increased from $25,000 to $30,000, and it can be used every time an asset under that amount is purchased,” Mr Frydenberg said.

“Allowing a cafe to get a new fridge or grill, or plumber to buy new tools or a courier a new van.”

It also will be expanded to businesses with a turnover of up to $50 million.

As foreshadowed in the weeks leading up to the Budget, infrastructure is a big-ticket item, with $2.6 billion dedicated to new “congestion busting” infrastructure projects.

In addition to previously announced funding to complete the North-South corridor, the Budget has unveiled a handful of new projects, including $73.6 million for the Victor Harbor Rd duplication and $44 million for the Horrocks Highway. The former is a blatant pitch for votes in Mayo.

The uneven road surface of the Horrocks Highway.

An additional $40 million for supplementary road funding, to make up for a consistent shortfall, has been included but it was unclear how long the funding was expected to last.

Across the country, Mr Frydenberg said the Coalition was boosting the infrastructure budget spending to $100 billion over 10 years.

“Cranes, hard hats and heavy machinery will be seen across the country, as we build Australia for current and future generations,” he said.

The projects were aimed at easing congestion and unlocking the potential of the regions, to better manage population growth and improve road safety, he said

The Budget contains a $525 million skills package to create 80,000 new apprenticeships in industries with skills shortages, which will be felt keenly in SA as we prepare for a major defence build.

Incentive payments for employers to put on apprenticeships will double to $8000 per placement and new apprentices also will receive a $2,000 incentive payment.

At the other end of the learning spectrum, the Government has committed $453 million to extend support for the 2020 school year, so that children can get 15 hours of preschool for four-year-olds.

But the one year commitment will be seen as not long enough for a sector desperately hoping for the certainty of two years.

Health and hospital spending to South Australia is $1.4 billion in 2019-20, with the Government pledging to help build a new Brain and Spinal Ward in Adelaide and bolstering funding for GPs in a $1 billion package to keep people out of overcrowded emergency wards, such as the RAH.

In light of the Royal Commission into Aged Care being held in Adelaide in the wake of the Oakden scandal, there is $725 million in funding for the aged care sector.

This will go towards 10,000 new home care packages aimed at keeping older Australian living in their homes for longer.

As expected, there also is $500 million for a Royal Commission into the mistreatment of people with a disability.

Major savings in the Budget

$2.1 billion — Social Security Income Assessment — efficiency gains through single touch payroll system aimed at cutting overpayments.

$296 million — Reduce target of overseas-trained doctors recruited for areas of shortage by 155 a year from 2100 a year.

$78 million — Support for refugees — efficiency through changing employment servicing by requiring job-active participation from 12 months rather than six months after arrival.

$59 million — Employment Services — savings by swapping to online rather than face-to-face services for some jobseekers.

$29 million — VET student loans — increase in loan limit for aviation courses from $104,000 to $150,000.

Tax cuts for 780,000 South Aussies

About 780,000 South Australian workers have been promised a tax cut of up to $1080 when they lodge their tax returns from July 1, under the latest stage of the Federal Government’s tax reforms.

Low and middle-income workers earning up to $126,000 a year will be eligible for the new savings, which are more than double the offset received last year to ease living costs.

From 2024, when the Government proposes to abolish a tax bracket, it will also lower the tax rate by 2.5 per cent to 30 per cent.

The move means 94 per cent of workers earning between $45,000 and $200,000 will pay no more than 30c in every dollar.

Treasurer Josh Frydenberg said workers would be able to use the extra money to put towards their “monthly mortgage payments, your quarterly power bill or your yearly car insurance”. “This tax relief will lift household incomes, ease cost-of-living pressures and boost spending at local businesses,” he said.

Based on Australian Taxation Office data from 2016-17, about 780,000 South Australians will receive the offset, with families on dual incomes set to pocket up to $2080.

The measures — reducing the tax rate and increasing the offset — are expected to cost the Government $158 billion over the forward estimates.

Mr Frydenberg said the reforms were the “biggest tax cuts since the Howard Government”.

“More than 10 million taxpayers across Australia will benefit from the offsets and almost half will receive the full amount,” Mr Frydenberg said.

“Taxes, skills and infrastructure will help build the economy. This is very important tax reform.”

The doubling of the offset this financial year contrasts with Labor’s policy — which will increase the offset for low- and middle-income earners to $928 for their 2019-20 tax return.

Labor also plans to reverse the last two stages of the Government’s already-passed plan.

Low-income earners will benefit from an increase in the top threshold of the 19 per cent tax bracket from $41,000 to $45,000 from 2022-23, when the low income tax offset will also rise by $55 to $700.

The top 5 per cent of taxpayers will be contributing one third of all income tax collected from 2024.

— Jade Gailberger

Cash to ease bill shock as grid expansion intensifies

Pensioners and veterans will be given grants of up to $125 per couple to help combat the spiralling cost of power bills, as the Federal Government also commits to a range of grid-building projects it says will bring down prices for all.

With energy a hot-button topic in the coming election, pensioners and a range of other people on carer and parenting payments will receive a $75 bill boost for singles, and $125 for couples. The total program will cost $284 million.

The Snowy 2.0 program spruiked by former prime minister Malcolm Turnbull also gets a $1.4 billion cash injection, as the Government seeks to increase system storage that helps with the transition to more intermittent renewables.

As SA enters the final stages of planning for a new interconnector extension cable to NSW, a similar project that will link Tasmania to the mainland has scored $56 million.

Tasmania already has huge amounts of hydro storage and power, and is seeking to be the “battery of the nation”.

Supporters of interconnection hope that a better-linked grid will avoid the need for expensive new power stations often unused, and easier access to power in other states when it is cheap.

Another $50 million is being poured into plans that can help remote communities be energy self-sufficient, including the local generation and storage of electricity.

Businesses will also be helped to become more energy efficient and cut their bills, with $50 million in grants available to applicants. They can each win grants of up to $20,000 for savings schemes.

— Daniel Wills