Tax cuts to be brought forward in historic budget
Billions of dollars in tax cuts will be brought forward for millions of “working Australians” in Tuesday’s historic budget, which will be sold as focused on jobs and “building for the future”. WHAT WE KNOW SO FAR
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Billions of dollars in tax cuts will be brought forward for millions of “working Australians” in Tuesday’s historic budget, which will be sold as focused on jobs and “building for the future”.
It is widely expected that stage two of cuts will be brought forward and backdated to July 1 this year, which would see $1080 or more delivered into the pockets of most Australians.
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There are also expected to be some bonus for pensioners, after the increase was frozen when inflation went backwards, as Treasurer Josh Frydenberg hands down the Federal Budget.
As well as $7.5 billion in infrastructure being brought forward, including cash for starting work on the second M1, there will be a push for states to do more of their share of spending on roads and rail.
There will be a deficit of more than $210 billion and no hint of a surplus is expected over the next four years at least.
A mind-boggling $1 trillion gross debt is also expected to be forecast over the long-term as the Morrison Government’s more than $314 billion response to the coronavirus pandemic takes its toll.
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But economists say the record low interest rates will dampen the impact of the debt.
Rather than austerity and increasing taxes, Treasurer Josh Frydenberg is planning to tackle the debt by growing the economy.
The Budget will attempt to avoid too much “baked-in” spending, but focus on plans which boost productivity into the future, such as subsidising wages of apprentices to keep young people in jobs.
Finance Minister Mathias Cormann heavily-hinted at the tax cuts to come on Monday, saying the government was “committed to pursue” them where possible.
“Personal income tax cuts put more money into workers’ pockets. They boost take-home pay for hardworking Australians,” he said.
“It is about letting working Australians keep more of their own hard-earned money. It is people’s own judgment as to how they spend or save their money.”
Stage two tax cuts, already legislated to come in from July 2022, would increase the threshold for the 19 per cent tax bracket from $37,000 a year to $45,000 and the 32.5 per cent tax bracket lifted from $90,000 to $120,000.
This effectively means people earning more than $45,000 a year will pay $1080 a year less tax, and those on more than $90,000 a year will pay $1215 to $2565 less tax a year.
Opposition treasury spokesman Jim Chalmers said it was vital the government use the budget to “prevent unemployment being unacceptably high for unacceptably long”.
“If they fail to do that in the budget then the Government itself will have failed,” he said.
Griffith University economist Tony Makin, a former Treasury economist from the Howard-era questioned the effectiveness of tax cuts as stimulus, as people may seek to bank them in the uncertain job environment.
“I believe the tax cuts should be deferred, because they’re only going to be saved,” he said.
Deloitte Access Economics chief economist Chris Richardson said bringing forward the tax cuts could be effective in combination with other measures.
“Is it the world’s best stimulus measure? No. Am I more than happy to see it? Yes,” he said.
Hawthorne father-of-three Wayne Grant said many Australians and families were struggling because of the impacts of COVID-19 and the colossal government debt to support those people and boost the economy was worthwhile.
“You would rather spend the money now, hopefully the recovery is quite quick and we can start to generate more money off the back of it,” he said.
“I’m okay with the spending to be quite honest.”
WHAT WE KNOW SO FAR
– $7.5 billion boost for transport infrastructure, including $750 million to start the second M1 (Logan to Gold Coast) and $95 million to upgrade the Bruce Highway (Caloundra Rd to Sunshine Motorway).
– $1.2 billion to subsidise half the salary of new trainees and apprentices for 12 months in any industry.
– JobKeeper extended until March 31 and JobSeeker to December 31.
– $1.5 billion manufacturing strategy.
– $18 billion over 10 years for energy investment, including a gas hub in western Queensland.
– $4.5 billion to upgrade the NBN.
– $2 billion to extend telehealth consultations.
– $1.6 billion to boost the nation’s cyber security capacity.
– $800 million digital business plan, including facial recognition technology for accessing government services and fast-tracking 5G.
– $250 million for regional tourism through grants and business events.
– $68 million on environmental projects that also attract tourism, like a $5 million facelift for Reef HQ in Townsville.
– Credit lending reforms to make it easier to get a loan.
– Insolvency law changes to give businesses facing bankruptcy a second chance.
– Fringe Benefits Tax breaks for small businesses.
– Capital Gains Tax exemption for granny flats used by pension-aged family members.
