Budget 2016: A direct pitch aimed at wooing Labor’s lost tribe

Tradies who have hung out their own shingles will be among the winners from one of the main budget features.

Scott Morrison has made a direct pitch to Labor’s lost tribe — tradies and working families — in an election budget without the usual frills that precede a dash to the polls.

Tradies who have hung out their own shingles will be among the big winners from one of the main features of the budget, the cut in the small and medium-sized enterprise tax rate to 27.5 per cent.

Something that is not in the budget — any changes to negative gearing and capital gains tax — is also significant.

With Labor planning to limit negative gearing to new homes after July next year, and cut the capital gains tax discount from 50 per cent to 25 per cent for assets held for more than 12 months from the same date, the budget paves the way for the government to tell working families that Labor’s policies will impact the value of their homes.

Skilled blue-collar workers with trade certificates, services workers, labourers, truckies, commuters and young mums walked away from Labor last election, according to a report into the poll by Australian Development Strategies, a ­research firm run by former Labor senator John Black.

“The list reads like a demographic who’s who of the groups which used to support the Labor Party in the days of (Bob) Hawke and (Paul) Keating,’’ Mr Black said.

The tax cut for small and ­medium business targets the trade ­certificate-holders and a super­annuation tax offset for low-­income earners while an ability to top up their accounts when they rejoin the workforce targets the low-paid and young mums.

But there are risks in this budget on the eve of an election ­campaign. The vast majority of workers in most of the 19 marginal seats that Bill Shorten needs to take to win government will not benefit from the rise in the middle-income tax threshold from $80,000 to $87,000.

In marginal seats such as Petrie in Queensland, La Trobe in Victoria and Lindsay in NSW, more than half of households earn less than $37,000. In the marginal ­Tasmanian seat of Bass, the proportion earning under $37,000 is nearly two-thirds.

The Treasurer was making doubly sure at his budget lockup press conference that the middle- income tax relief wasn’t going to cause a revolution.

Full coverage: Budget 2016

He said lower-income earners had received a $300-a-year benefit in the government’s first budget when it abolished the carbon tax and kept the compensation, and he sold the change more as tax reform to alleviate bracket creep than a “tax cut’’.

Those that receive it are unlikely to notice. The maximum benefit of $315 a year, or about $6 a week, might buy a latte, but not a muffin to go with it.

The other potential negative for the government is its decision to delay the childcare subsidy by a year to July 1, 2018, because the Senate knocked the measure back. It would have provided an average benefit of about $30 a week for eligible couples. The move saves the government more than $1.1 billion in 2017-18 and will more than wipe out any tax benefits for double-income parents with small children.

A marginal seat such as Lindsay in Sydney’s western suburbs has about a third of families with children under 15 while a marginal seat like La Trobe has about 37 per cent of families with children under 15.

The big sweetener for low-income earners and particularly young mums will be the reintroduction of the low-income superannuation tax offset that will give people earning up to $37,000 a $500 benefit.

Graeme Morris, former chief of staff to John Howard, said: “When you have a look at marginal seats they are full of young families and small businesses. The small business tax cut is important because it strengthens the Liberal base.

“What’s not in the budget — no capital gains tax changes and no negative gearing changes — means the government can really whack Labor over the head over what most families aspire to, which is to own a home which keeps appreciating,’’ he said.

The votes of homeowners will be vital in the seats that will decide the election. In most of Labor’s must-win seats, those that own or are paying off their homes outnumber renters two to one.

Renters represent less than one-quarter of households in the seats of Lyons in Tasmania, Eden-Monaro and Gilmore in NSW and Corangamite in Victoria. Federal electorate data released yesterday by the Australian Bureau of Statistics based on the 2011 census, the latest available, shows that in Cowan in Western Australia and La Trobe in Victoria, renters are fewer than one in five households.

Only in Brisbane (48.1 per cent) and Solomon centred on Darwin (45.9 per cent) are renters near a majority.

The small business tax cut could be the government’s electoral ace. Workers with some form of trade certificate represent nearly 40 per cent of the workforce in the marginal Tasmanian seats of Braddon and Lyons and top 38 per cent of the workforce in the key NSW seat of Robertson on the central coast.

These workers top one-third of the workforce in the Queensland marginal seats of Petrie and Capricornia, Lindsay in NSW and Bass in Tasmania. Under the tax changes, the corporate tax rate will decrease from 28.5 per cent to 27.5 per cent and the turnover threshold will be raised to $10 million from $2m. Unincorporated businesses will also received a concession, with the unincorporated tax discount increased from 5 per cent to 8 per cent for all businesses below a $5m threshold. This opens up the $20,000 instant asset write off, simplified GST and fringe benefits tax concessions and more generous tax deductions.

The Treasurer estimates that about 870,000 small companies would have their taxes cut in the budget, including 810,000 getting the 1 per cent cut and 60,000 getting a 2.5 per cent cut.

The expansion of the tax concession threshold to $10m turnover will expand it to the likes of IGA supermarkets, hardware stores and chemist shops.

Master Grocers of Australia chief executive Jos de Bruin said these type of enterprises employ about one-third full-time staff, one-third casuals, and one-third part-timers. That is where many kids get their first jobs or mums re-entering the workforce look for part-time jobs. “It will allow them to reinvest and expand their businesses,’’ he said.

The Treasurer will be hoping it will let the government keep Labor at bay.