Budget Review …. A new tax is still tax even if you give it a new name!

2014 FEDERAL BUDGET REVIEW
“A tax doesn’t stop being a tax just because you give it a different name”

So what was the highlight of last night’s budget ……

Well it had to be ABC’s Sarah Ferguson’s post budget interview with Treasurer Joe Hockey.

Sarah’s opening question was “Is it liberating for a politician to decide election promises don’t matter?” BOOM!

In essence that’s what last night’s Federal Budget was all about.

It was the breaking of what were clear pre-election promises made by the then Opposition Leader Tony Abbott. You remember the “no cuts to education, no cuts to health, no changes to pensions, no changes to GST, no cuts to the ABC and SBS under any Government I lead”. And just to make sure you were listening, he then went on to say that there would be no tax increases and that the budget would be returned to surplus.

Of all that was said above, the only promise that survived was “the no changes to GST” but if you consider that the cost burden of health and education has now been pushed back to the States, then its only logical to assume that a change here is only a matter of time.

So why did the Government feel compelled do this?

Well the answer to this question is pretty simple really.

By adjusting numbers to suit, the Government has built a strong case that the budget is in desperate need of repair, a crisis in fact, and that without immediate action that we, and future generations, would be impoverished.

Let’s be frank here …. this is complete nonsense.

The fact is that our government debt level, measured relative to the size of the economy, is less than one quarter of the average for the developed world.

This is not to argue that we should have more debt, only to say that, whatever the costs of the deficit may be, leaving us with an unsustainable level of debt is not one of them.

Now while we can quibble about this, we do need to focus on what decisions were actually made.

For his part, Treasurer Hockey needs to be commended for at least having a vision. It was nice, given the events of the past six years, to hear someone speak with confidence and deliver some basic home truths. Yes the age of entitlement is well and truly finished.

That said, some of the decisions made are questionable and what is of most interest now is the actions of the Senate …. fair to say that we are in for some interesting times ahead

Listed below is a summary of what was put forth:-

 

YOUR QUICK GUIDE TO THE BUDGET
HEALTH AND WELFARE

  • From July 1 2015, the aged pension qualifying age will rise by 6 months every 2 years, to gradually reach the qualifying age of 70 years by July 1 2035
  • Aged pensions and disability support pensions will be indexed to inflation, rather than wages from September 2017. This change will also affect those receiving a bereavement allowance, carer payments, and some department of veterans affairs pensions

SELF FUNDED RETIREES

  • From January 1 2015, untaxed superannuation will be included on the assessment of income to determine if your are eligible for a Commonwealth Seniors Health card. This initiative is not great for self funded retirees
  • The government will also index income limits for the Commonwealth seniors health card in accordance with the  CPI, this is proposed to take place September 20 2014

TAXATION

  • A 2% levy will apply to those earning an income above $180,000. This temporary three year levy this will be introduced on July 1 2014 – 30 June 2017. That means if you are earning $200,000 you will be faced with an additional 2% on $20,000 – a total levy of $400. or if you are earning $300,000 you will be paying the levy on $120,000 which equates to $2400. In truth, many believe this tax has been implemented to share the load among all income earners
  • The FBT tax rate has already risen to 47% ( due to the increase in the medicare levy) and an additional rise to 49% is proposed. It is estimated this will occur from April 1 2015
  • The government has indicated that it still remains committed to cutting the company tax rate by 1.5% to 28.5% from July 1 2015
  • Smokers will pay an extra 6.5% per packet of cigarettes

JOBS AND SKILLS

  • 16,500 full time public service jobs will be gone within three years
  • The merger of customs and immigration will cost approximately $480 million and 480 jobs
  • Companies will be incentivised to employ people over the age of 50. They will receive a $10,000 bonus for each employee newly employed in this age group, provided certain criteria is met
  • Apprentices will lose funding in the Tools for trade program

HIGHER EDUCATION

  • The higher education sector will be deregulated. This means that universities are free to charge whatever they like for tuition fees for a higher education degree or diploma. This is likely to significantly increase the cost of higher education in Australia, and potentially reduce access to students who want to study but cannot afford the fees. This is a very similar higher education system to the one run in the US
  • To help students defer the initial costs of study, the government will continue with the HELP scheme and graduates will only need to repay the debt once there income reaches $50,638 from July 1 2016.  There is also a plan to increase to the interest are on HECS or HELP debt

UNEMPLOYED

  • Joe Hockey called it the governments ” Earn or Learn policy.” Young people who want to receive the dole will have to wait for six months from application to receive any entitlements, after which they will have to work for the dole for another six months before either getting a job, or getting cut off for another six months. This effects all people under 30 who are seeking the Newstart allowance. This will effect approximately 730,000 Australians

FAMILIES

  • Fewer families will be eligible for tax benefit A, which is currently worth $172 per fortnight for each child under 13
  • The government is making changes to the paid parental leave scheme. The scheme will now provide paid parental leave for 26 weeks based on pre birth earning capped at $100,000 p.a including superannuation payments, a payment of up to $50,000 including super over the 26 week period
  • Family tax benefit part B, will be limited to families with a combined income of $100,000 (down from $150,000) and families will only be eligible until there youngest child turns six

GENERAL

  • Petrol prices to increase next year , due to the reintroduction of a fuel excise from August 1 2014
  • $43 million dollars has been cut from SBS and ABC
  • The establishment of the Medical Research fund is set to cost $20 Billion dollars by 2020
  • $100 million dollars will be invested to fix mobile phone black spots in rural and regional areas