The Federal Government’s election budget hands out $140 billion in income tax cuts over the next decade.
The budget locks in a surplus within three years and forecasts a massive reduction in debt before 2030.
The budget’s centrepiece is a seven year tax plan rolled out in three phases over seven years providing up to $200 a year for low-income earners and up to $530 extra a year for people on middle incomes. For higher earners, the income bracket is lifted from $87,000 to $90,000 before they start paying the 37 per cent tax rate.
The government plans to abolish the 37 per cent tax bracket completely on July 1, 2024 and lift the top threshold to $200,000. This will see 94 per cent of the workforce earning between $41,000 and $200,000 paying just 32.5 cents in the dollar.
The top personal tax rate of 45 per cent will kick in for those earning $200,000 from July 2024.
Treasurer Scott Morrison’s third budget has forecast a $2.2 billion surplus in Fiscal 2020 with an underlying cash deficit of $18.2 billion this financial year, reducing to $14.5 billion forecast in 2018-19.
A surplus of $11 billion is projected in 2020-21 with continuing budget surpluses building to a projected surplus of more than 1 per cent of GDP by 2026-27.
This is on the back of a revenue windfall which will see net debt as a share of GDP expected to peak at 18.6 per cent of GDP in 2017-18 with projections of it falling to 14.7 per cent by 2021-22.
This has allowed the government to unveil a budget aimed at boosting its flagging poll ratings with modest tax cuts and more support for the elderly.
In his address to parliament, Mr Morrison said there were “five things we must do to further strengthen our economy to guarantee the essentials Australians rely on”.
“One, provide tax relief to encourage and reward working Australians and reduce cost pressures on households,” Mr Morrison said.
“Two, keep backing business to invest and create more jobs. Especially small and medium-size businesses.
“Guarantee, three, the essential services that Australians rely on like Medicare, hospitals, schools, and caring for older Australians.
“Four, keep Australians safe with new investments to secure our borders and, as always, ensure that the Government lives within its means, keeping spending and taxes under control.
“Five, ensure that the government lives within its means, keeping spending and taxes under control.
For the elderly, there’s a pledge to create 14,000 new aged care places costing $1.6 billion over four years.
The budget has also allocated $83 million to improve mental health services in nursing homes.
The government’s 10-year plan to reduce company taxes for all businesses from 30 to 25 per cent is currently stalled in the Senate.
Nonetheless, the Budget extends the instant tax write-off on spending under $20,000 for another financial year to June 30, 2019. This will be at a cost of $350 million over the forward estimates.
Employers who take on certain older workers will get up to $10,000 in wage subsidies.
The government says the elderly can earn up $300 a fortnight without losing their right to a state pension.
The budget also provides for increased infrastructure spending with new bridges, highway upgrades, rail lines and airports.
It also allocates $2.4 billion to boost Australia’s technological infrastructure. This will include funds for a national space agency, research in artificial intelligence, better satellite imagery and more accurate GPS.
The budget has promised $130.8 million to the ATO over four years to increase compliance activities, including additional audits and prosecutions with a focus on Over-claiming of deductions such as work expenses and rental losses. The tax office crackdown aims to raise $1.1 billion in additional revenue.
While the government has pledged $41.5 million over seven years to ensure secure, reliable and affordable energy, Mr Morrison made no mention of solar and wind.
Shadow Treasurer Chris Bowen said the Budget was based on a dubious economic assumption.
“Clearly the government has committed billions of dollars on the back of a temporary global economic upswing — we have seen how that plays out before,” Mr Bowen said in a statement..
“Any budget that gives a handout to big business but hurts pensioners is a bad budget.”