Budget 2017: Winners and losers


Turnbull and Morrison’s second Budget tackles health, education, housing and welfare.

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What does the Budget mean for me?


This year's Budget contains a feast of policy announcements across a range of areas including housing affordability, health, education and social welfare. Although there are few big ticket items that weren't pre-announced, the big news tonight is that the government has finally settled on a plan it hopes will make it easier for people to save for a first home deposit.

Highlights include:

  • A half-a-percent increase to the Medicare Levy to pay for the NDIS funding shortfall.
  • A plan to allow first home buyers to use their superannuation as a low-tax savings account to save for a deposit.
  • $18.6 billion for needs-based school funding over the next 10 years.
  • Cuts to universities, with students made to contribute to more of their tuition fees.
  • Student debts will have to be paid back quicker, with a lower income threshold for starting repayments.
  • Demerit points for jobseekers who don't meet their obligations.

Treasurer Scott Morrison wants to target this Budget at the many Australians who, he admits, "remain frustrated at not getting ahead", despite Australia's enviable economic growth. Whether people buy what he's selling remains to be seen, as does whether it manages to reduce cost of living pressures or increase housing affordability.

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Quiz: Budget oddities: Where do your tax dollars go? 

Families and schools

The government has declared its support for needs-based schools funding, aiming for a fairer distribution of Commonwealth funds within 10 years. There are also some changes to child care benefits and Family Tax Benefit, but only for a few.

Gonski 2.0: needs-based school funding

The government has adopted the Labor policy of allocating funding to schools on a fairer needs basis, with formulas developed by the 2011 Gonski Report to calculate disadvantage and direct money to where it's most needed. $1.75 billion over the next four years has been allocated, with a 10-year commitment of $18.6 billion. This is on top of the $1.2 billion allocated last year.

The long-term plan is to increase the level of Commonwealth funding for all schools up to an equal percentage of their baseline funding requirements: 20% for public schools and 80% for Catholic and independent schools.

David Gonski will also chair a review into increasing educational standards, which are declining in Australia by international standards.

Child Care Subsidy to take effect next year, wealthy families need not apply

The government finally got its Child Care Subsidy passed in the Senate recently, although apparently not soon enough for it to be implemented in the coming financial year. In a change to the rules this Budget, $119.3 million will be saved by restricting it to families earning less than $350,000.

The Child Care Subsidy replaces two payments introduced by Labor, pays a percentage of child care costs, depending on family income, up to 85% for the least well-off (with caps on hourly rates). The payment is also attached to an activity test, meaning the more hours of work, training or study parents undertake in a fortnight, the more hours of child care will be subsidised.

Originally set to come into effect in 2016, the subsidy will now take effect in July 2018. Until then, the existing Child Care Benefit and Child Care Rebate payments will remain in place.

Preschools funded for another year

Over the next two years the Commonwealth will pump $428 million into early childhood education through the National Partnership Agreement with the states. This will extend funding for universal access to preschool education for the 2018 school year.

No cuts to the Family Tax Benefit (except for those who refuse vaccinations)

The Coalition has walked back on its promised increase to Family Tax Benefit Part A payment rates, taking away $1.9 billion it promised in the 2015-16 mid-year budget. However, a range of other proposed cuts to FTB benefits have also been ditched this year (see zombie measures).

The government has also gone a step further with its "No jab, no pay" policy and cut Part A benefits by up to $28 a fortnight, per child, to families who refuse to vaccinate their children without a medical exemption. Currently non-vaccination means an otherwise-eligible family is denied the annual end-of-year supplement of $726.35 per child.

This new rule addresses concerns that the original cuts would only affect poorer families: the end-of-year supplement is only available to families earning less than $80,000. The fortnightly Part A payments, on the other hand, can be claimed by all but the very wealthy. This means that the further $728-a-year cut to benefits will be an incentive for well-off families to vaccinate their children.

Speaking of vaccinations, the government is spending $5.5 million on immunisation awareness programs that specifically target areas with low child immunisation rates. Another $14.1 million will be spent on free catch-up childhood vaccinations for children and young adults between 10 and 19 who missed their scheduled shots.

Graphic: 2017 Budget crunch

2017 budget crunch: click here for an accessible text-only version of this infographic.

Higher education

The Coalition has given up on full fee deregulation and the 20% funding cut to universities it tried and failed to introduce with the 2014 Budget. However, it still argues that universities are being given more money than it takes to give their students an education. It also wants students to pay a larger share of their tuition. Not only will students be borrowing more for their education, they'll be paying it back faster.

University fees

$2.8 billion is being taken out of the university sector, with a 2.5% efficiency dividend being imposed on universities over the next two years. An increase in student fees will also be introduced, with tuition fees to increase: 1.8% per year for four years, settling at 7.5% by 2021. This will increase the price of an undergraduate degree by between $1000- $3900, according to the government's figures, although the Commonwealth will still pay for just more than half of the cost of a degree.

Permanent residents and New Zealand citizens will also be stopped from enrolling in Commonwealth-supported places, meaning they will have to pay full fees for degrees (they can still take out concessional HELP loans).

Student loan repayments to start earlier, and hit harder

Repayment rates for most will increase from 1 July 2018, and the income threshold for making mandatory repayments will decrease.

HELP loans (which include HECS debt and loans for full-fee places in university and VET training courses) are paid back through the tax system: most people have their repayments deducted from their paycheck along with their income tax. Above that, you paid a percentage of your income toward your debt. Just like income tax, the more you earn, the higher the percentage.

Next year the threshold for repayments will decrease from around $52,000 to $42,000, meaning people on this income will be $420 worse off next year. A person on $51,000, just below the old threshold, will find themselves shorter about $23 a week.

There are also changes to the contribution rates of people already paying back their loans. The $315 income tax cut high-middle-income earners got in last year's Budget probably doesn't taste as sweet tonight: people on $90,000 will pay an extra $900 a year on their student debt.

A 2016 report warned that the cost for the Commonwealth to offer interest-free loans to students was set to skyrocket in coming years. Clawing back the money faster will go some way to reducing this cost. At the beginning of this year the discounts for paying fees up-front or making voluntary bulk repayments were removed.

Graph: will you pay more on student loans?

Will you pay more on your student loans? Click here for an accessible text-only version of this infographic.

New fund to promote trade skills

A $1.5 billion Skilling Australians Fund will be established to promote vocational education as an alternative to a university education. The government claims it will create an extra 300,000 apprenticeships. The fund will target regional areas, laid-off staff from the manufacturing sector, the long-term unemployed and older workers. States will be made to match the Commonwealth funding.

More Commonwealth-supported courses

Students who don't already have tertiary qualifications will now be able to access Commonwealth Supported Places for sub-bachelor courses. This means people who don't want to commit to a three-year undergraduate degree can receive subsidised education in shorter courses like diplomas, advanced diplomas and associate degrees.

Housing affordability

As expected, the government isn't going to touch negative gearing, but it has announced its plan to support people saving for a first home deposit, new superannuation rules to encourage older Australians to downsize, and plans for the government to finance affordable housing.

Salary sacrifice for first home savers

People saving for a first home deposit will be able to divert a part of their pre-tax wages into their superannuation, which will come with preferential tax treatment. Under the salary sacrifice scheme, individuals will be able to contribute $15,000 a year, to a total of $30,000. Savers will be able to draw on this money and its earnings. This will all be on top of their employer's minimum 9.5% super contributions, which won't be able to be used for a deposit.

The advantage to the scheme is that super funds tend to have better rates of return than a savings account, on top of being taxed at a lower rate. $30,000 is still only a fraction of the cost of a 20% deposit for an entry-level property in Sydney and Melbourne, meaning savers might not be able to rely on it for their entire deposit.

Super incentive for empty nesters to downsize

Homeowners living in properties with empty rooms will be encouraged to sell up and move into smaller accommodation. New rules will allow people to contribute an extra $300,000 from property sales to their super accounts, on top of the current $100,000-a-year cap.

This will allow people to put some or all of the earnings from a property sale into their super account and take advantage of the discounted tax rate. Up to 50,000 properties a year could be freed up if empty-nesters moved into smaller houses.

Commonwealth loans for community housing

The government will attempt to address increasing pressure on the rental market as more Australians are locked permanently out of home ownership. The plan is to increase the stock of affordable housing by encouraging more institutional investment in low-cost rental properties, particularly for the community housing sector.

The government plans to raise money by issuing bonds, which it will lend at low interest rates to institutional investors – community housing groups, industry superannuation funds, and the like. Affordable housing currently makes up just 5% of housing stock in Australia, compared with 18% in the UK.

Because the housing market in Australia is geared more to capital gain (selling properties at a profit) rather than yield (ongoing revenue from rent), there is little incentive for investors to offer affordable rentals.

National standard leases on the horizon

The government has announced that they will work with states and territories to create a standard long-term lease – although as with standard leases currently there is no indication that the government wants to make these mandatory. There is also nothing in the Budget that seeks to strengthen renters' rights in the imbalanced power relationship between tenant and landlord.

"Ghost house tax" and other restrictions on foreign investors

Foreign investors who purchase properties in Australia just to leave them empty will be hit with a "ghost house tax" in an effort to discourage the practice. $16.3 million will be raised from the charge, which will be levied on owners of properties which are "not occupied or genuinely available on the rental market" for six months in the year.

Foreign investors will also have stricter capital gains tax rules imposed on their properties (saving $600 million). In addition, new property developments must now be at least 50% Australian-owned.

Australian investors are still permitted to leave properties sitting empty with no penalty.

Health

The government has announced a series of healthcare measures bundled into a package called Guaranteeing Medicare – so-named to head off accusations from the opposition that it wants to gut public health.

Unfreezing Medicare rebates

The centrepiece of this plan is the staged unfreezing of Medicare Benefits Schedule fees. Last year the government caused an uproar in the medical community when it extended the indexation freeze on the rebates, first frozen by Labor in 2014, for another two years. This meant that the fees doctors would be paid by the Commonwealth for the services they provided would be the same in 2020 as they were in 2014, despite increases in their costs.

The government has now walked away from some of that position, but it won't be an immediate change. Bulk-billing incentives for GPs are to be indexed (increased in line with inflation) from this July, although fees for GP visits and specialist attendances won't be unfrozen until July 2018. Specialist procedures and allied health services will stay frozen until July 2019. Some diagnostic imaging services will be indexed again starting in 2020, for the first time since 2004.

Over the next four years this will cost $1 billion, which replaces the $925 million that was cut from health when the freeze was extended last year.

Increase in the Medicare Levy to pay for fully funding NDIS

When the National Disability Insurance Scheme was first announced it came with a 0.5% increase to the Medicare Levy. Now the levy will increase again, by the same amount, to ensure the program can be properly funded. The Medicare low-income threshold will also be increased.

The extra revenue from the levy increase – $8.2 billion over four years – will go toward the new NDIS Savings Fund, which will ensure ongoing funding of the scheme.

Cheaper medicines, and more of them

$1.2 billion is going to be spent on new and amended listings for medicines on the Pharmaceutical Benefits Scheme, including $510 million alone for Entestro, a medication for patients with chronic heart failure.

The cost of these PBS changes is offset by reductions in the amount the Commonwealth will pay for medicines already supplied through the PBS. Existing statutory price reductions will be extended over the next five years, saving the Commonwealth $1.8 billion and potentially reducing out of pocket expenses for consumers.

Social welfare

Tough new measures are in store for people on jobseeker benefits who don't take their obligations seriously. Jobseekers over 30 are going to have to do more to prove they deserve their benefits, and there will be a trial of welfare quarantining for people who fail drug tests.

A new start for Centrelink payments

Centrelink payments are set for a overhaul, with Newstart and the Sickness Allowance being folded into the new JobSeeker Payment, which has the same fortnightly payment rate. The minimum age for applying will be 22; younger people will be able to access Youth Allowance if they meet independence and educational activity criteria. These changes won't come into effect until 2020.

Work-shy dole recipients to have payments cut

Around 80,000 people a year will feel the sting of tough new measures designed to make people meet their job search obligations. The government is introducing a three-strikes system for people on job search benefits who don't do as they're told.

Like bad drivers, jobseekers will accrue demerit points: one point for failing to do things like attending Work for the Dole or other appointments, applying for jobs or entering into a job plan. Missing a job interview will be worth three points.

Jobseekers who get four demerit points against them in six months will be put on a three-month notice period. The next strike earns them a one-week suspension of payments, two weeks for the second strike. If they hit three strikes, or fail to accept "suitable work" at any time, they will have their payment cancelled entirely and have to wait four weeks before applying again.

The tough measures will apply to 1.22 million jobseekers each year, and will save $204.7 million over four years. This supersedes a previous proposal to fully cut payments for eight weeks for jobseekers who refuse work "without a good reason".

New activity obligations for jobseekers

From September 2018, jobseekers will have to put in more effort to qualify for their payments under changes to mutual obligation requirements. This can include part-time work, work experience, language, literacy and numeracy courses, part-time study, and in some cases volunteering.

Job seekers aged 30-49 will have their required activity hours increased from 30 to 50 hours a fortnight, equal with people aged 18-29. Jobseekers between 50-59 years will only be able to do half of their 30 hours a fortnight in volunteer work. Those over 60 will have to fill 10 hours a fortnight (up from zero).

Don't do drugs (if you're young or looking for a job)

From next year the government will begin a trialling random drug test regime targeting 5000 Newstart and Youth Allowance recipients. The two-year program will attempt to curb the affects of dangerous and addictive substances like marijuana, ecstasy and methamphetamines. The locations for the trial have not yet been announced.

Participants will be chosen at random, from a pool of individuals who have been profiled for characteristics that indicate a potential high risk of substance abuse. If a welfare recipient tests positive for drugs they will be put on a welfare quarantining program and possibly be made to seek treatment as part of their Job Plan.

The Budget contains other tightening of rules for people with drug and alcohol abuse problems. From 2018 substance abuse will no longer be a legitimate exemption to activity tests under payments like Newstart and Youth Allowance, unless the recipient is getting help. From 1 July, people will no longer be able to apply for the Disability Support Pension on the basis of substance abuse alone; this is predicted to affect 450 people a year. These two restrictions will save $50.5 million over four years.

A controversial welfare quarantining trial is also set to be expanded in some remote Indigenous communities, with a cashless debit card that prevents welfare payments being used for alcohol, gambling or cash withdrawals.

Small wins for pensioners

A one-off payment for pensioners, consisting of $75 for singles and $125 for couples, is supposed to help with the cost of electricity and gas. This policy was introduced as the price for Nick Xenophon's support for the first round of corporate tax cuts. It will cost $268.9 million.

Recipients of the part Age Pension will have their Pensioner Concession Cards reinstated. People affected by changes to Age Pension asset rules lost their concessions when the new rules came into effect at the beginning of this year.

Simplifying other Centrelink payments

Other existing payments, some of them closed to new applicants, will be folded into existing benefits.

About 75,500 recipients of the Wife Pension (closed since 1995) will move on to the JobSeeker Payment, Age Pension or Carer Payment where relevant, but have their rates grandfathered to ensure they aren't worse off.

The Bereavement Allowance, a 14-week benefit for people whose partners have died, will be replaced by bereavement clauses in the JobSeeker Payment. This has a lower rate of pay, but they will receive a triple payment in the first fortnight.

The Widow B Pension will be folded into the Age Pension, with no change in rates.

The Widow Allowance will be closed in 2018. Paid to women who lost their partners through death or divorce and have no recent work experience, existing beneficiaries will age into the Age Pension by 2022, as will recipients of the closed Partner Allowance. Both payments will be discontinued then.

Last but not least

Zombie measures get a shot to the head

A raft of measures from Budgets past that the government has been unable to get through the Senate – so-called "zombie measures" – have finally been taken off the books. These include some harsh measures from the unpopular 2014 Budget which the government held out hope of one day passing. Policies that have finally been given the chop include:

· Changes to the Family Tax Benefit. End-of year supplements (worth around $1000 per child) are safe, and rules that would restrict Part B payments to single families with children under 17 are out.

· Changes to the Medicare safety net, which would have changed the way Medicare supports people with out-of-pocket medical costs. The current system remains in place, although the Health Minister is still undertaking a wide review of Medicare.

· Increases to Pharmaceutical Benefits Scheme safety net thresholds and $5 increases to customer copayments for medications.

· Moving younger job seekers off Newstart and on to the less generous Youth Allowance, and adding a one-month waiting period for payments.

· Changes to diagnostic imaging and pathology bulk-billing benefits

One positive measure, the removal of HELP loan fees for undergraduate and VET students in full-fee positions, will no longer go ahead. This means fees of 25% (for undergraduates) and 20% (for VET students) for student loans will stay in place. It was part of the wider raft of fee deregulation measures and has been tossed out with it.

Overall the scrapped measures will cost the Budget about $14.5 billion.

Related Budget 2017 coverage


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