- A half-a-percent increase to the Medicare Levy to pay for the NDIS
- 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
- 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.
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
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
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
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.
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.
$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
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.
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.
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
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.
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
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.
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
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
The Widow B Pension will be folded into the Age Pension, with no change in
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
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.