The government's tax plan is a seven-year program to introduce temporary tax discounts for people on low and middle incomes, increase the thresholds at which tax rates increase, and reduce tax rates for people on higher incomes. The discounts and the scrapping of the Medicare Levy increase will cost $26.2 billion over the next four years.
Temporary tax offset for "low and middle" incomes
The Low and Middle Income Tax Offset (LMITO) will provide tax discounts up to $530 a year for people earning up to $125,333. It will exist for four years beginning 2018–19, and the amount you get back depends on your income. If you earn:
- less than $37,000: up to $200
- between $37,000 and $48,000: $200 plus 3c for every dollar over $37,000
- between $48,000 and $90,000: $530
- between $90,000 and $125,333: $530 minus 1.5c for every dollar over $90,000
The offset will be paid as a lump sum in your tax refund, so make sure you get cracking on your tax returns when the time comes. It will be available from tax time 2019.
From 2022 the Low Income Tax Offset (LITO) amount will be increased from $445 a year to $645. This basically locks in the $200 LMITO bonus for people on less than $37,000. Like the LMITO, you receive this as a discount when you submit your tax return.
Flattening the tax rates
In 2022–23 there will be the first of two significant changes to the income tax brackets. In that year the income level at which you begin to pay 32.5c per dollar earned will increase from $37,000 to $41,000. The level at which you pay 37c per dollar will jump from $90,000 to $120,000. For people earning over $120K this will mean a tax cut of $2025.
Changes to bracket thresholds will mean that people on lower incomes won't pay more tax once the LMITO disappears. For example, if you earn $50,000 you'll lose the $530 end-of-year discount in the offset, but your income tax will reduce by $540 due to the bracket changes. You'll see those tax cuts in your pay packet, rather than at the end of the year.
The second big change to tax brackets will happen in 2024–25, when the 37% bracket will be abolished altogether, and the threshold to pay the top level of tax will jump from $180,000 to $200,000. This will mean that for every dollar earned between $40,000 and $200,000, you'll pay 32.5c income tax.
Tools for the tax man
The Australian Tax Office (ATO) will receive $131 million to make sure people aren't dodging taxes. The funding will continue programs that were set to expire, such as tools that can detect incorrect income reporting. It will also give the tax office extra tools and funding for auditing, prosecutions, education programs, and real-time messaging to deter tax agents and taxpayers from fudging their entitlements.
It's not going to pay the bill for the tax discounts, but it is expected to bring in $1.1 billion in revenue over the next four years.
GST on all online hotel bookings
From July 2019 overseas-based hotel booking websites will have to collect GST for bookings they make in Australia. These businesses were exempted in 2005 when it was mostly international tourists who were using these services. But increasingly more Australians are using overseas booking services to get cheap tax-free deals on domestic holidays, putting their Australian competitors at a disadvantage. This is part of the government's attempts to collect GST on the things we buy online, including digital services and low-value goods from overseas.
Cheaper craft beer
In case the tax cuts didn't secure the hipster vote, two alcohol excise measures targeted at smaller breweries will hopefully mean cheaper craft beer at the pub.
The biggest change is to how tap beer is taxed. Currently, if a brewery sells its beer to a licensed venue in a keg larger than 48L, it pays a much lower excise rate than if it used a keg smaller than 48L. For full strength beer the tax saving is about 40%. This hurts smaller brewers, which typically use smaller kegs. From July 2019 the lower excise rates will apply to alcohol sold in containers larger than 8L, meaning it won't affect bottled beer. Here's to pubs passing on the savings.
Current rules allow alcohol producers such as brewers and distillers to claim back from the ATO 60% of the alcohol excise they pay, up to a $30,000 cap. This cap will be increased to $100,000, giving alcohol producers a tax cut.
New superannuation rules
The average Australian will lose about $25,000 by the time they retire if they don't consolidate their superannuation accounts. Younger people and seasonal workers are especially at risk of collecting multiple super accounts as they move from job to job. The low balances of these accounts can be eroded by fees and insurance premiums.
A suite of new measures will try to protect people's retirement savings by reducing unnecessary insurance and account fees, and helping people consolidate their accounts.
Life insurance in superannuation will become opt-in for people who are under 25, have a super balance less $6000, or have a super account that hasn't been touched in 13 months. This rule will come into effect in July 2019. If you're in one of these categories your insurance will be cancelled after 14 months unless you opt back in.
Investment and administration fees will be capped at 3% for balances with less than $6000. To encourage people to consolidate their super, exit fees will be banned from July 2019.
The ATO will be given powers to actively reunite people with their lost super accounts. The tax office will use data matching tools to find the owners of accounts with less than $6000 and move the balances into their active accounts.
Tackling the aged care waiting list
The government is dealing with a chronic shortage of places for some types of in-home aged care. These services provide assistance for older people to remain in their homes instead of going into residential care.
The government will release an extra 14,000 high level home care packages over the next four years, on top of 6000 it announced in the mid-year Budget last December. However, it's uncertain whether this will put much of a dent in an ever-growing waiting list.
In June 2017 there were about 89,000 people in the queue for a suitable home-care package, of which 67,000 were waiting for one of the high-level packages. While some had been placed on a lower level of care on an interim basis, nearly 54,000 people were still waiting to be allocated any package at all.
Advocacy groups such as the Council on the Ageing Australia have called for a "rejigging" of the mix of places to better target the needs of people accessing in-home aged care. The strongest demand is for higher level care packages, while some providers have said they have trouble filling places for lower level care.
$3.5bn has been put up for funding new listings on the Pharmaceutical Benefits Scheme (PBS) over the next five years. An additional billion dollars has been set aside for future listings that are yet to be approved.
The government also wants to save $336m over four years by encouraging people to use "generic or biosimilar" medicines, as opposed to pricey branded products.
Government loans for all pensioners
The Pensions Loan Scheme will be expanded to include everyone on the Age Pension, not just part pensioners. The loan scheme allows pensioners to borrow money off the government against the value of their home. The loans are issued at 5.25% interest.
The loans aren't paid in a lump sum, but previously would top up part pensioners' payments to the full pension amount each fortnight. From July 2019 everyone over pension age will be able borrow up to 150% of the full pension amount.
Encouraging older Australians to stay in the workforce
The Budget includes $190 million in programs to train people over 45, in particular those looking for work. They include programs to develop digital skills, $2000 grants for employers or individuals to reskill or develop new skills, career counsellors and more funding for wage subsidy places for mature age workers.
Another $227.4 million will be spent increasing the Pension Work Bonus. People on the Age Pension will be able to earn $300 a fortnight (up from $250) without it affecting their pension. You'll be able to earn up to $7800 a year. Self-employed retirees will also be included under the new rules, which come into effect in July 2019.
Unpaid to be deducted from welfare payments
The government has been cracking down on welfare recipients who get tangled up in the law. From March 2019, welfare recipients with outstanding court-imposed fines will have their payments docked until the debt is paid. If you have an outstanding warrant for an indictable criminal offence, your payments will be suspended for four weeks or until the warrant is cleared – after the four weeks the payment will be cancelled.
Targeted collection of Centrelink debts
The Coalition has copped flak for what some have described as heavy-handed tactics for collecting debts owed to Centrelink, especially from people who are still on benefits. From July 2019 the focus will shift to debts worth over $10,000 and people who are no longer reliant on Centrelink payments. According to the government, $1.2bn in Centrelink overpayments is owed by people who are no longer claiming welfare.
There's nothing less controversial than spending money on railways and highways. This Budget throws $24.5 billion at a raft of transport infrastructure project across the country, with the lion's share going to Victoria.
Major funding commitments include:
- rail link between Melbourne's Tullamarine airport and the city, at a cost of $5bn
- $1.75bn for the Melbourne North East Link motorway
- $1bn toward the Perth Metronet rail project, on top of $700m funded last year
- $1.4bn for the North-South Corridor roads project in Adelaide
- $3.5bn for a "Roads of Strategic Importance" program, including a $1.5bn package for roads across northern Australia
- An extra $3.3bn for Queensland's Bruce Highway
- $971m for a bypass at Coffs Harbour on the Pacific Highway.
With schools funding one of the centrepieces of last year's Budget, there is little in this year's announcement relating to schools. The National School Chaplaincy Programme has been renewed with another $247m in funding for four years, and $442m has been put forward to fund preschools for another year.
There are also some changes to Youth Allowance rules for regional students. The parental income cut-off will be increased from $150,000 to $160,000, allowing more students who move away to study to claim the benefit.