Federal budget 2015: finding revenue to reduce the deficit


11 May 2015 | Options range from a hike in the GST, a tax on bank deposits and the 'Netflix tax'.

A near-$50bn black hole in the budget has the government scrambling


There’s expected to be a budget deficit of $45.9 billion for the financial year ending 2015, according to Deloitte Access Economics' latest budget monitor. That's not much improvement on the deficit of $48.5bn recorded in 2013-14, and this year’s estimate is $5.5bn worse than the mid-year budget update suggested.

With declining revenues from a drop-off in iron ore prices and with wage growth slowing, how will the government find revenue?

So far, there have been a few options put on the table – some perhaps more likely than others.

Tax on bank deposits

Banks are expected to be hit with a new 0.05% tax on deposits up to $250,000 to build a fund that could be used in the event of a banking collapse. The money raised from the tax would amount to around $500 million and would be used to protect consumers if the bank collapsed.

The problem is, the banks have already warned that any additional taxes would be passed on to consumers in the form of higher fees or lower interest rates on savings. If it goes ahead it would be slated to start on January 2016.

GST measures

There’s been a lot of chatter about changes to the GST. Last year there were discussions about increasing the rate of the GST above 10%, however that doesn’t look likely in this budget. Discussions have now moved towards what the government calls ‘integrity measures’. The two measures that have been flagged so far are the so-called Netflix tax and lowering the GST low-value threshold.

Netflix tax

The most likely to go ahead of these measures is the Netflix tax. It would essentially extend the 10% GST to cover intangible goods bought online such as electronic books, movies and music. It’s unclear at this stage whether this tax would also cover internet-based services such as Uber and Airbnb.

GST low-value threshold

The other measure, which it looks like the government has already ruled out, is lowering the GST low-value threshold for goods bought online from overseas, such as clothes and books. Goods that are worth less than $1000 are currently not subject to the GST if they're bought from overseas.

In principle, CHOICE isn’t opposed to such a measure, however, several government reports have found it would often cost more money to collect the tax than the tax itself would raise. For example, collecting a $38 parcel bought online could cost you an extra $17.80 once you include GST and parcel processing fees. So unless a business case which shows the benefits outweigh the costs can be put forward, we don’t think it’s a great idea.

Income tax: bracket creep

The last time there was any change to income tax brackets was in 2012-13, when the tax-free threshold increased from $6000 to $18,200 and tax rate was increased for the two lowest tax brackets, not including the tax-free threshold.

However, there haven’t been any indications the income tax rate is likely to change. But you may find that if your pay has increased, you’ve been bumped into a higher tax bracket by what’s known as ‘bracket creep’.

Average ordinary full-time earnings were around $75,000 in 2013-14, and they are expected to reach around $104,000 by 2023-24. Currently, your average worker sits in the third-highest tax bracket. However, under the current settings, by 2016-17 your average full-time employee will hit the second-highest tax bracket as a result of bracket creep.

Current tax brackets are as follows:

Tax brackets

Taxable income

Tax on this income

$0-$18,200

No tax payable

$18,201-$37,000

19 cents for each $1 over $18,200

$37,001-$80,000

$3,572 plus 32.5 cents for each $1 over $37,000

$80,001-$180,000

$17,547 plus 37 cents for each $1 over $80,000

$180,001 and over

$54,547 plus 45 cents for each $1 over $180,000

Unchecked, bracket creep affects low and middle income earners proportionally more than higher income earners, accordingly to the tax white paper released by the government earlier this year.


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