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In what is clearly a pre-election budget, the 2016-17 Federal Budget includes significant changes in the areas of:
- Tax concessions for small and medium businesses
- The taxation of multinational groups
Obviously, implementation of many of these measures is contingent on the result of the next election.
Interestingly the greatest revenue is being raised by the changes to the Tobacco Excise ($4.707bn) followed by the new Tax Avoidance Taskforce being established within the Australian Taxation Office ($3.060bn). The superannuation changes are forecast to raise some $2.884bn in additional revenue.
This revenue is funding tax cuts for individuals ($3.950bn) and businesses ($2.650bn), although the benefit of the reduction in the company tax rate is being phased in over 10 years.
There were no changes to negative gearing or the CGT discount concession.
The cash budget deficit is estimated to be $37.1bn for 2016-17 representing around 2.2% of estimated GDP. The budget position over the forward estimates is as follows:
Real GDP growth is predicted to be 2.5% in 2016-17 (down from the 3.25% estimated last May), increasing to 3% in 2017-18 and then remaining steady for the next two years. The unemployment rate is forecast to decrease to 5.5% from the 5.75% previously estimated for 2015-16. The CPI is estimated to increase slightly in 2016-17 to 2% from the 1.5% previously estimated for 2015-16.
Mr Morrison described the Budget as “an economic plan … not just another budget” with the three key elements being to:
- Maintain initiatives directed towards jobs and growth
- Fix problems in the tax system to make it more sustainable
- Ensure that the Government lives within its means
He noted that the “Government remains strongly committed to returning the budget to balance as soon as possible” but this is not expected to occur until 2020-21, some 5 years away.