- A new tax on banks, bringing in at least $1.5 billion a year; senior bankers to be registered to ensure good behaviour.
- A rise from 2019 in the Medicare levy to 2.5% from 2% to fund the National Disability Insurance Scheme.
- Special savings accounts for first home buyers taxed at just 15%, the same as superannuation.
- Limits to how much of a property development can be sold to foreign investors. And a levy on those who leave apartments empty.
- A massive infrastructure plan with $75 billion spent over ten years and the government taking part ownership of major projects such as the Western Sydney airport.
Treasurer Scott Morrison’s second budget tackles housing affordability with tax breaks for first home buyers saving for a deposit, launches a “nation building” infrastructure program, targets welfare cheats, gets the banks to help fill a revenue hole and still gets the budget deficit under control on target by 2021.
The budget is all about sharing the coming spoils of an improving economy.
He acknowledged that most Australians haven’t had a decent pay rise for some time but says Australia is now moving towards the end of a difficult economic period.
“This budget is about making the right choices to secure the better days ahead,” he told parliament when releasing the budget.
“Our choices are based on the principles of fairness, security and opportunity. We must choose to focus on growing our economy to secure more and better paying jobs.”
Morrison finally put in the ground the so-called zombie spending savings, held up by a hostile Senate.
He reset the budget by reversing those measures from the 2014-15 and 2015-16 budgets at a cost of $13 billion.
Part of the revenue gap will be filled by a levy on the major banks – Commonwealth, Westpac, NAB, ANZ and Macquarie – raising $6.2 billion over four years.
The six-basis point levy on the big banks’ liabilities will start on July 1.
Morrison confirmed that the budget is still projected to return to balance in 2020-21 and remain in surplus after that.
The underlying cash balance will improve from a forecast deficit of $29.4 billion in 2017-18 to a projected surplus of $7.4 billion in 2020-21.
Growth in payments has been restricted to less than 2% per year.
The deficit is expected to fall from $29.4 billion in 2017-18 to $2.5 billion in 2019-20, with the budget returning to a projected surplus of $7.4 billion in 2020-21.
Here’s how the projections look:
The budget forecasts real economic growth to rebound to 3% over the next two years, after a temporary slowing this year.
“Household consumption, non-mining business investment and exports are expected to support growth,” says Morrison.
Wage growth is expected to increase from 2% to above 3% over the next four years.
“Given commodity prices continue to be volatile, we have maintained conservative assumptions,” says Morrison.
Morrison says there’s no silver bullet fix for housing affordability.
However, from July this year first home buyers will be able to save for a deposit by salary sacrificing into their superannuation account over and above their compulsory superannuation contribution.
The tax will be 15% on the way in and the interest earned on the saving will also be a low 15%. Withdrawals will be taxed at their marginal rate, less 30 percentage points.
Contributions will be limited to $30,000 per person in total and $15,000 per year. For couples, that translates to a quick, tax-effective way to get $60,000 together.
And tax deductions for travel to a negatively geared property are being eliminated. There’s been a strong suspicion that a lot of these claims are more a personal benefit than for investment purposes.
A new foreign investment levy of at least $5,000 a year will be imposed on all future foreign investors who fail to either occupy or lease their property for at least six months each year.
And the government is restoring the requirement that prevents developers from selling more than 50% of new developments to foreign investors.
The government says it will also work with the states to ensure the release of land for housing.
And to encourage downsizing, older Australians, those aged over 65 will now be able to make a non-concessional contribution of up to $300,000 into their superannuation fund from the proceeds of the sale of their home.
The budget is extremely tough on the major banks.
A new levy on balance sheet liabilities for banks of a certain size means the big four banks plus Macquarie will deliver more than $6 billion more in taxes over the next four years.
There’s a summary to how it all works here.
A new Banking Executive Accountability Regime is being created, essentially meaning the licensing of senior executives at the big banks.
If they misbehave, they lose their licence and their ability to work at that level.
All senior executives will now be registered with APRA. If in breach, they can be deregistered and disqualified from holding executive positions, and be stripped of their bonuses.
“Banks will also be held to account if they try and hide misconduct by executives with new mandatory reporting requirements,” says Morrison.
If banks breach misconduct rules, they will also face bigger fines starting at $50 million for small banks and $200 million for large banks.
The government is also establishing the Australian Financial Complaints Authority, a vehicle where people can resolve disputes and obtain binding outcomes from the banks and other financial institutions.
The National Disability Insurance Scheme (NDIS) will be funded from 2019 by a half a percentage point rise in the Medicare Levy to 2.5% from 2% of taxable income.
This fills the $55.7 billion funding gap, the federal government’s contribution, for the scheme over the next ten years
The government is squeezing welfare payments again, this time docking the payments of those who don’t turn up to appointments or refuse to take on work.
“Those who do not meet their responsibilities and either fail to turn up to appointments or take on suitable work will face escalating financial penalties, ranging from reduced to cancelled payments,” says, Morrison.
“We will no longer accept, as an excuse from repeat offenders, that the reason they could not meet their mutual obligation requirements was because they were drunk or drug-affected.”
The government is creating a drug testing trial for 5,000 new welfare recipients.
Those who return a positive result will be put on the Cashless Debit Card and face further tests.
An annual foreign worker levy of $1,200 or $1,800 per worker per year on temporary work visas and a $3,000 or $5,000 one-off levy for those on a permanent skilled visa.
Over the next four years, $1.2 billion will be raised from this levy that will contribute directly to a new Federal-State Skilling Australians Fund.
Previously, employers with foreign workers have had to contribute 1% to 2% of their payroll to training. However, this has been difficult to police.
The $20,000 immediate tax deductibility threshold for small businesses is being extended or a further 12 months.
The concession is available to all small businesses with aggregate annual turnover less than $10 million, about five times higher than the previous threshold.
The government is guaranteeing Medicare by establishing the Medicare Guarantee Fund. Proceeds from the Medicare Levy will be paid into the fund.
The freeze on the indexation of the Medicare Benefits Schedule is being lifted and the removal of the bulk billing incentive for diagnostic imaging and pathology services has been reversed.
The increase in the PBS co-payment and related changes has also been axed.
The cost of reversing these measures is $2.2 billion over the next four years.
$1.2 billion in new medicines will be made available, including for patients with chronic heart failure, funded by an agreement to decrease the cost of medicines.
The federal government will increase hospitals funding by an additional $2.8 billion over four years.
More budget coverage:
- Moody’s says Australia’s fiscal strength is high, a key support for its AAA credit rating
- NEW TAX, BONUSES HELD FOR YEARS: Australia’s top bankers are the budget’s biggest losers
- A new visa will let citizens bring their foreign-born parents to Australia for up to 5 years
- How the 2017 budget will affect millennials who like smashed avocado toast
- People who smoke ‘rollies’ because they think it’s cheaper are about to be taxed the same amount as packet cigarettes