The 2014 Budget Is Out: Here's What You Need To Know

Get used to paying more to go to the doctor, more to put fuel in the car and, if you’re on a good salary, chipping in a little bit extra in tax to help reduce federal government debt.

A 2% levy on those earning more than $180,000 will bring in more than $3 billion in tax revenue over the next three years.

But if you have a company, the good news is that company tax will come down 1.5 percentage points to 28.5% from July next year.

Meet the government’s “Our Economic Action Strategy”, which Treasurer Joe Hockey says is about bringing debt under control and spending less on consumption and more on investment.

By that he means reducing spending to just keeping the wheels of government moving and directing more to productive investments which will deliver returns into the future.

Much of new revenue raised will go to building, such as fuel excise money going to roads and doctor visit revenue to medical research.

“The days of borrow and spend must come to an end,” Mr Hockey says

“It is time, for all of us, to contribute and build. From this effort, there will be benefits for jobs, for higher education, for health and for those in genuine need.

“If we all contribute now, we will build a truly world-class higher education system and a workforce that can meet head-on the emerging competition in Asia.”

The budget deficit will fall from its current $49.9 billion to $29.8 billion next financial year. It will then fall to a deficit of $2.8 billion in 2017-18.

“Our decisions have contributed $36 billion towards this improvement,” Hockey says.

The productive spending includes $50 billion on infrastructure by the end of the decade on roads, rail, ports and airports.

Those who mostly escape the government axe are the almost half those eligible to vote in Australia, those who are aged 50 and over.

The budget’s measures leaves this demographic mostly in the clear, part from the measures which affect all such as the co-contribution on doctor visits.

And there is a little extra for these older workers. Employers will get up to $10,000 over two years if they hire a job seeker aged 50 or older who’s been unemployed for at least six months.

Those most affected by changes are those born after 1965, those earning $180,000 or more (about 400,000 people) and those who go to the doctor often.

Here’s the key measures from the budget:

The Temporary Budget Repair Levy of 2% will apply for next three years from July 1 for every dollar earned over $180,000. That’s an extra $400 a year on $200,000.

A visit to the doctor will now come with a $7 contribution attached.

Part of this extra money ($5 of it) will be used to build a $20 billion Medical Research Future Fund which will be in five years the biggest medical research endowment fund in the world.

Fuel. Pay more at the bowser as the government reintroduces the indexing of the fuel levy which was frozen a decade ago at 38.1 cents per litre. This will now move upward in line with inflation starting in August. The money raised will be spent on road building.

Big spending on infrastructure through an initial $5.9 billion to the Asset Recycling Fund, to encourage the states to re-spend money from any asset sales, starting in July. This is on top of $10 billion to transport through the Infrastructure Growth Package, bringing total infrastructure spending to $50 billion by 2020-21.

Universities will be able to set their own fees, pushing some higher and, perhaps, some lower depending on the university’s reputation and market standing. Federal funding this year for higher education is $15.6 billion. However, from 2016 the Commonwealth’s contribution to course fees for new students will be cut by 20%.

Part of the changes to higher education means the Commonwealth will for the first time provide direct financial assistance to all students studying diploma and sub-bachelor degree courses.

And student loans Fees will be repayable when students are in the work force earning more than $50,000 a year. This is higher than the $32,000 recommended by the Commission of Audit.

The aged pension is relatively untouched except that the eligibility age will be 70 by 2035. Asset and associated income test thresholds will be indexed between now and 2017, but then remain at fixed levels for three years.

Middle class welfare. The Family Tax Benefit Part B income threshold will be reduced to $100,000. For a typical family receiving the base rate of Family Tax Benefit Part A, payments will start to reduce when family income exceeds $94,316 per year.

Smaller government. Abolishing more than 230 bureaucratic programme and getting rid of more than 70 government bodies, boards, committees and councils.

Public service. 16,500 public servants will leave over the next three years. This is another 2,000 from previous targets announced and the largest new cuts will be in the Australian Tax Office. And some are a result of folding AusAID into the Department of Foreign Affairs and Trade.

Duplication of service between the states and the Commonwealth. Over the next eighteen months, the federal government will work to strengthen the Federation and ensure that the overlap between the layers of government is reduced or removed.

Youth welfare. From next year, unemployed people under 25 will get Youth Allowance not Newstart. People under 30 will wait up to six months before getting unemployment benefits, and then will have to participate in Work for the Dole, to be eligible for income support.

Work for the dole. The program, to provide structure and support in a work-like setting, will be phased in over two years and is designed to stop the drift into welfare dependency. Some $14.9 million has been allocated to the program.

Apprenticeships. Concessional Trade Support Loans will be provided from July of up to $20,000 over a four-year apprenticeship. Mr Hockey says: “We give young people loans to help them complete a university course, so it is only right that those completing a trade qualification get the same fair go.”

Indexation. Indexation of many payments and programmes will be temporarily paused: eligibility thresholds for Family Tax Benefit and Newstart; thresholds for the Medicare Levy Surcharge, Private Health Insurance Rebate and most Medicare Benefits Schedule fees; Official Development Assistance funding; Local Government Financial Assistance Grants; and 112 government grant programs.

Australian Network. The Australia Network, which beams television programming into Asia, has been axed. The service, run by the ABC will deliver savings of $76.8 million over four years. The government says the service has failed to deliver a cost-effective vehicle for advancing Australia’s interests.

The ABC and SBS have been hit with a 1% base funding cut in the form of a down payment on back office savings identified during an efficiency study. The government says it expects efficiencies to be achieved without a cut in programs and services.

Refugees and border protection. Another 20,000 places over four years will be provided under the Special Humanitarian Program. The government says this is the dividend paid for stopping refugee boat arrivals. The Australian Border Force will be created by combining the Department of Immigration and Border Protection. The government says this will provide more efficient and stronger border protection.

Defence. No cuts to the defence budget. The government says it wants to grow defence spending to 2% of GDP within a decade. Current budget is $29.2 billion.

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