This 2018 Federal Budget was framed against improving revenues from company and personal taxes giving a smaller Budget deficit and the promise of surpluses beginning earlier than expected.
The changes to superannuation are minimal, with announcements to protect smaller balances and an opt-in for life insurance in super.
Most attention will focus on the personal tax cuts for low and middle-income earners starting on 1 July 2018. This is intended to boost consumer spending at a time of low wages growth, as well as recognising this is a pre-election Budget. There is funding for infrastructure and business to promote growth as GDP rose only 0.4% in the December 2017 quarter. The dependence for growth on personal consumption was demonstrated by the strongest contributions coming from household and government consumption, offsetting falls in private non-dwelling construction and weaker exports.
However, as during the mining boom, the risk is the coming budget improvements will not be used to repay debt and bolster the economy for a future slowdown in global growth or rising domestic unemployment. On 27 April 2018, The Australian Financial Review published a poll which showed 32% wanted improved revenues spent on retiring government debt versus 27% asking for personal tax cuts and only 10% wanted a company tax cut.
Personal tax
The personal income tax cuts will be spread over 10 years with a modest start, and regardless of who wins the next election, they are likely to be sustained by both parties looking to voter favour. Low to middle-income workers will receive maximum initial tax relief, but the ‘aspirational’ class on higher incomes, including the top marginal tax rate, are also targetted but for a later start.
Retirement incomes
The Budget includes two useful retirement income policies, with a more open access to the Pension Loans Scheme, and encouragement for innovative income steam products.
The highlights of Budget 2018 are linked in the article below and on our website, including a state-by-state look at the infrastructure spending to promote growth and jobs and reduce congestion.
Graham Hand, Managing Editor
Edition 252 | 8 May 2018 | Editorial | Newsletter