2019 Budget Impact Summary: Surplus to requirements?

So…What just happened? Short answer. Not much.

It’s not surprising that Governments, in their Budgets, try to please as many people as possible, and upset as few as possible.  This strategy is even more important for a Budget in an election year – when short-term memories are still likely to be working on polling day.

As a result, Election Budgets are usually a mix of a ‘small target’ strategy, coupled with a large splash of cash. They also tend to hold something in reserve for announcements during the election. (We suspect this is why the Government didn’t ‘engineer’ an actual surplus this year, because it won’t look so bad if they need to dip back down to a deficit to buy their way back to power during the election.)

But to give the Government credit, it did a pretty good job of not upsetting anyone.

The Budget centerpiece – an upheaval of personal and company tax rates – was mostly announced last year.  As we covered last year (see here: 2018 Budget Impact Summary) the 2018 Budget suffered from being a bit boring because it was largely based around future tax cuts that were yet to happen.  This time around, the 2019 Budget may be a bit boring because we may already feel like we got the tax cuts (“but what have you done for me lately?”).  This is where the tax offsets come in – as confusing as they are – they give people the general impression they’re getting some money back (which they are).

This leaves the politics of the 2019 Budget down to things like the huge $100 billion infrastructure spend, particularly in Queensland and Victoria (though this uses the standard trick of using the amount of funding to be provided over the next 10 years).

This is good for those States, but the overall impression seems to be a bit ‘meh’.  In other words, there is a reason substantial media coverage has gone to the $20 million of ‘accelerated funding’ to deal with fire ants.

There were also the standard announcements about the ATO getting more money and ‘task forces’, to fight multinational enterprises avoiding tax – which, let’s be honest, they are not doing through illegal means (though perhaps immoral).

In any case, other than things like spending on infrastructure, commuter parking, ASIO and mental health, here are the main things we consider worth mentioning:

  • Tax offsets for people up to $126,000: There will be a ‘tax offset’ of $1,080 for single people and $2,160 for ‘dual income families’ that will apply from 2018-19 and the next three income years to 2021-22. The amount of the offset reduces as you earn more income, until it stops for people on $126,000 per year.  This is a separate discount of tax that will only last for those years, and is not related to the changes in the tax brackets.
  • Change to lowest bracket in 2023: The current lowest tax bracket of 19%, which applies from $18,201 to $41,000, will apply up to $45,000 from 1 July 2022 (assuming the Government continues).
  • Expanding the middle bracket by 2025: Lowering the 32.5% tax threshold to 30% by 2024-25 (assuming this ends up happening). This bracket currently includes people earning $37,001 to $90,000, and last year’s Budget said that will end up applying to income between $37,001 to $200,000 by 2024-25.  Once again, these changes are less exciting because many things could happen in the meantime.
  • Big expansion of instant write-off: Increasing the ‘small business’ instant asset write-off to $30,000, and giving it access to businesses with turnover of up to $50 million. This is a huge expansion of the write-off which the Rudd Government announced as a temporary measure after the GFC.

So, overall, this Budget is again a bit boring for business. Which is not always a bad thing….

Stay tuned as we head into the election in May.

The information contained in this post is current at the date of publishing – 5 April 2019

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