Maggie Tagg, who writes Citadel 'Financial Info on the Go' for GSA, says the key features of this years Federal Budget are:
In what has been dubbed the 'have a go' budget, Australian Treasurer Joe Hockey has moved to restore the confidence of ordinary Australians in the country's growth prospects. The big winners are small business, families, farmers and job-seekers, with spending measures designed to stimulate spending, investment and growth.
There is also a big lift in spending on national security. Retirees and investors will be relieved that the government has repeated its promise to not make any changes to superannuation in this term of government.
Despite the new spending commitments, the government is forecasting a lower-than-expected budget deficit in 2015-16. This Budget has refrained from any major structural reforms. It should go a long way towards restoring faith in the government commitment to a fair go for all. Most of the spending initiatives favour low and middle-income earners and the neglected business and rural sector.
Just as importantly, these measures are also designed to boost consumer confidence, spending and economic growth. Gone is the talk of Budget emergency. Instead the Government has unveiled nearly $10 billion in spending initiatives for small business and families.
There is also support for youth unemployment and drought stricken farmers with a message that "this is the time to get out there and have a go".
While the emphasis on debt and deficit was somewhat muted, the Treasurer announced that the timetable back to surplus was unchanged.
The Budget deficit is expected to grow to a lower than expected $35.1 billion next financial year on the path to $6.9 billion in 2018-19. This is well below market expectations of around $45 billion this year and next.
Even so, the improved deficit forecast for next year is significantly higher than the $17 billion forecast this time last year.
The Treasurer acknowledged that local and global economic conditions have been, and remain, challenging.
The Treasurer has forecast the economy will grow at 2.75 percent in 2015-16 in line with the Reserve Bank's forecast 2-3 percent.
Unemployment, however, is projected to remain stubbornly high at 6.5 percent in 2015-16 falling to 6.25 percent then 6 percent in the years following.
Small businesses with a turnover of less than $2 million have been singled out as one of the major growth engines of the economy.
Small business gets a 1.5 percentage point tax cut to 28.5 percent. Unincorporated businesses get a five percent tax discount worth up to $1000 a year.
The small business instant asset write-off will also be increased from the current $1000 to $20,000 starting immediately. Fringe benefit tax for small business is abolished on portable devices like mobile, tablets and laptops.
In a nod to the importance of the entrepreneurial sector, employees in start-ups will receive tax breaks on shares they receive as part of their remuneration.
The good news for retirees is that the government will continue to index the age pension to ages, not inflation. It has also repeated its pledge not to make changes to superannuation in this term of government and has maintained its hands-off approach to negative gearing, dividend imputation and capital gains tax discounts.
There will, however be a $2.4 billion in savings from an increase in the age pension assets test threshhold and taper rate. For example, couples with assets, excluding their home, above $823,000 will lose their pension instead of the current $1.15 million cut off.
Editors Note: Maggie Tagg is an Associate Financial Planner, who holds an Advanced Diploma of Financial Planning. General.
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