Australia Budget 2018 - tax cuts and more
Australia’s Budget was a mix of promises of long-distant tax cuts and real-time crime-fighting measures.
There’s a worrying trend in Australian politics towards ‘promises’ made for so far down the track that leaders, and entire parties, are unlikely to be in any position to keep their word once the time comes.
The issue raised its head again during Budget 2018 in a very big way. Personal tax cuts were being rolled out, Treasurer Scott Morrison revealed, over a period of seven years. Yet the next Federal election is in 2019, or possibly even late this year. Then another election takes place three to four years after that.
If the measures are voted through, Australia’s personal tax system will shift from five brackets to four in 2024, with the 37% bracket eliminated and around 1.8 million taxpayers moving down to the 32.5% group.
Initial indications are that Labor’s support for the cuts announced by Treasurer Scott Morrison in the Federal Budget is conditional.
From the 2018-19 financial year the top threshold of the 32.5% tax bracket will rise to $90,000, from $87,000. If cross-party support succeeds, then around 3 million citizens will see immediate tax reductions from 1 July.
Individual income taxes make up more than 50% of government revenue, so this is all a big promise, indeed.
Michael Croker, Australian Tax Leader at Chartered Accountants Australia and New Zealand, recommended that taxpayers don’t start counting their savings just yet.
“Tax cuts need to be legislated and the Coalition must work with the Senate to get laws passed,” said Michael. “There will likely be two Federal Elections before 1 July 2024.
“Initial indications are that Labor’s support for the cuts announced by Treasurer Scott Morrison in the Federal Budget is conditional on restricting the benefits to those in the low to middle-income tax brackets.”
Tax reduction and black economy crackdown
What else did the Budget offer for commentators this year?
Up to $530 annually of low and middle-income tax offsets, beginning in the new financial year, will be paid as a lump sum on assessment. This new offset will be paid in addition to any existing offsets a taxpayer may be able to claim.
Plenty of infrastructure spending was announced. Frequent flyers will be thrilled to hear that $5 billion has been earmarked for Melbourne Airport’s long-awaited rail link to the CBD.
Financial criminals, in general, are going to have a difficult time doing business thanks to several, newly funded compliance-enhancing and crime-fighting measures. The Australian Taxation Office, for instance, has received a $130.8 million boost to police tax compliance issues, very much putting tax agents on notice – read our story on this in the upcoming July issue of CA Australia.
Businesses will no longer have the ability to claim deductions for employee payments that have not had PAYG held back.
Those who ply their trades in the unrecorded and untaxed ‘black economy’ (including those who work for cash) and criminals involved in such activities as money laundering and illegal tobacco-smuggling and sales, will be in the spotlight.
A black economy hotline will be launched for members of the public to report a tax cheat. And businesses will no longer have the ability to claim deductions for employee payments that have not had PAYG held back.
Around $170 million has been announced for counter-terrorist officers, intelligence agents and airport security upgrades.
Of course, as with any Budget there was lots more, including further crackdowns on multinationals siphoning profits offshore, a sharper focus on welfare cheats, $500 million to help restore the Great Barrier Reef, funding of health and fitness campaigns, incremental tax cuts for small businesses and the funding of a National Space Agency.
Budget 2018: The response
What did the experts think? Here’s a selection of responses.
“In what is clearly a pre-election budget, the Government has certainly delivered with a wide range of announcements likely to be favourably received by Australian individuals and businesses.
“The immediate hurdle will be navigating the Senate, and securing cross-bench support for any measures which are not waved through by the Opposition. From there, time will tell if the announced measures will result in long-term and sustainable economic prosperity for the country.”
PwC Budget report
“In a pre-election year the government has delivered a budget that aims to build a fairer society, while announcing it expects the Budget to return to surplus by 2019-20. The central drivers include the recovery of taxes from the black economy as a significant contributor to revenue, while introducing $13.4 billion in personal income tax reductions.
“The passage of the government’s bill to reduce company tax rates remains uncertain, however the impact of changes to research and development incentives, and keeping a watchful eye on any progress of the company tax cut bill will be important for business.”
KPMG Budget report
“The budget just landed the trifecta, with new tax cuts, no more increase in the Medicare levy, and a faster return to bigger surpluses. That trifecta was miles from reach just a few short months ago, but it has been made possible because another trio has been delivering some dazzling dollars to the budget: jobs and profits have both been outperforming, while businesses have reached the bottom of the barrel on their tax losses earlier than expected.
“That combination dropped a handy $35 billion into the government's lap over the coming four years. Feel the difference: that's the first time since 2010-11 that the economy has done the budget any favours.”
Chris Richardson, Partner, Deloitte Access Economics
About the author
Chris Sheedy is one of Australia’s busiest and most successful freelance writers. He has been published regularly in the Sydney Morning Herald, Virgin Australia Voyeur, The Australian Magazine, GQ, In The Black, Cadillac, Management Today, Men’s Fitness and countless other big-brand publications. He is frequently commissioned to carry out copywriting and corporate writing projects for organisations, including banks, universities, television networks, restaurant chains and major charities, through his business The Hard Word.