Australia

'Back in the black': Government doubles tax relief and splashes the cash in pre-election budget

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Treasurer Josh Frydenberg has more than doubled the Coalition’s tax reform package in a pre-election budget the government hopes will turn around its electoral fortunes.

Key points from Budget 2019-20:

  • The government will deliver Australia’s first surplus in 12 years
  • Tax offsets for low and middle-income earners doubled to up to $1,080 a year
  • Christmas Island detention centre to close by July, four months after it was reopened
  • A clampdown on welfare to save $2.1 billion over four years
  • Refugee support services take $77.9 million hit

The Coalition government is banking on a generous income tax package and a massive infrastructure cash splash to turn around its electoral fortunes.

Australian Federal Budget Delivered In Canberra
Treasurer Josh Frydenberg smiles after delivering the budget in the House of Representatives, Canberra.

Handing down his first budget just weeks out from a May election, Treasurer Josh Frydenberg has set up a contest with Labor on tax policy, announcing $158 billion in additional tax cuts.

More than 4.4 million low and middle-income earners will receive $1,080 when they submit their tax return for the 2018-19 financial year  - more than double the tax offset announced last year.

Those earning between $48,000 and $90,000 will get the full amount, while taxpayers earning up to $125,000 will receive a reduced amount.

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Budget 2019: Stakeholders rate 2019 Budget
Budget 2019: Stakeholders rate 2019 Budget

Mr Frydenberg said it was the largest personal income tax cut since the Howard government.

“This is money that could go towards your monthly mortgage payment, your quarterly power bill or your yearly car insurance,” Mr Frydenberg said.

Longer term, the government also wants to flatten tax breaks and reduce the amount of tax paid by those earning up to $200,000, to 30 per cent.

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The Treasurer delivers the 2019 Budget
The Treasurer delivers the 2019 Budget

'Back in the black'

Declaring Australia is “back in the black”, Mr Frydenberg was keen to emphasise the budget had been brought back into surplus for the first time in 12 years without increasing taxes.

The government is projecting a $7.1 billion surplus for 2019-20 and promising to pay off net debt by 2030.

But the treasurer warned of challenges ahead including a contraction in international growth and a seven per cent forecast downturn in the housing market.

In the meantime though, the government is splashing the cash.

Pre-election sweeteners

The budget is packed with pre-federal election sweeteners thanks in part to a revenue spike from better than expected commodity prices.

Australian Federal Budget Delivered In Canberra
Prime Minister of Australia Scott Morrison and Member of the Australian House of Representatives Christopher Pyne.
Getty Images AsiaPac

Among the biggest beneficiaries are apprentices, small businesses, commuters and those in regional areas.

A $525 million skills package will increase incentives for apprenticeships and their employers is a bid to create 80,000 new apprenticeships.

The instant asset write-off will also be increased from $25,000 to $30,000 and extended to small businesses with an annual turnover of $50 million.

A $100 billion 10-year infrastructure package will target regional areas and quadruple spending on urban “congestion busting” projects.

Combined with the reduction in the annual migration intake from 190,000 to 160,000, the infrastructure package is a key plank of its population strategy.

A $500 million commuter car park fund is designed to encourage motorists to drive to public transport hubs and leave their cars behind. 

Mr Frydenberg said the government planned to “focus on immediate, practical measures to cut travel times within our cities”.

Former foreign minister Julie Bishop reacts ahead of Treasurer Josh Frydenberg handing down his first Federal Budget in the House of Representatives at Parliament House in Canberra, Tuesday, 2 April 2019. (AAP Image/Lukas Coch) NO ARCHIVING
Former foreign minister Julie Bishop reacts ahead of Treasurer Josh Frydenberg's first budget hand down.
AAP

After what has been described as the “angriest” summer on record in Australia, the government has set up a new $3.9 billion Emergency Response Fund to deal with future natural disasters.

There’s also $453 million to enable 350,000 children to receive 15 hours of preschool education.

Welfare crackdown

The government is hoping to reap $2.1 billion in savings on welfare payments through a new automated income reporting system.

From July 2020, the social services department will rely on payroll information supplied to the Australian Tax Office, rather than welfare recipients self-reporting income.

The department estimates that that will prevent $650 million in overpayments to recipients of Newstart and other benefits in the 2020-21 financial year, rising to more than $700 million the next year.

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Government doubles tax relief
Government doubles tax relief

While there’s no change to eligibility criteria or entitlements, welfare recipients are no doubt wary of any automated scheme designed to deliver such savings after the robodebt debacle.

Calls from the welfare sector for an increase in the Newstart payment have also been ignored.

Refugees and migrants

Refugee services will also take a hit under the few savings measures in the budget.

Australian Federal Treasurer Josh Frydenberg is congratulated by Australian Prime Minister Scott Morrison after the delivery of the 2019-20 Budget.
Australian Federal Treasurer Josh Frydenberg is congratulated by Australian Prime Minister Scott Morrison after the delivery of the 2019-20 Budget.

Newly arrived refugees will need to wait one year instead of six months until they access Centrelink’s Jobactive program, saving the government $77.9 million over four years.

While the program will be voluntary before then, an estimated 3,200 refugees each year are now expected to not use the program.

But the budget also allocated $64.2 million for new social cohesion measures, to “increase support for migrants to become established and integrated in their communities”.

Key points of the budget:

ECONOMY

- Budget surplus forecast of $7.1 billion, the first in 12 years

- Surplus forecast rising to $11 billion In 2020-21 and then $17.8 billion in 2021-22 before dropping to $9.2 billion in 2022-23

- Goal of eliminating Commonwealth net debt by 2030 or sooner

- Economic growth as measured by GDP to rise to 2.75 per cent

- Unemployment rate steady at 5.0 per cent

- Inflation as measured by CPI to be 2.25 per cent

TAXATION

- $158 billion of additional tax relief for those earning up to $126,000 a year

- Up to $1,080 in savings for single income families and up to $2,160 for dual income families.

- Tax rate lowered from 32.5 per cent to 30 per cent from July 2024 for all taxpayers earning between $45,000 and $200,000

SMALL BUSINESS

- Tax rates cut to 25 per cent by 2021-22

- Increasing access to finance with a new $2 billion fund

- Instant asset write-off increased to $30,000 and expanded to businesses with turnover of up to $50 million

- Additional $60 million for Export Market Development Grants

REGULATION

- Additional support to the Tax Office to reduce tax cheats

- Additional support to financial regulators in the wake of the Banking Royal Commission

INFRASTRUCTURE

- Boosting infrastructure spending to $100 billion over the decade

- Increasing the Urban Congestion Fund four-fold from $1 billion to $4 billion including a $500 million Commuter Car Park Fund

- Providing $2 billion for fast-rail between Melbourne and Geelong as well as fast-rail corridors in other areas

- $2.2 billion for safer roads

- $1 billion to improve freight routes and access to ports

- $100 million for regional airports

THE BUSH

- $6.3 billion in drought support

- $3.3 billion for those affected by flood

- New North Queensland Livestock Industry Recovery Agency

- New $3.9 billion Emergency Response Fund for natural disaster recovery efforts

YOUNG WORKERS

- $525 million skills package

- 80,000 new apprenticeships

- Incentive payments to employers up to $8000 per placement

- New apprentices to receive a $2000 incentive payment

- $62 million to boost literacy, numeracy and digital skills

- Funding to increase participation for women and girls in STEM (science, technology, engineering and maths) industries

RESEARCH

- $9 billion for science, research and technology, including commercialisation

- $400 million for genomics research to unlock the secrets of DNA

- $160 million for research to improve the health of indigenous Australians

HEALTH

- $80 billion for more MRI machines, more life-changing medicines on the PBS, more funding for mental health, better access to GPs, hospitals and dental services

- Funding upgrades to regional hospitals, the first being in Townsville

- Establishing Australia's first comprehensive children's cancer centre in Sydney

- Helping to build a new Brain and Spinal Ward in South Australia

- $461 million for youth mental health and suicide prevention strategy

- $500 million for a Royal Commission into the mistreatment of people with disability

AGED

- $725 million for 10,000 new home care packages

- One-off Energy Assistance Payment for pensioners of $75 for singles and $125 for couples

- $84 million to enable carers to leave a loved one in safe hands and take a break

ENVIRONMENT

- $3.5 billion Climate Solutions Package, $2 billion of which will go to practical emission reduction activities, working with farmers and Indigenous communities

- $100 million Environment Restoration Fund to deliver large-scale environmental projects

SCHOOLS

- Committing around $300 billion to all schools, a total increase of 63 per cent for upgrades to libraries, classrooms and play equipment

- New scholarship program for over 1,000 students a year to study in regional Australia

- $453 million to extend pre-school education, enabling 350,000 children to receive 15 hours of quality early learning per week in the year before school

SECURITY

- $328 million to fund prevention, response and recovery initiatives

- $570 million for the Federal Police and ASIO

- Additional $680 million to support service men and women deployed abroad.

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