The 2019-20 Federal Budget brought forward from May to 2 April with no new tax measures and further tax cuts and offsets were announced. Labor is, among other tax reform measures, proposing the removal of negative gearing for existing residential dwellings, a reduction in the capital gains tax (CGT) discount to 25% and the removal of franking credit refunds.
In the lead up to the election, the Coalition will advocate that it is a better manager of the economy than Labor.
The projected 2019-20 budget surplus is $7.1 billion being $5 billion higher than the surplus projected previously. If achieved it will be the first time in 12 years that the budget has returned to surplus. Higher than forecast commodity prices contributing towards the improvement in the country’s fiscal position and outlook.
Real GDP is projected to increase to 2.75 %, the CPI is projected to increase to 2.25 % and the unemployment rate is projected to remain constant at 5%. Some economists are projecting a slowdown in the world economy in the immediate horizon, and should this occur, the foundation on which this budget has been based would be concerning.
This Budget contained very few newly announced tax related measures. The low and middle-income tax offset will more than double to $1,080 from 2018-19. Taxpayers earning up to $126,000 will be entitled to the offset. More than 10 million Australians will benefit from this offset.
From 1 July 2024 the 32.5% rate, covering income bands between $45,000 and $200,000, will be reduced to 30%. This will result in 94% of Australians paying tax at a rate of no higher than 30%. The cost of these two measures is $158 billion to 2029-30.
Small to medium sized businesses will be assisted by an extension of the instant asset write-off. With effect from 2 April 2019 until 30 June 2020, businesses with a turnover of up to $50 million will be able to immediately write off for tax purposes a depreciable asset costing up to $30,000 (previously $25,000.
The Australian Taxation Office (ATO) will receive an extra $1 billion of funding over four years to expand the Tax Avoidance Taskforce that monitors compliance and undertakes reviews of multinationals, large public and private groups, trusts and high wealth individuals. The ATO will receive additional funding to develop data analytics tools that will enable them to get new perspectives on taxpayer data. Taxpayers should expect more regular and focused ATO reviews.
On the debit (expenditure) side of the budget the Government has announced a myriad of spending measures. Newly announced infrastructure spending on rail and road projects will cost $4.5 billion taking infrastructure spending to $100 billion over the next decade.