The Federal Budget 2017: What you need to know

The Federal Budget 2017 has been released. Take a look at some of the main points to see how it may impact you.

The Treasurer Scott Morrison has presented the Federal Budget 2017 proposals to Parliament.

We’ve broken it down to explain what’s been announced and what it might mean for you.

Keep in mind, any changes outlined in the Federal Budget must be passed by both the House of Representatives, which is controlled by the government, and the Senate, where proposed expenditures are subject to examination within Senate estimates hearings.

This means any proposed cuts or changes outlined may not necessarily become law.

Education

  • $18.6bn in extra funding to education over the next 10 years, but students will pay an extra 7.5% for higher education to be phased in over four years
  • Universities will have to pay a 2.5% efficiency dividend for the next two years

Housing

  • Launch of a First Home Super Savers Scheme where contributions will be taxed at 15%, rather than the marginal tax rates, and withdrawals will be taxed at the marginal tax rate, less 30%. Contributions would be limited to $30,000 per person in total and $15,000 per year
  • People over the age of 65 will be encouraged to downsize their homes by being able to make non-concessional contributions of up to $300,000 into their superannuation fund from the sale of their principal home
  • Foreign investors who fail to occupy or lease their property for at least six months a year will be charged a levy of at least $5,000 a year, while developers will be stopped from selling more than 50% of new developments to foreign investors
  • The National Affordable Housing Agreement will be replaced with a new set of agreements that requires states and territories to deliver on housing supply targets and reform planning systems

Families

  • The ParentsNext program to be expanded from 13,000 vulnerable young parents to 68,000 in 20 new locations to help with child care, pre-employment training, financial literacy and numeracy skills
  • Government to restore the pensioner concession card
  • Drug testing trials for 5,000 new welfare recipients

Healthcare

  • Medicare Levy will be increased by 0.5% in two years’ time to ensure National Disability Insurance Scheme is fully funded
  • Hospital funding will be increased by $2.8bn and healthcare research will receive $1.4bn over the next four years; $1.2bn in new medicines will be made available
  • $80m announced to go towards mental illness such as severe depression, eating disorders, schizophrenia and post-natal depression
  • A lift of the freeze on some Medicare rebates and a reversal of the decision to remove some bulk billing incentives. The cost of reversing these measures is estimated to be $2.2bn over the next four years

Infrastructure

  • The Federal Government plans to build and operate a new airport in western Sydney, creating 20,000 jobs by the early 2030s and 60,000 jobs over the long term
  • An $8.4bn project linking Melbourne and Brisbane to be built by the Australian Rail Track Corporation. Construction would start this year and it is estimated the project would support 16,000 jobs at the peak of its work
  • $75bn in infrastructure funding and financing over the next 10 years, $844m would be used to upgrade the Bruce Highway in Queensland and $1.6bn into Western Australia
  • $472m would go to regional communities through the Regional Growth Fund, including $200m to support another round of the Building Better Regions program
  • $90m set aside to secure access to gas resources for domestic use
  • South Australia to receive $37m for new energy infrastructure
  • A total of $3bn has already been provided to support new emissions technologies

Tax changes

  • Changes to negative gearing with deductions for travel expenses to be disallowed from 1 July 2017 and limits to plant and equipment depreciation deductions to only the expenses incurred by investors
  • The Australian Tax Office is expected to raise more than $4bn from public companies and multinationals this financial year as part of a clampdown on tax avoidance

Defence

  • By 2020-21 defence spending will be increased to 2% of GDP, three years ahead of schedule
  • An estimated $300m to be invested in the Australian Federal Police to further fight against terrorism, organised crime, child exploitation and other crimes

Finance and business

  • New levy on liabilities for the five largest banks
  • A new banking executive accountability regime will be introduced
  • An annual foreign worker levy of $1,200 or $1,800 per worker per year on temporary work visas to be imposed on businesses, with a $3,000 or $5,000 one-off levy for those on permanent skilled visas
  • Small businesses with a turnover of up to $10m will continue to be able to immediately write off purchases of up to $20,000

Economy

  • The budget is projected to reach a surplus of $7.4bn by 2020-21 and remain in surplus over the medium term
  • Real growth is expected to rebound to 3% over the next two years
  • Wage growth is expected to increase from 2% to above 3% over the next four years

Why does it matter to you?

The Federal Budget details how the Australian Government plans to spend your tax money, among other things.

The Federal Budget serves as a plan for the country’s finances in the medium term. It covers both earning and spending estimates for the current financial year (FY16/17), the coming year (FY17/18) and the three years after that.

Like almost any other budget, the Federal Budget shows ‘incomings’, or the revenue the government expects to raise and how it hopes to raise it. It also reports on what has been spent in the past year and shows planned expenditure.

It reveals how the Australian Government intends to deliver on its priorities and commitments. That is, how it plans to pay for key programs and where it plans to make any cuts.

What does it all mean?

All of this adds up to a Federal Budget which is either:

  • In balance – where the amount spent is equal to earnings for the financial year
  • In surplus – where earnings are greater than spending for the financial year
  • In deficit – where spending is greater than earnings for the financial year.

The Federal Budget is the Australian Government’s most important tool of economic policy and the decisions made impact everyone.

Depending on priorities and the state of the economy, individuals can either end up receiving more as a consequence of government spending programs and tax policies, or conversely, being required to contribute more.

A surplus could mean more money available for government and community services or paying down any national debt. A deficit could mean tightening the belt for individuals, families and businesses in order to reduce spending and balance the books.

‘Contributing more’ can happen either in the form of something such as a compulsory levy or by changes to tax rules to boost the revenue side of the equation.

Ultimately, it is the Australian Parliament that controls government finances and has to authorise any changes to taxation legislation and any spending of money by passing an appropriation bill.

Source: Commonwealth bank of Australia

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