Commentary

The Treasurer flagged that the Budget needed to contain some pain to bring the budget to surplus by 2012-13. Unsurprisingly, there are no tax cuts and not much for business. 

It is interesting to note that the rhetoric has changed.  We are no longer in a two speed economy but rather a patchwork economy.  According to Mr Swan, we are about to participate in an investment boom.  Perhaps it is a pity that not too many can see it coming.

However, he acknowledged that small business is perhaps doing it a little tough and announced measures including a reduction in the PAYG instalment uplift factor and the $5,000 immediate vehicle write off (although this does not take place until the 2012-13 year).

In terms of headline figures, real GDP growth is expected to be 4% in 2011-12 and 3.75% in 2012-13.  The forecast deficit for 2011-12 is $22.6 billion with the budget to return to surplus forecast at $3.5 billion for 2012-13.  The jobless rate is expected to be 4.75% at June 2012 and 4.5% at June 2013.  The Treasurer spoke at length about training and participation in the workforce.

He announced $22 billion of so called pain over five years with approximately two thirds of this represented by spending cuts. 

Some of the tax measures that were leaked prior to Budget night include the following:

• progressive changes to a flat 20% statutory fraction rate for FBT on cars;
• removal of the low income tax offset for unearned income of minors; and
• amendments to ensure access to losses on infrastructure investments.

A couple of proposed amendments can probably be categorised in the mean spirited box.  There will be a potential to refund excess superannuation contributions but only up to an amount of $10,000 and only where the excess contribution arises from 1 July 2011.  The other area is a crack down on the commercial activities of charities and also the introduction of a common definition of charity. This may well see some current charities losing that status.

The Government has highlighted the following key expenditure:

• $558 million for the national workforce development fund
• additional funding for health including expanding access to diagnostic imaging services, improving access to public dental services and $1.5 billion in new initiatives to address mental illness. 

In addition new investment in schools amounts to over $800 million and approximately $230 million has been allocated to new strategic investments to develop regional Australia.

Click on the links below to read further.

Personal Income Tax
Pay As You Go Instalments Taxpayers
Small Business Tax Changes
Capital Gains Tax
Company Loss Recoupment Rules
Debt/Equity Tax Rules
Taxation of Financial Arrangements
Managed Investment Trusts
Goods and Services Tax
Fringe Benefit Tax
Superannuation
Not-For-Profit Sector Reforms
Tax Compliance – Improvement Measures
Other Amendments

Download full analysis