An old proverb says “people unite over problems but divide over solutions”. The weight of expectation lies heavily on Joe Hockey’s first Federal Budget to solve many many long standing fiscal problems without creating a war in the voter base over the solutions. The budget sell is an appeal to a vision of a national ideal that Australians are “lifters not leaners”. It is a sales pitch with modest increases in taxation and significant cost reduction measures including significant welfare reductions. In return, the budget deficit will reduce from a projected $49.9 billion in 2014 to $29.8 billion in 2015.
Almost all the tax increase measures had been leaked prior to the budget. Of 235 pages of budget measures, only 14 pages are devoted to revenue measures. The headline revenue measure is the 3 year “Temporary Budget Repair Levy” of 2% which applies to income in excess of $180,000. This increases the personal income tax rate to 49% from 1 July 2014. To match the personal tax increase, the FBT rate increases to 49% from 1 April 2015. Interestingly this means that there is a 2% benefit to packaging taxable fringe benefits for people on more than $180,000 between 1 July 2014 and 31 March 2015. Will we see a salary packaging frenzy in the short term? The same opportunity arises from 31 March 2017 to the end of the 3 year levy on 30 June 2017. Indexation of the fuel excise is set to recommence ½ yearly by indexation to movements in customs duty rates on other fuels. This will hit people at the browser.
For the full Federal Budget 2014 – “Lifters not learners” click here.