The recent budget announcement has got people talking. As with most Government announcements there are always polarised opinions with regards to the issues that have, or have not, been addressed.
With the latest announcement it would seem that the Rudd government has responded to the global financial crisis by restructuring the budget to focus new stimulus spending around infrastructure construction, job protection and pensions funded by cuts to middle-class welfare. Many of these spending cuts however will not be fully impacted until the economy begins to recover.
The Affects
Below we have summarised some of the most important changes in the 2009 Budget that may affect you.
Economy
The government predicts that the unemployment rate will peak to 8.5% in 2011. In response to this statistic and in an attempt to lessen the impact of such an outcome they have allocated almost $1.5 Billion over four years to retrain young and retrenched workers. Other winners from this budget include businesses that provide consulting services and products to the environment, building, infrastructure, defence and superannuation industries. The big spending programs, including $8.5 billion in land-transport networks, $3.5 billion in clean-energy programs and $5.7 billion for higher education and innovation, an extension of the first-home-owners’ scheme, paid parental leave and increased pensions, aim to retain 210,000 jobs and ensure Australia out performs other economies. This budget is intended to be the “nation-building” budget.
Business
For small businesses the initially proposed 30% tax rebate on eligible capital assets will be increased to 50% for small businesses installing capital infrastructure before December 2010. New funding for research, research infrastructure and business innovation is also an important helping-hand for businesses. The government is also allowing $10 million for businesses seeking to improve their e-commerce facilities. The much anticipated paid maternity leave scheme comes into effect from January 2011, but unless private business contributes to the payment, it will have minimal effect with projected budget costs of $730 million over four years.
Superannuation
From 1 July 2009, the limit on salary-sacrificed and employer-paid superannuation will be set at $25,000 a year, which is half the current limit. For people over 50, the cap will also be halved to $50,000, and from 2012-2013 people over 50 will also be included in the lower $25,000 cap. It can bee seen that this is perhaps one of the Government’s attempts to generate some revenue as by capping the contribution limits employees and other super fund contributors will now have to find alternative means for storing or investing their money. It is more than likely these other forms will be taxed at a higher rate than the super funds and hence this creates extra revenue for the Government.
In addition, the government’s contribution to the superannuation co-contribution scheme will be temporarily reduced for three years. This will give the government a saving of almost $1.4 Billion over the next four years.
Infrastructure
The government is looking to implement improvements to road, rail and ports over the next 6 years allocating $8.4 billion to improve city livability. The bulk of this funding is aimed at improving metropolitan rail links and the main road transport route between Melbourne and Cairns.
Investors
A tax loophole for the wealthy has been lost. Under the new rules, people who earn more than $250,000 a year will no longer be able to deduct losses from their unprofitable businesses from their own income; the loss will only be deductible from business income. For shareholders the rules relating the use of private company assets will tighten, meaning the use of company owned assets such as cars, boats and properties without paying tax will not be allowed.
Tax
The government has honoured already announced personal income tax cuts. From 1 July the tax rate in the $80,000 to $180,000 tax bracket will drop from 40% to 38% then to 37% from 1 July next year.
Despite the introduction of the promised tax cuts, in combination with high levels of spending in many other areas, the federal budget is forecast to remain in deficit for the next 6 years.
The 2009 budget is a recovery budget with the key areas of infrastructure construction, job protection and pensions being substantially funded by cuts to middle-class welfare being the core focus. Whilst this budget will aim to help Australia recover from the recession most of the proposed effects will not be seen until the economy recovers.
The team of legal and accounting professionals at The Quinn Group pride themselves on keeping up to date with the latest Australian consumer and business news and advancements. If you would like advice on how you can make the most of the current economic climate and optimise your financial position contact us on 1300 QUINNS or click here to submit an online enquiry.
