Snapshot of the 2009-10 Federal Budget
The Federal Treasurer, the Hon. Wayne Swan, tonight delivered the 2009-10 Federal Budget.
The Budget articulated the Government’s focus on current and immediate economic stimulus and future economic growth.
The Budget includes a significant program of investment in infrastructure, including roads, metropolitan rail, ports, universities and energy efficiency. These measures signal a move into larger, longer-term projects as part of the Government’s continued response to the global economic downturn. The Budget also commits to an increase in additional pension payments and other family benefit measures.
- A deficit of $58 billion returning to a surplus in 2015-16.
- A contraction of the Australian economy by 0.5 per cent in 2009-10 but expected recovery in 2010-11 with growth of 2 ¼ per cent.
- Employment contracting to mid-2010, with the unemployment rate forecast to peak at 8½ per cent in 2010-11.
- Housing flat but recovering strongly in 2010-11.
$22 billion Nation Building Infrastructure including:
- $3.4 billion for roads projects
- $4.6 billion for the construction and planning of 9 metropolitan rail projects in Victoria, Queensland, South Australia, Western Australia and New South Wales.
- $389 million for ports and freight infrastructure.
- $4.5 billion for the Clean Energy Initiative, which includes $1.0 billion of existing funding.
- $2.6 billion in projects focused on universities and research from the Education Investment Fund.
- $3.2 billion in projects focused on hospitals and health infrastructure from the Health and Hospitals Fund.
- Partnering with the private sector to build the $43 billion National Broadband Network.
Other key measures include:
- A pension increase of $32.49 per week for singles and $10.14 per week combined for couples on the full rate.
- A increase of $2.7 billion in funding for tertiary education, research and innovation
- $1.5 billion for the Jobs and Training Compact, providing education and services to support young people, retrenched workers and local communities
- A 50 per cent Small Business Tax Break for eligible assets
- Extending the First Home Owners Boost for an extra 6 months
- Honouring existing tax cut commitments
Budget Initiatives in detail
The Government will commit a $22 billion investment in infrastructure including investment of $8.5 billion in road, rail and port infrastructure needs. The projects reflect advice from Infrastructure Australia and will be funded from provisions set aside, including in the Building Australia Fund.
The Government tonight committed to investing more than $4.6 billion in the construction and planning of nine metropolitan rail projects across the nation:
- $3.2 billion towards a dedicated dual rail link from West Werribee to central Melbourne’s Southern Cross Station;
- $40 million towards planning, design and engineering works for Melbourne’s East-West rail tunnel linking Footscray with the CBD;
- $365 million towards a light rail corridor for the Gold Coast and $20 million for a detailed planning study into potential new corridors in Brisbane;
- $294 million to upgrade Adelaide’s Gawler rail line and $291 million to extend the Noarlunga to Seaford line, in addition to $61 million to extend the O-Bahn track in
- $236 million towards the central city section of the Perth to Fremantle rail line and the Wellington Street bus station to facilitate urban redevelopment in Perth;
- and $91 million for detailed design work of the Sydney West Metro — a new
- 25 kilometre rail line from Central Station to Westmead Hospital.
The Government will invest $3.4 billion investment in a so-called ‘Network 1’ — the road freight corridor between Melbourne and Cairns that includes the Hume, Pacific and Bruce Highways:
- $1.5 billion for the Hunter Expressway — a new dual carriageway road in New South Wales between the F3 and the New England Highway near Branxton;
- $618 million towards a dual carriageway bypass of Kempsey and Frederickton to the east of the existing Pacific Highway;
- $488 million to replace 25 kilometres of the Bruce Highway between Cooroy and Curra in Queensland with a better four-lane divided carriageway; and $884 million to upgrade the Ipswich Motorway from Dinmore to Goodna.
The Government will set aside $389 million to invest in the capacity of Australia’s bulk commodity ports:
- $50 million towards design and engineering works for the Port of Darwin’s EastArm; and
- $339 million towards the development of common user facilities at the Port of Oakajee, north of Geraldton in Western Australia.
National Broadband Network
As previously announced, the Government plans to partner with the private sector to build a $43 billion national broadband network. This will be supported by an initial investment by the Commonwealth of $4.7 billion.
Clean Energy Initiative
In addition to the Government’s previous announcement of the introduction of a Carbon Pollution Reduction Scheme in 2011 and expanding the national renewable energy target, the Treasurer also announced tonight that the Government will invest $4.5 billion in a new Clean Energy Initiative. The focus of this initiative is to support low-emission technologies and create green jobs.
- The Government will establish Renewables Australia, a new innovation body to promote the development, commercialisation and deployment of renewable technologies.
- The Government will establish up to four new Solar Flagship projects to demonstrate the viability of solar technologies.
- The Government will support projects that demonstrate carbon capture and storage on an industrial scale from coal-fired power stations.
R & D red tape cut with simplified tax credit
The Government will simplify and enhance the Research and Development (R&D) Tax Concession to boost business investment. From 2010-11, the Government will replace the complex R&D Tax Concession with a simplified R&D Tax Credit which cuts red tape and provides a better incentive for business to invest in research and innovation.
Increase to the Small Business and General Business Tax-break
The bonus tax deduction under the Small Business and General Business Tax Break will be increased to 50 per cent. This is up from the 30 per cent previously of the cost of eligible assets acquired between 13 December 2008 and 31 December 2009, and installed by 31 December 2010. The expanded tax break will be available to small businesses with a turnover of less than $2 million.
Reducing compliance costs and improving tax law
Tonight’s Budget unveiled a range of measures to improve the operation of the tax law by cutting compliance costs for business. Key measures include:
- reform of GST administration in response to a Board of Taxation review;
- repeal of unlimited amendment periods and a review of elections in the tax law;
- a review of anti-avoidance provisions of the tax law; and
- amendments to the off-market share buyback provisions.
$600 million for ATO strategic compliance package
The Government will provide $595.2 million over four years to help business in the context of the global recession. The purpose of this measure is to tackle emerging revenue risks. The funding will support four key measures:
- support small businesses and other taxpayers experiencing difficulties meeting their tax liabilities as a result of the global recession.
- address the cash economy and unfair competitive practices.
- investigate and prosecute tax haven abuse.
- target wealthy Australians and large and medium sized businesses.
Extension of the First Home Owners Boost
The Government will extend the First Home Owners Boost for a further six months.
World-Class Universities and Research
The Government will invest $5.3 billion in tertiary education, research and innovation over six years. The Government will commit $2.6 billion from the Education Investment Fund for priority infrastructure projects in Australia’s tertiary institutions and research agencies.
- $934 million for 11 teaching and learning projects, 8 research-based projects, and
- 12 vocational education and training projects around the nation;
- $901 million for 21 research projects in space, marine, climate and nuclear science; and
- a further $750 million for future funding rounds from the Education Investment Fund.
The Government announced that it will invest $491 million over four years to uncap the number of university places from 2012. This will allow an extra 50,000 students to commence university courses by 2013.
To help achieve the Government’s targets for Australia’s innovation performance, this Budget provides funding of $500 million to encourage additional research, development and commercialisation of ideas, on top of $512 million to help universities fund the indirect costs of research.
From 1 July 2010, the Government will also replace the current research and development tax concessions with an expanded tax credit that rewards firms for research and development.
Paid Parental Leave
The Government is investing $731 million over five years to deliver a Paid Parental Leave Scheme. From 1 January 2011, eligible parents will receive taxable payments at the rate of the Federal Minimum Wage, for up to 18 weeks.
Measures for pensions and carers
Pensioners who receive the Age Pension, Disability Support Pension, and Carer Payment, Veterans’ Service Pension, Income Support Supplement, War Widow /ers Pension, Bereavement Allowance, Wife Pension, and Widow B Pension will all benefit from pension reform.
Under the new arrangements pensioners will receive an additional:
- $32.49 a week for single pensioners on the full rate of pension, amounting to $1,689 a year; and
- $10.14 a week for pensioner couples (combined) on the full rate of pension.
The Government also announced:
- that age and service pensioners will be able to keep more of the money they earn through part time work.
- A new Work Bonus will treat age and service pensioners’ earned income more generously.
- Only half of the first $500 of employment income earned per fortnight will be assessed under the income test. This will enable up to $250 of earnings a fortnight to be excluded from means testing.
- Pensioners who do some part time work could get an extra benefit of $125 per fortnight, on top of any pension increase.
Superannuation concessions cut
The Government has halved the amount which superannuation fund contributors can contribute to their superannuation accounts at concessionally taxed rates.
In addition the Government announced in the Budget a “temporary” reduction in the amount of personal contributions on which it will pay the matching Government superannuation co-contribution.
Under the changes:
- The cap on concessional superannuation contributions for people under 50 will be reduced from $50,000 to $25,000. The cap will be indexed.
- The existing transitional cap for concessional contributions for those aged 50 years and over will also be reduced, from $100,000 to $50,000. This reduced cap will apply for the 2009-10, 2010-11 and 2011-12 financial years, after which affected persons will revert to a $25,000 cap (or the applicable indexed amount).
- The non-concessional contributions cap will remain at $150,000 for the 2009-10 financial year, and will only increase when the new lower $25,000 cap is increased by indexation.
- The existing ‘grandfathering’ arrangements that apply to Defined Benefit schemes will continue.
The Budget also contained temporary reductions in the level of the Superannuation Co-contribution. The Government Superannuation Co-contribution matching rate will be reduced from
150 per cent to 100 per cent for contributions in 2009-10, 2010-11 and 2011-12, and to 125 per cent for contributions in 2012-13 and 2013-14 income years.
Hospitals and health care
The Government has announced it will invest an additional $2.5 billion over five years to drive hospital and health workforce reform, in cooperation with the States and Territories.
$3.2 billion will also be drawn from the Health and Hospitals Fund to expand and modernise key public hospitals across Australia, improve cancer treatment facilities, and support cooperative research between clinical researchers and health professionals.
The Government will provide $121 million over four years to relieve pressure on maternity services, and $134 million over four years in a new Rural Health Workforce Strategy to attract medical practitioners to areas of need.
Private health insurance incentive tightened, freeze on family payments
In its changes to private health insurance, from 1 July 2010, the Government will introduce three new ‘Private Health Insurance Incentive Tiers’.
Under the much-anticipated (but not previously announced) changes to private health insurance rebate arrangements, existing arrangements will remain unchanged for singles with income of less than $75,000 per annum and families with incomes of less than $150,000 per annum.
Under the new three tier arrangement:
- Tier 1 will apply to singles with income between $75,001 and $90,000 ($150,001 and $180,000 for families) based on current projections. The private health insurance rebate will be 20 per cent, increasing to 25 per cent at 65 years of age, and to 30 per cent at 70 years. The surcharge for not taking out complying private health insurance will remain at 1 per cent.
- Tier 2 will apply to singles with income between $90,001 and $120,000 ($180,001 and $240,000 for families). The private health insurance rebate will be 10 per cent, increasing to 15 per cent at 65 years of age, and to 20 per cent at 70 years. The surcharge for not taking out complying private health insurance will be increased to 1.25 per cent.
- Tier 3 will apply to singles with income of more than $120,000 (more than $240,000 for families). No private health insurance rebate will be provided. The surcharge for not taking out complying private health insurance will be increased to 1.5 per cent.
Hawker Britton will continue to post Budget-related Occasional Papers over coming days.
The Budget 2009-10 is available at www.budget.gov.au .