Budget 2019-20 released

The budget shows that Australia will deliver a surplus of $7.1 billion in the next year, rising by a total of $45 billion over the next four years.

These surpluses will reportedly build towards 1 per cent of gross domestic product within a decade.

Further, the government said it would eradicate the nation’s debt by 2029-30.

The major theme of the budget was tax cuts, in fact, the budget is said to deliver an extra $158 billion of additional tax relief, “the largest personal income tax cuts since the Howard government”.

These tax cuts, mainly for low- and middle-income taxpayers, are for those earning under $126,000 a year who will receive a non-refundable tax offset of up to $1,080 per individual (or $2,160 for dual income families).

The government will also lower the 32.5 per cent tax rate to 30 per cent from 1 July 2024, covering all taxpayers earning between $45,000 and $200,000.

This “will mean that 94 per cent of taxpayers will pay no more than 30 cents in the dollar,” the Treasurer said in his budget speech, adding that the top 5 per cent of taxpayers will pay on third of all income tax collected.

SME instant asset write-off

Many finance brokers will welcome the government’s decision to increase the instant asset write-off for both small and, in a new move, medium-sized enterprises too.

Following on from its announcement in January this year that it would increase the instant asset write-off threshold from $20,000 to $25,000 and extend it out to 30 June 2020, the Coalition government has now said it will immediately increase the instant asset write-off from $25,000 to $30,000 and expand this out until 30 June 2020.

This means that these businesses will be able to immediately deduct purchases of eligible assets costing less than $30,000 that are first used or installed ready for use.

This measure is estimated to reduce revenue by $400 million over the forward estimates period and, by being extended out to medium businesses, reportedly cover an additional 22,000 businesses employing 1.7 million Australians.

Mr Frydenberg said that small businesses are “the engine room of our economy” and are “integral to every local community”.

“People running a small business put their livelihoods on the line,” the Treasurer said.

“They start early and finish late. They manage the front desk and the back office. They pay their workers first and take their own wages last.

“We want small businesses to prosper, and we are backing them to do so.”

Noting that the government has committed to cutting small business tax to 25 per cent and introduced a $2 billion fund too, he added: “[F]rom tonight, the instant asset write-off will be increased and expanded.

“It will be increased from $25,000 to $30,000, and it can be used every time an asset under that amount is purchased.

“Allowing a café to get a new fridge or grill, a plumber to buy new tools or a courier a new van.”

He continued: “Already, more than 350,000 businesses have taken up the instant asset write-off. And now, even more will have the chance to do so.”

The government also said it would reduce the SME tax rate to 25 per cent by 2021-22, with the unincorporated small business tax discount rate increasing to 16 per cent in the same year.

Banking royal commission costs

The cost of implementing the government’s actions in response to the 76 recommendations of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry has also been accounted for.

The Coalition government has said that it will spend $606.7 million over five years (from 2018-19) to “facilitate the government’s response”.

Resourcing the Australian Securities and Investments Commission (ASIC) to implement its new enforcement strategy and expand its capabilities and roles will get the biggest slice of this pie ($404.8 million over four years from 2019-20), while resourcing the Australian Prudential Regulation Authority (APRA) to strengthen its supervisory and enforcement activities, particularly with respect to governance, culture and remuneration, will take up $145.0 million over four years from 2019-20.

“This will strengthen the financial system and deliver better outcomes for all Australians,” Mr Frydenberg said in his budget speech.

The new taskforce, which will be tasked with undertaking the review of the royal commission reforms in three years’ time, the Financial Services Reform Implementation Taskforce (FSRIT), will cost government $11.3 million in 2019-20.

The FSRIT - continuing the work of the Treasury's royal commission taskforce - will be established in Treasury to “implement the government’s response to the royal commission, and coordinate reform efforts with APRA, ASIC and other agencies through an implementation steering committee,” the budget documents reveal.

Nearly $8 million will be spent over three years from 2020-21 to establish an “independent financial regulatory oversight authority, [which will] assess and report on the effectiveness of ASIC and APRA in discharging their functions and meeting their statutory objectives”.

Another million dollars will be spent undertaking a capability review of APRA, which will examine its effectiveness and efficiency in delivering its statutory mandate, as well as its capability to respond to the banking royal commission. 

Others costs included in the $606.7 million total include those for:

• designing and implementing an industry-funded compensation scheme of last resort for consumers and small business ($2.6 million over two years from 2019-20)
  
• providing the Australian Financial Complaints Authority with additional funding to help establish a historical redress scheme to consider eligible financial complaints dating back to 1 January 2008 ($2.8 million in 2018-19)
• paying compensation owed to consumers and small businesses from legacy unpaid external dispute resolution determinations ($30.7 million in 2019-20)
• providing the Office of Parliamentary Counsel with additional funding for the volume of legislative drafting that will be required to implement the government’s response to the royal commission ($0.9 million in 2019-20)

However, the cost of this final measure will be partially offset by revenue received through ASIC’s industry funding model and increases in the APRA Financial Institutions Supervisory Levies and from funding already provisioned in the budget.

The budget also includes: