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The focus for the budget was to support the economy through the transition to non-mining led growth, boosting government spending for small businesses. The small business package should provide support to the economy, including through the retail sector. It was a benign budget that should help consumer confidence the overall impact on the economy should be mildly positive.
Main points
The budget proposed significant changes for families, retirees and SMEs but few of interest to high net worth individuals.
- Slightly better than expected deficit of $35.1bn 2015-16, improving gradually over the next five years with the underlying cash balance in surplus from 2019-20.
- A return to above-trend GDP growth in 2016-17.
- Unemployment expected to peak next financial year at 6.5%.
- The terms of trade expected to fall a further 8.5% in 2015-16 and then stabilise.
- If you enter a residential aged care facility from 2016 onwards, any rental income generated by your former home will be assessed when determining your aged care fees.
- Pension assets test changes could mean some higher net worth retirees receive reduced entitlements.
- The company tax rate for eligible small businesses will be reduced by 1.5%.
- Unincorporated small businesses will receive a 5% tax discount.
- Small businesses will be able to fully deduct capital expenses of up to $20,000 per annum.
Deposit levy
YieldReport readers will remember that we flagged up that treasurer Joe Hockey indicated that he would clarify the government’s position on the mooted deposit levy in the 2015 Budget and scheduled to start in 2016. The basic idea for levy was outlined by the last government in August 2013 and was centred on plans to establish a Financial Stability Fund to fund the Financial Claims Scheme with the fund paid underpinned by a 0.5% tax on protected deposits.
The treasurer’s budget said, “From 2016, subject to the government’s response to the Financial System Inquiry, any payments under the Financial Claims Scheme relating to ADIs would initially be met from the Financial Stability Fund announced in the 2013 Economic Statement. In this case a levy could be applied to ADIs.” The budget does not stipulate what form the levy might take.
The budget was expected to include a confirmation that the deposit tax would start as planned from January 1, 2016 but the budget said it would be left to the government’s response to the Murray financial system inquiry instead. The inquiry recommended against the levy, proposing instead an industry tax but the treasurer said he will allow it to go ahead anyway.
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