Jim Chalmers is calling his fifth Budget the most important and ambitious in decades, amid global uncertainty.
The impact of the Middle East conflict is set to last, with inflation and unemployment going up, but the Treasurer says Australia will avoid a recession and must pursue reform.
He’s announced an expected, but controversial, overhaul of negative gearing and capital gains tax for housing.
And a surprise $250 tax hand-out for workers, but you won’t see the money until late next year.
KEY TAKEAWAYS FROM FEDERAL BUDGET
GLOBAL UNCERTAINTY:
Global oil prices are set to remain higher for at least 12 months as a result of the Iran war, but the Budget’s numbers are dependent on inflation quickly returning within the Reserve Bank’s comfort level after peaking at 5 per cent in the middle of this year.
HOUSING TAX REFORM:
As widely expected, negative gearing tax concessions for landlords will be axed from July next year – except for new builds.
The 50 per cent capital gains tax discount will be replaced by indexation, according to inflation.
Again, new builds will be exempt and the new rules won’t be retrospective.
But a minimum 30 per cent tax rate will be applied on capital gains from July next year.
The Government claims the changes will “level the playing field” and help about 75,000 Australians achieve home ownership.
COST OF LIVING RELIEF:
A new $250 Working Australians Tax Offset won’t be rolled out until July 2027, but will be permanent.
On top of last year’s stage three tax cuts, and the new $1000 instant deduction, it’s expected to save the average worker up to $2,816 in 2028 or $54 per week.
The exemption threshold to avoid paying the Medicare tax levy has been increased by 2.9 per cent, from this July.
The threshold for singles goes from $27,222 to $28,011. The family increases from $45,907 to $47,238.
HEALTH, DISABILITY AND AGEING:
The controversial overhaul of the NDIS accounts for half of the Budget’s touted savings.
The Government said the “difficult but necessary” reform of the insurance scheme will improve the bottom line by $26.1 billion. There is $2 billion allocated for the Thriving Kids program that is expected to take over disability support for children under nine with level one or two autism. And $3 billion for other foundational supports.
The Budget includes another $25 billion for public hospitals, and $3 billion to deliver more aged care beds and home care packages.
That includes an extra $349.1 million over 4 years for capital subsidies to encourage aged care facilities to expand. There’s also $224.3 million to deliver 20 specialist dementia care units.
NATIONAL SECURITY:
A new $600 million Counter-Terrorism Online Centre has been announced, to help law enforcement agencies crack down on hate speech, violent extremism and terrorism.
BUSINESS PRODUCTIVITY:
A new productivity package will aim to cut red tape costs by $10.2 billion per year, by expanding digital ID, simplifying building regulations and national competition reforms.
The $20,000 instant asset write-off for small businesses will be permanent.
A two-year loss carry back will be re-introduced for companies with up to $1 billion in turnover.
KEY FORECASTS:
Deficit
2025-26 = $28.2 billion
2026–27 = $31.5 billion
2027-28 = $31 billion
2028-29 = $34.4 billion
2029-30 = $25.2 billion
Gross debt
2024-25 = $928.6 billion
2025-26 = $982 billion
2026-27 = $1.051 trillion
2027-28 = $1.12 trillion
2028-29 = $1.193 trillion
2029-30 = $1.249 trillion
Real GDP growth
2024-25 = 1.3%
2025-26 = 2.25%
2026-27 = 1.75%
2027-28 = 2.25%
2028-29 = 2.5%
2029-30 = 2.5%
Unemployment rate
2024-25 = 4.2%
2025-26 = 4.25%
2025-26 = 4.5%
2027-28 = 4.5%
2028-29 = 4.5%
2029-30 = 4.25%
Inflation rate
2024-25 = 2.1%
2025-26 = 5%
2026-27 = 2.5%
2027-28 = 2.5%
2028-29 = 2.5%
2029-20 = 2.5%
Wage growth
2024-25 = 3.4%
2025-26 = 3.25%
2026-27 = 3.5%
2027-28 = 3.5%
2028-29 = 3.5%
2029-30 = 3.35%
Where your money will be spent
Social security and welfare: 37.1%
Health: 16.4%
Education: 6.9%
Defence: 6.2%
General Public Services: 3.9%
“Other” Purposes: 19.6%
All others: 9.9%
Iron ore price
All key commodities are assumed to decline from “elevated levels” with an iron ore spot price of US$60/tonne baked in, down from US$103 currently and much lower than the State Budget’s assumption of $US85.2 per tonne in 2026-27
Oil price
Treasury has forecast oil will stay around $100 per barrel until the end of next month and moderate to $80 by the end of June next year – still above pre-Iran war levels.
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