The federal government is planning to raise an extra $10 billion from the business sector through new tax measures announced today in response to a sharp deterioration in its budget outlook.
Treasurer Wayne Swan released the mid-year update to the 2012-13 budget this morning, with a lowering of the economy’s expected growth and $16.4 billion of tax increases and spending cuts over four years to keep the budget in surplus.
The most significant change is the phased introduction of monthly, rather than quarterly, tax instalments by companies.
The change will be adopted over three years, eventually applying to about 10,500 companies with turnover of $20 milion or more.
It is estimated to raise $8.3 billion on an “underlying cash basis” over the next four years.
The government will also provide extra funding to the tax office to improve tax compliance by individuals and small businesses. It expects to boost tax receipts by $1.6 billion over four years as a result.
The third most significant measure will see the tax office take responsibility for more ‘lost’ superannuation accounts. This will increase net receipts by $738 million.
Other changes include reduced baby bonus payments, higher visa application charges, removal of concessions for in-house fringe benefits, lower research grants for universities, and reduced training and apprenticeship payments.
Mr Swan said that while Australia's economic fundamentals remained strong, worsening global conditions had cut almost $22 billion from tax receipts over the forward estimates and $4 billion alone in 2012/13.
"The weaker global outlook and lower than expected commodity prices, along with the general easing of price pressures in the economy, are again slowing the recovery in tax revenue," Mr Swan said in a statement.
The domestic growth forecast has been cut since the May budget.
Real gross domestic product is now forecast to grow at around trend, at three per cent in 2012/13 and 2013/14.
This is a downgrade of one quarter of percentage point since the May budget.
Australia's terms of trade is also forecast to worsen, declining by eight per cent this financial year compared to a previous forecast fall of 5.75 per cent.
But unemployment rate is expected to remain low at five per cent in 2012/13 and 2013/14, while inflation is likely to remain well-contained.
"The government has responded to the more challenging global outlook by delivering $16.4 billion in new savings over the forward estimates," Mr Swan said.
"These savings strike the right balance, minimising any impact on the economy and on the community's most vulnerable, while still maintaining strong public finances."
The government has cut its forecast surplus for this year to $1.1 billion, from $1.5 billion.
But it raised the surplus for 2013/14 to $2.2 billion, from $2 billion.
As part of its savings measures, private health insurance rebate costs will be reformed further.
From 1 April 2014, the premium to which the rebate is applied will move in line with consumer price index, or the commercial premium increase, whichever is lower.
The rebate as it currently applies will remain unchanged.
Mr Swan said this will save about $700 million over the forward estimates and ensure the rebate remains on a sustainable footing.
Mr Swan said that, because of the government's fiscal discipline, government payments as a share of the economy were projected to fall by 1.5 per cent in 2012/13 to 23.8 per cent.
"It is estimated that payments as a share of GDP will remain relatively stable over the forward estimates," he said.
"This is the longest period in which payments will remain at 24 per cent or less as a share of GDP in over 30 years."
Meanwhile, the government is still counting on the economy to continue to be underpinned by a surge in investment in the resources sector.
It also expects strong growth in commodity exports and solid household demand.
"Household consumption remains solid in aggregate and there are tentative signs that residential building activity may be starting to improve," the budget update said.
The key risks to Australia's economic outlook include a further escalation in the financial woes in Europe, a stalled US recovery and less-than-sustainable growth in China.
"Still, with a low unemployment rate, solid GDP growth, a strong financial sector, room to manoeuvre on monetary policy and strong public finances, Australia is well-placed to manage the effects of any further deterioration in the global economy," the update said.
