Personal income tax offsets and business expensing deductions will be extended; while the government has lifted spending promises for the year ahead by $25 billion.
Personal income tax offsets and business expensing deductions will be extended; while the government has lifted spending promises for the year ahead by $25 billion.
Treasurer Josh Frydenberg said the deficit for the 2021 financial year would be much lower than anticipated in October, when the previous budget was announced amid the pandemic recession.
Then, Mr Frydenberg had forecast a deficit of $213 billion, tonight he said it would be $161 billion, about $52 billion lower.
Chart data source: Commonwealth Treasury
That was in large part thanks to revenue being about $36 billion higher than forecast, as the economy was much stronger than expected in October.
But the deficit for the year ahead, the 2022 financial year, will only improve $6 billion, at $106.6 billion.
Part of the reason for the improvement being only marginal has been increased spending, including for aged care.
The government promised about $25 billion more for the financial year ahead than previously projected, taking planned payments to $589 billion for the year to June 2022.
On Mr Frydenberg's list of new commitments across the next four years were:
- $2 billion for affordable housing
- $2 billion of support for aviation, tourism, the arts and international education providers.
- $2.7 billion for traineeships and apprenticeships
- $1.7 billion for childcare
- $15 billion of additional infrastructure spending
- $2 billion for R&D tax incentives
- $13.2 billion for the NDIS
- $17.7 billion for aged care
- $3.4 billion for women's economic security
On the revenue side of the ledger, the low and middle income tax offset will be extended for the upcoming financial year, at a cost of $7 billion.
Source: Budget 2021
That’s on top of a reform package to flatten the rates of income tax announced under the Turnbull government and expanded in the years since (see chart for total impact).
“Over 10 million low‑ and middle‑income earners will benefit from a new and additional tax cut,” Mr Frydenberg said tonight.
“A stimulus measure that will support the recovery and build on tax cuts we announced in last year’s budget and the budgets before that.
“Low‑ and middle‑income earners will receive up to $1,080 for individuals or $2,160 for couples.
“More of their money in their pockets to spend across the economy, creating jobs.”
For businesses, there will be an extension of full expensing and loss carry-back provisions, which will cost $20.7 billion.
"A sustainable recovery requires a strong private sector,” Mr Frydenberg said.
“Our record investment incentives are filling the order books of the nation.
“Over 99 per cent of businesses, employing over 11 million workers, can write off the full value of any eligible asset they purchase.
“This has seen their spending on machinery and equipment increase at the fastest rate in nearly 7 years.
“(Tonight, we are) announcing the extension of these measures for a further year until 30 June 2023, so a tradie can buy a new ute, a farmer a new harvester and a manufacturer expand their production line.”
