Some short - term tax pain for long - term economic gain?
By Dr Ken Devos
The Government has delivered the 2011-12 Federal Budget with a view to bringing it back into surplus by 2012-13, inflicting more pain than sweeteners in the meantime.
The obvious concession missing in this budget from previous budgets was the lack of personal tax cuts. Given the revenue write downs that had to occur because of the global financial crisis and recent natural disasters, this was not unexpected.
What was more of a surprise was the impact upon welfare payments. In particular, the suspension of the indexation to Family Tax Benefit (FTB) Part A and B supplements for three years and the eligibility of FTB Part A being limited to children up to the age of 21 years.
Removal of particular tax rebates will also be hard felt, such as the low income tax offset for minors receiving unearned income and the dependent spouse rebate for those aged less than 40. This latter measure was implemented to help encourage more Australians into paid employment, but it fails to recognise that non-working spouses may play an important role in maintaining the household.
On a positive note the introduction of a flat statutory rate when calculating the taxable value of car fringe benefits is welcome. It removes the need to drive around further just to pay less tax, and less kilometres means a better outcome for the environment.
This leads to the issue of the carbon tax where, unfortunately, we are no wiser post budget.
The budget measure that allows refunds of concessional super contributions up to $10,000 is to be applauded as it introduces fairness for those who may have inadvertently breached the cap. Also, enhancing the possibility of small business owners accessing the CGT concessions is strongly supported.
Overall, most people would be prepared to tighten their belts for the short term and embrace these and other budget measures with a view to seeing the economy return to a strong fiscal position. Now it is up to the government to deliver on that.