An estimated underlying cash surplus of $21.7 billion, or 1.8 per cent of GDP (fiscal $23.1 billion) for 2008-09, compared with an estimated $16.8 billion (fiscal $20.4 billion) for 2007-08. Underlying cash surplus projected for 2009-10 of $19.7 billion, or 1.5 per cent of GDP.
Inflation (Consumer Price Index) of 3.25 per cent forecast for 2008-09, compared with 4 per cent estimated for 2007-08.
Expected real GDP growth of 2.75 per cent for 2008-09, compared with estimated 3.5 per cent for 2007-08.
Unemployment rate forecast at 4.5 per cent for 2008-09, compared with estimated 4.25 for 2007-08.
A current account deficit forecast for 2008-09, being 5 per cent of GDP, down from a deficit estimated at 6.25 per cent of GDP for 2007-08.
Personal income tax cuts worth $46.7 billion over four years. From 1 July 2008, the 30 per cent threshold rises from $30,001 to $34,001; the low income tax offset (LITO) increases from $750 per year to $1,200; the 40 per cent threshold increases from $75,001 to $80,001; and the 45 per cent threshold increases from $150,001 to $180,001. From 1 July 2009, the 30 per cent threshold will increase to $35,001, the LITO will increase to $1,350 and the 40 per cent rate will reduce to 38 per cent. The Federal Government’s goal is that by 2013-14 the number of tax rates will reduce from four to three, being 15 per cent, 30 per cent and 40 per cent.
Major revenue raising initiatives for 2008-09 (and extra tax raised for 2008-09) include:
increased rates on “otherwise excisable beverages”, so called “alco-pop” drinks ($640.1 million)
removal of current exemption of condensate from crude oil excise ($564 million)
tighter fringe benefits tax exemptions for work-related items such as laptop computers and meal cards($164 million)
increased luxury car tax from 25 per cent to 33 per cent ($130 million)
increased period over which in-house computer software expenditure can be depreciated from 2.5 years to four years ($15 million in 2008-09, rising to $681 million in 2010-11)
increased passenger movement charge from $38 to $47 per passenger ($106.3 million), and
increased funding of compliance activities by the Australian Taxation Office (ATO) particularly in relation to large businesses and high wealth individuals with extra revenue raised for 2008-09 being $105 million rising to $795 million for 2011-12.
Other tax changes of interest to business include:
a reduction in the withholding tax rates for certain distributions of Australian source net income (other than dividends, interest and royalties) of Australian managed investment trusts to foreign residents, with effect from 7.30 pm on 13 May 2008
modified scrip for scrip roll-over rules to ensure the acquiring entity’s cost base of shares in the target reflects the tax cost of the target’s net assets, but only in the case of certain “restructures”, and
tightening of certain rules regarding employee share and rights acquired from 1 July 2008.
The Child Care Tax Rebate will increase from 30 per cent to 50 per cent, at a cost of $1.6 billion over four years; and a 50 per cent Education Tax Refund (ETR) will be introduced from 1 July 2008, costing $4.4 billion over four years.
Spending initiatives include:
assistance to first home buyers to save for a home (cost $1.2 billion over four years)
National Rental Affordability Scheme to encourage construction by investors of new dwellings rented out to low income tenants at least 20 per cent below the market rate ($623 million over four years)
lump sum payments of $500 to eligible senior Australians, $1,000 to Carer Payment recipients, and $600 to Career Allowance recipients, by 30 June 2008 at a cost of $1.8 billion.
Other major proposals include:
a Health and Hospital Fund (with an initial allocation of $10 billion)
an Education Investment Fund (with an initial allocation of around $11 billion)
$2.3 billion over five years to implement a range of climate change measures
a new $12.9 billion ten year national water policy framework
an initial allocation of $20 billion to a new Building Australia Fund (BAF) to finance transport and communications infrastructure that cannot be delivered by the private sector or the States, and
a $22.3 billion investment in land transport infrastructure from 2009-10 to 2013-14 under AusLink 2, in addition to the BAF
