Budget 2014: 10 things to expect from the federal budget

Budget 2014: 10 things to expect from the federal budget

The small business community is bracing itself for this year’s federal budget, with all indicators suggesting Treasurer Joe Hockey’s budget debut will be a painful affair.

It’s a well-known tale for the more than two million small businesses around the country, which have become accustomed to tough federal budgets.

But if the government’s pre-budget spin is to be believed, it won’t just be small business that will bear the load this year. Big business, high-income earners, drivers and welfare recipients are all set to contribute to the government’s efforts to improve the country’s balance sheet.

SmartCompany will be locked up at Parliament House this evening to prepare our special annual budget edition. But for now, here are 10 things you can expect to hear about tonight.

1. Deficit

It should come as no surprise this year’s budget will deliver a deficit.

The government has used the lead-up to the budget to lay the blame for the shape of the country’s finances with the previous government, warning the electorate that immediate sacrifices are needed for long-term gain.

The most recent estimates place the expected deficit in the arena of $47 billion, with future budgets also expected to show the government’s accounts in the red until at least 2019-20.

Hockey has said in pre-budget speeches that the government will aim to reduce real spending growth by 1.75% over the next five years to turn things around.

2. A debt levy of some kind

The government’s so-called debt levy has gone through a number of guises since it was first leaked, but cabinet has signed off on the tax increase, so we know it is coming.

The government looks likely to impose a 2% increase on the highest income tax rate, which will affect around 650,000 taxpayers on incomes above $180,000.

Unsurprisingly, the debt levy is one of the more controversial measures to be included in the budget, with accusations the government has broken pre-election promises not to change existing taxes or introduce new taxes being hurled at the government, even from within its own ranks.

Hockey and Prime Minister Abbott have both said the levy will be temporary, but as most people know, once a tax is introduced it is very difficult to undo.

3. Less money for corporate welfare

In one of the more recent pre-budget leaks, the government has said it will reduce the amount of money available to struggling companies by $10 billion.

Hockey flagged the move a few weeks ago, using a speech about the economy to outline the government’s position when it comes to corporate welfare. However, there is little information about what shape the cuts will take at this stage.

Hockey said on the weekend “those who depend heavily on government support will not necessarily receive the same support into the future”. 

“Business has a responsibility to manage itself in the same way we expect (others to do so), other than those most vulnerable in the community,” he said.

4. A raise in the retirement age

Australians will need to start preparing to work for longer, with the government set to raise the retirement age to 70 within coming decades.

While Prime Minister Abbott has ruled out making changes to the eligibility or indexation of the age pension for the next three years, the government is widely tipped to proceed with plans to change the age at which Aussie workers can retire.

“With four or five seniors on the pension, the number of workers per retiree dropping from five to three by 2050, and more than 1000 people becoming eligible for the age pension every single week, long-term reform is essential and unavoidable,” said Abbott recently.

5. Paid parental leave

Voters can also expect to see Abbott’s paid parental leave in the budget, although in a scaled-back form.

The scheme, first proposed by the Coalition when it was in opposition, is expected to cost $5.5 billion each year, with the aim of encouraging more Australian women to return to work after having children.

The eligibility threshold for the scheme was originally set at $150,000, but faced with growing concerns about the affordability of the scheme from opposition parties and within his own party ranks, Abbott has cut the threshold to $100,000.

The scheme will continue to pay six months of 26 weeks parental leave based on the recipient’s full-time salary, but the maximum payouts from the scheme will now be capped at $50,000 instead of $75,000.

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