There’s only one more sleep until Federal Treasurer Wayne Swan unveils the much-anticipated 2012 Federal Budget, which comes with the long-held promise of a return to surplus.
As small businesses await the details of the budget – with an equal mix of hope and trepidation – StartupSmart has identified 10 budget measures you can expect.
1. A “modest” surplus
Despite the Government’s dogged determination to return the budget to surplus, Treasurer Wayne Swan has admitted it will be a “modest” surplus when he hands down his fifth budget tomorrow.
Last November, Swan forecast a $1.5 billion surplus in the next financial year, compared to a $37.1 billion deficit in 2011/12.
“The aftershocks of the global financial crisis have hit our revenues… It will be a modest surplus – the surplus will build over time,” Swan said yesterday.
2. Carry-back measure
In a bid to boost confidence in the small business sector, businesses will be able to “carry back” losses of up to $1 million as part of a budget initiative.
From July 1 this year, companies will be able to carry back up to $1 million worth of losses to get a refund of tax paid in the previous year.
From July 1 next year, companies will be able to carry back up to $1 million worth of losses against tax paid up to two years earlier.
3. Tough stance on mining
Miners are urging Swan to refrain from using the industry as a tax cash cow, warning that if he goes too far in his attempt to get the budget back into surplus, the consequences could be dire.
In particular, the industry warns any removal of the diesel fuel rebate will drive up the costs of building.
The Greens are keen to see the rebate dropped, saying it is nothing more than a subsidy for miners.
The rebate was introduced for miners and farmers to claw back some of the excise payable on diesel, which was originally intended to help fund road building.
4. Cuts, cuts and more cuts
Up to $4 billion is expected to be wiped from defence spending over the next four years, although Prime Minister Julia Gillard has said the cuts will not impact on defence force numbers.
“When we look at major capability acquisitions for the defence force, there’s no point allocating in the budget money defence can’t spend,” Gillard said.
There will also be almost $1 billion in welfare cuts.
5. No more tax-free super benefits for people over 60
Retirees aged 60 and over currently receive their super benefits tax-free, either as a lump sum or as an income stream.
That means they enjoy a tax-free income in retirement, provided they have sufficient super savings to deliver that regular income. However, this measure is set to be scrapped.
6. Carbon tax giveaways
In an effort to sweeten the carbon tax deal, the Budget will contain a cash payment to low-income households.
Eligible families will receive $820 a year for each teenager in high school, and $410 for every child in primary school.
7. Return to trend growth
Swan is insistent Labor’s $40 billion budget turnaround will not place additional pressure on the economy, after the Reserve Bank slashed national growth forecasts.
Revised RBA forecasts predict the domestic economy will now grow by just 2.75% by June, down from its forecast of 3.5% delivered just three months ago.
The economy is then predicted to bounce back slightly to 3% next year, while the Government is tipping growth at 3.25%.
Some commentators have expressed concern the Budget will slow economic growth through the massive fiscal turnaround required to post a 2012-13 surplus.
8. No immediate impact on interest rates
According to Deloitte Access Economics director Chris Richardson, there is no guarantee a return to surplus will prompt another interest rate cut from the RBA “any time soon”.
Richardson also expects Swan’s task of returning the budget to surplus to be even harder than he projected back in November, but is hoping the cuts won’t be too severe.
“I don’t want them to cut too hard. The economy’s still a bit fragile,” Richardson told Ten.
9. Dentistry package
An injection of more than $500 million into the dental system – providing treatment for 400,000 people on the waiting list – will be one of the main measures in the budget.
The package also includes funding to encourage more dentists to work in country areas.
10. Aged care
Aged care will be the other main feature of Labor’s health budget, but there won’t be any surprises on that front when the 2012/13 fiscal package is handed down tomorrow.
In April, the Government announced a $3.7 billion aged care package, with $577 million in new funding over five years.