There Goes the Federal Budget: What was delivered?

Well there you have it, the Federal Budget has been delivered. Riveting stuff. So where do we stand now?

Here’s a look at the most important aspects for millennials and what they’ll mean for you. We’ll go a little deeper into some of these throughout the week, but for now, here’s the gist.


 Home ownership


As promised, there is no relief for housing affordability. Negative gearing and capital gains tax remain unchanged, with Treasurer Scott Morrison citing usage by average taxpayers as his reasoning.

“Those earning less than $80,000 a year in taxable income make up two thirds of those who use negative gearing.”

The only thing remotely close to the issue is infrastructure upgrades that will aim to reduce commutes to employment centres, along with spreading out economic hubs. Prime Minister Malcolm Turnbull referred to this as the ‘Smart Cities’ plan, however, that name is absent from the Budget.

Earlier, I spoke with Professor Hal Pawson, Associate Director of UNSW’s City Futures Research Centre about the ‘Smart Cities’ plan and whether it was an adequate solution to the housing affordability crisis.

“I think that it’s part of the solution, but it isn’t enough by itself,” he said.

“The government needs to intervene more directly to encourage the kind of supply that is useful to lower income earners in particular.”

Why should you care?

Housing affordability is spiralling out of control. If you want to buy a median priced property in Sydney and don’t want to pay insurance on your loan, you’ll need a 20 per cent deposit upwards of $150,000, plus stamp duty.

How can we be expected to pay more in university fees, to be repaid at a lower income threshold, and still save that kind of monumental cash?

The good news is that the topic will likely be a key election issue, says Professor Pawson.

“There is at least, I think, a very healthy debate, and the kind of recognition that the government can’t turn it’s back on this policy area.”


 University deregulation


With a federal election on the horizon, it seems the government isn’t keen on ditching the young vote by introducing university reform…yet.

The basic idea is that the government wants to cut funding to save money, allowing universities to raise their own fees. The Labor Party argues that this will lead to profiteering among universities.

Any decisions around the matter have been deferred pending “further consultation.”

Why should you care?

Well, there’s not a lot to care about until they propose any kind of reform, but either way, the point still stands: it’s unfair to place such a large financial burden on students that have barely entered the real world, then expect them to pay it back at a lower income.

You can get my complete rundown on HECS-HELP debt reform right here.


 Tax changes


Anyone earning between $80,000 and $87,000 (about half a million people) have been given a nice little tax break.

The second highest tax bracket has been pushed up from the former to the latter, leaving those at the higher end of that scale about $315 richer per year.

This is to alleviate bracket creep, where inflation pushes income into higher tax brackets, but leaves no increase in purchasing power.

This cut comes at a cost of $3.95 billion over four years. Morrison said he would “like to do more, but this is what we can afford today.”

Why should you care?

You probably won’t, unless you earn between $80k and $87k.


 Youth employment


The government will introduce a new youth employment program that aims to assist 120,000 young Australians enter the workforce.

It’s called Young Jobs PaTH (Prepare, Trial, Hire) and will be open to job seekers under 25 as of April next year. With a focus on teamwork, presentation and computer literacy, it will provide job applicants with “intensive pre-employment skills training.”

The plan is to then work with businesses to introduce the applicant to a 15 – 25-hour work week over one to three months, in which time the government will supplement their regular benefits with $200 each fortnight.

Why should you care?

It’s nice to see that the government is taking practical steps to lower youth unemployment and get young people into the workforce, but it could see them working for as little as $4 an hour. An extra $200 a fortnight probably isn’t going to help that, either.

We’re all for getting young people into jobs, but the rules around this one leave a little too much room to be abused. Companies receive $1,000 up front for taking on free labour and can choose not to hire you in the end. I’m not sold just yet.


 Low-income earners


The government will raise the threshold at which low-income earners start paying the Medicare levy. This is a cost to the budget of around $280 million.

For singles, the new threshold will be $21,335. Couples with no children will begin paying at $36,001 and for senior and pensioner couples with no kids, it is raised to $46,966.

An additional $3,306 can be added to the threshold for couples per depending on how many children they have.

The low-income tax offset that allows a refund of up to $500 of the tax pay on their super if they earn under $37,000 will also remain in place.

Why should you care?

This will provide some small relief to low-income earners, particularly those with children.   


 Innovation


To support our economic transition away from mining and towards innovation, the Turnbull Government is investing $1.1 billion to a National Innovation and Science Agenda, as well as investment tax reforms.

It proposes changes to many of the tax incentives around startup companies to encourage their creation, growth and investment opportunities.

Importantly, the government will encourage young Australians to take on self-employment and entrepreneurship through the New Enterprise Initiative Scheme, which will receive extra funding of $88.6 million.

It has been increased to 8,600 places each year and will now be open to those not on income support, including those who have recently lost their job.

Why should you care?

If we are going to successfully maintain our economic growth, we need to create smart, profitable companies. This kind of education is extremely valuable to that cause.

OFX CEO Richard Kimber says that while this support for young people is encouraging, it should be further extended.

“It would have been great to see more focus on investing in STEM education at all levels.  I am passionate about global talent and supportive of initiatives to help develop raw talent as they are going to be crucial to developing Australia’s next wave of entrepreneurs.”


 Smokers


Yep, you’re about to be slugged 12.5 per cent each year on the cost of your durries.

Beginning September 1, 2017, ciggies will cop a hefty increase in tobacco excise, eventually nearing the dreaded $40 pack.

Also, starting July 1 next year, you’ll only be able to leave the airport with 25 durries, rather than the current 50.

Why should you care?

You only will if you’re a smoker, in which case, just fucking quit already. $40 a pack!? Forgeddaboutit.

We’ll be having a closer look at some of these aspects during the week, so be sure to check back regularly. We’ll also be sharing budget views from our pals at Startup Daily and Kochie’s Business Builders, so keep an eye out for those too!