Scott Morrison Budget Speech 2016-17

The Treasurer, Scott Morrison, has delivered the 2016-17 Budget Speech, his first for the Turnbull coalition government.

The Budget forecasts a deficit for 2016-17 of $37.1 billion, falling to $6 billion in 2019-20.
It tightens superannuation concessions and introduces a new Youth Employment Package with internships and wage subsidies for business.

The Budget cuts company tax for small business and raises the personal income tax threshold of $80,000 to $87,0000.

The full text of the Budget is shown below, with complete audio and video.

Documents

Download the Budget documents (PDF).

  • Listen to Morrison’s Budget Speech (31m)
  • Watch Morrison (31m)

Hansard transcript of Scott Morrison’s Budget Speech.

Appropriation Bill (No. 1) 2016-2017

First Reading

Message from the Administrator transmitting particulars of proposed expenditure and recommending appropriation announced.

Bill and explanatory memorandum presented by Mr Morrison.

Bill read a first time.

Mr MORRISON (Cook—Treasurer) (19:30): I move:

That this bill be now read a second time.

Mr Speaker, this cannot be just another budget, because these are extraordinary times.

This budget is an economic plan, it’s not just another budget.

Australians know that our future depends on how well we continue to grow and shape our economy as we transition from the unprecedented mining investment boom to a stronger, more diverse, new economy.

They know that their future, their jobs and those of their children and grandchildren depend on it. This is a very sensitive time.

Australians have clearly said we must have an economic plan to make this economic transition a success.

This economic plan is the foundation on which we can build a brighter, more secure future, in a stronger, new economy with more jobs.

This budget delivers our economic plan in three key ways.

First, by sticking to our plan for jobs and growth.

Tonight I will announce a growth friendly, 10-year enterprise tax plan to boost new investment, create and support jobs and increase real wages, starting with tax cuts and incentives for small and medium-sized business.

We will continue our investment in our National Innovation and Science Agenda—to create our own ideas boom, in every city, in every town, in every factory, farm, shop and office—including support for new start-up businesses.

Through our defence industry plan, we will secure an advanced local defence manufacturing industry, driving new high-tech jobs in Australia, including 3,600 direct jobs as part of the government’s naval shipbuilding plan.

More export opportunities will be opened up by following through on our export trade agreements that are already delivering new jobs and markets for Australian producers, manufacturers and service providers right across the country.

And I will announce tonight a new initiative to help more than 100,000 vulnerable young people into jobs, to be part of our growing economy by giving them real work experience with real employers that lead to real jobs.

Second, by fixing specific problems in our tax system so we can sustainably cover the government’s responsibilities for the next generation.

This means combating tax avoidance, especially by multinationals, with new measures to ensure everyone pays the tax they should on what they earn in Australia, not avoid tax by shifting their profits offshore.

I will announce how we will close off generous superannuation tax concessions for Australia’s most wealthy and better target these tax concessions to hardworking Australians saving and investing for their retirement so as not to be dependent on the age pension.

And we will give hardworking Australians, and the thousands of Australian businesses that employ them, some tax relief so when they earn more, they will not be taxed more.

And third, by continuing to ensure the government lives within its means, to balance the budget and reduce the burden of long-term debt.

In this budget we will continue to cut unnecessary waste and keep government spending under control to balance the budget over time, as coalition governments always do.

We will continue to target welfare abuse to protect our social safety net and ensure it is there for Australia’s most vulnerable, in particular those with disabilities.

And we will continue to responsibly invest in infrastructure like roads, rail, dams and public transport and guarantee real, affordable funding for health and education services that Australians rely on.

The Turnbull government understands the economic challenges that Australia faces.

This budget is a practical, targeted and responsible economic plan that meets these challenges by clearing the way for jobs and growth, in a stronger, more diversified new economy.

It is the right plan. We have spent time getting it right because it is such an important foundation for everything else.

It is also a fully funded, affordable and sustainable plan.

This is important because hardworking Australians and their families know that when governments make promises with money that is not there, they either end up being let down or left with the bill.

This budget keeps us on a sustainable path to bring the budget back into balance.

The deficit in underlying cash balance terms is expected to reduce from $39.9 billion in 2015-16 to $37.1 billion, or 2.2 per cent as a share of the economy in 2016-17. The deficit is then projected to fall to $6 billion or just 0.3 per cent of GDP over the next four years to 2019-20.

We are achieving this by policies that continue to control spending.

Any increases in tax revenue as a result of measures contained in the budget have been reinvested back into lower taxes, not towards fuelling unsustainable higher spending.

Our new spending commitments have been more than offset by our disciplined restraint and better targeting of spending in other areas.

Payments as a share of our economy will fall from 25.8 per cent in 2015-16 down to 25.2 per cent in 2019-20. At the same time there is no increase in the projected tax burden as a share of the economy, compared to previous estimates.

This is not a time to be splashing money around or increasing the tax burden on our economy or on hardworking Australians and their families. Such policies are not a plan for jobs and growth, they simply put our successful economic transition at risk.

I now turn to some of the specific initiatives of our economic plan that are delivered in this year’s budget.

Tonight, we announce a 10-year enterprise tax plan to support jobs and growth.

Small and medium businesses are driving jobs growth in Australia and must continue to do so.

They are also overwhelmingly Australian owned and more likely to reinvest their earnings in future growth, as they seek to build their businesses.

A tax on their business is a tax on their enterprise and the jobs they provide.

That is why last year, we announced a 1.5 percentage point reduction in the tax rate for small businesses with a turnover of less than $2 million per year.

Tonight we go further and share the ambition for smaller businesses to become bigger businesses.

From 1 July this year, the small business tax rate will be lowered to 27.5 per cent and the turnover threshold for small businesses able to access it will be increased from $2 million to $10 million. This means businesses with a turnover of less than $10 million will also be able to access other tax incentives, including the small business depreciation pooling provisions, simplified trading stock rules, and the pay-as-you-go instalments payments option.

This will mean 870,000 Australian businesses, employing 3.4 million Australians, will have their tax reduced, including a 2½ percentage point cut in the tax rate for up to 60,000 businesses with a turnover between $2 million and $10 million, employing around 1.5 million Australians.

At the same time we will also increase the unincorporated small business tax discount to eight per cent and extend the threshold from a turnover of $2 million to less than $5 million.

Also, from 1 July 2016 we will extend access to the instant write-off for equipment purchases of up to $20,000 that will expire on 30 June 2017, to businesses with a turnover of less than $10 million.

But we do not want these enterprises and these businesses to stop there.

Each year we will continue to step up the turnover threshold for access to the lower company tax rate of 27½ per cent for more businesses, from $10 million to $25 million in 2017-18, to $50 million in 2018-19 and $100 million in 2019-20.

This will mean by 2020 more than half of all employees in companies in Australia will be in companies paying a lower tax rate of 27½ per cent. That is around 4.9 million employees, whose jobs will be supported by a lower tax rate in just four years.

Phase 2 of our 10-year enterprise tax plan will extend the lower tax rate of 27½ per cent to all businesses, by continuing to step up the threshold each year until 2023-24, before reducing the 27½ per cent rate for all businesses to 25 per cent at the end of 10 years in 2026-27. This is an important measure in securing our future prosperity.

We will not be able to rely on our natural advantages in resources to secure the jobs of the future like we have in the past. If we wish to continue to see our living standards rise with more jobs and higher wages, we need to ensure our tax system encourages investment and enterprise.

Australia has the seventh highest company tax rate of the 34 OECD countries and it is much higher than our neighbours in the Asian region.

These measures will reduce revenue by $5.3 billion over the next four years. This reduction is fully offset by the increased revenue derived from the revenue and integrity measures in this budget.

Tonight we will also back in average full-time wage earners by preventing them from moving into the second highest tax bracket.

From 1 July this year, we will increase the upper limit for the middle-income tax bracket from $80,000 to $87,000 per year.

This will stop around 500,000 taxpayers in each and every year from paying more than the 32½c marginal tax rate. They will be in the middle-income tax bracket with all the other average wage earners, where they should be.

This is about providing room in our tax system for average full-time wage earners to earn more without being taxed more.

Of course we would like to do more, but this is what we can afford today.

This change also builds on the tax cuts provided to those on incomes of less than $80,000 to compensate for the carbon tax. By abolishing the carbon tax and keeping the tax relief in our first budget we delivered a genuine tax cut for those earning up to $80,000 a year—not compensation.

And we will not remove or limit negative gearing—that would increase the tax burden on Australians just trying to invest and provide a future for their families.

Those earning less than $80,000 a year in taxable income make up two-thirds of those who use negative gearing. They are teachers, they are nurses, they are police officers, they are Defence Force personnel, office workers and tradespeople.

We do not consider that taxing these Australians more on their investments, including increasing their capital gains tax, and undermining the value of their own home and investments is a plan for jobs and growth.

While these are modest changes to our personal income tax system, they are important. They are affordable. They are not funded by higher deficits or higher borrowing.

This modest tax relief demonstrates that wherever possible we prefer to leave a dollar in your pocket than take it for the government. We know that your money in your pocket is where it can help you and your family most.

These changes will reduce revenue by $3.95 billion over the next four years and are again offset fully by the revenue and integrity measures contained in the budget.

To increase revenues we will crack down further on multinational tax avoidance.

Everyone has to pay their fair share of tax on what they earn here in Australia—especially large corporates and multinationals.

The Turnbull government has been listening to the Australian people on this issue and taking action.

Last December, despite opposition, we secured the passage of world-leading multinational tax avoidance laws. The new powers and penalties in these laws are now in place and supporting the Australian Taxation Office to ensure multinationals pay tax on what they earn in Australia.

However, we need to do more.

Tonight I announce that these new laws will be backed up by a new operational taskforce of more than 1,000 specialist staff in the ATO to police and prosecute companies, multinationals and high-wealth individuals not paying the tax that they should.

This will be added to new measures to combat multinational tax avoidance which include:

embracing a new diverted profits tax, as implemented in the United Kingdom, that taxes multinationals on income they have sought to shift offshore at a penalty rate of 40 per cent;

strengthening the protections for whistleblowers who come forward and report tax avoidance; and

increasing penalties for multinationals that fail to meet their compliance and disclosure obligations to the ATO.

These measures, including from the multinational tax avoidance legislation, will raise an additional $3.9 billion in revenue over the next four years, helping us to reduce the tax burden on hardworking Australians and small business.

Tonight we also announce changes to better target superannuation tax concessions.

Together with raising your children and owning your own home, becoming financially independent in retirement is one of life’s greatest challenges and achievements.

We need to ensure that our superannuation system is focused on sustainably supporting those most at risk of being dependent on an age pension in their retirement, which is the purpose of these concessions.

While protecting the overall architecture of our superannuation system, including retaining the tax-free status of retirement accounts, from 1 July 2017 we will be reducing access to generous superannuation tax concessions for the most wealthy by:

introducing a transfer balance cap of $1.6 million on amounts moving into the tax-free retirement phase, with balances able to increase above this cap, on account of tax free earnings, once transferred;

extending the 30 per cent tax on concessional contributions to those earning over $250,000;

reducing the annual cap on concessional superannuation contributions to $25,000; and

from tonight, establishing a lifetime non-concessional contributions cap of $500,000.

A balance of $1.6 million can support an income stream in retirement around four times the level of the single age pension. The transfer balance cap will be applied to both current retirees and to individuals yet to enter their retirement phase.

The transfer balance cap, lifetime non-concessional cap and the 30 per cent contributions tax for those on high incomes will each affect less than one per cent of superannuation fund members.

A concessional contributions cap of $25,000 per annum will affect just three per cent of superannuation fund members, particularly those who pay the top rate of income tax.

Commensurate measures will also be applied to high-income earners with defined benefit arrangements, including current and former politicians and public servants.

In addition to tightening access to tax concessions, the government will also be introducing a low-income superannuation tax offset from 1 July 2017, to ensure that people earning less than $37,000 are not paying more tax on their superannuation than they are on their income.

This will effectively allow individuals with an adjusted taxable income of up to $37,000 to receive a refund into their superannuation account of the tax paid on their concessional contributions, up to a cap of $500.

The low-income superannuation tax offset will, in particular, assist around two million low-income women to build their superannuation savings.

At the same time we will increase flexibility and choice in superannuation to support how people work and save in our modern economy by:

allowing more employees and a wider range of self-employed people, such as tradespeople, to claim a tax deduction for personal superannuation contributions;

encouraging partners to make contributions to their low-income spouses’ superannuation by extending the eligibility for individuals to claim a tax offset for these contributions;

removing the current regulations that restrict people aged between 65 and 75 from making contributions to their superannuation; and

allowing people to roll over unused concessional caps so those with interrupted work arrangements—predominantly women and carers—are not prevented from making catch-up contributions to their super, if they are in a position to do so.

Ninety-six per cent of Australians with super will be unaffected by or be better off as a result of the superannuation changes we have announced tonight.

The net impact of changes to superannuation announced in these measures will be a net gain of $2.9 billion over the next four years. Six billion dollars will be raised in gross terms. Three billion dollars or thereabouts will be reinvested into the superannuation system. Three billion dollars more will be invested back into the earning economy of Australia.

In other revenue measures, we will implement a further four annual 12.5 per cent increases in tobacco excise, with the first increase to take effect on 1 September 2017.

The net impact of the tobacco measures will raise $4.7 billion over the next four years.

Harnessing the power of innovation and entrepreneurship, to create our own ideas boom, lies at the heart of our plan to support jobs and growth in a stronger new economy.

As part of our National Innovation and Science Agenda we are backing co-investment in new spin-offs and starts-ups created by Australia’s research institutions, through the CSIRO. We are also expanding the CSIRO’s accelerator program to support public research bodies get up to speed and achieve commercial success.

Reforms to employee share schemes and crowd-sourced equity funding will make it easier for start-ups to raise capital and our changes to company tax loss arrangements will make it easier for existing businesses to reinvent themselves.

Big improvements in the nation’s defence capability also support innovation and skills development in advanced technologies.

Through the 2016 defence white paper we have made the decisions necessary to establish a pipeline of work that will secure an advanced defence manufacturing industry here in Australia, driving new high-tech jobs for decades.

The nine future frigates, 12 offshore patrol vessels and 12 new regionally superior submarines will do the job of boosting our defence capability, but they will also drive jobs and growth in the new economy we are building—not just in the shipyards in Adelaide and Perth, but right across the supply chain of our defence industry in the national economy.

The budget also invests in public-private partnerships through our cybersecurity strategy to back Australian businesses to develop and promote their cybersecurity capabilities globally.

So often successful technology ventures have started by solving a complex problem for governments.

That is why these investments are not just about our national security and keeping Australians safe but are an important part of our economic plan for Australia for jobs and growth.

In this budget we continue to roll out our $50 billion national infrastructure plan to support economic growth.

We know that an inland rail link will help to integrate domestic markets and bring global export markets closer to home. This is particularly important to leverage the benefits of our export trade agreements for Australian agriculture.

That is why the Turnbull government will take the next step to realising an integrated inland rail link connecting Brisbane and Melbourne.

In this budget we are providing $594 million in additional equity to the Australian Rail Track Corporation for land acquisition and the continuation of pre-construction works and due diligence activities.

The government will also establish a $2 billion water infrastructure loan facility which will catalyse new investment in dams and pipelines across Australia, building on the existing National Water Infrastructure Development Fund and the Northern Australia Infrastructure Facility.

And around 180 other major projects are under construction or in the pre-construction phase.

Most importantly, our economic plan for jobs and growth will help young Australians get real jobs.

In 2012, 12 per cent of Australian children aged under 15 were growing up in jobless families.

We must do better than this. We must try new approaches, not just keep doing the same old thing. And we must keep trying until we get it right.

Tonight I announce a new attempt to get vulnerable young people into jobs called PaTH—Prepare, Trial and Hire.

Australian businesses, especially small businesses, have told me that they want to give young people a go, but we need to do more to get young people ready for a job, so businesses do not carry all the risk and all the cost.

And it is a two-way street. Young people have told me how they need to get people alongside them to help them to develop the confidence and the skills and the attitudes and the behaviours that are expected by employers so they can get a job and they can stay in a job, because that is what they want.

This is what the Youth Jobs PaTH is designed to do—it is not just another ‘keep them busy’ training program.

From 1 April 2017, young jobseekers, who need to boost their job-readiness, will participate in intensive pre-employment skills training within five months of registering with jobactive. The first three weeks of training will focus on skills such as working in a team, presentation, and appropriate IT literacy. A further three weeks of training will centre on advanced job preparation and job-hunting skills.

In stage 2, the government will introduce an internship program with up to 120,000 placements over four years to help young jobseekers.

Jobseekers and businesses, will work together to design an internship placement of four to 12 weeks duration, during which the jobseeker will work 15 to 25 hours per week.

Jobseekers will receive $200 per fortnight on top of their regular income support payment, Newstart or other, while supporting and participating in the internship. This is real work for the dole.

Businesses that take on interns will receive an up-front payment of $1,000, and will also benefit from the opportunity to see what a young worker can do and how they fit in to the team before deciding whether to offer them ongoing employment.

In stage 3, Australian employers will be eligible for a youth bonus wage subsidy of between $6,500 and $10,000. These subsidies are just a smarter way of leveraging what you would otherwise spend on Newstart and other welfare payments.

Businesses will have the flexibility to employ young jobseekers either directly, through labour hire agreements, or combined with an apprenticeship or traineeship.

In addition to these changes, all existing wage subsidies will be streamlined, making them easier for employers to access.

The $751.7 million cost of these initiatives is fully funded from making savings in less effective employment programs, including better targeting of Work for the Dole.

It is worth trying new ways to get young people into real jobs.

The cost of not doing so resigns thousands of young Australians to a lifetime of welfare dependency. In addition to the financial cost and the sustainability of our welfare system, the social and human cost is too great for our country to ignore.

That is why the Youth Jobs PaTH is such an important part of the Turnbull government’s economic plan for jobs and growth.

Finally, our strong plan to keep spending under control means we can afford to guarantee support for hospitals and schools and protect our strong social safety net for the most vulnerable.

We have already announced we will provide an estimated additional $2.9 billion over three years for public hospital services. The additional funding is linked to reforms that focus on improving patient safety and the quality of services, and reducing avoidable hospitalisations.

The government will also deliver a new approach to funding essential dental services for children and low-income adults.

The Commonwealth effectively provides around 53 per cent of education expenditure by states and territories, once Commonwealth general revenue assistance is taken into account. Between 2018 and 2020, the government will also provide $1.2 billion in additional funding for government and non-government schools.

This funding will be contingent on reform efforts from the states and non-government schools sector to get better outcomes for students and parents.

To meet the future costs of the National Disability Insurance Scheme we are establishing an NDIS savings fund. This fund will hold unspent funds from the NDIS as well as the proceeds of savings measures from better targeting our welfare spending. These funds can then be reinvested back into delivering the NDIS and contribute to filling the current funding gap that was left to us.

Conclusion

Australians know it is no easy task to secure jobs and growth in a highly competitive, volatile and uncertain global economy.

Despite the challenges and the naysayers, we are already making it happen as Australians.

Our economy last year grew by almost $40 billion and added almost 300,000 jobs.

At three per cent last year, our economy grew faster than the world’s most advanced economies, faster than the United States, the United Kingdom, Japan and Germany. We are growing more than twice as fast as Canada, faster than New Zealand and Singapore, and matching it with economies like South Korea.

Given the international headwinds and fragility, this is an achievement of which all Australians should be proud.

So like the Australian people, we are upbeat and optimistic, even though we understand and know that there are many Australians feeling the transition more acutely in some parts of our country than others.

We also know we have the opportunity, though, to do more by accessing the largest and fastest-growing economies in our own region, namely China and India.

Australians are already seizing their opportunities. The economic plan we have announced tonight will back them in to do more.

At such a sensitive time none of us can become complacent or make decisions that put our successful transition at risk. There is too much at stake.

That is why we must stick to our national economic plan for jobs and growth, fix the problems in our tax system so we can cover our responsibilities for the next generation and ensure the government lives within its means, just like Australians all around the country are doing in their homes and in their businesses.

This is the right plan for Australia to overcome the challenges of economic transition and to clear a path for long-term growth and jobs in a stronger and new economy.

Having set this critical direction and having laid out this plan, we must now commit to stay the course. The future of all Australians and their families depends on it.

So let’s get this clear, in short here are the components to our plan for jobs and growth:

1. An innovation and science program for start-up businesses;

2. A defence plan for local hi-tech manufacturing and technology;

3. Export trade deals to generate new business opportunities;

4. Tax cuts and incentives for small business and hardworking families;

5. A sustainable budget with crackdowns on tax avoidance and loopholes; and

6. Guaranteed funding for health, education and roads.

I commend the Turnbull government’s economic plan for jobs and growth and this bill to the House.

Debate adjourned.

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