Australian budget at a glance: Turnbull promises tax cuts

Corporate and middle income tax rates fall as spending goes up.

Key points:

  • corporate tax reducing to 25% over 10 years;

  • immediate tax cut for small businesses;

  • increased income threshold for highest tax rate;

  • Google tax’ crackdown on multinational companies; and

  • major new infrastructure and defence spending.

The double whammy of a growth-oriented budget and a central bank interest rate cut has given the government a strong hand to wage an election.

Prime Minister Malcolm Turnbull is expected to call the July 2 election by the end of this week.

Treasurer Scott Morrison's first budget has delivered on most of the already signalled tax cuts and spending policies.

A ‘Google tax’ will close tax loopholes for multinational companies, raising $A3.9 billion to fund broader corporate tax cuts. These include lowering company taxes over 10 years from 30% to 25% and an immediate one-percentage point cut to 27.5% for small businesses.

A diverted profits tax with a 40% penalty rate will target multinational companies that attempt to shift profits offshore.

Middle-income earners will pay less tax as the income threshold is raised from $A80,000 to $A87,000 for the highest tax rate (32.5%). 

This will be funded by a $A1.6 million cap on tax-free retirement savings that is expected to raise $A2.9 billion from the wealthy. The "concessional cap" – the tax-free limit for compulsory retirement savings – will be reduced from $A30,000 a year to $A25,000.

On the spending side, the government has committed to a $A50 billion spending package on infrastructure and an even bigger one of $A90 billion on defence.

On top of this, the Reserve Bank of Australia yesterday cut the official cash rate to a record low 1.75% in a bid to stimulate the economy and reduce mortgage costs.

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