The Turnbull Government will proceed with all elements of the 2016 budget, including its controversial corporate tax cuts, superannuation changes and ongoing Medicare-related savings, despite its looser-than-expected grip on power and a potentially hostile Senate.

via Turnbull Government will push ahead with 2016 Budget despite questions over mandate, says cabinet secretary Arthur Sinodinos

Who’s who?

Malcolm Turnbull – Prime Minister of Australia

Arthur Sinodinos – Cabinet Secretary

  • The Cabinet consists of the Prime Minister and up to 30 Ministers (usually around 17) who meet secretly, usually on a weekly basis, to discuss and devise policy, and propose bills. The Cabinet is accountable to the Parliament as a whole. Source

What’s what?

Corporate Tax Cuts

The Liberal government wants to give tax cuts to Australian companies to the tune of almost $8 billion a year. The idea behind this move is that these companies will ‘stimulate the economy’ by employing more people, paying them better, and being less shifty about paying their company taxes. However, independent experts have advised the government that it is unlikely that these tax cuts will be covered by companies doing the right thing; this money will need to be made up either by cutting spending in other areas or increasing other taxes. Source

Superannuation Changes

Currently, money put into your super account by your employer (or as part of a salary sacrifice agreement) before income tax is applied, is taxed at a concession rate of 15% and is capped at $30,000, or $35,000 for over 50’s. Non-concessional contributions made to your super account after your income has been taxed, is not subject to super tax. It has been the case that an individual can put up to $180,000 into their super each year from their after-tax income. However, the Liberal government is now attempting to pass legislation that would mean an individual could only make a maximum of $500,000 worth of non-concessional contributions in their lifetime.

The government is also seeking to impose a limit of $1.6 million on transfers from concessionally-taxed super accounts to tax-free retirement accounts. So, the amount that can be added tax-free to a super account will be reduced considerably, and the amount of super that can be transferred to a tax-free account will be capped. According to The Australian, only 4% of Australians will be affected by the changes; however, many people are concerned that their retirement savings will be reduced. Political Savvy recommends that concerned individuals consult a financial advisor to better understand how these policy changes may (or may not) affect them.

Sources: [1] [2] [3]

Medicare Savings

Debate is raging in parliament over how the government can reduce spending on Medicare – the third-largest cost to the Federal government, after payments to the states, and the age pension. The government has iterated that it will not be privatising Medicare; this idea would seem to have originated from the privatisation of certain aspects of Medicare’s functioning, such as payroll operations.

The 2016 Budget proposed before the election planned to save $2.4 billion over four years by freezing the Medicare rebate for GP visits. This means that although the cost of going to see a doctor will rise with inflation, etc, patients will continue to receive the same amount back from Medicare, thus paying more out of pocket. The government is also planning to save $1.4 billion over the same period by reducing bulk-billing incentives for pathology (blood tests) and radiology (ultrasounds, x-ray, etc), meaning that more providers are likely to charge patients for these tests.

There is particular concern that the rising cost of GP, pathology and radiology services will see an increase in low-income earners going to public hospitals for free treatment of minor ailments, which will put pressure on a system already dealing with long waiting times.

What is a ‘hostile Senate’?

Parliament consists of an Upper and Lower house. The Lower House comprises the current government, and the ‘Opposition’ (those who are not part of the governing party). The Upper House is also known as the Senate, and comprises Senators from different parties. For legislation to pass parliament, there must be majority support in both the Lower and Upper houses. Because the Liberal party does not have a majority of seats in the Senate, they must work harder to negotiate with senators from other parties, who may not share the same values, to achieve a majority vote on proposed legislation.