Australia’s new Federal Government brought down its first budget, the first by a Labor Government in 13 years, in a difficult economic environment with inflation trending upwards, a tight credit market and weakening business and consumer confidence.
Described as a good start for the new government by commentators, Budget 08 aims to overhaul the Federal-State funding of health, education, and infrastructure and undertake an extensive review of the tax system which will include streamlining personal income tax rates.
To achieve this it has introduced a series of funds – Building Australia Fund (initial allocation of $20 billion), Education Investment Fund ($11 billion), Health & Hospital Fund ($10 billion) – to disburse federal funds to the states to be directly spent on projects and reforms.
Budget 08 reported a $21.7 billion surplus, the largest in nearly a decade with this to be divided across the three funds with the surplus from 2008/09 also to be set aside for these policy areas.
Cost savings identified in the budget came to $2 billion, with some government benefits and tax breaks to be means-tested.
The new Government also kept its election commitment on delivering income tax cuts with these amounting to $46 billion over four years. Part of its overhaul of the tax system will include moving to three standard rates for personal tax rates by 2013 – 15%, 30% and 40%. Company tax remains unchanged at 30%.
In this Winter 08 issue of the Walker Wayland Australasia Bulletin we take a look at Budget 08 in more detail, particularly changes to family trusts, the need to keep on top of tax planning issues and the increased funding given to the Australian Taxation Office on compliance initiatives.