In just a few hours, Treasurer Wayne Swan will hand down his second federal budget. He and Prime Minister Kevin Rudd claim it has been the toughest budget to frame in a lifetime, set as it is against a backdrop of the global financial crisis, rising unemployment, record low business confidence and an aging population.
SmartCompany will report direct from Canberra this evening in a special budget edition of our daily email, with all the news and analysis that matters most to business owners.
But before then, here are 10 big issues that entrepreneurs should watch out for in federal budget 2009.
Let’s start with the one item we know is going to be in the budget. Under the proposal announced by Treasurer Wayne Swan on Sunday, the Government will pay a child’s primary care giver 18 weeks of parental leave at the minimum wage of $544.
Thankfully, small business will not be forced to make superannuation payments on top of this, which was a proposal which came out of the Productivity Commission’s review of the issue.
While the guts of the scheme are known, there are a few details we’ll be waiting to see. Exactly how will the scheme be administered? Will SMEs carry the administrative burden or will the Government take this over? What will the cost of administration be? What will happen to companies that already have a policy?
While the Howard government tried to encourage people to take put private health insurance via a special 30% rebate, it appears Federal Treasurer Wayne Swan is keen to cut back on the incentive for high and middle income earners.
According to a report in The Australian last week, the rebate will fall from 30% to 20% for singles earning $74,000 and $90,000 a year and couples earning $150,000 to $180,000. The rebate will drop to 10% for singles earning between $90,000 and $120,000 and couples earning between $180,000 and $240,000.For singles earning more than $120,000 and couples earning more than $240,000, there will be no rebate.
And high income earners who think they can avoid taking out private health insurance should think again – the report suggests Swan will lift the Medicare rebate for high income earners from 1% to between 1.25% and 1.5%.
It is believed that the changes will help save $1.9 billion in the first three years and $8.7 billion between now and 2019-20.
The Government has assured high income earners that tax cuts are safe, but superannuation funds are likely to feel most of the pain on budget night.
Expected announcements include changes to the amount that can be contributed tax-free by the wealthy, with the concessional 15% rate likely to shoot up to 46.5%. Tax-free withdrawals may also be hit.
Transition-to-retirement plans may also be affected. Transition-to-retirement measures were traditionally designed to help workers who cut back to three or four days a week to maintain their cashflow by drawing a pension on their super fund. But because the strategy involves salary sacrificing, it costs the Government tax revenue and could be on the chopping block.
The wealthy may be restricted in the amount they can salary sacrifice into super accounts, with the current maximum amounts of $100,000 for over-50s and $50,000 for under-50s likely to be halved.
The Federal Government increased the first-home owner grant last year to help boost the property market, and it seems to have worked.
Organisations such as the Real Estate Institute and Australian Property Monitors have all praised the grant – which increased to $21,000 for new homes and $14,000 for existing homes – and want it to be extended in the budget.
Will this happen? Probably not, partly because the grant is so popular it will become unaffordable to support it for much longer.
But there is a chance the Government could extend the grant for newly-constructed homes, which will help support the building sector.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
