Surprise tax increases in 2017 Australian budget

Owen Stevens
May 12, 2017

Banks will face a new tax that is expected to recoup $6.2 billion over the forward estimates and help to fix the budget.

"Having exhausted every opportunity to secure savings from our 2014-15 and 2015-16 Budgets, we have chose to reset the Budget by reversing these measures at a cost of $13 billion".

So the Treasurer has delivered a budget that lifts the Medicare levy for all but the lowest income earners in two years' time.

When the scheme is fully operational in 2020, it will cost $21 billion and is forecast to provide care for 460,000 Australians who have a severe disability.

The tax has reportedly been modelled on the UK Bank Levy, which Mr Morrison explored during a recent trip to Britain.

"It's unlikely the government will lose votes whacking a tax on big banks, although the banks will certainly squeal, and parts of the (government's) conservative base won't like these tax measures, meaning its political effectiveness depends a great deal on them sucking it up and keeping their mouths shut".

Opposition Leader Bill Shorten also said an increase in the nation's healthcare levy was a kick in the teeth to ordinary Australians which Labor would have avoided.

The truth is, MB expected the Budget's housing measures to be much worse, so we were relieved that they ended up being Mickey Mouse.

A financial complaints authority will be created to adjudicate binding outcomes for disgruntled customers, while senior executives who fail to properly register can be disqualified from their positions and stripped of bonuses.

The package will allow first home buyers to make voluntary contributions into their superannuation savings, which are taxed at a reduced rate, to help them build a deposit faster.

But Mr Morrison has revised that figure to $65.4 billion for the decade starting a year later, on July 1, 2017 (2017-28).

Credit Suisse analysts estimated in a note on Wednesday that the levy would cost financial institutions around A$1.6 billion a year, or around 5 percent of the banks' current profits.

The government has now accounted for the costs from 2018 to 2028 - adding another year when the full tax cut to Australia's largest corporations takes effect - resulting in an additional cost of more than $16bn.

Unions said the budget waged war on the vulnerable through cuts to welfare and higher university fees.

Mr Bowen said his party was still dissecting the increase to the Medicare levy, which it is proposed will raise about $8 billion.

Turnbull's coalition lacks a majority in the Senate and relies on rival lawmakers to pass legislation - a sometimes hard task, as shown by the government's decision in Tuesday's budget to abandon A$13 billion of stalled savings measures.

Australian Bankers' Association chief executive Anna Bligh called the tax a "not a well thought out policy response to a public interest issue".

"The measures may have an impact on home prices over time if they incentivize states to ramp up supply, but it's likely to be marginal in the short term", Shane Oliver, head of investment strategy at AMP Capital Investors in Sydney, wrote in a report. It will also make underutilized and surplus land available for housing.

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