11 Ways The 2016 Budget Could Affect Your Wallet

The 2016 Federal Budget is a mammoth and complex tome that covers all areas of government spending. For the vast majority of Aussies, the most pressing question is how this affects the money they need to pay through taxes and essential services. As always, there's good news and bad news -- with the ratio determined by how much you earn. Here are 11 important changes you need to know about.

Loose change image from Shutterstock

The following points relate to the changes in this year's Budget that affect everyone's wallets; from business and property owners to backpackers and the unemployed. As you can see, we're mostly paying more for the same stuff. No change there, then.

Tax cuts incoming

The threshold at which tax payers begin to pay 37 cents on the dollar has been increased from $80,000 to $87,000. This means anyone who earns over $80,000 will take home more money at tax time with an additional $7000 of their income taxed at the lower rate of 32.5%. This works out to a tax break of around $315 per person.

Meanwhile, high income earners will continue to pay a 2 per cent levy on income over $180,000. In 2017-2018, this levy will be removed. An extra 2 per cent on the super-rich was too much of a burden to make permanent, apparently.

Tax-free online purchases scrapped

We knew it was coming. From July 2017, the GST will be applied to all online goods purchased overseas. (Currently, the GST only kicks in with purchases over $1000.) The government will essentially be relying on foreign businesses to jack up their prices by 10 per cent when dealing with Australian buyers. We think this is stupid for a number of reasons, some of which you can read here.

Medicare will cost more

The income threshold for the Medicare levy will increase in line with the CPI, which should leave low-income earners slightly better off. However, the freeze on Medicare rebates introduced last year will remain, which will see the government covering smaller portions of medical bills. This translates to higher out-of-pocket expenses for patients across all health services.

No change to negative gearing

Negative gearing has been a hot topic in the leadup to the 2016 Budget. True to its word, the government has made no changes to negative gearing. This is good news for property owners. Not so much for everyone else.

Free dental threatened

The Children and Adult Public Dental Scheme provided low income earners with $1000 worth of "free" non-cosmetic dental care. These programmes have now been scrapped. In its place will be a combined scheme covering children and Commonwealth concession card holders, but with less money devoted to the scheme. If your kids have any teeth issues, we suggest getting it sorted asap.

Smokers are being slugged hard (again)

For the fourth year running, the tax on cigarettes will increase by 12.5%. This works out to a massive 69% tax on the total price of a pack of cigarettes. We're of two minds about this tax hike. On the one hand, anything that encourages people to stop smoking is good. On the other hand, studies have shown that most heavy smokers are low income earners, which means it will mainly affect Australians who can least afford to pay it.

Unemployed catch a break

The government is changing the way its Work For The Dole scheme works. Instead of kicking in after six months of unemployment, participants will only need to enter the Work For The Dole scheme after being on benefits for twelve months. While this change is largely due to budget cuts rather than a reassessment of policy, we think 12 months makes more sense. In today's job environment, finding full-time work definitely isn't easy.

Backpackers taxed harder

From July 1, backpackers and other foreigners on working holiday visas will pay 32.5 cents on every dollar earned in Australia. (Currently, backpackers pay 19 per cent on earnings up to $37,000.) The tax-free threshold of $18,200 has also been scrapped.

While many Aussies will think this is fair enough, as it keeps more money in our economy, it has been met with criticism from the agriculture industry who are worried about a potential labour shortfall. If you're a business owner who regularly employs foreigners, this is something to watch.

Passport price hike

Passport fees are being increased again. From January 1 2017, adult passports will cost $274; a jump of $20. Children's passports and priority application fees will also be increasing, by $10 and $54, respectively. If your passport is due for renewal, we suggest doing it before the end of the year.

University fee deregulation is off the table (for now)

After a storm of criticism, the government has backed away from complete fee deregulation for universities. If you're a uni student or are just finishing up high school, this means you don't need to worry about exorbitant uni fees for the time being. We don't expect we've heard the last of this, however. Indeed, the government has announced plans for further "public consultation" on this issue.

Fairer superannuation

A new Low Income Superannuation Tax Offset will be introduced in July 2017. This will see people that earn $37,000 or under receive a tax discount of up to $500 on their super fund. The government will also be cracking down on the super wealthy who use super top ups to avoid paying higher taxes. From July, anyone who earns over $250,000 will have their super contributions taxed at 30 per cent.


Comments

    I need my passport renewed, even at the current price, I never realised they cost so much. Has been quite a few years though since I needed one so there is that. I will wait until closer to the end of the year, still need to lose 32kg haha

    Last edited 05/05/16 10:57 am

Join the discussion!