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The sweeteners tipped to be in the federal budget tomorrow

Josh Frydenberg

As the federal government charges towards election campaign mode, tomorrow’s federal budget is tipped to be littered with tax sweeteners.

In its mid-year budget update earlier this year, the federal government had parked almost $9 billion dollars in unannounced measures.

It’s expected that these will be rolled out tomorrow, at 7:30pm, as federal Treasurer Josh Frydenberg delivers his first budget.

What’s on the cards?

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A reduction of marginal tax rates or an increase in the marginal rate thresholds are looking like the most likely outcome of tomorrow’s budget.

“While individual tax cuts could be seen as being election sweeteners, there are also good reasons to give individual tax cuts right now. These reasons include the reversal of bracket creep caused by inflation,” said BDO national tax director Lance Cunningham.

“There is a good argument that the reduction of individual taxes could give a boost to GDP as it would provide more disposable income for households to spend. The alternative to increase GDP is to promote the increase of wages, but unless there is a corresponding increase in productivity, this could be counterproductive by increasing inflation. Therefore, the reduction of the individual tax rates may be the better option,” he said.

There are concerns from accounting and advisory firms, like PwC, that the propensity to up spend in an election year could have a detrimental knock-on impact in the economy.

“The concern is that, in an election year, both sides of politics will have an incentive to spend this windfall. But the projected surpluses are so small as to be mere rounding errors in the context of the total budget,” said PwC Australia’s chief economist, Jenny Thorpe.

“In a time when there is a real concern about oncoming headwinds, squirrelling some additional funds away becomes increasingly important,” she said.

Nest Egg will be bringing you federal budget coverage and exclusive coverage as news breaks.

The sweeteners tipped to be in the federal budget tomorrow
Josh Frydenberg
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