TREASURER Wayne Swan has put a number on the savings he'll need to outline tomorrow week to return the budget to surplus.
Appearing on Channel Ten's Meet the Press yesterday, Mr Swan said a collapse in projected budget revenue of $5 billion in 2012-13 and another $5 billion in 2013-14 meant he would need to find an extra $10 billion over the next two years.
The Age believes that only $2 billion of the $5 billion shortfall is due to weaker than expected company tax collections. Another $1 billion is due to weak collections from superannuation funds since a downturn in the sharemarket. A further $750 million is due to weaker than expected collections of customs and excise duties on alcohol, tobacco and fuel.
Mr Swan said he would do all within his power "to protect low and middle-income earners", confirming that earners on $300,000 or more would have their superannuation contributions taxed at 30 per cent rather than at the present highly concessional 15 per cent.
"We have got to make sure superannuation concessions are distributed fairly . . . and in a budget where we are looking for savings, it's important to run your ruler over a whole range of tax expenditures to make sure that they are directed to the right areas," he said.
Mr Swan will also tighten so-called living away from home allowances under which executives hired from overseas or interstate receive large tax-free sums to compensate them for "living away from home".
From July 1 they will have to prove they rent or own a second home to claim such an allowance and it will be limited to a period of one year. Fly-in fly-out workers in the mining industry will be allowed to continue to claim the allowance.
Four leading public health bodies have written to Prime Minister Julia Gillard asking for a crackdown on alcohol tax concessions as a way of stemming the tide of alcohol-related deaths and injuries and saving $1.5 billion a year.
The Australian Medical Association, the Cancer Council, the McCusker Centre for Action on Alcohol and Youth and the Foundation for Alcohol Research and Education say taxing wine by volume at the rate applying to beer would save more than $1.5 billion and would stop the leakage of concessions to New Zealand wine makers now claiming them as part of the Closer Economic Relations agreement.
"We are aware that the government has previously declined to act in this area, arguing that it will not act in the middle of a wine glut and where there is an industry restructure under way," the letter says. "However, research shows the current alcohol taxation arrangements actually contribute to the increased availability of very cheap wine and action is urgently required."
Businesses taking part in the Treasury's liaison program report "strong demand" in the resources sector, a "challenging" environment in the retail sector and "difficult" conditions in manufacturing.
Frequently Asked Questions about this Article…
What is Treasurer Wayne Swan's $10 billion savings target and what timeframe does it cover?
Wayne Swan said the budget needs an extra $10 billion in savings spread over the next two years — $5 billion in 2012–13 and another $5 billion in 2013–14 — to return the budget to surplus.
What are the main causes of the recent budget revenue shortfall?
The article says the $5 billion shortfall in 2012–13 is only partly from weaker company tax collections (about $2 billion). Around $1 billion is blamed on weaker-than-expected superannuation fund tax collections after a sharemarket downturn, and roughly $750 million comes from lower customs and excise duties on alcohol, tobacco and fuel.
Could changes to superannuation tax concessions affect high-income earners' retirement savings?
Yes. Swan confirmed earners on $300,000 or more could see their employer superannuation contributions taxed at 30% instead of the current concessional 15% — a move aimed at making superannuation concessions fairer and helping meet budget savings.
What changes are coming to 'living away from home' allowances and who is affected?
From July 1, executives hired from overseas or interstate who claim living-away-from-home allowances must prove they rent or own a second home and the allowance will be limited to one year. Fly-in fly-out (FIFO) workers in the mining industry can continue to claim the allowance.
Will low- and middle-income earners be protected amid the budget savings?
Swan said he will do all within his power 'to protect low and middle‑income earners' while pursuing the savings needed to return the budget to surplus, indicating priority protection for those groups in policy decisions.
What alcohol tax changes have public health groups proposed and how much could they save?
Four public health bodies — including the Australian Medical Association and the Cancer Council — asked the prime minister to crack down on alcohol tax concessions. They propose taxing wine by volume at the same rate as beer, which they say would save more than $1.5 billion a year and reduce the availability of very cheap wine.
How might changes to alcohol taxation affect the wine industry and cross‑border concessions?
The groups argue current arrangements leak concessions to New Zealand winemakers under the Closer Economic Relations agreement. Taxing wine by volume at beer rates would reduce that leakage and curb cheap wine availability, though the government has previously been reluctant to act amid industry restructuring and a wine glut.
What is the current economic picture for key sectors according to the Treasury liaison program?
Businesses in the Treasury's liaison program report 'strong demand' in the resources sector, a 'challenging' environment in the retail sector, and 'difficult' conditions in manufacturing — useful context for investors watching sector performance.
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