Dale Boccabella

There are changes to taxation law, which are being introduced as part of the Mid-Year Economic and Fiscal Outlook. Company tax, the baby bonus and private health insurance are being targeted by the federal government.

The budget has lost $3.9 billion in tax receipts for this financial year since the May budget and $21 billion over four years. In particular declining commodity prices have led to a crash in forecast receipts from the mining tax from $13.4 billion over four years to $9.1 billion. As a result, the government has increased some taxation.

Corporations will have to pay company tax monthly, rather than quarterly. While this will ensure that instalments are closely aligned to fluctuations in these businesses’ income, it isn’t exactly going to be helpful to firms which are already struggling under a bureaucratic workload.

On the cuts to the baby bonus from $5000 to $3000 for the second and each subsequent child, this is a relatively minor item for the government – however it will impact on parents. Expensive items such as the cot, pram, change table and baby capsule can sometimes be reused for subsequent children, but they are often hit by other costs.

There are changes to private health insurance starting in April 2014. This will increase the cost of all premiums. Under the latest round of cuts, the government’s 30 per cent rebate will no longer automatically be increased to match the annual increase in premiums. Instead the rebate will be indexed to inflation, which is normally less than the premium increases. There’s a double whammy too – if the premium increase is less than inflation, the rebate will be indexed to that.

We already saw increases in the May budget. At the time, the government means-tested the private health insurance rebate, which will save it about $2.8 billion over four years. This further measure will save $700 million over three years. For those people who thought they had escaped by being under the private health insurance means testing limit, they will now be hit by having the rebate indexed to inflation. However I expect this measure may put a bit of pressure on the funds to try and cap their premium increases.

Dale Boccabella is an Associate Professor of Taxation Law at the Australian School of Business.