8 May 2012

Australia scraps company tax cuts for welfare

10:55 pm on 8 May 2012

The Australian government is scrapping billions of dollars worth of company tax cuts, instead redirecting the money to welfare payments.

Federal Treasurer Wayne Swan delivered his budget on Tuesday night, announcing billions of dollars in savings as expected to return the budget to a modest surplus of $A1.5 billion in 2012-13 from a $A37 billion deficit.

Major spending initiatives include $A1 billion to start a National Disability Insurance Scheme; $A1.1 billion for a new Supplementary Allowance for welfare recipients; and $A1.8 billion to increase a family tax benefit, the ABC reports.

In savings, the budget proposes scrapping company tax cuts to save $A4.7 billion; cutting $A5.4 billion from Defence, including losing 1000 civilian staff; and delaying Australia's foreign aid commitments to save $A2.9 billion.

Low and medium-income families have been spared significant pain in the budget. Instead, the Government has targeted those on higher incomes through increased tax on superannuation contributions.

The ABC reports these are the budget measures aimed at the Labor heartland which the government hopes will pay off just before the next election. They reveal a handout of between $A300 and $A600 for 1.5 million families eligible for Family Tax Benefit - Part A and the increase comes into effect in July next year.

Treasurer Wayne Swan says he wants everyone to share the benefits of the mining boom.

"These new measures are good for low- and middle-income families because they will help them make ends meet and get ahead," Mr Swan said. "It's a Labor budget to its bootstraps."

The Government is predicting a further $A7 billion blowout in this year's budget deficit to $A44.4 billion, largely because of a further write-down in company tax receipts and bringing forward some support payments.

But it is forecasting a return to surplus of $A1.5 billion in 2012-13 on the back of the significant cuts, which Wayne Swan says will give the Reserve Bank more flexibility to cut interest rates.

"Tonight we make a forceful statement that ours is one of the world's strongest economies and fairest communities. The deficit years of the global recession are behind us. The surplus years are here."

The government will be hoping the budget shifts attention away from scandals that threaten Prime Minister Julia Gillard's grip on power.

A report on Tuesday claimed suspended Labor MP Craig Thomson spent nearly $A6000 on prostitutes during his time as a union official.

Meanwhile, Peter Slipper has sat in the Speaker's chair for the last time, while claims of sexual harassment and fraud against him are investigated.