After the mid-year Budget update, we wrote that the Government appeared to be softening the ground for future tax rises. We are starting to see the outline of their taxation strategy with targeted increases in taxes in areas that are unlikely to garner sympathy in the wider electorate; namely, high-balance superannuants, multi-national petroleum companies via the Petroleum Rent Resource Tax (PRRT), and smokers.

Given, this is a Government that promised no new taxes during the election campaign, we believe that further tax rises are likely in subsequent years. Possible changes include an increase in capital gains taxes and a watering down of the Stage 3 income tax cuts.

The outlined improvement in spending is driven by favourable changes in long-term economic and policy assumptions and is likely to be a mirage. For example, annual spending on the National Disability Insurance Scheme (NDIS) has been revised down to 10.4% (previously 13.8%) purely based on a National Cabinet commitment rather than actual policy initiative. Achieving this $59 billion in savings will be far easier said than done, as it requires debt-laden States to stop cost-shifting other social services to the Commonwealth.

Similarly, the Government will come under further spending lobbying under its “no one left behind” election promise and a pending review of the Defence Integrated Investment Program over the next 12 months.

As partners in your investment journey, we monitor, examine, and navigate change. The Federal Budget is one such factor in our highly considered investment strategy and wealth management process.

This article is one part of our 2023 Budget series. To read more of our Budget commentary, click the links below:

–      Individuals and Families

–      Small and Medium Business

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