The 2010 Budget - What Does it Mean?

After slashing almost $1 billion worth of incentive programs designed to help entrepreneurs during the 2008 budget in favor of increasing the Centrelink assistance given to carers and those on a disability pension, the Rudd Government followed the 2009 budget up by announcing some initiatives to assist small business in a minor way. The foremost of these is a boost to the small business tax breaks available for buying assets before the end of June 2009 up from 30% to 50%.

However, it's Treasurer Wayne Swan's 2010 budget that hits mid to high income earners where it hurts - in the hip pocket.

Unfortunately, the 2010 federal budget has been released during an election year. Despite assurances to the contrary, there are many announcements aimed directly at smoothing over election campaign promises.

How is the Budget Being Funded?

The big plan for funding some of this year's federal budget is all about increasing the tax on profits earned by the big mining corporations up to 40%. They've already spent that money to the tune of $9 billion, which is great while the resources boom is still happening. They're banking on the resource prices rising and miners continuing to mine for profits, but what happens if those big companies move offshore to avoid the steep taxes. Worse still, what happens if our biggest resources customer, China, stops buying our resources?

What About Super Contributions?

While there are promises to raise the minimum amount of employer superannuation contribution from 9% up to 12% by 2020, surely this should spark a bit of a warning light in the minds of some. After all, the vast majority of funds invested into superannuation are invested into the stock market by way of either direct shares or mutual funds.

With so many baby boomers due to retire over the coming decade, all demanding their superannuation and pension payments to be paid out of the stock market in which their funds are invested, what happens then?

When you add the fact that the compound return on superannuation is barely ahead of the inflation rate at 3% on average over the past 13 years, will anyone really be better off by the time they retire?

What About Mid and High Income Earners?

There is very little in the 2010 budget to help the welfare of the middle class. The introduction of the idea of a 50% tax rebate on savings in the bank for the first $1,000 worth of interest earned is designed to help low to middle income earners by encouraging them to save more. At the current interest rates, this allows them to save up to around $20,000.