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Budget funding focuses on businesses

Scott MorrisonFederal Treasurer Scott Morrison’s second budget has promised big on infrastructure, funding an increase in spending with revenue measures targeted at consumers and businesses.

FMCG stakeholders will be among those subjected to a Skilling Australians Fund levy that will direct an estimated $1.2 billion into government coffers over the forward estimates by charging businesses for employing foreign workers on certain skilled visas.

Businesses with a turnover of less than $10 million per year will be required to pay $1,200 up front per visa per year for each employee on a Temporary Skill Shortage visa, while also making a one-off payment of $3,000 for each employee being sponsored under the permanent Employer Nomination Scheme. Those turning over $10 million or more will be required to pay $1,800 per visa each year and make similar one off payments valued at $5000.

Additional revenue measures that stand to hit consumers include a planned 0.5 per cent increase to the Medicare levy to fund the National Disability Insurance Scheme (NDIS) and a levy on Australia’s five largest banks, which Banking Association chief Anna Bligh has already warned will be partly passed on to consumers.

Pharmaceutical Benefits Scheme re-position

The government has moved to dump measures from the 2014-15 budget to increase co-payments and safety net thresholds in the pharmaceutical benefits scheme, and has instead moved to “provide certainty” to medicine manufacturers through a five year agreement with Medicines Australia to build on existing statutory price reductions.

Changes include extending the current 5 per cent reduction for Formulary 1 medicines to 2022; an increase in price reductions on Formulary 1 and 2 medicines from 16 per cent to 25 per cent from 1 October 2018 to 30 June 2022; the introduction of a one-off 10 per cent statutory price reduction in Formulary 1 medicines; and a one off 5 per cent statutory price reduction on Formulary 1 medicines that have been on the Pharmaceutical Benefits Scheme (PBS) for 15 years or more.

In total, the measures are expected to achieve $1.8 billion in savings over five years, correlating to $1.2 billion in spending over five years for new and amended PBS listings, including heart failure, pulmonary fibrosis and schizophrenia drugs.

Agricultural levies and loan expansion

The government is making a number of changes to agricultural levies and export charges for agriculture and water resources, which are expected to generate more than $10 million in revenue over the forward estimates.

Levvies on bananas, avocados, seed cotton and tea tree oil will be increased and partly re-invested into research and development in the agricultural sector following recommendations made by the Agricultural Competitiveness White paper.

The eligibility for Farm Business Concessional Loans is also being expanded, with the Federal Government providing assistance to States and Territories in provisioning loans to those who are not in receipt of other Commonwealth income support.

Other measures

Company tax cuts outlined in the 2016-17 budget for businesses earning more than $50 million each year appear to be on the backburner, with the coalition struggling to pass the second half of its headline economic reform from last year through the Senate. There are, however, a number of other measures that stand to impact FMCG stakeholders, including:

  • The government has committed an undisclosed sum to strengthening Australia’s food safety system, with an eye on reducing the regulatory burden for complaint food importers.
  • A tax avoidance crackdown that negates foreign trusts and partnerships in corporate structures, which “circumvent multinational tax avoidance law”.
  • The government will recover $112.6 million from companies regulated by ASIC for costs associated with the promotion of financial literacy and the administration of unclaimed money, among other things.
  • Tougher penalties for breaching Australian consumer law, increasing maximum penalties to three times the benefit received from the relevant act, or 10 per cent of annual turnover.
  • The Government will pursue $360 million over the forward estimates aligning taxation on roll your own tobacco and other related products like cigars with manufactured cigarettes.

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