Labor flags fresh spending cuts in a bid to return the budget to surplus

Treasurer Wayne Swan has announced fresh spending cuts as part of the Federal Budget, including changes to university funding, in a bid to return the national ledger to surplus.

Swan said the new measures, announced as part of the Federal Government’s mid-year economic outlook, build on ideas discussed at last month’s tax forum.

Despite international turmoil, which has stripped $20 billion from the budget, Swan said the government is determined to deliver a surplus of $1.5 billion in 2012-13.

“The Government has responded to the more challenging fiscal outlook in a measured and balanced way, delivering $11.5 billion in new savings,” Swan said in a statement.

“The combined effect of all policy decisions has improved the budget bottom line by $6.8 billion over the forward estimates.”

Major savings include changes to:

University funding

There will be a number of changes to university funding in recognition of the increased funding available to universities, including increased research and capital grants.

Reward funding for universities will continue to prioritise enrolment for students from low socio-economic backgrounds.

The Band 2 contribution rate for maths, statistics and science will also be reinstated. Both changes will save $10 million over four years.

Living-away-from-home allowance and benefits

The Government will introduce reforms to stop individuals from being able to exploit the tax exemption for living-away-from-home allowance and benefits.

According to the Government, this tax exemption is being increasingly misused by a select group of people, namely highly paid executives and foreign workers.

The Government will limit access to the concessions for temporary residents who maintain a home in Australia, and individuals will be required to substantiate their expenses.

These measures are expected to provide savings of $683.3 million over the forward estimates.

Dependent Spouse Tax Offset

The Government will phase out the Dependent Spouse Tax Offset for those aged 60 years and over. This will raise $370 million over four years.

There will also be some significant changes made to family payments, with the Baby Bonus to be reset at $5,000 and indexation paused, delivering $360 million over four years.

Also, family tax benefits will be subject to families who have completed immunisation requirements for their children, resulting in savings of $250 million.

Retirement income

The existing co-contribution scheme will be reduced, with the Government explaining its new low income super contribution is better targeted and will benefit three times as many low income earners.

This initiative will save $1 billion over four years.