The 2016 Federal Budget: Lower Income Families to Be Worse off Financially

The new Federal Budget doesn’t carry good news for the poorest families in Australia, with most of them being worse off once all budget measures come into full affect. The Australian National University’s research on social sciences revealed that the changes to family payments, childcare, taxation, tobacco excise and superannuation will be felt most by the poorer families.

Dr Ben Phillips, a reporter revealed that 40% of lower income families will be impacted the most after all changes of the new budget come into motion and by 2018-2019, with the poorest families becoming $1,407 worse off per year. The biggest impact is brought by the removal of the tax benefit part A and B, which is roughly $480 per year. This is quite surprising for a government who claims they are consistently fair.


Who will save or lose money in Australian federal budgetOnce all the changes come into affect, households with higher incomes will actually be $200 better off each year, thanks to the personal income tax cuts made. Tobacco excise will be increasing by 12.5% each year for four years from September 2016, also contributing to the negative effects on lower income families.

The Australian National University’s report revealed that the lower income earners on average were the ones who benefited the least from the changes and the most significant proportions of money affected were related to superannuation. It appears that the government has remained consistent in favouring higher income families as with the past two budgets before this one.


Another factor that means lower income families will spend more money, is related to the increase in indexation. Higher income families would have to pay $144 more per year whilst lower income families would have to pay $135. These amounts are almost the same and therefore would burn through lower income family’s savings much faster, hence why they would be worse off.

Higher income families are less affected in recent Australian Federal budget

The report classifies a low-income family as earning between $27,000 to $57,000 per annum, which consists of two adults and two children. The animosity within the country has been felt by the public, which was represented by Newspoll who found that 39% of people believed they were now worse off. A separate Fairfax-Ipsos poll found that only 37% of the people thought the new budget was fair.

Many Australians are asking why low-income families were missed out from the tax relief. The government’s response was that this budget has been less severe compared to the previous, such as the 2014 budget that resulted in the lowest 20% of earners having to contribute an additional $1.1 billion to the government compared to higher income families.


The only thing we must all bear in mind is that a model is only as good as the assumptions on which it is based and whilst it’s difficult to get everything 100% accurate, certain trends can be cautiously recognised within them. Despite this year appearing that low-income families have been hit a little harder, we must not forget that back in 2012 that same group received a serious tax cut of around $1,000 via a lift in the tax free threshold from $6,000 to $18,000 to accommodate for the carbon tax which never actually came to be. Ultimately, there is no decision that can please everyone and the government must do what it needs to, to continue running our country.

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The Australian Federal Budget

TOPICS:   Money

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