Politics & Society Blog

The Australian Labor Party's Swansong

Wayne Swan's 2013-2014 Budget is nothing but a sham and a shambles. 

It is a sham because virtually none of it is seriously expected to be initiated or effected in the little time Labor has left in government. It is not intended to be a real budget at all, just a pale imitation, a counterfeit. In the cold, hard light of morning, it can only be explained as a spoiling exercise. 

Although this budget is clearly intended to make the job of an Abbott/Hockey government much more difficult, the real pain over the next two parliaments will be felt across the whole Australian community. Labor's shameless perfidy has produced a scorched earth policy that will do harm to us all.

It is a shambles because there is no overarching budget theme. It contains no map for the future and no 'report card' on the 2012-2013 Budget. 

The lack of a 'report card' is entirely understandable - how could Swan convincingly explain the $20.5 billion arithmetic error in his last effort?

The country would best be served by an immediate election. We need Abbott and Hockey to start fixing this disaster ASAP!

Swan's "self-education" blunder

Australian Treasurer Wayne Swan's so called "Reforms to self-education expense deductions" are a blunder on so many levels it's embarrassing. 

From the perspective of high-end business schools, it is a potential disaster. Many (if not most) of their students will be mid-level executives on 39% or 47% effective marginal tax rates. Assuming their executive MBA has a cost of $66,000 (including textbooks and sundries) and takes 3 years to complete part time, their tax deduction will be limited to $6,000. 

The Swan tax hike will cost the 39% taxpayer $23,400 (a total investment cost of $89,400). The tax increase on the 47% taxpayer will be $28,200 (a total cost of $94,200).

How many mid-level executives (most of whom will have mortgages and children) are likely to make the investment in a prestigious MBA on that arithmetic? Those that do are more likely to instead choose a "utilitarian" MBA from a less prestigious business school. 

This is likely to seriously damage the budgets of high-end business schools. 

On another level, members of the professions will also be severely disadvantaged. As a professional accountant practicing in the tax area, I have mandatory professional development obligations that cost an average of $6,000 each year. Some includes domestic travel in cattle class. If the measures are passed, only one-third of my not just legitimate, but compulsory expenditure, is tax deductible!

But wait, there's more! I am under the care of two world-leading specialists in their field. Both will attend at least two international seminars each year to maintain their levels of expertise. My preference is that they should continue to do so, regardless of whether the seminars are in London, Paris, New York or even Monte Carlo! Furthermore, I would very much prefer that at the very least, they travel business class so that they arrive at both the seminar and back home, bright eyed and bushy tailed. 

Medical specialists are likely to spend between $10,000 - $20,000 per year on professional development (check out the discussion on the AMA website). 

This isn't a "reform" it is a poorly disguised, discriminatory tax increase on professional taxpayers. 

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