Mid-Year Economic and Fiscal Outlook (MYEFO) 2014-15

The projected budget deficit for this 2014-15 financial year has now been confirmed by Treasurer Joe Hockey to be $40.4 billion.

This is up by over $10 billion than the 2014 May budget forecast, with the projected return to surplus delayed by 4 years until 2019-20 financial year.

The Treasurer identifies a number of significant causes of the deteriorating budget position, including:

• falling tax receipts due to a 30% slump in iron ore prices
• falling tax receipts due to weaker wages growth
• Senate delays in passing legislation

Among the proposed savings measures outlined in the MYEFO documents are a further $3.7bn cut to budgeted foreign aid spending over three years, and an extension to the May 2014 Family Tax Benefit indexation pause by an additional year (to 3 years from 1 July 2014).

There’s also a further 175 government agencies on the chopping block – see Minister for Finance Mathias Cormann’s Ministerial Paper

Other tax-related measures:

• Statutory effective life for in-house software — the existing statutory effective life of 4 years will be increased to 5 years for assets installed ready for use on or after 1 July 2015, with associated changes to the software development pool rules.
• The start date for the adjustment of the R & D incentive for large companies (incomes of $20 billion) is delayed by one year to 1 July 2014.
• Defence force exemptions — tax exemptions for pay and allowances of ADF personnel deployed on Operation Manitou will apply from 1 July 2014 to 30 June 2015 and the existing exemption covering Operation Palate II is to be be extended until 31 December 2015.

Further information:

• ABC News MYEFO summary
• Government MYEFO documents