Opinion: Federal budget sets stage for early election

OPINION: One well-known journalist had this to say about Tuesday's Budget: it replaced "the overblown rhetoric of a year ago with an intensely political Budget aimed at polling repair rather than fiscal repair".

Given the airy-fairy nature of Opposition leader Bill Shorten's reply on Thursday night, I'd suggest we buckle up for an early election, before Xmas perhaps.

The bottom line of the Budget is that Treasurer Joe Hockey has committed to spending 25.9 percent of Gross Domestic Product (GDP = The Economy) in 2016-17 - about equal with what the Rudd government did but with a projected $52 billion collapse in tax receipts because of the end of the mining boom.

I personally am quite happy Mr Hockey has shelved last year's austerity ideology in favour of what is pretty much a Keynesian approach - stimulation.

The surprise was that from 7.30 pm on Budget night to 30 June 2016, small businesses turning over $2 million or less can immediately write off assets costing up to $20,000 including vehicles.

Assets costing more than $20,000 can be pooled and depreciated at 15% in year one then 30% thereafter.

In addition existing pools whose value has fallen below $20,000 may be immediately written off.

The initial leak was that incorporated businesses turning over less that $2 million per annum would qualify for a tax cut of 1.5% reducing the tax rate from 30% to 28.5%.

On Budget night eve, the announcement was made that this concession would apply to all types of small business, sole traders, partnerships and trusts as well as companies.

As it turned out, the tax relief for unincorporated businesses is to be 5% not 1.5%.

I wondered how tax relief can be given to partnerships and trusts which distribute profits to partners and beneficiaries and are not taxpayers themselves.

The 5% is to be delivered as a tax offset!

Smoke and mirrors if your profit derived earnings are any more than $20,000, you will be able to claim a tax offset of 5% up to a maximum of $1000.

As it is a rebate it will not be refundable and it will mean yet another add-on to individual tax returns, already a dog's breakfast.

What it also means is that successful small businesses will potentially profit from being incorporated.

Not only will the tax-rate be limited to 28.5% but the franking credit for tax paid will not reduce from the current 30%, FBT will not apply to electronic equipment provided to employees and directors even if their functions are duplicitous and the 1.5% discount is fair dinkum no matter what the level of profit - unlike the offset for individuals.