Federal budget night saw Treasurer Scott Morrison promise the Australian people five things in the 2018/2019 financial year:
- tax relief to encourage and reward working Australians;
- keep backing business to invest and create more jobs;
- guaranteeing the essential services that Australians rely on;
- keeping Australians safe; and
- ensuring that the Government lives within its means.1
What does this mean for students and new graduates? We drill down into how the budget will impact young Australians specifically to help you be better prepared for the year ahead.
Higher education to take a hit
Unfortunately, the Coalition government has long maintained that it needs to reduce higher-education spending.2 Previously, the government funded universities on a demand-driven basis, meaning that tertiary education institutions were funded according to how many students enrolled.3 Now, there will be a two-year pause in tuition subsidy growth, which means that universities will receive the same amount of funding in the upcoming financial year as they did in the previous one.4
Fortunately, there’s some good news too! Rural and regional students will have an increased chance of going to university with the government funding almost 2000 new places for young students in remote areas, at a cost of $125 million.5 The government is also committed a $400 million boost to research funding over the next five years.6
Additionally, the government plans to progressively raise funding levels for government schools so that at the end of the decade they will have spent $24.5 billion.4 The Federal government is leaving it up to the state governments to decide whether they will contribute extra funding so that all schools meet the full Schooling Resource Standard (SRS) recommended in the 2011 Gonski report into school funding.4
Help! What's going on with student debt?
During the Mid-Year Economic and Fiscal Outlook (MYEFO), which updates the economic and fiscal outlook from the previous budget, the government proposed a $100,000 lifetime cap on student loans for all courses.7 The proposal has since been updated, and the Budget confirms the cap will be $104,440 for most disciplines (and $150,000 if you are studying medicine, dentistry and veterinary science), but these changes are still subject to the passage of legislation.8 This is happening in a bid to create a more sustainable education loan system.
More importantly, the government is considering lowering the income threshold, which determines how much a person with a student loan will need to repay each year. Currently sitting at $52,000, the Coalition has proposed dropping the initial repayment threshold by $7000.9
This means if you earn $45,000 per year, your repayments would be 1 per cent of your loan. Don’t panic quite yet, nothing will officially change until 1 July.10 But be warned: the government is also looking to spend $36.2 million on IT infrastructure to help ensure that you actually do repay your VET student loans!4
More dollars in your pocket
There will be tax offsets for those earning less than $90,000, which includes most students and graduates. If you earn less than $37,000, you can expect an extra $200 in tax back at the end of the financial year (June 2019), while those earning between $48,000 and $90,000 could stand to save up to $530.11
While an extra couple of hundred dollars at tax time might not seem like much, it can make quite the difference if you play it smart. You could plan ahead to spend it on booking a professional development course or attending a conference, making a donation to a cause close to your heart, or simply saving it to spend on your next family holiday.
Your super bright future
There's more good news for young people trying to save - if you're 25 or under, you'll no longer be forced to take out life insurance.12 The move is designed to help young people save more for their retirement years, as well as save the government a projected $700 million over four years.13 If you want to keep your life insurance, you've got 14 months to make a decision.
The Government will also impose a 3% cap on fees on superannuation accounts with balances less than $6,000.12 Financial Services Minister Kelly O'Dwyer says this fee cap on low balance accounts – often held by those just starting out in the workforce - would save those members $570 million collectively in the first year.13
Lending a helping hand
An increased number of young people will also be eligible to receive Youth Allowance, as the government has raised the parental income threshold. Now, students whose parents earn up to $160,000 will be eligible for Youth Allowance, so that students studying and not living at home will be able to stress less about their finances.14 Unfortunately, no changes have been made to Newstart payments, which currently equate to about $39 per day15 - $390 below the poverty line fortnightly - and has not been raised for the past 23 years.16
Funding for mental health initiatives, including adding mental health services to the Royal Flying Doctor's Service17 for the first time, means that it will be easier for students to access much-needed support at university. The government has also invested $230 million in community sport and wellness initiatives,18 ensuring that students have greater access to physical exercise and recreational activities.
One last thing
Remember, all of this is contingent on the Coalition government maintaining the public vote a year from now. With a Federal election due sometime in the next twelve months, it is possible that a Labor government will enact substantial changes to the budget.