What we got in the budget

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Health, infrastructure and renewable energy will be the focus of new spending initiatives.

Health a big winner

The government wants to roll out another 450 GP super clinics to deliver co-ordinated health care in the community - despite the fact only three of the 31 clinics it promised before the last election are fully operational today.

The Rudd government also plans to establish a nationwide network of primary health care organisations, to be known as Medicare Locals, which will cost $417 million to establish, and provide every Australian with an electronic health record by mid-2012.

A total of $2.2 billion will be directed to the national health and hospitals network, as part of the government's takeover of Australia's hospitals and is new funding on top of the $5.1 billion directed towards hospitals in last month's COAG deal.

The spending – which takes the government's total new investment to $7.3 billion over five years – includes $772 million for GP clinics and primary care services.

Another $523 million will go towards training and support for nurses, with $467 million to fund the introduction of individual electronic health records.

The budget includes $390 million for 4600 new nurses to work in GP clinics.

Doctors will receive $25,000 each to put towards the salary of a registered nurse, with payments capped at $125,000 per clinic.

Some critics say this will lead to a nursing shortage in public hospitals and rural Australia.

But the nursing federation argues better working conditions in clinics will entice up to 40,000 burnt out nurses back into the workforce.

Changes to the Pharmaceutical Benefits Scheme will save $2.5 billion over five years from 2010-11, and the new tobacco tax will raise $5 billion over five years.

The bulk of the savings comes from the expansion of price disclosure.

It requires manufacturers to tell the government what they are charging pharmacies for a medicine. The commonwealth then pays an amount based on the average disclosed price.

Further, drugs coming off patent will now be reduced by 16 per cent instead of 12.5 per cent.

Incentives encouraging chemists to process scripts online will be scrapped too, saving $417 million.

The budget papers include another $2 billion in savings from means testing the private health insurance rebate, despite the measure having been blocked twice in the Senate.

The big losers from Tuesday's budget are people with mental illnesses and dental problems.

There's no new mental health funding besides the $176 million announced as part of the COAG negotiations, and a recommended universal dental scheme wasn't taken up by Labor.

Big spending on infrastructure, renewable energy

The government will set up a renewable energy future fund, worth $652 million over four years, aimed at leveraging private investment in small and large-scale wind, solar and biomass projects.

This follows a saving of $652 million over the period 2009-10 to 2013-14 due to deferring the Carbon Pollution Reduction Scheme (CPRS), as well as additional savings.

Almost $1 billion will be spent on rail freight works, through the Australian Rail Track Corporation, with extra funding to establish an intermodal terminal at Sydney's Moorebank.

It follows the government's previously-announced $5.6 billion infrastructure fund for the states – part of its response to the Henry tax review – which commences with a $700 million payment in 2012-13.

Aviation security will receive a further $200 million, with an extra $89.9 million for the safety watchdog.

A total of $661 million will be spent on training and apprenticeships, including $300 million for skills development in the construction, infrastructure, renewable energy and resource sectors.

The government has also brought forward another $100 million in funding for water purchasing in 2010-11.

Tax cuts for savers

In releasing the budget, the government announced several tax reforms in addition to those made in its response to the Henry review nine days earlier.

Those reforms already announced include a 40 per cent tax on resource profits, a two per cent cut to company tax and a three per cent boost to the superannuation guarantee.

Firstly, a new 50 per cent discount will apply to interest earned on deposits, bonds, debentures and annuity products, up to a value of $1,000.

The discount, effective July 1 2011, is expected to apply to 5.7 million people in that financial year, and is similar to the tax treatment for capital gains on assets held longer than a year.

Taxpayers will also be able to elect to receive a $500 standard deduction, instead of claiming work-related expenses and tax return costs.

The deduction will increase to $1,000 from 2013-14.

Interest withholding rate changes

In releasing the 2010 budget, the federal government has announced several initiatives in response to the Johnson report, which was aimed at promoting Australia as a financial hub.

A total of $25 million will be spent over four years to set up a Centre for International Finance and Regulation, providing training and research on innovation.

Consultation will also begin on an investment manager regime (IMR) to reform Australia's managed funds industry and encourage international investment.

The government also announced it will phase down the interest withholding tax (IWT) for local subsidiaries and branches of overseas lenders.

Business borrowing

Listed companies will be able to issue bonds to retail investors using a simplified process, under a class order issued by the Australian Securities and Investments Commission (ASIC).

The streamlined process will only be available to companies with a good continuous disclosure history, where the size of the bond offer is at least $50 million, and will only apply to simple, so-called 'vanilla' bonds.

Business restructure reforms

The government also plans to introduce legislation to amend the capital gains tax (CGT) rules on business restructures.

Under the proposed changes, the government would extend the CGT roll-over for the conversion to an incorporated company.

It would also broaden the range of CGT roll-overs where entities can use a share or interest sale facility for foreign residents in a restructure, and provide demerger relief for entities which are not currently eligible.

"The roll-over will now allow indigenous incorporated bodies to covert to a company incorporated under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (CATSI Act) without immediate CGT consequences," the government said.

"Also, indigenous companies will be able to move between the Corporations Act 2001 and the CATSI Act without CGT consequences."

The government says it will also allow Australian interest holders access to a broader range of CGT roll-overs where an entity restructures using a share or interest sale facility for foreign interest holders.

"Currently, where a business restructures and it uses a share or interest sale facility for foreign interest holders, Australian resident interest holders are unable to access some CGT roll-overs.

"Some of these entities can be reluctant to restructure because their Australian investors face immediate CGT consequences and could even have to sell their interest to meet any CGT liability.

"This measure will make it more attractive for certain entities with foreign investors to restructure."

The government also said it would amend the CGT demerger relief provisions so that demerger groups, which currently include corporations sole or complying superannuation entities, can benefit from the CGT demerger roll-over.


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