Small business tax breaks at the heart of the Abbott government’s second budget are likely to pass the Senate, but other policies to cut family tax benefits and parental leave entitlements face a rockier road through the upper house.
There is also broad political support for the childcare reforms that will cost the budget an extra $3.5bn over five years, yet it remains unclear whether the government will package them with the controversial accompanying savings. Combined legislation would present the Senate with an all-or-nothing choice.
The Coalition has several options to pass legislation. The simplest – from a negotiating point of view – is to secure support from either Labor or the Greens.
When bills are opposed by both Labor and the Greens, the Coalition’s task is more complicated because it needs to persuade at least six of the eight crossbenchers.
The opposition leader, Bill Shorten, is due to present his budget reply speech to parliament on Thursday evening but Labor has already signalled that it is inclined to support the small business tax breaks, which include allowing an immediate tax deduction for any individual assets worth up to $20,000.
Labor will also consider “sympathetically” the childcare changes, which include streamlining the existing system of multiple subsidies and providing increased support for families, particularly low and middle-income earners. Labor has also left the door open to examining the details of the government’s part-pension eligibility measures.
But the government has angered some crossbenchers by linking the childcare package to the passage of cuts to family tax benefits payments that were proposed in last year’s budget and stalled in the Senate. If the government presents them together in a combined bill to parliament, Labor and the Greens might vote against the legislation or amend it.
The shadow treasurer, Chris Bowen, said the government had “made the budget a ransom note” by linking the measures and he indicated Labor would firmly oppose the cuts to family tax benefits. Those stalled savings include $1.9bn by moving families off Family Tax Benefit Part B if their youngest child is six years or older.
The Greens similarly oppose these cuts and many crossbench senators are also concerned about them.
The government is also expected to face Senate difficulties if it pushes ahead with a plan to reduce or end taxpayer-funded parental leave entitlements for people who receive parental leave from their employers. The parental leave issue has triggered a political storm this week.
The finance minister, Mathias Cormann, would not say on Thursday whether the childcare spending presented to parliament would be a standalone bill or combined with the family tax benefit cuts, although the Prime Minister, Tony Abbott, has opened the door to negotiating alternative equivalent savings.
Cormann said: “The logistics in the parliament will work their way through over the next few weeks and months but let me just say we will not proceed with the spending unless we get the savings and the process through the parliament will ensure that there is no additional spending unless there are the additional savings to pay for it.”
Cormann called on Shorten to use his budget reply speech to explain how Labor would fund proposed spending measures if it did not agree with the Coalition’s approach.
The Greens have accused the government of resorting to blackmail but leader Richard Di Natale said the childcare package had positive elements and the party would consider it as long as it was not tied to cutting family payments.
Several crossbenchers – including Jacqui Lambie, Glenn Lazarus and Ricky Muir – said they supported changing the childcare system but opposed cutting family payments.
The independent senator, Nick Xenophon, said it was likely there would be “some give and take with both packages”.
“I can’t see Family Tax Benefit B, particularly in the change from 16 to six year olds, which is draconian, will get through,” he told the ABC.
