There have been thousands of opinion pieces and articles scrutinising the Federal Budget. But who did well in the personal finance space?
The Federal Budget, handed down this month, is largely a campaign manifesto: no big announcements and more a gentle reminder to voters of the Government’s economic management credentials. No surprises that income tax and infrastructure spending were fixtures, a rebuttal to poor wage and low consumption growth, weakened house prices in Sydney and Melbourne, concerns around China’s economic slowdown and recovery, as well as the recent cost of drought and flood.
Treasurer Josh Frydenberg is celebrating the nation’s first forecast surplus in 12 years. This year, he’s calling a surplus of $7.1 billion. In four years, the Government is forecasting $45 billion in surpluses, building towards one per cent of GDP within the decade. Frydenberg has committed a whopping $100 billion over 10-years to fund rail and road projects, addressing congestion. This new road infrastructure will happen despite the Government bearishly predicting the iron ore price, a major tax revenue source, will plummet from $US88 to $US55 a tonne by early 2020. Note there’s room for upside for the Government if the price doesn’t reach those lows.
In terms of finance and the impact on clients, we have identified three winners and three losers.
- 10 million taxpayers The proposed legislation is a grand in the hand – this means that a solid proportion of Australians will receive this when they lodge their tax return, when it’s introduced. The Budget’s doubling of lower-middle personal income tax offsets will affect about 10 million taxpayers who will be about $1000 per person better off, or slightly over $2000 per couple. As radio journalist Sabra Lane on ABC said, that’s little more than a beer-and-schnitzel saving each week. Simultaneously, the Government is keen to crackdown on tax avoidance – focusing on multinationals – totaling a saving of $3.6 billion over four years.
- Small business More companies can access an instant tax write-off of $30,000 which was $25,000, allowing assets to be immediately deducted from small businesses. This was previously only accessible to companies with turnovers of less than $10 million, but now includes those up to five times that amount.
- Retirees The 40-hour work test is to be scrapped allowing those aged 65 and 66 years to access the bring-forward non-concessional contribution limit of $300,000 (formerly $100, 000 non-concessional) to be made in one year.
- Higher Income earners If you earn over $126,000 there’s nothing for you in this Budget, but last year you were given a $135 tax cut!
- Cash earners The Government will introduce a limit of $10,000 for cash payments as part of a plan to capture payments falling outside the tax system resulting in underreported income. They estimate this will bring the government $5.3 billion in four years.
- Job seekers The unemployment rate is at a historic low of 4.9 per cent, and the Government will be keen to keep it that way. In the Budget, the unemployment allowance remained stagnant. Additionally, an automated social security reporting system starting July 1 that inputs the employment incomes of welfare recipients (those employed and receiving Centrelink payments) is expected to save the Government $2.1 billion over five years, rather than manually calculating and reporting earnings.
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