Over the past week or so, many of you will have heard what was expected to be in the Budget. So lets look at it…
The Government forecasts
- That the ecomony will grow by 3% in the FY to June 2018;
- Unemployment will remain below 6% due to infrastructure projects;
- Wages will grow but no forecast rate;
- Inflation will continue to rise to 2.25% in 2018;
- Commodity prices to remain at current levels; and
- A$ will weaken slightly
IT is commonplace for Budget forecasts to be positive and I personally cannot see the economy growing by 3% or unemployment remaining below 6%. This is especially so if China and our Asian neighbours’ economies slow.
- First Home Buyers
Saving for a home is being encouraged by allowing eligible buyers will be able to divert $15,000 to $30,000 of their pre-tax income towards a special savings account. Contributions and earnings will be taxed at 15%. Withdrawals will be permitted from 1/07/2018 and will be taxed at marginal tax rates, less a 30% offset.
- Retirees who downsize
Selling the family home after turning 65 is being encouraged in order to free up homes for families. The carrot is that older Australians will be able to make a non-concessional contribution of $300,000 from the proceeds to their super.
- Infrastructure, construction and building materials companies
$70bn will be spent on national infratructure projects which include an inland railway line between Melbourne and Brisbane and the airport at Badgery’s Creek. It is estimated that 20,000 jobs will be created over the 8 year period.
Social Housing is another incentive and investors will be enticed to invest by the 60%CGT discount being offered if a property is held for 3 years. There are a few ‘red-tape’ issue to contend with though… This could be positive for Adelaide Brighton (ABC), Boral Ltd (BLD), Bluescope Steel (BSL), CSR LTd (CSR) as well as residential developers Mirvac (MGR) and Stockland (SGP).
- Young Families
Families earning less than $185,710 in 2017/8 no longer have an annual cap of $10,000. G8 Education Ltd (GEM) and Think Childcare Ltd (TNK) should benefit from workers being able to get funding for more hours of care.
- Small Business Owners
The $20,000 write-off provisions for businesses with an annual turnover of less than $10m has been extended. The Federal Government has also offered $300m to States that reduce red-tape for small businesses.
- Healthcare Sector
The freeze on the indexation of Medicare and Pharmaceutical Benefits Scheme will be lifted. Doctors will be encouraged to bulk-bill for services including diagnostic imaging and pathology. A deal with Medicines Australia will deliver lower prices on certain medicines. Healthscope (HSO) and Sonic Health (SHL) may see and increase in diagnostic services provided.
Not much in it
- Negative Gearing
Property investors will be happy to see negative gearing remian however, there are tighter rules around travel expenses and depreciation deductions.
In line with the Gonski ‘needs-based funding’, $18.6bn will be funnelled into schools over the coming decade. In my mind this was already ‘pencilled-in’.
However, some private and Catholic Schools will have to deal with reduced funding.
- The Disabled
The Government plan to fully fund the NDIS by increasing the Medicare Levy by 0.5% in 2019.
- Foreign Property investors with vacant properties
The owners of ‘ghost houses’ will be charged an annual vacancy charge if a property is vacant for more that 6 months. The aim is to reduce foreigners speculating on the Australian property market.
- Universities and Students
Universities will have to meet a 2.5% efficiency dividend to retain funding. Students will face a 7.5% jump in fees as well as higher repayments on HECS loans.
- Banks and their Executives
On 1 July 2017, a new tax on bank liabilities is proposed with the aim of raising $6.2bn over forward estimates.
Bank Executives will be accountable to a planned customer complaints authority and the ACCC will have a permanent team investigating competition in the sector. The 4 major banks will face increasing pressure with heightened regulation and monitoring not just from this budget but also from Basel III. Therefore, watch Net Interest Margins (NIM) which have been declining for the last decade!
- Multinational Companies
Multinational corporates will have to ensure that there structures are more transarent as the ATO investigate foreigh partnerships, trusts and hybrid structures for tax evasion.
There may be more when the bones have been picked…