The 2018-19 Budget will be the last before the next election (due by May 2019) and so had to provide pre-election goodies, but in a way that keeps the return to surplus on track. Thanks to an improvement in the budget position since the Mid-Year review, of around $7bn per annum, this has been made relatively easy. A modest fiscal stimulus will help households, but the main risk is that the revenue boost proves temporary.
As always, most of the measures in the Budget were pre-announced or leaked. The goodies include:
> A simpler tax system, with immediate income tax cuts from July for low to middle income earners of up to $10 a week which is mainly achieved by lifting the Low Income Tax Offset and raising the $87,000 tax threshold to $90,000.
> A plan for broader tax cuts starting in 2022, which from 2024 includes removing the 37% tax bracket and having the 32.5% tax bracket go all the way up to $200,000.
> Dropping the planned 0.5% Medicare levy increase.
> Ongoing commitment to cut the corporate tax rate to 25% for large companies by 2026-27.
> Extension of the small business instant asset write off.
> Increased spending on home aged care, various concessions for older Australians related to superannuation contributions and work tests, more hospital funding and new products listed on the Pharmaceutical Benefits Scheme.
> An extra $25bn in infrastructure spending including the Melbourne rail link, Bruce Highway, Gold Coast/Brisbane M1, road and rail in WA and North-South Corridor in SA.
> A limited exemption from the work test for super contributions, for workers aged 65–74 who have super balances below $300,000.
> New means test rules for lifetime retirement income streams to help reduce longevity risk.
> An increase to the maximum number of SMSF members from 4 to 6, to provide more flexibility for larger families.
The impact on interest rates and the share market should be minimal, and at the end of the day, from a financial advisor's perspective, the good news for clients is that the areas of superannuation and pensions have been, thankfully, pretty much left alone this time around.
Of course, the above proposals will need to be passed by parliament.
For budget specifics, please click on the links below. In the meantime we'll continue to monitor things closely - and as always, Westmount clients should feel free to call us on 9382 885 if you have any questions or concerns.