Each year it is fascinating to observe how the Budget is received.
Most commentators subjectively assess the Treasurer’s efforts by how they, or their interest group, is expected to be impacted.
But is it possible to assess a budget more objectively?
According to the stock market and rating agencies the Treasurer has done a reasonably good job. The ASX is up in today’s trade and rating agencies have reaffirmed our AAA credit rating. Surprisingly, bank stocks are firm and showing no impact from the announcement of their new levy.
Importantly the Budget makes a commitment to engage in infrastructure development. This is an area which governments have been shying away from, fearing the criticism of escalating our national debt. However, investment in roads, rail and airports fast tracks national development. We need federal leadership and investment in these areas where the payback is very long term, and beyond the funding capability of private enterprise.
Property Investment and Housing Supply
Wisely, negative gearing has not been removed. I am a firm believer that private enterprise needs an incentive to invest in residential property to ensure a supply of rental accommodation. Tax incentives to private enterprise is a far more affordable and effective means of creating housing stock than by Governments funding and managing Affordable Housing projects.
A further targeted incentive for investors in affordable housing is the increased Capital Gains Tax discount to 60% – a sensible policy which has silenced the critics of negative gearing.
Special provisions have been introduced to stop developers selling more than 50% of projects to foreign buyers – this was a common occurrence in the hot Sydney and Melbourne markets. A tax is to be levied if residences are not being occupied. Foreign and temporary tax residents will no longer be exempt from a capital gains tax when selling their main residence.
Incentives have been introduced for first home buyers to save for a deposit through their superannuation fund. With a maximum of $30,000 accessible through this measure I suggest it will be largely ineffective. However, the option for those over 65 to invest $300,000 from the sale of the family home into superannuation may prove to be a more meaningful policy.
Medicare and the NDIS
One must applaud the commitment to Medicare and particularly the funding of the NDIS. Although it is adding another 0.5% to our tax rate, there surely can’t be a more worthy and responsible initiative than to support families who shoulder the burden of a disabled relative.
Small business is to enjoy a 12 month extension (to 30 June 2018) of the asset write-off concession for assets up to $20,000.
Obviously there are a raft of further changes and announcements that can be viewed at your leisure in this Institute of Chartered Accountants Thomson Reuters Budget Bulletin 2017.
In conclusion, I think this is a responsible and well-considered budget. Many are critical that broader tax reforms have not been made but I am optimistic that as a collective, this budget will deliver stability and a sound economic future for the nation.
We are available on (02) 9908 9888 to answer any query you have regarding the budget and how it impacts on your specific circumstances.