Election Outcome: Nothing to see here folks, business as usual
Well, the election is over, the Coalition has been re-elected and will likely form a majority government in the lower house. This means they won’t have to rely on deals with other parties to get their announced policies through. While there is a risk on one hand, that the Government may decide to use that power, on the other hand, a number of the Federal Budget announcements made in April 2019, leading up to the election, will be able to be pushed through immediately.
Many clients will be able to collectively breathe a sigh of relief that franking credit refunds and negative gearing changes have been voted down. Low and middle income earners will enjoy the tax cuts that are on their way.
More generally, a post-election bounce in equity and property market sentiment seems likely.
Here’s what you need to know now that the Coalition is back in power:
- Commencing from 1 July 2019, if your total super balance is less than $500,000, you can take advantage of unused concessional super contributions (up to the cap of $25,000 per annum). This means that if your employer contributes $15,000 to super on your behalf this year and you make no other contributions, you can carry forward the unused $10,000 for up to five years. We’ll provide more details on this topic in another detailed Newsletter soon; and
- The low and middle income earners tax offset will increase from $530pa to $1,080pa ($2,160 for working couples). This can be claimed within the current 2018-19 tax year.
- The $30,000 immediate asset write off will continue, as planned, for this year and to 30 June 2020, which should give some certainty in planning for future purchases; and
- Decreases in tax rates for companies and individuals will assist as businesses will be able to reduce their tax burden as well.
For Superannuation Funds, and particularly Self Managed Superfunds (“SMSFs”), the election result is great news, there are some big opportunities coming down the track:
- Refundable franking credits remain, so it will be a level playing field for SMSFs and the larger industry funds and retail funds;
- Six member SMSFs are guaranteed (previously limited to only four members) – so families can consider inter-generational strategies by adding children to their SMSF (the passing of assets to family members);
- Industry Superannuation Funds will be forced to have independent Boards, which will give greater transparency to the fee debate that currently exists in the superannuation industry; and
- Limited Recourse Borrowing Arrangements are set to continue, which means that Superfunds can borrow to buy property and shares, subject to the rules of course.
The economy and markets
AMP Capital chief economist Shane Oliver said with the election over, it seemed Australians “were not prepared to support the higher taxes, increased government spending and redistribution” offered by Labor. “It’s back to business as usual in terms of the immediate economic policy outlook with modest tax cuts for low and middle income earners on track for the next few months,” he said.
A number of clients have already commented that the Labor franking credit and negative gearing policies were quasi death taxes, and are now relieved that, for the time being, this won’t occur, so:
- Their asset pool won’t be eroded;
- They can therefore afford a better retirement (without relying on their children); and
- They can provide more assets to their estate upon their passing.
Recent housing finance data and the NAB Business Survey both pointed to a weakening economic outlook, with the highlight being a lift in the unemployment rate to 5.2%, despite continued solid employment growth. That higher unemployment rate might be enough to all but cement RBA rate cuts this year.
Of course, what might now give the RBA some pause is the Coalition’s surprise victory. With the risk of negative gearing and franking credit changes now removed, it might give the housing and share market a short-term boost at least.
What does all of this mean? No FOMO for ScoMo.
For further insight on how all of this affects you and what to expect, please click the links below.
- Federal election 2019: What a Coalition win means for you, major policies explained
- AAG Federal Budget 2019-2020 summary
For more of a market perspective, please click here.
Important information and disclaimer
This publication has been prepared by AustAsia Group, including AustAsia Financial Planning Pty Ltd (AFSL License No 229454) and AustAsia Accounting Services Pty Ltd (Registered Tax Agent No 7587 3005).
AustAsia Accounting Services Pty Ltd – Liability limited by a scheme approved under Professional Standards Legislation.
Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Accordingly, reliance should not be placed on the information contained in this document as the basis for making any financial investment, insurance or other decision. Please seek personal advice prior to acting on this information.
Information in this publication is accurate as at the date of writing, 22 May 2019. Some of the information has been provided to us by third parties. Whilst it is believed the information is accurate and reliable, the accuracy of that information is not guaranteed in any way.
Opinions constitute our judgement at the time of issue and are subject to change. Neither the Licensee nor any member of AustAsia Group, nor their employees or directors give any warranty of accuracy, nor accept any responsibility, for any errors or omissions in this document.
Any general tax information provided in this publication is intended as a guide only and is based on our general understanding of taxation laws. It is not intended to be a substitute for specialised taxation advice or an assessment of your liabilities, obligations or claim entitlements that arise, or could arise, under taxation law, and we recommend you consult with a registered tax agent.