STAC Capital had the pleasure of attending both Westpac’s & NAB’s Budget presentation last week. General consensus appears to be that the 2018 Federal Budget is very much a pre-election budget with nothing too exciting to write home about!
Here are some of our key take-outs that provide coverage on items that are worth mentioning.
Greener pastures await us
Or at least that’s what they’re telling us! A return to surplus has been predicted to occur by 2019-20 with an estimated surplus of $2.2b (not that their track record of achieving surpluses is all that great!). The government has also stated that they do not wish to have tax revenues greater than 23.9% of the GDP. Whilst the government’s bill to reduce company tax remains uncertain, measures to review the personal tax system have been announced. In short, it’s pretty uncertain as to how the surplus will be achieved, but, their heart is in the right place.
Personal Income Tax Cuts
Before you start getting too excited, this is a seven-year plan, so some changes will take some time to provide any material benefit. It’s also hardly generous in our view considering the largest tax savings will occur in 2024 when the 37.5% tax bracket gets removed, leaving the 32.5% threshold reaching all the way $200K.
Worth also mentioning that these proposed reductions will see a revenue reduction of $13.4b for our economy AND there’s two federal elections in between now and then – so chances of these promises coming to fruition are…?!
Land Tax Changes– Developers Land Banking take note!
Expenses associated with holding vacant land will cease to be deductible from 1 July 2019 and will not be carried forward. They will be deductible when either (a) construction is complete, approval for occupancy has been granted and the property is available for rent, or (b) the land is used in “carrying on a business”.
The big question here is (and accountants we’ve spoken to say there’s not yet clarity on this) – does a developer holding a potential future development site qualify as “carrying on a business”? The devil will be in the detail (that hasn’t yet been released)…
Yes, this is the ‘pinup parcel.’ The government has committed $24.5b in funding for new major transport projects and initiatives that will benefit every state and Territory. Queensland can certainly be happy with their allocation of funds on this front, getting some much-needed support for following projects:
· $3.3b for Bruce Highway
· $1b for M1
· $478m for Great Barrier Reef
· $390m for Beerburrum to Nambour Rail Upgrade
· $300m for Brisbane Metro
Across Australia, the government has allocated $75b over the next decade in investment in transport infrastructure. This clearly demonstrates a focus on removing congestion and improving productivity by addressing pinch points, last mile access to ports, airports and freight hubs. As well as appealing to the people!
A war is being waged against the dark side. The black economy is estimated to be around 3% of our GDP or $50b. Illicit tobacco appears to be a focus with an estimated $3.6b in revenue estimated to be raised over the next 4 years. That is a lot of tobacco for a nation where social smoking is on the decline!
Oh and here’s a surprise – from July 2019, it will be ILLEGAL to do ANY transaction over $10,000 using cash.
Businesses tendering for Commonwealth contracts greater than $4m need to prove that their tax obligations are up to date.
Lastly, for those “rock stars” that happen to read our material (you’re all rock stars in our eyes!), from 1 July 2019 you will be prevented from licensing your fame or image to another entity, ensuring that any income earned will be taxed in their own hands. Does this impact you? If so, we want to know who you are!
AND who knows if all this will get past the Senate!
That’s all folks.