What a fix we’re in! Just a few weeks ago we were contemplating big changes to super, lower small business taxes and property investors were finally able to rest assured negative gearing was sticking around. Well, that’s all changed since the election, as we could now be facing a hung parliament.
Even if the coalition does end up taking the cake, it’s with a heavily reduced majority and ironically the stability Malcom Turnbull promised won’t be able to be delivered. The minor parties have peppered the Senate and the House of Reps is a reduced majority, to the potential point of defeat.
So what does this mean for your finances?
It’s unlikely all the super changes announced in the budget will be enacted in law. For example, many liberals, let alone the Independents and Labor, were against the retrospective nature of the $500,000 non-concessional super cap.
The reduced concessional contribution, to $25,000 from July 1, 2017 is likely to remain, as may the $1.6m tax-free pension cap and the introduction of tax on transition to retirement pensions as they appear to have the support of both sides of government prior to the election and are positive for tax revenue.
So too, it would be great to see the LISTO (Low Income Super Tax Offset) for those earning under $37,000 to be enacted as law. LISTO allows a rebate of up to $500 for super tax paid. The lower co-contribution threshold has now risen to $36,021 from July 1, and the ability to super split with your partner is already in place.
The other great opportunity for spouse contributions allows one partner to make a contribution of $3000 and receive a rebate of up to $540 if their partner earns under $10,800. The federal budget proposed that this lower threshold moves to $37,000 providing more opportunity for lower-income workers to benefit from super. This is likely to remain as it has the support of both of sides of politics.
Hopefully we’ll see the company tax rate fall to 25% but I reckon you can wipe this one off your Christmas list. Whilst stimulatory to jobs, and with all the influence of minor parties and their many objectives, I think business will have to wait.
If we have a hung parliament, no doubt Bill Shorten will attempt to kick this little diddy around the block a few times but given the precarious position of property around the country, I think it’s unlikely to see parliament. Supply is forecast to outstrip demand in the next two years but if interest rates continue to fall, as predicted, then the heat will remain in the property fire for a little longer.
The greatest damage from the election result has been confidence. No party has a clear mandate to lead and the tough decisions are unlikely to be made in such circumstances as the major parties will need to pander to the demands of the minors. Confidence is everything in sharemarkets, property markets, jobs growth and industry so hopefully common sense prevails.
Our advice is to seek advice, and keep your ears to the ground and your hand securely on your wallet.
Written by Sam Henderson (CEO of Henderson Maxwell).