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Choose Your Budget

The proximity and timing of the Federal Budget and upcoming election means that neither the Coalition nor Labor have provided much Budget detail. Instead, voters must choose from their policy ideas.

Whichever you choose, they won’t be legislated until the winning party can call the new parliament together and persuade them to approve or modify their policies. It’s probable that such legislation won’t become law until July or so. So, legislation intended to come into force on 1st July would need to be backdated.

The Budget positions announced during the recent Budget week seem to cast the election as a generational divide – older Australians supported more by Coalition policy vs a Labor focus on young Australians. Our role is to stay out of the politics but just to inform on financial matters, so here’s a brief summary of their differing positions:

No doubt there will be more to come once Federal Election publicity begins in earnest. We do hope you survive the whole experience with minimal distress.

Whichever side wins the next election, they’ll face a delicate Australian economy desperate for new sources of investment growth. Two policies set to influence the Australian investment market are Labor’s Negative Gearing restrictions and higher capital gains tax.

The International Monetary Fund (IMF) lead economist for Australia recently noted that “the housing market downturn is sort of sagging on the demand side”. As we’ve previously noted in our Australian Property Price Outlook and Property Bell Tolls blog, “the natural growth limit for property is our ability to pay for it”. Restricting negative gearing also restricts borrowing capacity and consequently a property investor’s ability to pay for it. Increasing capital gains tax is likely to further subdue demand and prices for investment property.

Of course the other key concern for retirees is Labor’s policy to stop refunding franking credits. We wrote about this in our Labor Changes for Investors blog last week and we’ve begun talking with our clients about how this may affect them directly.

More than ever, quality financial advice is critical.

We believe in a higher standard of financial advice, free from product bias and conflicts of interest.

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Disclaimer: All information in this article is intended to be general in nature for discussion purposes only. So you should not rely on it and seek personalised professional advice before making any decision.

Wotherspoon Wealth FPA Professional Practice of the Year