The budget wrap-up

Raj Ladher

With the Treasurer announcing the budget a few weeks ago for 2018/19, here’s a summary of key elements and how they may affect you.

Australia’s Budget Profile: The Treasury is predicting a budget deficit reducing from $18.24bn in 2017-18 down to $14.5bn in 2018-19. The Treasurer is predicting the budget will then return to a surplus in 2019-20.

Large Corporations and SMEs: The $20,000 asset write-off scheme is extended for the coming financial year which encourages SMEs to invest in new equipment. The Government will be restricting multinational corporations on shifting profits to lower-taxing countries.

Personal Income Tax Cuts: Australians earning up to $90,000 will get a tax cut of up to $530 per annum. This threshold will increase from $87,000 to $90,000 next year and then raised again to $120,000 in 2022-23. The 37 per cent tax rate threshold will be abolished in 2024-25 with all Australians paying 32.5 per cent to $200,000. Wages are expected to grow 2.25 per cent by the end of this financial year.

Infrastructure: Although no new money, the Government is continuing with the already budgeted $75bn on infrastructure, improving roads, rail lines and bridges.

Education: Funding for schools is to continue as per the last budget, however a few tweaks have been made for a permanent fixture of the schools chaplaincy program and more funding for some regional universities.

Health: There will be extra funding for public hospitals and investment into new medicines. $1.6bn will go towards aged-care funding, helping more elderly Australians stay in their homes.

Superannuation: The ATO will be actively trying to consolidate dormant superannuation funds with active accounts along with banning funds automatically signing under 25s to life insurance policies. From 2019 admin and investment fees will be banned on low balance accounts, and exit fees will be abolished on all accounts.

As a whole the budget was received well – with a small tax relief for low to middle income households, backing small businesses, measures designed to improve the life of our ageing population and continued infrastructure upgrades.

In terms of interest rates, with slightly lower than target inflation and higher than target unemployment rates and along with slow wage growth, I feel rates are to remain stagnant for some time. Many chief economists are predicting the RBA  will increase the cash rate from mid-to end 2019.

Interest rates are still the lowest they have ever been, however there a number of lenders who are raising rates out of sync with the RBA due to increased borrowing expenses. There are a number of competitive fixed rates available for the more cautious borrower or for borrowers where household expenditure is tight.

Get in touch with your local mortgage broker to discuss how the recent changes in interest rates could better structure your current and future borrowing needs.

_______________________________________________________________________ Raj Ladher from Tomorrow Finance is a mortgage expert with over 11 years’ experience both in the UK and Australian mortgage markets. Accredited with the Mortgage and Finance Association of Australia (MFAA) and access to numerous lenders, Raj specialises in all types of mortgages, from first homeowners to investors increasing their portfolio. For more, email raj@tomorrowfinance.com. au

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