The Federal Budget was announced on Tuesday night and with a looming election it was full of goodies for all.
I don’t need to tell you that Federal Budgets are as much about winning votes as they are about managing the economy.
Tax cuts are promised with thresholds set to increase in 2023/24 and a rate reduction to come into place in 2024/25.
Obviously this is good news; however it is also a long time away, in between now and the first tax benefit there are two elections. The sceptic in me isn’t confident we will ever see these tax cuts, and already the opposition are voicing similar views. The middle income tax rebate will increase by $550 immediately. Anyone earning less than $80,000 will be entitled to the full rebate.
There will be a one off payment for pensioners, $75 for individuals and $125 for couples.
The instant asset write off will expand and increase with the limit raised from $25,000 to $30,000 and will now also be available for medium size businesses (those with turnover up to $50 million).
There have been some minor changes to make it easier for older Australians to contribute to Superannuation. Those aged 66 will no longer have to pass the work test in order to make a contribution, this includes the option to use the bring forward provision.
Spouse contributions can now be made up until age 74 (up from age 69). These are in line with recommendations from the last Budget that made it easier to contribute to Superannuation.
This provides greater flexibility and opportunity with a number of financial planning strategies.
It is worth noting that this is in contrast to the Opposition’s plans which are more restrictive when it comes to contributing to Superannuation.
In the last Budget the Government proposed that individuals under 25 with less than $6000 in Superannuation would have insurance offered on an opt in basis. Currently many Superannuation funds provide insurance as a default and those who do not want this insurance have to actively opt out. This was originally proposed to begin July 2020, now it will begin October this year.
The Government has allocated a one-off additional funding payment to aged care with a view to improve quality, availability and affordability of aged care. There was a mention of developing an end to compliance framework to monitor care providers. The detail at this stage is light, but this can only be good news to the sector.
The majority of the proposals seem to have positive effects for most people.
Some of the economic data was less favourable, there was mention of a slowing economy and stagnant wage growth.
For this reason it is interesting that they opted for a surplus Budget, a contractionary measure designed to slow the economy.
I guess as I said in the beginning, Budgets are as much about winning votes as they are about economic management and politicians have conditioned the public to believe surpluses are good and deficits are bad.
Alex McKenzie, Future Financial Services
Alex McKenzie is a financial planner, and the owner of Future Final Services in Penrith. He is a graduate of Western Sydney University.