I suspect that aliens may have taken over Smokin’ Joe’s body. The narrative has gone from "Debt and Deficit Disaster" and "End of Entitlement" to everything is going to plan! From talking down the economy to “have a go, spend and borrow”. So what has actually changed? Growth is down and unemployment is up. Debt has doubled. There are storm clouds brewing. So while the budget measures announced do very little for structural reform, they are likely to give an initial boost to retailers such as JB Hi-Fi and Officeworks where much of the business spending will be used for the instant write-off. One could even be a little cynical and suggest that the about-face in narrative is more about personal popularity and shoring up political popularity and position –no, surely not!
There are several measures however that are likely to impact many clients.
While there have been no changes to superannuation tax and negative gearing, there have been significant changes to Centrelink pensions. The LOWER threshold has been increased from $286,500 to $375,000 (carrot), but the reduction taper has been increased from $1.50 to $3.00 (stick). They have also reduced the upper threshold for the assets test significantly from $1.15m to $823,000 (big stick).
Couples with assets between $286,500 and $451,500 will get a slight increase.
Couples with assets between $451,500 and $823,000 will get a decrease.
Couples with assets between $823,000 and $1,151,500 will lose pension payments.
These changes are scheduled to come into force on 1st January 2017 so we do have a little time to consider your individual circumstances, what impact this is going to have on your current and future plan and to consider what strategies might be available to give the best outcomes.
The other big announcement is that if you are self-employed you will be able to claim a tax deduction for items up to $20,000 and claim the full deduction in that year. While it is good if you were planning on upgrading business equipment or a car, you still need profits to make use of the deduction and of course the cash flow to pay for it.
There are many other changes but these are the two that are likely to impact most clients from a planning and strategy perspective.