With a Coalition win in the election, the economy is looking to be more stable in the short-term at least. There are also some short-term opportunities presented by the Coalition’s election policies and through maintaining a “business as usual” approach. What does this mean, however, in terms of benefits to you? How can you capitalise on the available opportunities to improve your quality of life, and work towards living your best possible life?
Like with any election, part of the outcome is about what policies do not make it through from the opposing government. The Coalition’s win is in part, a successful outcome for those not supporting some or many of Labor’s policies, several of which could have adversely affected the financial health of a variety of Australians.
What it means now is that there are good outcomes from the election that can help you with your financial journey, notwithstanding that any new policy will have to go through both houses before it is enacted. Following is a list to digest, knowing that help from one of our Advisers is as simple as making contact with us below. Get in touch today.
1. Firstly, We’re Not Saying Goodbye to Franking Credits
Franking credits are a relied-upon source of income for many self-funded retirees. With Labor’s failure to secure government, self-funded retirees can look forward to keeping their franking credits. Those considering self-funded retirement can also capitalise on the revenue franking credits might add to their income if they hold shares in an Australian company. Talk to an Adviser today. You can also check out our article on strategies to achieve Post-retirement bliss.
2. A Coalition Government is Good News for Negative Gearing
Negative gearing is a winner when the income generated by an investment property is less than the cost of managing the property in terms of interest and depreciation. Under a Labor Government, negative gearing was to be limited to new housing only from 1 January 2020, affecting those looking to purchase investment properties. Whilst investors may have benefited in the short-term from lower housing prices due to an oversupply, the long-term impact would have been unknown. With the housing market already having cooled off, lower house prices would have also affected investors wanting to sell by dropping prices even more.
When it comes to selling, the Coalition has announced they will not be changing the rules around capital gains tax offsets and available deductions. This is a big positive for investment buyers given Labor’s policy to halve the offset from a 50% to a 25% deduction.
The continuation of negative gearing is obviously not great news for first home buyers, however. Labor’s intent was to lower house prices by removing the demand of investment buyers. The benefit now to first home buyers is the 5% deposit scheme introduced by the Coalition.
Invest Blue can help you with personalised advice about investing in property and whether it is the best type of investment for you.
3. First Home Buyers Get a Break with 5% Deposits
Entering the housing market is harder for this generation than ever before, with the difference between wages and house prices increasing exponentially. There is some relief for first home buyers however, with the Coalition’s First Home Loan Deposit Scheme effectively reducing the required deposit amount from 20% to only 5%. The scheme will be available to first home buyers who earn less than $125,000 as a single or $200,000 as a couple, capped at 10,000 loans per year. This should help a proportion of first home buyers get a loan without having to worry about the expense of lender’s mortgage insurance, and move into their own home quicker.
Talk to an Adviser today about how to achieve your dream of owning your own home!
4. Interest Rate Cuts
The RBA on 4 June 2019 announced a widely anticipated rate cut to 1.25%, a cut of 0.25 percentage points that signifies a new record low, with it being the first time the RBA has cut interest rates in nearly three yearsi. The decision was taken by the RBA Board “to support employment growth and provide greater confidence that inflation will be consistent with the medium-term targetii“. This will provide some welcome relief for homeowners in the wake of falling house prices. The cut should enable access to some of the lowest mortgages available to date. Even though this is good news for borrowers, with a slower economy to contend with times will continue to be tough for a while yet. Now could be a good time to consider refinancing your loan to achieve your best possible returns.
5. Stocks & Shares
The Coalition win saw a 1.9% spike to the All Ordinaries directly following the election, with the banks enjoying some of the strongest spikes. This was good news for investors, as the Coalition’s re-election restored confidence in the market. These type of gains are short-term and need to be considered within the context of a long-term investment strategy. Our Financial Planners can help you decipher what investment strategy is best for you.
6. What about Superannuation?
The good news is a Coalition government favours increased superannuation contributions from those nearing retirement. The age for voluntary contributions to be made without meeting the work test will be increased to include 66 and 67 year-olds from July 2020, and those aged up to and including 74 will be able to receive spouse contributions, increased from aged 70.
Invest Blue has a variety of ways to help you maximise your returns from Super.
7. Income Tax Cuts
The Coalition’s proposed change to immediately provide a tax offset for low and middle-income earners will make a difference at tax time, however, this is likely to be delayed. Individuals earning between $48,000 and $90,000 can receive an offset of $1,080 instead of $530 under the changes. This will be $2,160 for dual income earners. The offset gradually decreases between $90,000 and $125,333.
In the longer term, the Coalition plans to flatten the tax structure to lower income tax from July 2024. This change would mean that a projected 94% of taxpayers would be eligible to face a marginal tax rate of 30% or less in 2024-25. Whilst this positive for many Australians, there are still many steps in the process for these major changes to take effect, as well as another election.
8. How about Jobs? How will Jobs Growth Occur?
The Coalition’s main short-term plan with respect to jobs creation is to finish a list of infrastructure projects sitting in the pipeline, however, that is thought to peak later this year. Longer-term jobs growth will come from slow improvement to the Australian economy, that will indeed be a steady-as-she-goes approach. With the RBA predicting GDP growth to be 2.75% over the next two years, inflation running at about 2% – well below the RBA’s 2-3% target band – and weakened consumptioniii, jobs growth will be slow without additional stimulus. The RBA’s rate cut on 4th June 2019 to 1.25% was made with the intention to stimulate employment growth as one of its key objectives.
9. I’m in Small Business
A Coalition government presents some good news for small business. The small business instant write-off for assets under $30,000 is extended until 30 June 2020, from what was $25,000. The offset means businesses can invest – get the equipment, supplies and tools they need – and deduct these expenses at tax time. Back in 2018 the Coalition already dropped the corporate tax rate for SME’s with a turnover less than $50M per year from 30% to 27.5%. A further reduction is on the horizon with the Coalition elected, who has communicated a drop in the corporate tax rate to 25% from 1 July 2021. Check out Invest Blue’s Better Business Program, that is geared at helping a small business minimise risks and grow as a business.
At Invest Blue, we are passionate about helping people realise their goals and dreams so that they can live their best possible life. Get in touch with us today about how we can dive deeper into the details of the financial changes impacting your life, and show you how this can translate to a richer and more rewarding future for you.
i RBA cuts interest rates to a fresh record low
ii Monetary Policy decision statement by Governor Philip Lowe
iii Economic Outlook
What you need to know
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