There’s been lot’s of commentary about the budget in the last few days.
One of the best summaries comes from the Property Council of Australia who said:
The Abbott Government’s first budget outlines an economic blueprint to restore the nation’s finances to the black and invest in growth, underpinned by a $50 billion investment in infrastructure – including $11.6 billion for newly announced projects.
The Budget includes a series of cuts targeting welfare, health and industry assistance designed to return the budget to a surplus of $1 billion by FY2018.
It also introduces a two percent temporary ‘Debt Levy’ on personal income tax for individuals earning more than $180,000 per annum. The Government says temporary measure will be repealed from 1 July 2017.
The property industry is not exempt from the budget pain.
The Budget announces:
- ending the National Rental Affordability Scheme (NRAS);
- new pilfering of industry funds held in the Australian Reinsurance Pool Corporation; and,
- scrapping of the Housing Help for Seniors program.
The cuts are offset by some promising initiatives, particularly in the infrastructure arena. These include:
- Infrastructure Growth Package – delivering $11.6 billion of previously unannounced transport infrastructure;
- an Asset Recycling Initiative – providing a 15 percent incentive for states and territories to offload assets to fund new infrastructure; and,
- confirmation of key election commitments such as the $2.55 billion Emissions Reduction Fund, and a 1.5 percent reduction in the company tax rate.
The Budget is the first of the Abbott Government’s major reform statements.
More comprehensive reform is slated for tax modernisation and federal-state relations.
Infrastructure, strategic planning and growth
Infrastructure Growth Package
- The centrepiece of the budget is the Infrastructure Growth Package which builds on the previously announced $39 billion Infrastructure Investment Plan.
- $11.6 billion of new spending is allocated to transport infrastructure in the budget.
- Major new investments include: acceleration of Melbourne’s East West Link; Adelaide’s North South Corridor; the Perth Freight Link; Toowoomba Second Range Crossing; and Western Sydney road upgrades to support Badgerys Creek.
- Details of all projects slated for funding can be found at the Treasury website
Asset Recycling Initiative
- $5 billion from the Infrastructure Growth Package will be allocated to the Infrastructure Recycling Initiative – aimed at incentivising asset sales by states and territories.
- This program will be underpinned by a new National Partnership Agreement.
- States and Territories will receive an incentive equal to 15 percent of the price of all public assets they divest.
Asset Recycling Fund
- An ongoing Asset Recycling Fund will be established at the Commonwealth level.
- This will be capitalised using remaining money from the Building Australia Fund and Education Investment Fund, with further contributions following the sale of Medibank Private.
Housing, retirement living and liveability
National Rental Affordability Scheme to be discontinued
- The final round (Round 5) of the National Rental Affordability Scheme (NRAS) will not proceed – saving $235.2 million over three years.
- Uncontracted funding from earlier rounds – or contracted funding that hasn’t been used within agreed timeframes – will be returned to consolidated revenue.
- Funding for tenanted NRAS properties will not be impacted.
Housing Help for Seniors Programme – scrapped
- Government will not proceed with the Housing Help for Seniors pilot program.
- The program was introduced in last year’s budget to assist seniors downsize to age-appropriate housing.
- A saving of $173.1 million over five years has been booked.
Taxation of retirement village loan liabilities
- The Federal Government has confirmed it will carve out retirement village residential loan liabilities from tax consolidation changes announced in last year’s budget.
- The original proposal threatened to tax retirement village income twice, where the ownership of a village changes due to a company acquisition.
- The carve out will ensure retirement village operators are not subject to double taxation when a retirement village is acquired by a consolidated group.
- This win is a direct result of Property Council advocacy. Taxation and public finance.
Company tax rate – 1.5% reduction from 1 July 2015
- The Federal Government remains committed to cutting the corporate tax rate by 1.5% from 1 July 2015.
- For large companies, the reduction will offset the cost of the Government’s proposed Paid Parental Leave levy, also to be introduced from 1 July 2015.
Foreign resident capital gains tax amendments extended
- The former Government announced it would amend the capital gains tax rules to exclude intercompany dealings between members of the same tax consolidated group – this was relevant to determining whether an entity passes the “land rich” test.
- The “land rich” test ensures assets are not inappropriately double counted.
- It is good news that the proposal will now be extended to exclude intercompany dealings between members of unconsolidated groups.
Temporary Budget Repair Levy for personal income > $180,000 p.a.
- The Federal Government will impose a 2% levy on individuals with taxable incomes above $180,000 per annum.
- The levy will apply for three years, from 1 July 2014 to 30 June 2017, and raise $3.1 billion.
- To prevent high income earners from utilising fringe benefits to avoid the levy, the FBT rate will be increased from 47% to 49% for the period 1 April 2015 to 31 March 2017.
Capital Markets, Finance & Liquidity.
MIT reforms – deferred to 1 July 2015
- The Federal Government will defer the start date of the proposed MIT reforms by 12 months to 1 July 2015.
- The purpose of the MIT reforms is to codify industry practice, provide certainty for the market and slash red tape.
- The deferred start date will provide Government and industry additional time to consult on the measures and make the necessary administrative changes to implement the reforms.
Superannuation guarantee to increase to 9.5% on 1 July 2014
- The Federal Government has confirmed that the superannuation guarantee rate will increase to 9.5% on 1 July 2014.
- The superannuation guarantee rate will remain at 9.5% until 30 June 2018, after which it will increase by 0.5% each year until it reaches 12% in FY2023.
Eco-efficiency, climate change and resilience
Direct Action (the Emissions Reduction Fund)
- The funding commitment of $2.55 billion for the Emissions Reduction Fund has been confirmed in the Federal Budget.
- The Clean Energy Regulator and Department of the Environment will administer the scheme using existing resources.
National Climate Change Adaptation Research Facility (NCCARF)
- The Budget confirms the Coalition’s election commitment to fund NCCARF for a further three years.
- NCCARF will receive $9 million up to FY2017.
Governing smarter and efficient regulation
Reduced funding for corporate regulatory and tax administration bodies
- The Government will cut funding for the Australian Securities and Investments Commission (ASIC) and the Australian Taxation Office (ATO) by $262.9 million over five years.
- The Government will also conduct a review into the potential privatisation of ASIC’s registry function.
Tax compliance and data matching – deferred to 1 July 2016
- Government will defer the commencement of its proposed third party reporting and data matching regime to provide further time to consult on the measures.
- Unless amended, the proposed reporting regime will lead to the same information being unnecessarily collected by government agencies and businesses, duplicating time and costs.
Workforce, skills, industry productivity, innovation and security
Australian Reinsurance Pool Corporation
- The Australian Reinsurance Pool Corporation (ARPC) – a government agency funded by the property industry to underwrite terrorism insurance – will be milked to the tune of $450 million over the coming four years.
- This continues Labor’s malpractice of syphoning industry funds to plug budget holes. This reduces Australia’s preparedness for terrorist attacks.
- Astoundingly, further $1.2 million will be allocated to a study looking at the role of the ARPC into the future.
Australian Building and Construction Commission
- The budget provides $34 million for the coming year to fund a much needed boost to the capacity of the Australian Building and Construction Commission (ABCC).
- This delivers on a key election commitment to enable this cop on the beat to stamp out illegal union activity on construction sites.
Royal Commission into Trade Union Governance and Corruption
- The budget allocates $53.3 million to the Royal Commission into Trade Union Governance and Corruption.
- The Royal Commission will look closely at the conduct of trade unions in the building and construction industry.
- The Royal Commission is scheduled to report by 31 December 2014.
Read More: Property Council Of Australia
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