On Tuesday 13 May, Joe Hockey announced the new Coalition Government’s first Federal Budget; Stating that their aim is to reduce the federal deficit. If all their proposals pass both Houses of Parliament, the Budget deficit will fall from its current $49.9 billion to $29.8 billion next year. It will then fall to a deficit of $2.8 billion in 2017-18.
A brief overview
- Introduction of a ‘Deficit Levy’ of 2% on people with income over $180,000pa, raising the top marginal tax rate from 45% to 47%. They have stated that this is a temporary levy over three years and will commence 1 July 2014.
- From 1 July 2015 there will be a $7 charge for each currently bulk-billed service. This will be capped at 10 services per calendar year for concessional patients and children under 16.
- Company tax rate will fall by 1.5% from 1 July 2015.
- As of 1 July 2035, qualification for the Age Pension will rise to 70 years. This will be phased in from 1 July 2025. People born before 1 July 1958 will not be affected by this measure.
- Superannuation with increase from 9.25% to 9.50% as of 1 July 2014. As of 30 June 2018 it will continue to increase by 0.50% each year until 2022/23, when it is due to reach 12%.
Decisions that affect the property market
- An increase of $11.6 billion in funding for new infrastructure projects will open up access to development of new dwellings.
- There is no change to negative gearing.
- The CGT tax-free status for owner-occupier homes remained untouched.
- Despite rumours leading up to the Budget, the family home was excluded in pension means testing.
- Experts say that the austerity measures in the Budget will keep interest rates low.
Although there are some measures in the Budget that will remain unpopular with the electorate, the overall assessment is that the property market should remain buoyant despite the cuts.