Battle Lines have be drawn with Negative Gearing

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Attacking Super is an easy target, and other Lessons we learnt from the Budget

budget 2016

 

By now you would have read all the technical commentary around the 2016 Budget and who were the winners and losers…sometimes you have to read between the lines so what are the REAL lessons we have learnt from this latest Budget delivered by Treasurer Scott Morrison .

 

  1. The Government realise that they need to make up ground in the polls before the next election

 

Make no mistake about it this budget was designed simply with the next election in mind, it has been designed to give Morrison and the Liberals the best chance of delivering another Budget in 12 months time…and that Budget… because they will have a further three years to implement the policy will be more critical to the future of Australia .

 

  1. Targeting Superannuation for the wealthy, increasing tobacco excise, cracking down on Multi nationals and tax avoidance by shifting offshore is easy pickings and less political

 

Its less controversial and has less political impact to go after the Wealthy via superannuation, Multi nationals that structure themselves to avoid paying tax in this country and smokers, it impacts less voters and is seen by the majority as good policy. This is not to say the government shouldn’t attack these areas but these are soft targets .

 

  1. The Government see Small Business as critical to stimulating economic growth in this country

This policy appeases the traditional Liberal voter moving into the next election, up to this point there have been disquiet amongst small business owners believing that the conservative party had moved away from its principles around incentivising and supporting small Business. Small businesses will get a tax cut from July 1 this year, with the rate reduced to 27.5 per cent. The threshold for businesses eligible for this will rise from $2 million in annual turnover to $10 million. This will affect about 870,000 businesses and about 3.4 million workers. The lower rate will be introduced to more and more businesses progressively until it is applied to all businesses by 2023-24. By 2026-27, the rate for all businesses will go down to 25 per cent, which the Government hopes will make Australians firms more competitive internationally and will more importantly sure up votes for the upcoming election .

  1. The battle lines have been drawn by leaving Negative Gearing and Capital Gains Tax alone, the current government see this as a huge point of difference from the oppositions policy and will be a focal point in the upcoming election.

This is good news for property investors and the property market in general, and will be used by the government via a scare campaign over the next 8 weeks. Scott Morrison said ” Australians earning less than $80,000 a year accounted for two-thirds of those using negative gearing.”

“They are teachers, nurses, police officers, defence force personnel, office workers and tradespeople,” he said. “We do not consider that taxing these Australians more on their investments, including increasing their capital gains tax, and undermining the value of their own home and investments is a plan for jobs and growth.” *

* Note that this comment is directed squarely to  the demographic of a traditional Labor voter…be prepared for this battle it could be a game changer.

  1. Australian Government’s need longer term in Power to enable implementation of policy 

 

Under the Constitution, the House of Representatives lasts no more than three years after it first meets, but may be dissolved earlier. After the House is dissolved or expires, . The election must be held on a Saturday between 33 and 58 days after the writs have been issued. Putting aside the enormous cost of going to the Polls every third year, if we continue with  three year terms we will continue to see budget’s like this one delivered by Scott Morrison which are more designed to get re employed versus designed to move the country forward. Government’s need time to implement policy and put forward policy in the best interest of the country without the threat of eviction. The reality is that in Australia, Governments only have two budgets in a term to deliver real progress and make the less populous decisions, their last Budget ( like this one) is designed to get re elected. In this fast changing world and volatile economy, governments need to have more time to make the tough decision’s without threat of eviction and in my view 4 years would be a more suitable period.

 

 

David Naylor


Disclaimer: This article contains general information; before you make any financial or investment decision you should seek professional advice to take into account your individual objectives, financial situation and individual needs. Click for more detail regarding this disclaimer.

 
 
 
 

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