The 2019 Federal Budget was handed down by Treasurer Josh Frydenberg on Tuesday, 2nd April at 7:30pm AEST. Taxpayers, commuters, regional Australia and small to medium businesses were among the winners.
Treasurer Frydenberg announced the Australian Federal Budget will be back in the black for the first time in twelve years, with a budget surplus of $7.1 billion dollars forecast for 2019/2020.
What does the Budget 2019 mean for Australian property?
According to Morgan Stanley, the 2019 Federal Budget is unlikely to kick-start property prices or buyer confidence. However, the property market needs stability and this comes through job creation, improved infrastructure and a support package for the small to medium business sector, which this budget delivers.
Small to medium business owners will benefit from improved access to finance, with a $2 billion lending fund announced. This will deliver a direct, positive flow-on effect to the property market.
Currently, if small business owners want to grow their business, they can leverage their home equity to do so. With access to better funding, small to medium business owners can grow their business and use their home loan to upsize their existing property or invest in the property market.
Small to medium business owners with an annual turnover of less than $50 million will also benefit from changes to the company tax rate, which has been lowered to 27.5 per cent. This rate will be lowered further to 25 per cent by 2021/22.
In addition, the Government announced they will increase the instant asset write-off threshold to $30,000 and expand access to medium-sized businesses with an annual turnover of less than $50 million. These changes will apply from 7:30pm AEDT on the 2nd of April 2019 to the 30th of June 2020 and will benefit 3.4 million businesses employing around 7.7 million workers.
The threshold applies on a per asset basis, so eligible businesses can instantly write-off multiple assets. More than 350,000 businesses have benefited from the existing instant asset write-off rules and more businesses will benefit from the extension of this incentive.
Regional Australia is the big winner
The Government has increased planned spending on infrastructure and intends to deliver a total of $100 billion of investment over the next decade (including existing commitments).
The national infrastructure plan includes a new road safety package, a long-term fast rail vision, investment in regional and international airports and funding for improvements to national roads.
Regional farmers affected by the North Queensland floods will also benefit from $232 million in support. The Government will also provide up to $300 million in grants to help flood-affected farmers rebuild damaged farm infrastructure, to replace livestock and replant crops.
Personal income taxes
Australians will benefit from personal income tax cuts planned once 2018/2019 tax returns have been completed at June 30, 2019.
The Government is reducing tax for low and middle income earners of up to $1,080 for single earners or up to $2,160 for dual income families for the 2018/2019 to 2021/22 income years. Taxpayers will be able to access the offset after they lodge their end of year tax returns from 1 July 2019, which is in just 13 weeks’ time.
From 2022/2023, the Government will increase the top threshold of the 19 per cent tax bracket from $41,000 to $45,000 and the low income tax offset from $645 to $700.
From 1 July 2024, the Government is also increasing tax thresholds further and reducing the 32.5 per cent tax rate to 30 per cent.
By 2024, under the proposed changes there will only be three tax brackets: 19 percent, 30 percent and 45 percent.
These changes will benefit both property investors and home owners as they will have more funds available to help pay down their mortgages or save for future investment.
Looking ahead to the next election
The 2019 Federal Budget from the Coalition delivered a strong focus on building a stronger economy and securing a better future for all Australians. This comes through lower income taxes, incentives for small to medium business and increased infrastructure spend.
Australians need to be aware of how these changes will impact them and consider the Opposition’s budget response. Some previously announced Opposition policies could result in significant changes that will affect the property investment market.
For a copy of Budget 2019/2020, click here.