01 May 2019
Whichever major party finds itself in power after the imminent Federal Election, Australia’s retail investors can gain most reassurance from the fact that they will probably end up as beneficiaries of an income tax cut.
Coalition Treasurer Josh Frydenberg pitched his Budget largesse at salary and wage earners but spread the net wide at those earning between $30,000 and $200,000 a year, with the maximum tax relief of $23,280 a year accruing to a dual income household with both members on $200,000 a year.
If they were both at $100,000 a year the benefit would be just over $6000, so clearly the best perks go to the highest earners.
That’s the main game for retail investors, with the secondary consideration being that the more money Australia’s wage earners get back in their pockets, the better our retail stocks are likely to do.
And of course a strong economy with low inflation is precisely the kind of big picture backdrop that our investors really need and want.
There are very few perks in the Budget that have been aimed specifically at investors. The only exception is a kinder treatment of people aged between 65 and 67 who want to tip anything up to $300,000 extra into their super by way of non concessional contributions, without having to pass what’s called the work test.
Until now the top age limit for avoiding the work test was 65.
The test, which isn’t in fact that onerous, involves proving you’ve worked 40 hours over a 30 day period, or basically ten paid hours a week. Such a cash splash is most commonly the result of downsizing the family home.
But given we’re actually more likely to get a Labor Government for the next three year, it’s cheering to realise that Opposition leader Bill Shorten plans to outdo Josh Frydenberg’s tax cut offering.
His main focus is people earning below $40,000 a year, but he plans to offer tax benefits higher up the earnings scale that only peter out once people have a taxable income above $125,000 a year.
By way of example Mr Shorten plans to take up the second stage of the Government’s tax cut plan, offering around $550 a year of tax relief for workers earning more than $41,000 a year…even if it doesn’t kick in until July 2022.
To be brutal, it’s quite possible that much of this year’s Budget proposals will end up never being legislated because the Federal Election may put Labor in before the Coalition can legislate any of these measures.
This isn’t wild surmise: Tabcorp has Labor at $1.18 to win compared with the Coalition at $4.00.