I’d like to share some of my observations, particularly around the proposals that will affect the investment and finance world, as well as the economy more generally. Please note, none of these proposed changes are yet law.
 

• After significant changes to superannuation in last year’s budget, it was comforting to see only minor changes to superannuation this year.
   
• Once again, a key focus of the government is a return to surplus. And the government have predicted this to occur by 2020-21. At the end of the day a return to surplus is based on a set of assumptions and it’s anyone’s guess how these will play out. One economic assumption made by the government is that wage growth rises to 3.75% over the next four years, this may be a tad optimistic as wage growth has been falling for almost 10 years (see below graph from Business Insider). This could very well delay the return to surplus.
   
• It is pleasing to see a focus on infrastructure spending. This includes a Western Sydney airport, inland rail and various road projects.
   
• While it is positive to see a focus on increased housing affordability, the risk is that the proposed measure may just push up house prices further. To really tackle the problem, I would love to see a continued focus on addressing the supply issue by unlocking more land and encouraging people to move to less populated areas, supported with a greater infrastructure spend in some of those areas.
   
• A bank levy has been imposed that will raise $6.2 billion over the next four years. Scott Morrison has assured the people that the banks will not pass on this cost to the end consumer, however I find it very difficult to understand how the banks can be stopped from doing this.
   

HOW MIGHT THE BUDGET AFFECT YOU? 

Medicare Levy – From 1 July 2019, the Medicare Levy will be increased from 2.0% up to 2.5% to fund the National Disability Insurance Scheme. So expect a slight fall in your income.

Downsizing exemption to superannuation caps – If you are over 65 years of age and downsize your family home, you will be able to make a non-concessional contribution of up to $300,000 from the sale proceeds from 1 July 2018. The contribution can be made without breaching any of the current superannuation contribution caps, work and age tests.

First Home Super Saver Scheme – From 1 July 2018, first home buyers will be able to withdraw voluntary contributions to superannuation made from 1 July 2017 along with associated deemed earnings for a first home deposit. Under the measure $15,000 can be contributed a year and up to a total of $30,000. Amounts withdrawn will be taxed at a person’s marginal tax rate less a 30% offset.

Pensioner Card – The Government will reinstate the Pensioner Concession Card for pensioners who were no longer entitled to the pension following changes to the pension assets test from 1 January 2017.

If you’d like to discuss your personal circumstances in relation to the Budget – or to discuss financial planning and investment advice more generally – please contact Hewison Private Wealth on 03 8548 4800, email [email protected] or visit www.hewison.com.au

The information provided above is general information only.  It does not consider your needs, financial situation or objectives. You should seek specialised advice from a qualified financial adviser.