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Life after the Election

This week at Evalesco, we were fully expecting a Labor party led by Bill Shorten to be heading to the lodge, as was the broader community and investment markets.  That meant for a considerable period of time we were mindful of what life after the election meant for you and your financial plans, as the proposed changes were very significant.

We could list them all, however, it’s now quite clear that we don’t need to!

The most obvious demonstration as to the market’s views was there for all to see yesterday, as the Australian sharemarket soared to an 11 year high and closed up over 1.7% as investors reacted to the election result.  The reason for the dramatic movement is that investors now consider that the many tail risks from what was a significant and far-reaching tax and policy reform agenda from the ALP have now been removed.

What we do need to think about is how will the Coalition’s policies impact:

  • The economy;
  • Wages growth and unemployment;
  • The building industry;
  • Business investment; and
  • The Australian sharemarket.

The Coalition policies are based on the April budget with the inclusion of some modest sweeteners on the campaign trail.

Taxes:

  • Businesses (with a turnover of less than $50 million) can write off tax assets of up to $30,000 to July 2020;
  • Those with incomes of $48,000 – $90,000 will get a tax offset (The Low and Middle Income Tax Offset or LMITO) this financial year, pending the Parliament sitting before 30 June, and for the next three financial years thereafter;
  • In the 2022-2023 FY, the Low Income Tax bracket (19 cent) will lift from $38,000 to $45,000. The 32.5 cent tax bracket will lift from $90,000 to $120,000; and
  • In the 2024-25 FY we will see the 32.5 cent tax bracket drop to 30 cents.

 Health:

  • More medicines on the Pharmaceutical Benefits Scheme (PBS);
  • MRI scan covered by Medicare; and
  • Increased funding ($170 mil to $1.45 billion) on mental health.

 Property

  • The First Home Loan Deposit Scheme. Under this scheme, first home buyers who are struggling to come up with the 20% deposit required by most lenders will be given a chance to apply for a home loan with as little as 5% deposit, without paying lenders mortgage insurance.  The scheme will be available to single first homeowners on incomes up to $125k and couples earning up to $200,000 per year with only a 5% deposit.

The dust will settle and we will have a new opposition leader, but the really good thing, from a planning point of view, is the removal of uncertainty – at least in Australia.

It’s my job to work as my client’s financial ‘lifesaver’ to ensure that they swim between the flags and that they don’t get in over their heads.