Just like The State of Origin night, Budget night draws a crowd of millions as the nation waits in anticipation to see what plays will be made by the rainmakers in their pin-striped suits….OK, that last bit is a stretch (*total lie)…but this is the hottest budget we have seen for a long time – and mostly because of the issues around property. The popcorn is at the ready and whether these pre-budget announcements are as wild or mild as they seem will soon be clear.
PREPARE FOR SOME DEJA-VU
It looks like the idea of letting young Australian’s access their super to buy property is off the table with the idea of an assisted deposit savings program touted to make a comeback. Sound familiar? A First Home Savers Account (FHSA) Scheme was introduced in 2008 by the Rudd Government, which estimated that 750,000 Aussies would open an account by 2013, yet according to financial regulator APRA, only 39,000 did. There were many restrictions placed on the accounts which made them a risky way forward – if you didn’t use the savings to buy property you were forced to put it into superannuation – and inflexibility which meant that if you couldn’t keep up with the market, you lost your savings to your 65-year-old self. Let’s hope that if this idea is resurrected, that the delivery will be better.
SUPERANNUATION ISN’T THE SUPER FIX.
Rumour mills were engaged earlier in the year in the concept of a scheme whereby first home buyers were hoping to use their superannuation as (or part of a) deposit for a first home purchase. Seemed like a good idea. Treasury appears to disagree and so do the numbers from CoreLogic last month which affirmed that such a plan wouldn’t help those in Sydney and Melbourne.
While many local markets are strained by a chronic undersupply, the pattern in foreign investment has emerged to purchase property in Australia and leave those properties vacant. Starr Partners CEO Doug Driscoll said earlier this year, “Foreign investment is not the elephant in the room, it is a heard of elephants in the room, and more needs to be done. We need to start addressing the prevalence of empty homes and recognise its impact on the mounting affordability crisis.” Doug suggested that the solution was to introduce a financial penalty or tax on these vacant properties…and it seems someone in Canberra thought so too. Media and economists are predicting a “ghost tax” on vacant properties and land, held by foreign investors.
MEH, JUST MEH
Early reports from a variety of media suggest that Morrison has ‘vowed’ to leave negative gearing untouched, which is good because this was silly. As I have been saying there is no point touching negative gearing – those who have been enjoying it have made their money and to remove it as a carrot for anyone borrowing to invest now won’t help the current supply crisis – it will just make those long term property investments less appealing over the long term if (and only if) the market stabilises for a long time (some say it will). Meanwhile, rumoured Capital Gains Tax (GCT) concessions may have enticed investors to liquidate their investments and to ease the supply deficit, BUT it doesn’t look like this is on the table either. Silly…but budgets have to balance and governments need income to do that. So, meh ¯\_(ツ)_/¯.
NEED A NEW PHOTOCOPIER?
Buy one and write it off…no rush. The instant write-off scheme that has been available to small businesses (up to $2million) since 2015 and which allowed for the entire deduction on income earning assets up to $20,000 to be claimed instantly instead of over several years. The scheme was planned to be reduced to its original cap of $1,000 but it may not only stay at the larger cap but may also be extended to businesses turning over up to ($10million).
HOME, SWEET HOME
Good news for some of Australia’s most vulnerable people is that a scheme may be introduced for affordable housing associations to borrow at lower long-term rates to increase the supply of affordable housing. While we focus on the obstacles that might prevent our owning a home and a supply crisis, it is prudent to remember that the same cities facing affordability issues are also facing crises of homelessness. According to homelessnessaustralia.org.au, there are over 100,000 people experiencing homelessness each night in Australia. A good time to remember the efforts of Damian Cooley in organising the Real Estate Sleep Out for July 24 this year. The event raised $134,000 last year for Father Chris Riley’s Youth of The Street Campaign; the target for 2017 is $500,000.
STATES NEED TO GET ON BOARD, TOO
There have been talks of concessions to superannuation caps for older Australians who are downsizing their family home. The issue is that many older people might be facing barriers to transferring their property into more suitable, smaller accommodation that would give them more liquid capital funds to draw on and presumably free up larger family homes for…families. A good idea, but the stamp duty levelled by the state governments really to force older Australians to give up a lot of cash in the transfer. The Productivity Commissioner’s research back in 2015, found that “Stamp duties act as a barrier to housing mobility, and can discourage downsizing by older Australians”.
THE COSTS OF DOING BUSINESS
Good news for small business, with further cuts to the headline corporate tax rate…the progressive rate is geared to get as low as 25% for all companies.
MAKING IT EASIER
There are also planned schemes to reduce the amount of time it takes for small businesses to complete paperwork, such as BAS, and to increase the speed at which small businesses are paid by larger businesses and government organisations. We’re keen for more details on making it easier to do business.
You can watch a live countdown to budget at before the live streaming begins at around 7.30pm AEST. Follow @Treasury_AU on twitter for live updates if you must pretend you are interested in something other than the budget tomorrow night.