What Scott Morrison’s win means for Australian investors

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May 18 2019
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Scott Morrison and the Liberal Party have held government, meaning that a spate of tax sweeteners are in the works, as well as assistance for first home buyers.

What Scott Morrison’s win means for Australian investors

Who will get a tax cut?

In this year’s federal budget, the Morrison government moved for Australian taxpayers earning up to $126,000 per year to receive a tax cut.

From this tax time – the 2018-19 financial year – low and middle-income earners will have their tax reduced by up to $1,080 for single earners and up to $2,160 for dual income families.

In addition, the Morrison government plans to reduce the 32.5 per cent tax rate to 30 per cent in 2024-25.

At this stage, the Liberal Party estimates approximately 13.3 million taxpayers will pay permanently lower taxes in 2024-25 as a result of its package of tax changes.

Help for first home buyers

Mr Morrison announced last weekend that, should his party be re-elected, it will allow first home buyers to purchase property with a 5 per cent deposit.

In effect, this means some lenders will provide loans on a 95 per cent loan-to-value ratio.

The First Home Loan Deposit Scheme, which will partner with private lenders, will be available to first home buyers only.

To encourage competition, Mr Morrison said small lenders will also be used to facilitate the scheme.

Investment opportunities to watch

Energy, which was a key focus for both major parties, is set for increased funding injections in the coming years, presenting an opportunity for investors looking at technologies and companies with a focus on renewable energies in particular.

The opportunities created by infrastructure spend is also one to watch. The Morrison government has announced $100 billion in infrastructure spend over the next 10 years, which is about $25 billion more than current levels.

This is an opportunity for investors to capitalise on property markets, for example, which are set for major infrastructure upgrades.

You can read more about the industries tipped for growth here.

What’s off the table under a Liberal government?

Franking credits overhaul

The Shorten Labor government had plans to scrap cash refunds on excess dividend imputation credits, with exemptions for full and part pensioners. This attracted waves of opposition since the policy was first announced in March last year.

Taxes on trusts

Labor also had plans to introduce a minimum 30 per cent tax rate for discretionary trust distributions to adults.

For Labor, the purpose of this policy was to prevent income from being allocated to household members in lower tax brackets.

Superannuation tinkering

Labor had signalled plans to tackle the superannuation savings gap between men and women, although its policy direction wasn’t clear on this.

The federal opposition also planned to reduce tax concessions in superannuation for Australians at the wealthier end of the scale.

For example, Labor planned to reintroduce the 10 per cent test, which essentially restricts the ability for individuals to claim tax deductions for personal contributions.

Further, Labor also planned to set to lower the non-concessional contribution caps and remove the provision for catch-up contributions.

Changes to the threshold, at which high-income earners pay an additional 15 per cent tax on concessional contributions, was also set to be lowered from $250,000 to $200,000.

Subsidies for pensioners and working families

Mr Shorten had also committed to a series of funding injections for working families and Australians on the age pension, including:

- Directing $4 billion to subsidising childcare for Australian parents

- Directing $2.4 billion in dental care for those on the age pension

- Directing $537 million to fund an increase in childcare work

Medicare boost

A policy that was particularly well received was Labor’s plans to invest $2.3 billion over the next four years to help cancer sufferers with the cost of cancer scans, medical appointments and medicine costs.

Mr Shorten’s party planned to direct $600 million towards eliminating all of the out-of-pocket costs for diagnostic imaging, with $433 million put aside to cover specialist consultations for cancer patients.

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