Well, if last year's budget was considered ‘aggressive', this year's Federal Budget could definitely be considered ‘boring' by comparison.
Small business owners were the big winners to come out of the Federal Budget, winning tax breaks and other incentives, while homeowners and the housing sector remained relatively unscathed.
Small business owners
Small business owners will receive a stream of tax breaks and incentives to help them grow and flourish. Lowering of the tax rate from 30% to 28.5% and the ability to claim up to $20,000 in tax deductions for each item they purchase will give small business owners the opportunity to reinvest in their businesses and take their companies to the next level. And considering small businesses are the engine room of Australia, these tax breaks should spell good news for the broader economy and employment.
As part of the 2015-16 Federal Budget, Treasurer Joe Hockey has made changes to strengthen Australia's foreign investment framework. Under these proposed changes, a new fee regime will be introduced which will require foreign investors to pay an application fee of up to $5,000 to purchase residential properties valued under $1 million. Those purchasing a property equal to or greater than $1 million would be subject to a fee of up to $10,000. This would then increase in increments of up to $10,000 for each additional $1 million in property value.
While this application fee may be high enough to deter some foreign investors, we don't believe its high enough to make a significantly impact on the current level of foreign investment activity within Australia.
The Government has also committed to providing $327.7 million extra over the next four years to help vulnerable and disadvantaged families' access childcare. According to the Treasurer, this should help approximately 165,000 parents that can't currently work because of the high cost of childcare.
But while some parents will be given extra help to pay for childcare, new mums who are given Paid Parental Leave by their employer will no longer be able to access the government's Paid Parental Leave scheme.
This move will more than likely encourage new mums to return to the workforce sooner than they might have originally planned. According to Mr Hockey, mums that access the government's Paid Parental Leave scheme and are paid parental leave by their employer are ‘double dipping' and stopping them from doing this was ‘only fair'.
The Federal Government has revealed that there will be no new taxes on superannuation under their watch.
Additionally, the Age Pension will continue to increase, twice a year, this year, and every year — at the highest available indexation rate. The Age Pension is the Budget's biggest expenditure item, costing $44 billion a year. This equates to more than 10% of all government spending. Moving forward, Treasurer Joe Hockey said the pension would be increased so that it remains sustainable and affordable. But while many pensioners will benefit from the announcement, wealthy pensioners with more assets outside of the family home will miss out on any increases to the Age pension as the Government plans to tighten eligibility for those pensioners with higher levels of assets from 1 January 2017.
What this means for you
While it's a bit too early to tell how consumers will react to this year's Budget, it is widely expected that initial reaction will be more positive than last year's.
In the month following last year's announcement, consumer sentiment plummeted 6.8% and didn't recover in 2014.
So it seems this year, the Government is hoping to avoid such a strong negative reaction. Many financial commentators believe this year's Budget acts as an apology for last year's aggressive Budget. In fact, many believe this could be an election Budget.
While last year's budget theme appeared to be ‘pay down debt' this year's looks to be encouraging spending. It's too early to tell whether the Budget will have any impact on buying and selling activity in the immediate future. Auction attendance and clearance rates will definitely be under the microscope in the coming months as an indicator for increased consumer confidence.
With interest rates set to remain at historic lows for the rest of 2015, the housing sector is looking positive for home owners and those looking to buy their first home.