10 May UDIA National Budget Alert
The Treasurer delivered the Federal Budget last week. The UDIA has prepared analysis for members. As expected, the budget did not deliver much for housing affordability, after the success of last year’s budget. However, a commitment to a strong economy and investment in infrastructure remains.
The Budget will deliver a $14.5 billion deficit this year, with a $2.2 billion surplus for the 2019-20 financial year. The continuation of the strong economy provides good news for the development industry.
The Federal Government’s 7-year personal tax plan will reduce the rate of tax, which will result in 94% of tax payers paying no more than 32.5 cents in the dollar compared to 63% if the system were unchanged. The UDIA welcomes measures to increase take-home pay enabling more people to afford to buy a new home. The plan includes:
1. Up to $530 tax relief for low and middle-income earners for those earning up to $90,000, for those earning above $90,000 this decreases to zero. This is delivered though a targeted tax offset through annual tax returns.
2. From 1 July, the 32.5% top tax bracket will be increased from $87,000 to $90,000, this will be further increased to $120,000 in 2022.
3. From 2022-23, beyond the forward estimates, the $37,000 top tax bracket for the 19% tax rate will be increased to $41,000.
4. In 2024-25 the 37% tax bracket will be abolished entirely, and those earning more than 41,000 will pay 32.5% until the top marginal tax rate, which will be set at $200,000.
While, the initial tax cuts are modest, they will help provide allow more people to enter the threshold of home ownership and continued tax cuts will continue to be welcome to ease cost of living pressures.
The budget continues the Government’s $75 billion 10-year transport infrastructure and includes $24.5 billion in new investment, including:
• a $1 billion Urban Congestion Fund – helping to ease congestion in urban areas and around freight connections should help enable further infill development.
• $250 million Major Projects Business Case Fund – we consider this will help secure support for major projects.
The UDIA welcomes increased funding for infrastructure, although we will advocate for the funding to be tied to improvements in the planning system.
The Federal Government will provide $5.2 billion for priority regional and urban infrastructure in Queensland, including:
• $3.3 billion for additional Bruce Highway upgrades, including:
o Pine River to Caloundra ($880.0 million); and
o Cooroy to Curra Section D ($800.0 million);
• $1 billion for the M1 Pacific Motorway (Eight Mile Plains to Daisy Hill and Varsity Lakes to Tugun);
• $390 million for the Beerburrum to Nambour Rail Upgrade;
• $300 million for the Brisbane Metro;
• $170 million for the Amberley Interchange, Cunningham Highway; and
• $64.2 million for new upgrade projects on the Warrego Highway, including Dalby to Miles, Oakey to Miles and the Carroll Creek culvert replacement.
Deductions for expenses associated with holding vacant land
From 1 July 2019, the Government will deny deductions for expenses associated with holding vacant land. Denied deductions which would ordinarily be a cost base element (such as borrowing expenses and council rate) may be included in the cost of the asset for capital gains tax purposes; deductions not ordinarily in the cost base would not be included.
The UDIA is concerned that this measure applies to land where approvals for development are being sought.
The Budget provides an additional $1.6 billion to support 14,000 additional high-level home care packages supporting older Australians to age in place. We hope this will help entice older Australians to move to more appropriate accommodation to age in place, such as liveable, flats and apartments.
The Budget provides a Skills Checkpoint for Older Workers to provide advice on skills and training, in addition to providing up to $2,000 through the Skills and Training incentive.
$17.7 million to support entrepreneurs over 45, continues the Government’s focus on keeping older Australians into jobs.
The Budget did not include many provisions targeted at housing affordability on the demand or supply side. The UDIA maintains its position that infrastructure funding, particularly through city deals should be tied to improvements in the planning system from state and local governments to improve affordability.
We consider tax cuts are likely to result in improved ability for people to access the market on the margins; however, will not resolve the underlying supply side issues.
• $4.8 million to better estimate stock of affordable housing and improve statistics for planning and zoning data, and dwelling construction costs.
• From 1 July 2019 there will be a limit of $10,000 for cash payments made to businesses for goods and services, along with a range of reforms to target the ‘Black economy
• Exit fees banned on superannuation accounts
• ATO will proactively find lost super and have it sent to the active superannuation account
• $3.5 billion Roads of Strategic Importance upgrading key freight routes.
• $4.5 million to encourage more women into STEM education and careers.