Parliament House

Business friendly but announcements have minimal impact on the residential market

In an election year, the 2016-17 budget aimed squarely at continuing Australia’s long run of economic prosperity. GDP growth is forecast to hold steady at 2.5% in 2016/17, before stepping up to 3% after that.

With the global economic environment still uncertain the government focussed on the underlying cash deficit by restraining growth in spending in conjunction with sustainable revenue policies. As a result, the deficit is forecast to decline over the forward estimates.

With the resources ‘boom’ over the government is seeking to use this year’s Budget to a long term “economic plan” that will support Australia’s transition into an advanced and diverse economy.

Business will benefit in the long term by lower company tax rates, although access to the reduced rates will not flow through to our larger companies for many years. The government will reduce the corporate tax rate, ultimately to 25%, on an 11 year phased basis depending on turnover, commencing 1 July 2018.

While not the cornerstone feature of the Budget, infrastructure does receive commitments to more than $33 billion over the 4 year forward estimates for new projects. Key announcements included an additional $594 million over 3 years from 2017 – 18 for the Australian Rail Track Corporation to support the Melbourne to Brisbane Inland Rail Project.

Further out, the future drivers of infrastructure investment may develop out of the Smart Cities Plan. Under this plan, future investment looks set to come from new arrangements between local, state, territory and Australian Government with greater emphasis on technology that could improve the efficiency and productivity of existing assets.

In specific relation to the property sector, following on from its announcement last week, the Government has once again confirmed there will be no changes to negative gearing or capital gains tax arrangements for property investments.

In his budget speech, the Treasurer reiterated that removing or limiting negative gearing “would increase the tax burden on Australians just trying to invest and provide a future for their families.”