The 2018 Federal Budget is focused on cutting taxes for lower and middle income earners, reducing the budget deficit, and supporting selective sectors of the economy, particularly infrastructure. 

As the general election draws nearer, lower and middle income earners were targeted, albeit modestly.

To achieve these tax cuts, the budget will introduce a low income tax offset paid through the annual tax return. This rebate will amount to $530 per year.

Steady economic growth is expected, with the budget expected to return to a surplus in 2019-20 and increasing in following years.

With a focus on boosting productivity over the long-term with reduced journey times, the budget will deliver further support for infrastructure. This will translate into shorter travel time from Melbourne’s CBD to the airport with a new fast rail.

The government will privatise infrastructure assets to redistribute funds into new projects, providing longer-term opportunities for investors. There could be a positive effect on infrastructure investing, which is a sector that can present reliable income with some potential for capital growth, which in a low interest rate environment is attractive.

To encourage retirees to stay at home longer instead of moving into aged care facilities, the budget also announced extra places for aged care in the home.

Superannuation received some minor changes including the provision of annuity products to manage longevity risk, an extension of the Pension Work Scheme, capping total fees on low balance super accounts and increasing the maximum membership of an SMSF from four to six people.

There will be a boost to research and development and further support to the medical research and biotechnology sectors. By growing these industries, the objective is to diversify the economy whilst providing high income jobs. This is unlikely to have a large impact on the economy but will be beneficial for those directly affected.

In summary, the 2018 Federal Budget will have a minor effect on the economy in the next financial year, however the impact will be more substantial for income tax revenues in years to come.

For more information, please feel free to view our full report or contact AMEGA Financial Solutions on 03 9908 3390. We will be uploading further details regarding the budget to our website as it is released.

1. Federal Budget 2018-19 In-depth analysis and commentary on the Federal Budget

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