On first glance, it looks like Labor have given up on their chances of winning the next election but are giving it one last shot to win voters over. The budget could loosely be described as a marketing ploy – moreso than usual – with more middle-class welfare bribes, removal of business tax cuts, and a small but highly marketable surplus. 

That surplus has been largely achieved by rushing forward some spending into the current year (seriously!), breaking promises of other tax cuts, reducing foreign aid, and by deferring some spending until the following year – by which time, perhaps, it won’t be their problem and the Liberals will be trying to explain why they are delivering a deficit instead of a surplus like Labor before them.

So, what does the budget mean for property investors, in particular? In short, not much at all. A few key points that might be relevant to you, though, could include;

  • Individual tax rates cut a little further, especially those on low incomes (including those with high incomes, but lots of negative gearing).
  • Property developers and serial renovators operating through a company will see their tax rates left at 30%, instead of being cut as earlier promised. The tax break for green building development (environmental, not colourful) has also been scrapped.
  • However, small businesses can now write-off assets up to $6,500 instead of needing to depreciate them.
  • Companies may also be able to carry-back tax losses to retrieve a refund on tax paid in previous years, from 2012-13 onwards.
  • Non-residents with Australian property will no longer be able to claim the 50% CGT discount for long-term assets.
  • Last year, we were promised a tax offset on interest earned on savings accounts to encourage higher savings; this has been scrapped.
  • The education rebate has also been scrapped, with eligible families receiving set cash payments instead. If you’re not already registered for Family Tax Benefits, might be worth doing so now. There is a cash payment due by EOFY to replace the tax offset in the 2012 returns, although the Liberals have branded it irresponsible and have suggested that they will oppose the measure in Parliament.
  • Individuals earning over $300,000 will now be taxed 30% on their super contributions, instead of the usual 15%.
  • Taxpayers over 50yo with small super balances will not be able to double the contributions threshold as previously promised.

Finally, and perhaps most interestingly, the tax office is also receiving substantial additional funding to help ensure compliance and collect additional tax debts. With the government keen to keep their promise of a surplus, we can be assured that the tax office will have very strong instructions to collect as much revenue as possible.