NAB Federal Budget Hub

Bringing you
the Business End
of the budget

Our leading economists and industry experts have analysed the 2016 Federal Budget.
Here you’ll find in-depth coverage of the Budget, with a focus on what it means for you.

Use the dropdown to filter for news specific to your interest.

Close
Article
Pulse Check: Health and ageing after the 2016 Federal Election
The 2016 Federal Election put health issues front and centre. Now with the Turnbull Government…

The 2016 Federal Election put health issues front and centre. Now with the Turnbull Government returned but with a reduced margin and some ministerial changes in the health portfolio, NAB Health consultant Dr Barbara Carney reviews the election results, industry reaction and the implications for the future.

After an eight-week election campaign, the longest in Australia since the 1960s, Prime Minister Malcolm Turnbull has claimed victory albeit with a greatly reduced majority. The pundits have been out in force since election night with their reasons for the result, ranging from the electorate’s disaffection with mainstream politics to the pedestrian nature of the election campaign overall.

The Senate also returned the largest crossbench in the country’s history. It means the government will need to negotiate all major legislation with the crossbench, which has significant implications for the implementation of election policies, as well as, crucially, for the 2017 Budget.

As widely expected Sussan Ley has been reappointed Minister for Health and Aged Care. There’s a new appointment for Assistant Minister for Rural Health with Dr David Gillespie, a former physician and gastroenterologist, stepping into the role, replacing Fiona Nash. Ken Wyatt continues as Assistant Minister for Health.

Health and Ageing dominate

According to JWS Research, a company headed by John Scales, probably the best quantitative pollster in the country – “health was the dominant issue for voters in the 2016 Federal election campaign.”

57% of voters surveyed post-election nominated health issues as a key vote influencer, including 39% who nominated hospitals and health care generally and 33% who mentioned Medicare specifically. (JWS Research, Post-Election Survey, July 2016 – survey conducted 3-5July 2016).

This survey also showed the Opposition’s focus on Medicare in the last two weeks of the campaign had a significant effect – 46% of people who voted on election day nominated Medicare as a vote influencer, as did 41% of those who only made up their minds on how to vote on election day. These numbers are higher than normal for a single issue.

Medicare was the dominant issue for ALP voters at 59%. Coalition voters rated the economy and taxation issues higher than healthcare (69%) with healthcare coming in as most important for 32% of Coalition voters.

Greens voters and people who voted for other parties also rated health issues as most important (52%, with hospitals and healthcare most dominant at 36% and Medicare at 31%).

Aged care was singled out by 16% of voters as a significant issue on its own. However, looking at the JWS survey and other post-election reports, it can’t be ruled out that aged care figured in people’s concerns about health and Medicare.

Likely impact on government policies

There have been some statements, or strong hints, by some in government ranks that a clear, even if tiny, majority in the Lower House gives the Government a mandate to implement in full its budget and election policies no matter how unpopular with crossbenchers, or voters. This would include the continuation of the freeze on MBS rebates. Others, however, including members of the government’s backbench have called for a more consultative approach that attempts to make key stakeholders, especially doctors, part of the solution.

Treasurer Scott Morrison, asked whether he would end the rebate freeze, said the Medicare system needed to be sustainable. “You can’t expect Medicare into the future if you can’t fund it. To fund it you have to have a strong economy and to have a strong economy you also need to have your fiscal setting right. These issues are interdependent.” ( The Australian, 7 July 2016).

Some backbenchers, such as Dr Andrew Laming, a former GP and ophthalmologist, Queensland MP Warren Entsch, and West Australian Senator Chris Back, have said the government needs to listen to voters.

Dr Laming suggested a shake-up of the system which could see payments to clinicians based on quality and not quantity. He said this shift would reward doctors who oversaw improvements in patients’ outcomes and not those who saw large volumes of patients without producing results.

“The shift to quality is where the debate needs to go and is going that way in other countries,” said Dr Leming. “The only promising path in health reform is paying for quality. There are plenty of resources for high-quality healthcare if we could remove the waste, duplication and mismanagement. Ultimately we’ve got to pay for outcomes.” (The Australian, 7 July 2016)

Meanwhile, Warren Entsch has said the Government “had to move very quickly to reassure the public that Medicare would not be privatised” and the payments system would be improved. (The Australia, 7 July 2016).

Peak body reaction

Ageing

The Council on the Ageing (COTA) has called for the modelling for the current $1.6b Aged Care Financing Instrument Budget (ACFI) cuts to be made public. COTA CEO Ian Yates said the measure is unacceptable in its current form and has called for moderation and restoration of funds. COTA has offered the alternate suggestion of a voucher system. COTA acknowledges that the sector is “more viable” than previously, though acknowledging the view that struggling facilities should exit the industry.

Senator Nick Xenophon has promised to delay the ACFI cuts in the Senate until the government reveals the full analysis. (Australian Financial Review, 14 July 2016).

Doctors

Soon after congratulating the government on its election win, the Australian Medical Association (AMA) called for a complete review of the Coalition’s health platform.

In a media release on July 11 AMA President Dr Michael Gannon said the government should “immediately lift the freeze on Medicare patient rebates, scrap changes to bulk billing incentives for pathology and medical imaging, and increase public hospital funding”.

“The AMA agrees health funding must be sustainable well into the future and this will require a sector wide examination of approaches to prevention, public health, the ageing population and the significant increase in the incidence of chronic and complex disease,” he said.

“This will require investing more, not less, in primary health care, and keeping people out of more expensive hospital care where possible. We need to find a way to sustainably fund the health system but, at the same time, we must protect the health of the most vulnerable in our community.”

Dr Gannon said the AMA wants the Health Minister to have “a very strong voice in Cabinet” to ensure health policy is not dominated by the “considerations of the Department of Treasury or Finance”.

In an ABC Sydney radio interview on 15 July Dr Gannon said: “What we have seen in the past going back to the 2014 Budget was a desire by the Coalition to introduce a co-payment to try and work out ways those who can afford it can contribute more to the cost of their healthcare. The reason that proposal failed so badly is because it didn’t give the opportunity for individual GPs to make a judgement, knowing their patients well, who can and can’t afford a modest amount of money. We need to be open to all different conversations and that should be part of the conversation in unravelling the freeze.”

There’s been a beat up in some sections of the media that this comment amounts to advocacy of a GP co-payment. However, as can be seen, Dr Gannon is calling for a consultative discussion on sources of savings within the health portfolio, mindful of the difficulty of the task .

Community Pharmacy

Pharmacy Guild CEO David Quilty has pledged the Guild’s commitment to “working closely” with the Government and other stakeholders, as well as stressing the importance of maintaining the sector’s profile.

“With some 50 new Members and Senators there is significant turnover in the 45th Federal Parliament making it critical that the Guild and our grassroots members around Australia are visibly demonstrating the unique and vital contribution of community pharmacies to patient care and the wider health system,” he said in the Guild’s fortnightly e-newsletter.

Quilty identified the launch of the rollout of the Pharmacy Trail Program (PTP) as one of the most important priorities for the sector. “In terms of outstanding policy issues first and foremost it is vital that the benefits of the Sixth Community Pharmacy Agreement (6CFA) are delivered in full and on time,” he said. “Due to the late signing of the 6CPA and the early Federal Election the rollout of the PTP is behind schedule and needs to be fast-tracked.

“The Guild is committed to working with pharmacy organisations, patient groups, health professional bodies and research organisations to ensure these community pharmacy-based trials are of the highest calibre and rolled out as expeditiously as possible.

Quilty said the Guild would continue to work closely with the Pharmaceutical Society of Australia (PSA) to ensure the work they jointly undertook in the run-up to the 6CPA negotiation “comes to fruition in the PTP”.

“To that end, the Guild has submitted proposals to the Call for Ideas for the second tranche of the PTP that reflect this joint Guild/PSA work in the areas of prescription renewal, minor ailments, and anti-coagulation monitoring. In the coming weeks it is likely that the discussion paper for the Pharmacy Remuneration and Regulation Review will be released. The Guild will make a comprehensive submission to the Review and encourage our members and with their patients to do likewise, as well as attending the community meetings being held around the country.”

In summary

Overall the position of medical and other health practitioners, pharmacists, hospitals, insurers and consumers in the health care system has changed little since the Federal Budget in May.

Major reviews into Medicare, General Practice, Private Health Insurance and Pharmacy Remunerations and Locations are ongoing. All are due to be concluded this year, certainly in time for any outcomes to be factored into the 2017 Budget. But how this factoring is done depends very much on how soon and how well the government learns to get on with the new Senate crossbenchers. And all this with the savings from the 2016 Budget still not legislated.

Yet again, it will be a period for “vigilance and valour” in the health care arena.

Disclaimer: Pulse Check is a weekly/fortnightly article prepared for use by NAB by an independent consultant. It contains information about issues related to the health and aged care industry and Federal Parliament and politics. The information is not advice, and should not be treated as such. Any opinions expressed are those of the author only, not of NAB. Please contact barbaracarney@rocketmail.com with any queries or comments.

More from NAB:

Read More
Close
Video
Alan Oster’s Budget Breakfast Report
Verdict: See what Alan Oster makes of #Budget2016

A budget that speaks to jobs, growth, fairness and sharing the burden – Alan Oster delves into #Budget2016 off the back of NAB’s Melbourne Federal Budget Breakfast.

Watch Now
Close
Video
Budget 2016 report for Australian Business
A 'positive signal' for business is how NAB Business EGM Cindy Batchelor sees the key themes of last night's Budget. Check out what else she has to say on what Budget 2016 means for Australian Business.

The mood this morning is good and we see Australian Business able to go forward with confidence – Cindy Batchelor, NAB Business Executive General Manager hails Budget 2016 as ‘positive’ for Australian Business. An array of tax cuts and the Government’s promise to build on what was handed down to Australian Business last year is covered off by Cindy in this video. See what else she has to say about what Budget 2016 means for Australian Business.

Watch Now
Close
Video
MLC’s video analysis of the 2016 Federal Budget
Hear from Peter Hogan, Senior Technical Manager, MLC Technical Services to find out who the winners of this year’s Budget are, and the significant changes to superannuation.

With the recent release of the Budget it can be difficult to make sense of what it could mean for you. In this video, we’ve outlined the key superannuation and tax related changes and how they may impact your ability to invest for retirement.

Watch Now
Close
Video
NAB’S view of tax changes for business and families
Stephen Southon, Chief Tax Officer NAB, provides an overview of the tax changes announced in the 2016 Federal Budget and how they will impact Australians.

Stephen Southon, Chief Tax Officer NAB, provides an overview of the tax changes announced in the 2016 Federal Budget and how they will impact Australians.

Watch Now
Close
Article
What does the Budget mean for Agribusiness?
NAB Federal Budget Insights 2016-17.

The 2016-17 Budget includes a number of measures for agriculture, relating to water and drought, infrastructure, innovation and trade as well as revenue and savings measures.

For full analysis, download report (PDF, 683KB)

Read More
Close
Video
Federal Budget outcomes for Small Business
Check out what Leigh O’Neill, NAB’s Executive General Manager for Small and Micro Business makes of this year’s Federal Budget – and what it means for Australian Small Business.

Over 90,000 additional businesses are set to benefit from tax rate cuts, thanks to an increased threshold from $2m – $10m. It looks like Small Business has again come away as a winner from the 2016 Federal Budget.

Watch Now
Close
Video
Alan Oster’s 2016 Federal Budget verdict
Find out what NAB Group Chief Economist Alan Oster makes of this year’s Federal Budget and what it means for you.

Corporate tax cuts for small and medium business, stimulating growth, infrastructure, health and education are just a few of the things to come out of Scott Morrison’s Budget. For more information on what Australians can expect to see, NAB Group Chief Economist Alan Oster provides his initial reactions to the 2016 Federal Budget.

Watch Now
Close
Article
What the Budget means for Business?
The budget… is an exercise in selected refocusing of outlays and receipts to achieve the Government’s focus of growth and jobs.

There are a wide range of initiatives in this year’s Federal Budget. We’ve broken it down for businesses by sector

For full analysis, download report (PDF, KB)

Read More
Close
Video
Tom Elliott’s take on the 2016 Federal Budget
Tom Elliott deemed this as a budget that's 'fantastic' for companies. See what else he has to say about the outcomes of the 2016 Federal Budget.

A ‘neutral’ budget with a focus on business is what Media commentator Tom Elliott paints as the crux of Budget 2016. See what else Tom makes of the 2016 Federal Budget and what it means for Australians.

Watch Now
Close
Article
What does the Budget mean for Infrastructure?
Infrastructure commitment remains but little extra funding in this Budget.

 Key initiatives:

  •  The Government continues the $50bn investment in infrastructure that started in 2013-14 and ends in 2019-20.
  • Western Sydney airport preparatory works will receive $115.1m over two years from 2016-17 for the Badgerys Creek site. Some $26.2m of this is for concept design of rail facilities. The bulk of remaining funding is for specialist advice and planning, site management and security and minor land acquisitions.
  • In Western Australia (WA), $490m has been earmarked for the Forrestfield airport link that connects Perth’s eastern suburbs to the city. This money was announced in April as a measure to maintain WA’s GST share, and is now budgeted.
  • The Budget allocates $43.8m over four years to establish the Commonwealth entity called Northern Australia Infrastructure Facility (NAIF), which will administer financing to major projects in northern Australia.
  •  The Government has committed up to $593.7m over three years from 2017-18 in additional equity to the Australian Rail Track Corporation (ARTC). The equity should assist purchase of land and other preconstruction activities for the  Melbourne to Brisbane Inland Rail link. The funding is contingent on an equity funding agreement still to be developed between the Commonwealth and ARTC.
  • A National Water infrastructure loan facility of $2bn in concessional loans will go to the states and territories for dams and pipelines over 10 years.
  • Reallocation of $1.5bn in funds previously allocated to East-West Link to other Victorian infrastructure projects, including the Western Ring Road ($350m), Murray Basin Rail Project ($220m), rural and regional roads ($345m), urban congestion ($75m) and Melbourne Metro business case ($10m).
  • Projects with funding already met from the Infrastructure Investment Program include Perth Freight link ($260m) and Ipswich Motorway ($200m).
  • There are savings of $162.7m from uncommitted project contingency, of which the bulk ($150.4m) is achieved in 2019-20.

For full analysis download the report (PDF 843KB)

Read More
Close
Article
What the Budget means for your personal and business tax?
The budget delivers benefits to more small businesses.

This year’s budget delivers benefits to more SMEs.

Key Initiatives:

  • Raising the 32.5% personal income tax threshold from $80,000 to $87,000 from 1 July 2016.
  • Major SME tax changes – the small business threshold will be increased to $10m, reduced tax rates for small business and lower barriers to access small business tax concessions.
  • A phased reduction in the company tax rate over 10 years to 25% under a Ten Year Enterprise Tax Plan including tax simplification and increasing integrity.
  • Significant new measures directed at tax avoidance for multinationals, eg, a diverted profits tax, hybrid mismatch measures, strengthened transfer pricing rules.
  • Changes to superannuation:

- Concessional contributions cap cut to$25,000 from 1 July 2017.

-  Concessional contributions catch-up for account balances of less than $500,000.

- Superannuation contributions tax (extra 15%) for incomes greater than $250,001.

- Integrity measures for transition to retirement income streams.

For full analysis, download report (PDF, KB)

Read More
Close
Article
What does the Budget mean for Individuals?
Read the significant changes to superannuation in the 2016 Federal Budget analysis.

Treasurer Scott Morrison has handed down his first Federal Budget – the Coalition Government’s third. The winners are low and middle income earners, unemployed youth and small business, and there are significant changes to superannuation.

For full analysis download the report (PDF 763KB)

Read More
Close
Article
What does the Budget mean for Education?
The higher education sector is still facing unresolved issues following the Budget.

 Key initiatives:

  •  An additional $1.2bn over four years, commencing 2017-18 for government and non-government schools. More broadly, total funding for schools is expected to grow by 3.6% per year, with adjustments for changes in enrolment.
  • In real (inflation-adjusted) terms, funding for public schools will increase by 11.1% between 2016-17 and 2019-20, and 7% for private schools.
  • An additional $118m is expected to be provided over 2016-17 and 2017-18 for school students with a disability.
  • Unlike schools, higher education faces funding cuts. In real terms, higher education expenses are expected to decline 2.4%, reflecting the Government’s decision to delay the full implementation of higher education reforms announced in the 2014-15 Budget and Mid-Year Economic and Fiscal Outlook (MYEFO) until January 2018. Expenses between 2016-17 and 2019-20 are expected to decrease 7.7% in real terms, due to the reduction of Commonwealth Grant subsidies from 2018.
  • The Government has decided not to proceed with the deregulation of university fees announced in the 2014-15 Budget. However, it has released a paper (Driving Innovation, Fairness and Excellence in Australian Higher Education), which considers a range of options including:

- A 20% cut for bachelor degrees.

- A lower income threshold for repaying Government debt.

- Raising the student payment burden from 40-50%.

- Flexibility around the deregulation of fees for courses considered ‘flagship’.

- Recovering income from deceased estates for those who die with unpaid HECS debt.

  • In nominal terms, the Government is expecting cuts of around $2bn stemming from this review, with the bulk of the cuts expected between 2018-19 and 2019-20.

For full analysis download the report (PDF, 923KB)

Read More
Close
Article
What does the Budget mean for Health?
We take a look at the impact the Budget has on the health care .

NAB’s view:

  • Public hospitals will benefit from an additional $2.9bn in funding, restoring some of the funding cut in 2014-15.
  • Extending the indexation freeze for the Medical Benefits Schedule (MBS) will impact revenues for health care practitioners, who may pass additional costs to consumers. This could potentially impact demand for services.
  • Announced changes to the dental sector represent a consolidation of existing programs, with a modest contraction in total Federal funding (in contrast to the $1.7bn headline value announced).

For full analysis, download report (PDF, 689KB)

Read More
Close
Article
What does the Budget mean for Small Business?
Small business a winner in the 2016-17 Budget.

The Budget delivers on key tax measures for small business.

Key initiatives:

  • The company tax rate will be cut to 25% over 10 years. From 2016-17 the tax rate for businesses with annual turnover under $10m will be 27.5%. The $10m threshold will be gradually increased so that all companies face a 27.5% tax rate by 2023-24.
  • After 2023-24 the tax rate on all companies will be cut to 27% and then cut by one percentage point until it reaches 25% in the 2026-27 tax year. Franking credits will be distributed in line with the rate of tax paid by the company making the distribution.
  • The tax discount for unincorporated small businesses will be gradually increased from the current 5% to 16% by 2026-27 and the current annual cap of $1,000 per individual will be retained. Access to this tax discount will be extended to individual taxpayers with business income from an unincorporated business that has annual turnover of less than $5m, up from the current $2m.
  • The tax threshold for small businesses will be lifted from $2m to $10m from 1 July 2016. The existing threshold value will be retained for access to the small business capital gains tax concessions. Access to the small business tax discount will be limited to businesses with turnover less than $5m.
  • Division 7A of the Tax Acts has posed problems of complexity and uncertainty to many businesses. The rules will be made clearer and outcomes more certain and inadvertent breaches of 7A will have a self-correction mechanism.
  • The Wine Equalisation Tax (WET) has been a controversial arrangement and the rebate cap is to be cut from $500,000 to $350,000 in July 2017 and further to $290,000 in July 2018. Tighter eligibility criteria governing access to the rebate will also be introduced.
  • The pro-innovation measures that followed on from last year’s National Innovation and Science Agenda have been refined. These include cutting holding periods for investors to be able to access the capital gains tax exemption, putting a $50,000 cap on non-sophisticated investors claiming a tax offset and putting time limits on incorporation and setting criteria to identify a start-up innovation company.

For full analysis download the report (PDF, 1MB)

Read More
Close
Article
MLC’s analysis of the 2016 Federal Budget
Treasurer Scott Morrison has handed down his first Federal Budget—the Coalition Government’s third. The winners are low and middle income earners and small business owners.

Treasurer Scott Morrison has handed down his first Federal Budget—the Coalition Government’s third. The winners are low and middle income earners and small business owners. There are significant changes to superannuation that could warrant further discussion with your financial adviser.

For full analysis, download report (PDF, 161KB)

Read More
Close
Article
NAB Group Economics’ Budget Commentary
Budget Commentary 2016 – 17
  • This Budget clearly has a political as well as economic dimension – and in particular is framed against the assumption of an upcoming election.
  • As such it is really an exercise in selected refocusing of outlays and receipts to achieve the Governments focus of “growth and jobs” – but achieved within a realpolitik framework of burden sharing and keeping debt at sustainable (AAA) levels.
  • The current environment means there is little scope for large structural reforms.
  • And with a Budget not likely to get back to surplus by 2020/21 – and then only marginally – it clearly remains vulnerable to the vagaries of the economic cycle.

Comments

This Budget clearly has a political as well as economic dimension – and in particular is framed against the assumption of an upcoming election. As such it is really an exercise in selected refocusing outlays and receipts to achieve the Governments focus of “growth and jobs” – but achieved within a realpolitik framework of burden sharing and keeping debt at sustainable (AAA) levels. The current environment means there is little scope for large structural reforms. And with a Budget not likely to get back to surplus by 2020/21 – and then only marginally – it clearly remains vulnerable to the vagaries of the economic cycle.

Key measures are largely as “signaled” in recent days. On improving the ‘equity front”: there is the raising of the 32.5% personal income threshold from 80k to 87k (to help offset some effects of bracket creep), tougher rules on top end superannuation (lowering the threshold for the higher tax on super from $300k to $250k and imposing annual and lifetime caps on extra super contributions) and easing the tax treatment of super for lower to middle income contributors. Also on the equity theme is stricter enforcement of multi- national tax (essentially a “Google tax with diverted income to be taxed at 40%)

On the adding to “growth” theme is business tax cuts (from 28.5% to 27.5% for small and middle business (with the turnover threshold raised to $10m). Thereafter the turnover limit is progressively raised till all business gets the rate by 2023/34 and the rate then falls to 25% in 2024/25. There is an extra benefit in that the investment tax write off has been extended for an extra year. That said, the size of the near term cuts are limited (around $5.3bn over 4 years) – and our modeling suggests very small near term benefits. There is also extra money for infrastructure $5bn; extra money for health ($2.9bn); and education ($1.2bn – albeit much less than full Gonski). Also helping to repair the Budget bottom line is the (12½%) increase in tobacco taxation.

Outlays remain under 26% of GDP before moving a touch lower in the long run. By way of context, outlays peaked at around 27% during the GFC stimulus and before that around 23% of GDP. Revenue still does most of the repair job on the budget balance with a combination of policy and economic recovery. Overall net debt peaks a touch higher in 2019 at 19.2% (previously 18.5%) and starts to edge lower thereafter. Rating agencies have been much more guarded in their reaction than usual. As set out in the “Medium Term Economic Outlook” the Budget would represent a slight drag on economy going forward (around ½% per annum) and as such is probably doable.

Of course the Budget may not be the final word on medium term fiscal sustainability given the forthcoming election campaign. Our bottom line is there is not a lot of scope for pulling further “rabbits from the hat”. And that Budget repair will be a long and difficult “slog” given the economic environment. We are more cautious in 2018/19 forecasts.

Fiscal Outcome

Estimates of the underlying cash deficit are slightly larger at A$39.9bn (2.2% of GDP) in 2015/16 and $37.1bn (2.4% of GDP) in 2016/17 (slightly below market expectations – but near NAB’s). The projected deficit then moves down through the out-years with an eventual return to surplus in 2021/22.

Economic Outlook

There is little fundamental difference between Treasury’s and NAB’s economic forecasts in the next few years. A sharp increase in commodity export volumes, offset by subdued domestic demand, remains the common theme. However, NAB forecasts shift notably more pessimistic as we move into the forward projections (from 2018-19) reflecting significant headwinds as LNG exports reach their peak band the dwelling construction reduces. Over the forward estimates, expectations for the unemployment rate are similar, easing to around 5½% in the near-term before stabilizing. On the nominal GDP forecasts, NAB and Treasury expectations are similar in 2016-17 (around 4¼%) but the Treasury’s 2017-18 forecasts are more optimistic.  A real concern for the Budget repair path.

Financial Markets

There was little discernible market reaction to the Budget. Ratings agencies have been circumspect in their initial reaction to the Budget, and have not provided their typical rubber stamp, most choosing instead to allow more time for analysis.

For full analysis, download report

Disclaimer

Read More
Close
Article
A no surprises budget
Tonight’s budget contains relatively few surprises.

The forecasts imply a return to surplus by 2020-21, unchanged from last year and are based on modest expenditure restraint and an expected recovery in revenues. Modest expenditure restraint seems appropriate to the economy’s current circumstances. Forecast recoveries in revenue, in truth, have not been forthcoming in any budget since the GFC and is again a risk to the current forecast. S&P has made the following very short statement: “Our current rating on Australia is ‘AAA/Stable’. We will look through the details of the budget over the coming weeks. As we’ve previously highlighted, improving budget balances remain important to the rating to offset Australia’s high vulnerability to shifts in offshore financial market sentiment.” The comment suggests much may hinge on whether the agency believes the government’s forecasts for improved budget balances over the next four years.

Read More
Close
Article
RBA, Budget and Election Announcement!
It was a big week for Australian markets last week with a raft of data, a potential rate cut by the RBA, the 2016-17 Federal Budget and the likely announcement of an early 2 July Double Dissolution Election.

Key Points:

  • Another busy week on the cards in Australia. NAB narrowly expects a rate cut by the RBA tomorrow, just before the Budget is announced tomorrow night.
  • This week we summarise the main measures rumoured to be in the Budget. These include infrastructure spending, medium-term company tax cuts, tighter rules on multinational taxation, modest adjustments to the $80,000 income tax threshold and the tightening of concessions for superannuation for higher income earners.
  • Overall, the Government is expected to produce a budget that seeks to continue to slowly improve the budget over the medium term.
  • There are also important US data releases this week, which will likely keep two US rate rises in play for this year, slightly more than currently expected by US markets.

For full analysis, download report

For further FX, Interest rate and Commodities information visit nab.com.au/nabfinancialmarkets

Disclaimer

Read More
Read More
Close
Video
Alan Oster Federal Budget Preview 2016
Listen to Alan Oster, NAB Group Chief Economist, provide his Federal Budget Preview for 2016.

“We’re looking to see what the economy will do to the budget,
and what the budget will do to the economy.”

Watch Now
Close
Article
10 strategies for business owners to get EOFY ready
The end of financial year is the time for business owners to get things in order. Here are 10 strategies that could help you build and protect your personal and business wealth in a tax-effective manner.

The end of financial year is the time for business owners to get things in order. Here are 10 strategies that could help you build and protect your personal and business wealth in a tax-effective manner.

Strategy 1: Manage your Capital Gains Tax (CGT)

If you make a capital gain on the sale of an asset this financial year, you can use any capital losses you may have realised in the past to offset your capital gain.
You may also wish to consider the timing of selling your assets in order to manage your cash flow more efficiently.

If you’re self-employed¹, another option is to make a personal deductible super contribution² with some, or all, of the sale proceeds. The tax deduction you claim could reduce, or possibly even eliminate, your capital gains tax liability.
Note: To be eligible to claim a personal super contribution as a tax deduction, other conditions apply. Talk to a NAB Financial Planner to find out more.

Strategy 2: Bring forward your expenses

To manage your cash flow more efficiently, you could bring forward expenses. For example, consider pre-paying 12 months’ income protection insurance premiums outside super before 30 June. Also, look at carrying out last minute maintenance to business or investment properties.

Strategy 3: Structure asset purchases to maximise cash flow

Keeping your income producing assets up-to-date helps keep your business operationally efficient. The way these assets are funded and the amount of cash locked into them should be reviewed periodically. NAB Asset Finance Specialists work with you to structure financing and repayments to suit your tax and cash flow needs – helping you reduce your operating costs and increase productivity whilst freeing up cash.

Most depreciable assets can be funded, often with no upfront deposit – helping you to secure vehicle and equipment finance before 30 June4. Subject to your circumstances, you may also be entitled to claim an input tax credit for GST included in the price of the asset acquired and, generally, the interest you pay plus the depreciation of the asset should be tax deductible to the extent the asset is used in your business.

Strategy 4: Check your eligibility for small business tax regime

Small business entities with a gross turnover5 of less than $2m may be eligible for a range of tax benefits, including simplified depreciation and CGT concessions or exemptions. It’s worthwhile regularly checking your eligibility in relation to these concessions or exemptions.

Strategy 5: Establish a Buy/Sell agreement

If you’re in business with other people, consider establishing a Buy/Sell agreement as part of your broader succession planning. This can help ensure business ownership is transferred in an orderly manner in the event of death or disability.

Strategy 6: Capitalise on existing concessional caps and avoid excess contributions

The opportunity is limited to make larger tax-effective contributions from your pre-tax money just before retiring. So, it’s really important that you make the most of your contribution cap2each financial year to boost your super balance (if your cash flow allows it). It’s also important to be aware of the consequences of contributing too much into super, as the tax costs for making excess contributions can be enormous.While super is still a very tax-effective place to save for retirement, the benefits can be unwound if you put in too much.

Strategy 7: Invest the sale of your business

If you’re selling your business to retire, you may want to use the money to make a personal after-tax super contribution6 and start a superannuation income stream, such as an account based pension. Compared to investing outside super, this strategy could enable you to receive a more tax-effective income to meet your living expenses; and preserve more of your investment capital. Depending on your circumstances, you may also be eligible for a range of capital gains tax concessions that apply if you are disposing of your small business assets in connection with your retirement.

Strategy 8: Invest personal assets in super

Because of the tax-effectiveness of investing in super, if you currently hold an investment in your own name you may want to cash it out and use the money to make a personal after-tax super contribution6. This could be up to $540,000 per person this financial year7. This strategy can be particularly powerful if your money is currently invested in a term deposit or other asset where you don’t have to pay capital gains tax (CGT) on withdrawal.

But even if you have to pay CGT when selling assets like shares, investment properties and interests in unit trusts, the benefits of putting the money into super could more than compensate for your CGT liability. You may also be able to use other strategies to reduce or eliminate your CGT bill.

Strategy 9: Grow your super without reducing your income

If you’re an employee aged 55 or over, there may be a way to save more for your retirement without reducing your current income.  This involves:

  • arranging with your employer to put part of your pre-tax salary into a super fund2
  • investing some of your existing super in a transition to retirement pension (TRP8)
  • using the regular payments from the TRP to replace the income you sacrifice into super.

If you’re self-employed¹, this strategy still works if you make personal deductible contributions2, instead of salary sacrifice contributions.

Strategy 10: Protect yourself and your family

In addition to building up your super, it’s important you have enough insurance to safeguard your financial plans and protect your family. So it’s worthwhile considering taking out total and permanent disability (TPD) and life insurance, and you can do this through super or via a personal policy in your own name. When purchasing these insurances through a super fund, there is a range of upfront tax concessions generally not available outside super.  For example, if you’re:

  • self-employed¹, you can generally claim your super contributions as a tax deduction2 – regardless of whether they are used by the super fund to purchase investments or insurance, or
  • an employee and are eligible to make salary sacrifice contributions2, you may be able to buy insurance through a super fund with pre-tax dollars.

These concessions can make it more affordable3 to purchase life and TPD insurance in a super fund, or enable you to purchase a higher level of cover than you could otherwise afford. Another type of insurance you could purchase within a super fund is income protection. If you suffer an illness or injury and are unable to work, income protection can pay you a monthly benefit (typically up to 75% of your pre-tax income) to replace lost earnings.

Sit down with a financial planner and look at the different strategies. Each has the potential to make a significant difference to your financial situation now and in the future. But you’ll have to take action before 30 June to benefit from some of the opportunities available this year.

To find out more and book an appointment, go to nab.com.au/financialplanning

Footnote:
1. To be eligible to claim a tax deduction for the contribution, you must earn less than 10% of the total of your assessable income, reportable fringe benefits and reportable employer super contributions from eligible employment. Other conditions also apply.
2. Personal deductible super contributions, employer contributions (including salary sacrifice) and certain other amounts will count towards a concessional contribution cap. Concessional super contributions currently are capped at $30,000 pa, for people aged 48 or under on 30/6/16 and $35,000 for people aged 49 or over on 30/6/16. To be able to salary sacrifice your super, you need to have an effective salary sacrifice agreement in place with your employer prior to the income being earned by you (or in other words, the agreement must be in place before you perform the work to earn the income).
3. Tax may be payable on death and TPD benefits paid from within super. To make a provision for tax, you could increase the sum insured. While this will generally increase the premiums, the after-tax cost may still be lower than insuring outside super, when you take into account the upfront tax concessions available. You must also meet a condition of release under superannuation laws to be able to draw upon your insurance benefit.
4. Approval criteria apply.
5. Turnover is gross of any expenses and is net of GST that is charged on sales. It includes the sum of the entity’s turnover for an income year and the annual turnover of any entity that it is connected or affiliated with during that income year.
6. Personal after-tax super contributions and certain other amounts will count towards a non-concessional contribution (NCC) cap. In 2015/2016, this cap is $180,000. However, if you are under age 65, it is possible to contribute up to $540,000 in 2015/16, provided your total non-concessional contributions in that financial year and the following two financial years do not exceed $540,000. In addition to this cap, it’s also possible to make personal after-tax super contributions of up to $1,395,000 over your lifetime using certain proceeds from the sale of small business assets. If you have a spouse, you could potentially take advantage of two NCC caps and two $1,395,000 lifetime limits. (The lifetime CGT cap is indexed annually and increases to $1,415,000 on 1 July 2016).
7. Under the 3 year bring forward option for the non-concessional cap. Other conditions apply.
8. A TRP is a type of income stream investment that allows you to access your preserved and restricted non-preserved super benefits when you’ve reached your preservation age (currently 55 for those born before 1 July 1960). Limits apply to the amount of income you can receive each year and lump sum withdrawals can only be made in certain circumstances.
9. For people born on or after 1 July 1960, the preservation age is at least 56 and will gradually increase to 60 depending on your date of birth.

Important information
This document is published by National Australia Bank Limited, an Australian Financial Services Licensee, Registered office at Level 4 (UB 4440), 800 Bourke Street, Docklands VIC 3008. This document contains general information only. NAB Financial Planning is not a registered tax (financial) adviser or registered tax agent. If you intend to rely on any advice to satisfy liabilities, obligations or claim entitlements that arise, or could arise under taxation law, you should seek advice from a registered tax agent or registered tax (financial) adviser. In preparing this information, NAB did not take into account the investment objectives, financial situation or particular needs of any particular person. Before making an investment decision, a person needs to consider (with or without the advice or assistance of an adviser) whether this information is appropriate to their needs, objectives and circumstances. This information is based on our interpretation of relevant superannuation, social security and taxation laws as at 10 March 2016.
©2016 National Australia Bank Limited ABN 12 004 044 937 AFSL and Australian Credit Licence 230686

Read More
Close
Article
Want to get ‘sorted’ for tax time?
The end of financial year is the time to get things in order. Here are 12 strategies that could help you build and protect your personal wealth in a tax-effective manner.

Here are 12 strategies that could help you build and protect your personal wealth in a tax-effective manner.

Strategy 1: Get more from your salary or bonus

If you’re an employee, you may want to sacrifice your pre-tax salary or bonus into super rather than receive it as cash, so you can:

  • reduce tax on your salary or bonus by up to 34%
  • take advantage of the contribution cap that applies in this financial year

Strategy 2: Make tax deductible super contributions

If you earn less than 10% of your income* from eligible employment (eg. You’re self-employed, or not employed), you may want to invest in super by making concessional contributions, so you can:

  • claim your contribution as a tax deduction
  • take advantage of the contribution cap that applies in this financial year

Strategy 3: Make after tax contributions to super

If you have an investment in your own name, you may want to cash out the investment and use the money to make a personal after-tax super contribution, so you can:

  • reduce tax on investment earnings by up to 34%
  • increase your retirement savings

Strategy 4: Use super to manage capital gains tax (CGT)

If you make a capital gain on the sale of an asset this financial year and earn less than 10% of your income* from eligible employment, you may want to invest the sale proceeds in super, so you can:

  • claim a portion of the contribution as a tax deduction
  • increase your retirement savings

Strategy 5: Get a super top up from the Government

If you earn less than $50,454*pa, of which at least 10% is from employment or a business, you may want to make a personal after-tax super contribution, so you can:

  • qualify for a Government co-contribution of up to $500
  • increase your retirement savings

Strategy 6: Boost your partner’s super and reduce your tax

If you have a spouse who earns less than $13,800*pa, you may want to make an after-tax super contribution on their behalf, so you can:

  • receive a tax offset of up to $540
  • increase your spouse’s retirement savings

Strategy 7: Buy insurance through super tax-effectively

If you’re eligible to make salary sacrifice super contributions or are eligible to receive Government co-contributions, you have a spouse who earns less than $13,800*pa, or you earn less than 10% of your income* from eligible employment, you may want to purchase life and total and permanent disability insurance in a super fund, so you can:

  • benefit from tax concessions
  • make premiums more affordable

Strategy 8: Pre-pay income protection premiums and reduce this year’s tax

If you’re employed or self-employed, you may want to pre-pay 12 months’ income protection insurance premiums, so you can:

  • claim your tax deduction upfront
  • pay less income tax this financial year

Strategy 9: Offset a capital loss against a capital gain

If you’ve received capital losses from your investments, you may want to utilise the capital losses against any capital gains, so you can:

  • manage your tax on your investments more efficiently

Strategy 10: Defer asset sales If you’re thinking of selling a profitable asset this financial year, you may want to defer the sale until a future financial year, so you can:

• manage your cash flow more efficiently

Strategy 11: Pre-pay investment loan interest

If you have established (or are considering establishing) a geared investment portfolio, you may want to pre-pay 12 months’ interest on your investment loan, so you can:

  • manage your cash flow more efficiently
  • potentially pay less tax this financial year

Strategy 12: Make better use of your tax refund

If you receive a tax refund, you may want to use your refund to pay off non-deductable debts first, pay off your home loan and then borrow to invest or fund your daily living expenses and contribute your pre-tax salary into super, so you can:

  • save on interest
  • invest your refund outside of super
  • boost your super tax effectively

A financial planner can sit down with you and look at the different strategies to see which suits you best. Depending on your circumstances, the strategies outlined here have the potential to make a significant difference to your financial situation now and in the future. But you’ll have to take action before 30 June to benefit from some of the opportunities available this year.

Find out more and book an appointment.

 Note: To use strategies 1 to 7, you generally need to be eligible to make super contributions. Furthermore, you won’t be able to access your super until you satisfy a condition of release.
Super strategies should be in consideration of concessional and non-concessional caps.
* Includes assessable income, reportable fringe benefits and reportable employer super contributions. Other eligibility conditions apply.

Important information

This document is published by National Australia Bank Limited, an Australian Financial Services Licensee, Registered office at Level 4 (UB 4440), 800 Bourke Street, Docklands VIC 3008. This document contains general information only. National Australia Bank Limited (NAB) is not a registered tax agent. If you wish to rely on this information to determine your personal tax obligations, you should consult with a Registered Tax Agent. In preparing this information, NAB did not take into account the investment objectives, financial situation or particular needs of any particular person. Before making an investment decision, a person needs to consider (with or without the advice or assistance of an adviser) whether this information is appropriate to their needs, objectives and circumstances.

©2016 National Australia Bank Limited ABN 12 004 044 937 AFSL and Australian Credit Licence 230686

Read More

Join the conversation #Budget2016