Tax cuts tweaked
There's been a lot of spirited debate about the government going back on its often-repeated election promise to deliver the previously planned tax cuts.
Perhaps like most things in life, the proposed changes not all good or bad.
On the plus side, the moves won't add to inflation so much, with less significant tax cuts for the highest income earners.
Bond yields ticked down just a little, as markets continue to expect interest rates declining in the second half of the 2024 calendar year.
Better still, there will be more significant tax cuts for those earning up to $150,000.
Arguably these have been the households most impacted by high inflation, particularly from food and energy prices, childcare expenses, and so on.
On the downside, despite the forthcoming tax cuts, Australia is still taxing income far too punitively.
The 45 per cent marginal rate (plus the 2 per cent Medicare Levy) will kick in from $190,000, up from $180,000 previously.
Had tax brackets been indexed to inflation since 2008, the top rate threshold would have increased from $180,000 to $260,000 by 2024, instead to where we have landed from July at $190,000 (versus what the Coalition had legislated $200,000).
Higher-income earners will still get a tax cut of $4,529, but that's only around half of what was previously planned.
Impacts of changes
Overall, the tax cuts are likely to be slight less inflationary than previously feared.
From a tax planning perspective, higher income earners will doubtless be looking to make some adjustments to their affairs to save tax on their income...notably from including from investing in negatively geared property.
For two-income households there will be an increase in borrowing capacity from July onwards of up to around $100,000 as interest rate cuts begin in the second half of 2024, which will be a tailwind for property prices up to the $2 million price level.
Overall, depending on the city and region, it seems that prices in the $2m to 4m price brackets are generally softer, but up to $2 million prices are rising.
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Australia's population clock screamed through 27 million today.
The population clock continues to rise at a near-record pace of 1,728 per day (or 631,000 per annum).
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