Digging for budget nuggets

26/06/2018 // by admin

Panning for positives: Tiny budget blessings can be found if you look hard enough. Photo: Marco Del GrandeBet you didn’t know there were some goodies in the budget. I counted two.And one of them, the company tax rate dropping 1.5 percentage points next year, has a use-by date.It doesn’t sound much but it might just be enough to save a job or two. Besides, there’s something else.The beauty is there’s an incentive for companies hoarding franking credits to pay out a bit more next year in dividends to give their shareholders a last crack at the 30 per cent credit before it drops to 28.5 per cent.I’m afraid the paid parental levy of 1.5 per cent also starting next year won’t count toward franking either. I did say there was a use-by date.Funnily enough, super was the other goodie, even if I’m scraping the bottom of the, um, budget here.Previously putting too much into super from after-tax pay – not salary sacrificing where the problem had already been fixed – could be taxed at up to 93 per cent.But from July you’ll only be taxed on whatever was earned on the extra money.Mind you, we don’t know what that charge will be. Judging by the vagueness of the budget documents the government hasn’t figured it out yet.Whatever, the point is don’t lose sleep over accidentally putting too much in super, which with a $150,000 and soon to be $180,000 a year limit on voluntary contributions you probably wouldn’t have anyway.It’s great the government is being less vindictive about accidentally going over the limit but my worry is that super is becoming a honey trap. It’s an open secret that at some point the government wants to lift the age you can get at your super to 65.So if you’re under 40 “go light on super” is the advice of Michael Hutton, a personal wealth management partner at HLB Mann Judd.You’d do better paying off the mortgage, or if you don’t have one, mimic super with your own portfolio of investments or a managed fund. Just remember to put it in the name of the lowest earning member of the family to save on tax.Over 40 the name of the game is to shift from bad (because it’s not tax deductible) to good debt (because it is). So a home loan is bad and gearing into an investment is good.But don’t get carried away by negative gearing, either. You’ll be lucky if the end gain makes up for years of losses. HLB Mann Judd says you need a 7 per cent a year – including price growth – gross return on a property to beat paying off a mortgage of around 5.5 per cent with the same money.Positive gearing, where you’re ahead form the start and there’s no cash drain, is better. The fact is you’re more likely to achieve it in the sharemarket thanks to dividend franking.I’m in a quandary about whether to count ditching the carbon tax as a goodie.The budget estimates its abolition, assumed to be on July 1, will trim 0.75 per cent off the consumer price index in the year to the June quarter next year.Or rather it compares what would have been with a carbon price of $25.40 which it isn’t. There’s the problem. How real is a 0.75 per cent cut to what would otherwise have been?And if it is real, it means a host of government handouts will increase by a smaller amount because of the lower inflation rate.Might leave that one for you to ponder.
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