Tax Cuts – where it fits for you

Tax Cuts – where it fits for you

From July next year, most tax payers will be getting a bonus of $530 a year, which should help many Australians with rising energy bills in an economy starved of wage growth. The benefits will initially be small – but proportionally higher for low income earners – and will grow by 2028 to be twice the size of the next largest tax cut in Australian history. By 2022 many taxpayers will get a tax cut worth $1000 a year. As a reminder, these are the current tax bands and rates: Taxable Income Tax Payable (excl. Medicare Levy of 2%) $0 – $18,200 Nil $18,201 – $37,000 19% $37,001 – 87,000 32.5% $87,001 – 180,000 37% $180,001 + 45%   So who wins? Only workers earning more than $87,000 will benefit immediately – about $135 a year on average – when the 32.5% tax threshold is lifted to $90,000 from July 1, 2018 (currently $87,000). This is the first step in eliminating the 37% bracket altogether ($87 – 180,000 income range). Eventually – by 2028 – 90% of workers will only pay 32.5¢ for every dollar earned between $40,000 and $200,000. How generous it will be for you depends on how much you make each year. As a rule, the more tax you pay the larger the cut you will receive. To sweeten up the flat tax system for workers on lower incomes, the government has introduced a low-medium tax offset [‘LMTO’]. What do low-medium income earners get? From July next year (2019), Australians who earn up to $125,333 will get up to $530 cash-back when they lodge their tax...
“Trump, unicorns & pixies. But this is no fairytale.”

“Trump, unicorns & pixies. But this is no fairytale.”

So Britain thought they had the story of the decade with outcome of the Brexit vote. Now America, as always, comes in and does it bigger & better than all others. So what does a Donald J Trump presidency look like? We’ve already seen the share market fall, and then have 5 straight days of gains … the Armageddon some predicted that would happen so far has not occurred. A man that has never run or held a political office, no experience in politics at all, made statements that alienated half the country, did not follow the election play book and did not have a traditional campaign. Half of the Republican party had distanced themselves from him. His candidacy was looking shakier than the Australian cricket teams top order there for a while, thanks in no small part to some astonishing events. Not anymore though (Trump that is, Australia’s batting woes are going to continue I fear), “The Donald” has – somehow – managed to convince enough of the American voters to place a tick next to his name. This to me shows how disenchanted middle America really is with the possibility of another Democratic term. And isn’t this somewhat of a theme the world over? Voters looking outside the ‘norm’ for answers to a period since the GFC that has challenged many people’s resolve in an environment of low growth, low interest rates, higher unemployment and negative wage growth. I’ll say this: I like Obama. He was the charismatic leader we like to see from Presidents / Prime Ministers. Sharp, quick witted (if you haven’t, have a look...

Australian inflation on the rise

Australian inflation is on the rise, with consumer prices rising 1.3 percent through the year to the third quarter of 2016 from 1.0 percent in the previous three month period and above market consensus of a 1.1 percent. The biggest upward pressure came from food and non-alcoholic beverages (+1.5 percent from -0.1 percent in the June quarter) as floods affected supply of vegetables. Cost also grew at a faster face for: housing, clothing and footwear, furnishing, household equipment and services, and insurance and financial services. In contrast, prices continued to decline for transport and communication. On a quarterly basis, consumer prices went up 0.7 percent, following a 0.4 percent rise in the June quarter while market expected a 0.5 percent increase. It was the highest figure since the June quarter 2015. Inflation Rate in Australia averaged 5.10 percent from 1951 until 2016, reaching an all-time high of 23.90 percent in the fourth quarter of 1951 and a record low of -1.30 percent in the second quarter of 1962. Inflation Rate in Australia is reported by the Australian Bureau of...
Reserve Bank leaves official cash rate on hold in October

Reserve Bank leaves official cash rate on hold in October

The Reserve Bank has decided to again leave official interest rates on hold over October at the record low 1.5%. The Bank will continue to take a wait and see approach and assess the impact on the economy of the recent interest rate cut to determine if further are required. General comments Latest economic data remains mixed and largely directionless. The RBA is waiting for the September quarter inflation rate data, due to be released on October 26. Although the national seasonally-adjusted jobless rate fell to a new three-year low of 5.6%, the economy is still shedding full-time workers. Recent jobs growth has been restricted to part-time work. Home building approvals remain good despite recent signs that the peak of the residential planned construction boom may have passed. Recent retail sales activity is relatively flat. The Aussie dollar is still higher than desirable, although the share market appears to be consolidating recent gains. The Bank however will be increasingly alert to a resurgence in house prices growth generated by lower mortgage rates. Concerns remain over a resurgence in house prices, an overall steady economic performance, and reasonable inflation rates. The Reserve Bank therefore is now likely to leave official rates on hold until next...

NEWS FLASH – Equity Market Volatility

What is occurring and why? We are now currently seeing swings in the equity market better than the bowling of James Anderson in the recent Ashes cricket series. Like the Australian batsman, equity markets have been very volatile over the last couple of months. This is being driven by an ongoing contraction in China’s manufacturing sector, turbulence in Europe and now a falling Australian share market it’s no surprise investors are starting to ask…where to next? We are seeing a similar situation now that we did back in 2011, however then it was Greece defaults and the US reaching their debt ceiling. Then we saw a 22% fall in the local market. Now, it’s China in particular impacting on Australian markets, and also currency – the  AUD/GBP has risen to around $2.15 / £0.47 for the first time in many years. The Chinese share market went berserk earlier this year, and is now back at the level it started 2015 at. As we know, generally speaking the Chinese do like to gamble (as do Australians … I’m a little over how many gambling ads we see on TV), and not being able to do so within the confines of China (and not everyone can hop across to Macau) has seen the levels of borrowing to invest in shares rise sharply. As margin calls hit when the market falls, this promotes more selling. Locally, the fall in the Australian market has been particularly stark; down nearly 1.5% on Friday 21 August; down over 4.0% yesterday (at close, 24 August); possible falls today however the market has recovered after an initial...

Finance Update for Dinner Conversations

The activity in the world markets does not stop, and processing the recent changes requires a very patient mind. At the present time this will be important for anyone with investment exposure particularly within their superannuation which is the most common. In this update we have prepared a brief on the key issues, numbers and short points about our economy, investment markets, currencies and generally issues that impact our financial lives.   Current Rates and Key Numbers   Arrows indicate change over last 6 months: RBA Cash Rate: 2.50% ↔ 1-year bank deposit rate: 3.55%* ↓ Average Standard Variable Mortgage Rate: 5.15%  ↔ Two Year Fixed Mortgage Rate: 4.99% ↔ AUD/USD: $0.9166 ↑ AUD/GBP: £0.5539 / $1.81 ↑ Australian Share Market: 5,396 points ↑ Average Dividend Yield of Australian Share Market:  4.85% ↑ *(average of major 4 banks)   A Brief Review of What Has Been Happening around the World Australia Australian shares were quite volatile at the beginning of this year. January’s 3.0% decline in the S&P/ASX 200 Accumulation Index was followed by a 5.0% rise in February, pushing the market up towards its highest level since mid-2008. The Reserve Bank of Australia (RBA) held the cash rate steady at 2.5% for an eighth consecutive month at its March 2014 meeting. The RBA surprised some by explicitly removing its mild easing bias and reference to the Australian dollar (AUD) being “uncomfortably high”. The Board is now looking for a “period of stability in interest rates”. The RBA revised-up its growth forecasts by 0.25%, with GDP now expected to be 2.5% for the year. A return to near-trend growth of 3.0% per year is expected in the first half of 2015 (interest rates...