CostWeb News

2018 Federal budget update.

Wednesday, 9 May 2018

What you need to know.

 

House prices are moderating in Sydney and Melbourne and this is starting to put the brakes on residential construction in our two biggest cities. The budget benefit to us and our construction clients is the funds allocation to infrastructure spending, and the certainty this provides. This will create work for the construction sector at a time when it is going to be needed. 

 These are the key infrastructure budget allocations: -

 New South Wales,

$5.3bn Western Sydney Airport

$1.5bn Westconnex

$2.9bn Western Sydney Infrastructure Plan

$971m Pacific Highway Coffs Harbour bypass

$400m Port Botany Rail line duplication

Victoria

$1.7bn North east Link

$500m M80 Ring Road

$500m Monash Freeway upgrade

$5bn Melbourne Airport Rail link

$475m Monash Rail

Queensland

$3.3bn Bruce Highway

$390m Beerburum to Nambour rail duplication

$1bn Pacific motorway Brisbane to Gold Coast

$300m Brisbane metro

South Australia

$1.2bn North South corridor in Adelaide

$220m Gawler Rail line electrification

West Australia

$1.05bn Metronet rail

$944m Perth congestion

$560m Bunbury outer ring road

Northern Territory

$180m Central Arnhem road upgrade

 Australian Capital Territory

$100m Barton Highway Corridor

The projects listed above are well known, and much of the funding was announced in previous budgets. This funding was largely expected by the market. There are also a number of new projects where funding is now allocated: -

$9.3bn Inland Rail

$3.5bn roads of strategic importance

$5-6bn on less well specified road projects.

What else is in there?

The biggest headline in the budget announcement is the income tax cuts.

The global economy is improving, commodity prices are higher, company profits are up and the government has gained a tax and royalty windfall.

 It is not straightforward however. The income tax reductions are phased in over 7 years providing tax cuts in 2018-19 for lower and middle income earners. This lowers taxes up to $530 per year or $10 per week for low and middle income earners. From July 1st 2018 the threshold for the 32.5% rate moves up marginally to $90,000 from $87,000. This is designed to help avoid bracket creep, in which you move into a higher tax bracket as your income rises. Other changes will be phased in by 2024-25 including removal of the 37% tax bracket and the 45% threshold will be increased to $200,000.

Measures to reduce over-claiming of tax deductions

A number of measures have been introduced to reduce over claiming of work related tax deductions and rental losses. Money is allocated for more tax audits and prosecutions related to improper claiming of tax deductions. Quantity surveyors preparing depreciation schedule should check and familiarise themselves with any changes here.

 Cash payments of over $10,000 now prohibited.

An economy wide cash payment limit of $10,000 is introduced from July 1 2019. This measure attempts to reduce the black economy where cash payments are regularly used to avoid paying tax.

Medical research fund of $1.3bn announced

This includes $500m allocated to genomics, the emerging science of preparing medical treatment based on your genetic blueprint.

Australia enters the space race

$41m has been allocated to helping Australian businesses to capture more of the lucrative global space industry. 

$500m for the Great Barrier Reef

$500m is allocated to over 5 years from 2017-18 to address the Crown of Thorns starfish and to improve water quality entering the Great Barrier Reef.

 "and finally cheaper beer

Yes it"s true. Previously small craft brewers paid a higher rate of excise on their products. From July 1 2019 brewers will no longer pay higher excise on smaller kegs than the large brewers. Potentially this will boost the craft beer sector enabling them to supply more outlets at lower prices. 

 

Gary Emmett
Senior Economist

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