The Federal Budget – what it means for the Real Estate industry

The Federal Budget has once again been handed down for another year and the changes directly impacting Real Estate businesses are minimal. Indirectly though, some of the changes will impact the income tax position of the people behind the businesses and the overall economic sentiment.

We have summarised below the most relevant parts from the budget for Real Estate businesses and the people behind them.

There is a reduction in the company tax rate by 1.5% to 28.5%. This is coupled with a 1.5% increase in tax rate for all companies with annual turnover above $5 million to pay for the paid parental scheme. In effect, this means small companies with a turnover below $5 million will receive a 1.5% cut from 1 July 2015.

The Temporary Budget Repair Levy (TBRL) will be introduced from 1 July 2014 to 30 June 2017, where taxpayers earning above $180,000 will be charged an additional 2% above of the top marginal tax rate. This rate represents an effective top rate of 49% (including the medicare levy), and note that it is only for amounts earned above this $180,000 where the levy applies.

The Fringe Benefits Tax (FBT) rate will increase to 49% from 1 April 2015 onwards. This is in line with the introduction of the Temporary Budget Repair Levy, meaning the FBT rate continues to be in line with the higher marginal tax rate plus medicare levy. This presents some opportunity for taxpayers on the top marginal tax rate around salary packaging arrangements.

There was no change to the GST, although much exposure in the media suggests this may shortly be requested by the State and Territory governments.

Of course there were many more changes impacting individuals personally including the co-payments for doctor visits, reductions in the government subsidies for prescriptions, changes for students and the unemployed, and increases in the fuel excise.

It is important to note that many of these announcements are not yet legislated and there is a chance they may never be legislated in the proposed form. Nevertheless, the budget changes are an indication of what the government wishes to do.

As reported by Craig Heath, Financial Business Executive.