The Budget will have little impact on financial planning businesses but changes to withholding tax for Australian managed funds have been heralded as a boon for the competitiveness of the Australian capital markets. Julian McLaren, principal at The Money Managers, says changes around the treatment of salary sacrifice will affect some clients but won’t have a large bearing.
“[The government] will now count superannuation as income where previously it was taxable income, so there may be less people eligible for the Commonwealth Seniors Health Card,” he says. “Salary sacrifice contributions are now going to be included in any assessments for a range of government benefits including the age pension, family tax benefit and the super co-contribution, effective July 2009. It will affect a small portion but won’t have a dramatic effect overall.”
The government announced a progressive reduction in the withholding tax rate – tax levied on income from securities owned by non-residents – from 30 per cent to 7.5 per cent from July 1, 2010. The tax cut is expected to boost investment in the listed property trust sector and put Australia on a more level playing field with countries such as Japan, Hong Kong and Singapore.
“It will deepen investments in large [real estate investment trusts] and obviously a liquid, diverse and deep listed property trust sector is critical to the development of an effective plan for Australians,” says Richard Gilbert, chief executive officer of the Investment and Financial Services Association (IFSA).
“More importantly from the point of view of financial planners, the message the Government sends by addressing this issue indicates their commitment to having a strong financial services centre. For [planners], that might not have a dollar value on it but in the medium to long term it has important implications.”
Tony Bates, CFP at Blue Point Consulting, says clients are “not terribly concerned” by the Budget. “I’ve spoken to a few clients this morning but it’s more that I’ve called them rather than the other way around,” he says.
