Christmas has come early for the bank’s shareholders with the decision to slightly increase the 2024 dividend – despite a single-digit decline in the net profit and cash earnings.
Beating the market benchmark is never easy, with 72 per cent of Australian actively managed global equity general funds trailing the S&P World Index in the six months to June 30, 2024. Domestic equity funds performed slightly better, albeit against a significantly lower bar set by the S&P/ASX 200 Index.
Budget brings surplus and cost-of-living relief, but super tax provisions draw industry ire
The federal government expects to deliver the first budget surplus since before the Global Financial Crisis, with plans to bank most of the $4.2 billion excess but also provide cost-of-living and other relief. The budget also memorialises the government’s plan to tax superannuation balances above a $3 million cap, despite opposition from industry groups that call it unfair and overly complicated.
While it will likely be a one-off surplus followed by a return to deficits starting in 2024, the budget also lowered predictions for the size of future deficits. According to Paul Bloxham, chief economist (Australia, New Zealand and global commodities) at HSBC, this surplus and the reduced deficit projections suggest a $126 billion upside surprise over the next five years.
“The surplus was primarily driven by a significant upside surprise to government projections for tax revenues, from a sustained low unemployment rate, high inflation and higher-than-expected commodity prices,” he said.
“Much of this upside surprise is saved – although not all of it – improving the budget bottom line and against the counterfactual of spending it all, not contributing as much to aggregate demand (and inflation) as could otherwise be the case.”
Under the budget, the federal government will work with state and territory governments to deliver $3 billion in electricity bill relief for eligible households and small businesses. It also estimates that the temporary price cap on wholesale gas contracts introduced earlier this year will reduce inflation by three-quarters of a per cent in 2023-24.
A $1.3 billion Household Energy Upgrades Fund will provide low-interest loans for energy-saving home upgrades and support states and territories in making energy performance upgrades to social housing.
Super taxation changes enshrined
The SMSF Association, which has opposed the government’s plan to impose a $3 million tax threshold on super accounts as particularly unfair to the self-managed superannuation fund (SMSF) sector, urged the government following the budget’s release to reconsider its decision.
“Further consultation about this new tax is imperative so that the full impact on the small business and farming communities and others can be properly considered,” SMSF Association CEO Peter Burgess said. “We understand the need to finalise things for the budget, but that should not come at the expense of rushing important legislation with unintended consequences.”
The new superannuation tax regime outlined in the budget would increase the headline tax rate to 30 per cent from 15 per cent for any portion of a member’s superannuation balance that exceeds the $3 million threshold. According to the SMSF Association, the plan should not calculate a member’s earnings based on their total super balance.
“By definition, a member’s total super balance includes unrealised gains and a growing list of items that will need to be excluded to ensure ‘earnings’ for the purposes of this new tax are not overstated,” Burgess said. “This methodology discriminates against those funds who can identify and report to the [Australian Taxation Office] actual taxable earnings attributable to each member.”
The budget also made a small adjustment to another controversial issue for the SMSF sector, the non-arm’s-length income (NALI) rules that Treasury released for SMSFs earlier in January. Rather than multiplying any expense shortfall by a factor of five, as originally proposed, just two times the general expense will now be taxed as non-arm’s length income.
“Although this proposal is an improvement, a factor-based approach is neither a practical nor desirable solution for the sector,” Burgess said. “It remains our view that the 2019 amendments to the NALI rules were overreach, and the mischief they were intended to address has already been addressed by previous ATO guidance and tax determinations.”
