The results of the Federal Election on 18th May 2019 came as a surprise to most people. But for many financial advisers, it was a nice surprise.
Prior to the Coalition being re-elected there was some uncertainty about the financial future for many retirees who rely on the franking credit refunds that make up part of their income, including those with self-managed superannuation funds (SMSFs).
Graeme Quinlan, Senior Adviser, explains:
“There were major changes being proposed by Labor and they would have impacted the viability of self-managed super funds for some people. The result does give some relief that SMSFs will live to fight another three years at least.”
With the Liberal-National Government remaining in power, there is increased confidence that the policies proposed in the 2nd April Budget will be legislated. Graeme says,
“The Government will do their best to pass the actions through to law as quickly as possible. Obviously, the composition of the senate will have an impact. The passage of legislation can be tricky to navigate when you don’t have a majority. The Government will have some interesting people that they will need to appease… but by and large we are expecting most of the budget will go through.
This gives us more confidence to continue our methods of planning for the future. Market confidence has rallied too. We saw an immediate lift after the election results. This suggests that some of the negative news was already priced into the market.
The talk of the impending franking credit forfeiture and the impact that might have on investments that paid franked income saw many people sell their investments, fearful of a Labor win. The market was pricing these investments on the high likelihood that Labor would win… but prices went up when the results were announced.
This is always a good investment lesson, trying to pick the market movement ahead of time… normally the market beats you, so long-term fundamentals are still the best way to invest. Sadly, all those people who sold are now sitting on the sidelines watching the value go up.”
Business as usual
As we discussed in our 2019 Budget Review article, the policies announced by the Government indicate a focus on maintaining the status quo. The changes we expect to see include:
- A boost to aged care services with additional home care packages and additional funding for home support services
- Minor changes to the superannuation work test
- Modest changes to income tax brackets and low and middle income tax offset
- An increase to the small business instant asset write-offFor now, we are looking forward to business as usual.Contact our team if you have any questions or concerns about your financial future. Read more Financial Industry articles.