I know, I know… none of us want to hear the “e” word ever again. But please, bear with me a moment, as I utter it one more time in the context to say…
The election is finally over, it is done and dusted and the results are in. And now we can all move on and get to work with the cards we have all been dealt, whether we consider them good or bad, the same way we would have whichever leader the country chose.
But what I will say, admittedly in part because of the result itself, but also to a large extent because of its potential to combine with a number of other factors that all seem to be ‘slowly’ turning in our favour, is that I am excited, in fact I’m really excited, for the future here in WA.
You see I think this is, and is going to prove to be, a great time to be getting into business or to start building wealth. A great time to be setting and then working towards achieving, aspirational business goals, financial goals and lifestyle goals.
My initial thoughts the day after the election…
Time to Appreciate Just How Good We Have It
You see sometimes we just don’t appreciate how good we’ve got things until we have come ever so close to losing them.
But after what was looking like being a close call, it’s been reaffirmed we’re going to get to keep –
- Negative gearing, not only in relation to property investing, but very importantly in relation to all other types of investment,
- The 50% capital gains tax discount, maintaining a strong incentive for individuals to invest for the future,
- The taxation of Trusts in its current format, which is so important to Australia’s small business owners including our own CapitalQ Community,
- The Imputation System in its truest form, with business profits being taxed at the ultimate recipient’s marginal tax rate including, where appropriate, refunding of franking credits.
And while you may have your own opinions about each of these individual measures, you can’t deny that all of these tax rules provide incentives for investment and risk taking and growth and that this can only assist the national economy at this time.
Tax Cuts are Coming
- Tax cuts, cuts which are being touted as the biggest in over a decade, will soon start to become a reality
- In fact, company tax rates have already begun falling for small businesses over the past couple years, and this should continue in most cases down to a corporate tax rate of 25%.
In addition, if the coalition are able to pass what some are arguing is now their mandate…
- When lodging your next tax return, those earning up to $126,000 will get an additional, unexpected, $1,080 benefit,
- All taxpayers earning between $45,000 and $200,000 will have their marginal tax rate reduced to 30% over coming years as follows –
- From 1 July 2022 the top threshold of the 32.5% tax bracket will be increased from $90,000 to $120,000, then
- From 1 July 2024, the government will remove the 37% tax bracket completely and reduce the 32.5% rate down to 30%, meaning
- A new 30% tax rate will then apply to ALL income between $45,000 and $200,000.
Some More Good Signs
On top of that…
- It appears likely some interest rate cuts are on the way, with actual rates being charged by banks to lenders already on the decline.
- Government-imposed restrictions on bank lending also looks set to be easing.
- The iron ore price, which is often considered a leading indicator for the prosperity of the WA economy and in particular its property market, has hit five year highs.
- There are signs property rents have started to increase.
- The property market is showing signs it may have bottomed out, and while not necessary a rule, the Perth property market traditionally sees price increases emerge a year or two after Sydney has experienced the same
- The exchange rate, while not great for those of us who like to travel, is providing much appreciated assistance to our nations exporters.
Now I assure you, my positivity has not made me completely delusional. I fully acknowledge and have seen first-hand that in many respects it has been a very tough few years for a lot of people in WA, particularly those heavily reliant on property and construction.
And several of those above ‘good news’ items are occurring because right now, in particular in certain parts of the country, the economy is suffering and therefore measures are being introduced with the intention of providing a boost.
However turnarounds, and dare I say, even booms, all start from small green shoots of positivity. And I suspect this could very well be the beginning of a period of renewed prosperity for the country, and in particular WA.
And remember that often, the real successes are achieved during the period that conditions are improving, not once they have actually already improved.
I’m All In
So, for me and my businesses, and when advising our CapitalQ Community Members, we feel now is the time to be doubling down on reinvestment and the seeking of growth.
Particularly because doing so is precisely the opposite to what so many of the ‘majority’ are doing right now, those that are instead choosing to ‘play it safe’.
I believe the next few years, even say the next 10 years, are going to provide fantastic opportunities, opportunities to really set yourself up if you’re prepared to make the necessary sacrifices, put in the work and take some calculated, educated and measured risks.
So there is my hot tip! My big prediction for the next 10 years. It will be fun revisiting this blog post in the future to see how right (or otherwise) I was.
Having said all that, you know as a rule I actually consider “the economy” to be more of an excuse than a genuine reason why a business venture fails. A good business, and a good business owner, will take the necessary steps to ensure that a change in economic conditions does not significantly impact its performance.
But having said that, I would never pass up the opportunity for a tail wind.
So, I’m going all in, and I hope the majority of the CapitalQ Community are going to join me.
Good Luck, not that luck really has a great deal to do with it
So to all those prepared to work hard, take some (calculated) risks and dare to dream big, I wish you the very best (but not luck, because for the most part, I believe we all make our own)!