The Budget

Wednesday, May 04 2016

The budget delivered no real surprises which was not totally unexpected given the looming federal election.
The main measures had largely been signalled in recent weeks with increased tax threshold to offset bracket creep and lower threshold for super concession offsetting easing the treatment for lower income earners. Businesses with turnover under $10m will move to 27.5% tax rate from 1 July while the new rate will be progressively phased into all businesses by 2023/24 with the rate falling to 25% in 2024/25. Company tax cuts will be funded by a series of measures aimed at clamping down on multinational tax avoidance.
While the budget was generally benign, there were several announcements that do have some implications for several stocks in our portfolios.
Change to the Wine Equalisation Tax (WET) will impact the economics of small vineyards operator and should see some easing in grape oversupply. Treasury Wines (not held in Socially Responsible portfolio) is not a beneficiary of the WET concessions itself but has suffered from the oversupply issue so any reduction in the incentive to continue uneconomic wine production should benefit the domestic business of Treasury Wines.
Healthcare is always a target for funding reform but the budget brought very little in the way of new news, rather updates on existing policy and estimates. There was no mention of the cuts to the Bulk Bill Incentive which were neutral for Sonic Healthcare, although continued industry campaign against the review hope for a reprieve. Pre announced committees to advance reviews and reforms in Private Health Insurance and Prosthesis List, while prostheses cuts appear to have been delayed which is a minor positive for Healthscope.
The government announced $50b in infrastructure funding over the next few years but gave no context to this level compared to current spend. The projects they identified were not material and there’s a possibility the Turnbull government might be saving some infrastructure announcements for the campaign trail but overall the lack of project announcements is disappointing for Lend Lease.
SEEK will benefit from the generous incentives for small business to hire interns and trainees. This will result in a robust job market and higher job ad listings.

Additionally changes to the tax tables and structures is a benefit for accounting software provider MYOB, as it provides a catalyst for customers to update and download newer versions.


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