Australia: a time to change

Posted: March 31, 2015 in Uncategorized

Australia: a time to change

 

In the next month or two, the Australian Federal Government will announce two very important documents that will change how you deal with your financial affairs and the future of this great country: a complete tax overhaul review and a competition review.

 

It is important that you acknowledge these changes, as there will be issues that will affect you both positively and negatively.

 

Naturally the details are not yet out, but our clients can always call us to ask for clarification and what they can do about it..

 

The Tax review

 

The leading driver behind the tax review is the fact that the Australian tax system receives 70% of its revenue from income tax (corporate and individuals).

 

This is not sustainable, as a large part of the population reaches “pension age”. It also has a negative effect on growth, as it discourages investments and hard work.

 

The various speeches from Treasurer Hockey are pointing towards a modification of the GST (increasing or broadening the applicable base), a potential tax on cash in bank accounts and a potential review of concessional/non concessional contributions to Super, franking credits and even negative gearing. Practically no aspects have been left out.

 

It is not useful to speculate at this point, but such dramatic changes will definitely need to be addressed at a personal level. Moreover, any proposed changes will need to go through Parliament.

 

The Competition review

 

The Government is looking also at the competition review.

 

Specifically, weekend penalty rates are in review, as they increase the cost of services and decrease operating hours due to a “Christian” holiday. This would automatically reduce the cost eating out – but also every shop that opens on Saturday and Sunday, including fuel stations.

 

Other interesting points are the availability of a larger range of medicines in supermarkets and an overhaul of the taxi industry. Again, this is just the start.

Internet and Globalization

 

This is the elephant in the room. The ease of technology and the various free trade agreements and general globalization will introduce new competitors in the Australian market – specially now that Australia, due to the Great Financial Crisis, is one of the wealthiest region in the world.

 

Internet makes easy for companies to set up shop here. You can see every evening the insurance phone/small loans companies advertising (mostly subsidiaries of US giants) and this will just increase without even touching the giant such as Ebay and Paypal (which is making great headways with credit card transactions, specially now with mobile phones).

 

We already saw some effects  as a market giant such a Woolworths has been under pressure by a new entrant such as ALDI and soon also LIDL (another German giant supermarket, slightly more upmarket than ALDI).

 

In time it will happen in every industry.

 

In 2020 we will have Apple and Google cars.

 

The big prize not yet  bitten is the Australian retail banking system. While the big foreign investors are constantly nibbling at the “side dishes” of finance (Wealth Management and Insurance) – no one has of yet attacked directly the big four banks.

 

But there is already a discussion at Government level, prompted by the regulator, about how to deal with the fact that a great disruptor like Google could enter the market with a “Google Bank”.

 

So everything is changing and you will need to change with it to take advantage of the new situation.

 

Our clients will receive updates as soon as the changes will be confirmed.

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