It’s tax time – which should be a good time of the year for most Custodians because we get money back. We mentioned a few weeks ago that the top 3.5 per cent of earners in Australia pay 31.5 per cent of total tax collected by the Australian Taxation Office (ATO).
In fact, each year the ATO processes $30.5 billion worth of tax refunds, with the average Aussie getting a refund of $2,820.
We reckon the average Custodian gets a tax refund of $10,000 to $15,000.
Don’t forget, too, that the working from home allowance will this year kick in for most. You can claim at least 80 cents per hour, potentially more if you have had to upgrade equipment!
We mentioned in last week’s podcast and blog that there were 218 new million-dollar suburbs created during the past 12 months.
To put that in perspective, there are now a total of 892 suburbs in Australia with a median house price of $1 million or more.
That works out to be an increase of just under a third (32.2 per cent) in 12 months.
Sydney still has the lion’s share of all million-dollar suburbs (419) followed by Melbourne (192).
However, the big movers throughout the year were Canberra with a 170 per cent increase, followed by Southeast Queensland (94 per cent), Adelaide (67 per cent) and Perth (40 per cent).
In other news, apparently just under one in ten Aussies are now millionaires, with 392,000 joining the club during 2020.
In fact, Australians grew their wealth through the Covid-19 crisis more than any other country in the world (except Switzerland).
Australia also topped the rankings for median wealth per adult in 2020 according to Credit Suisse’s latest global wealth report.
In Australia, wealth per adult jumped by $US65,695 in 2020 and our median wealth per adult sat at $US238,070 at the end of 2020.
The reason our wealth has increased so significantly is that Australia has handled Covid-19 so well, but also because a high proportion of Australians, 65.5 per cent, own their own home.
We have a similar rate of home ownership compared with the USA, UK, New Zealand and Sweden (all more of less 65 per cent), but higher than Switzerland (41 per cent), Germany (51 per cent), Austria (55 per cent), Denmark (60 per cent) and Japan (61 per cent). Canada sits slightly above Australia at 68 per cent.
Where we differ, however, is that our rental housing is typically owned by individuals (as opposed to companies in other countries). According to the Reserve Bank of Australia, 95 per cent of Australia’s housing is owned by households. In other words, not only do 65 per cent of us own our home, but we also own a big chunk of the other 35 per cent that are rented. With house prices up more than 10 per cent over the past 12 months, that is a big reason why so many Aussies have increased their wealth.
Most States have started to release their budgets, with New South Wales and South Australia releasing their budgets this week, and there is a common theme.
Both budgets were very positive with better than expected forecasts of revenue and big commitments to infrastructure spending.
The NSW budget, previously predicted to hit a $16bn deficit, has been halved to $7.8bn in financial year 2021.
The SA economy was predicted to contract by 0.75 per cent, but it has instead grown by 2.25 per cent, while a surprise $926m GST windfall has also helped slash the 2020-21 deficit to $1.8bn, down from the $2.6bn estimated.
Importantly for property owners, the 2021-22 NSW Budget announced a record $108.5 billion infrastructure commitment over four years, which will create jobs and boost the economy.
The $108.5 billion infrastructure investment includes $72 billion toward road and rail, $8.5 billion for schools and education and $11 billion for hospitals and health.
The South Australian Government also announced a record infrastructure spend too – $17.9 billion over the next four years – in its 2021-22 State Budget, which is set to provide a similarly significant boost to jobs and the economy.
This infrastructure spend is in fact the biggest in South Australia’s history.
Why is this good news for investors?
Governments are being opportunistic and taking the swathe of money on offer by the Federal Government and Reserve Bank at pretty much no interest cost.
By spending big on infrastructure like roads, rail, hospitals and schools the government creates a lot of demand for supplies and workers in the short term. In the long term, it increases the infrastructure of an area so that it’s well equipped to take on more population, housing and density. Which we will need when borders eventually reopen.
This will ultimately cause growth in land prices.
We talk about that very topic in our webinar this week – register here to hear more on that.
Interested in knowing more? Check out the weekly podcast we do at The Double Shot Podcast.
James and Alex