Budget 2008

In his inaugural budget as Treasurer, Wayne Swan has attempted to balance election promises against a backdrop of a turbulent global economy. The focus was firmly on ‘working families’. Less vaunted, there were however some measures of interest for the property industry.

There were a host of nation building initiatives including the Building Australia Fund, an Education Investment Fund and the Health and Hospitals Fund. The Building Australia Fund alone will initially provide $20 billion for infrastructure projects around Australia.

A key win for the commercial property industry is the reduction in withholding tax on rental income that is distributed to foreign investors from 30% to 7.5%. This is aimed at improving the international competitiveness of Australia by attracting overseas investors into property trusts.

In the medium term, the Government has ear-marked $90m over 4 years to establish a Green Building Fund to assist Australian business to implement energy efficient measures. The fund will subsidise 50% of the cost of retro-fitting and retro commissioning existing commercial office buildings, up to a maximum of $200,000 per building. Funds will be awarded to organisations on a competitive basis, with priority given to large buildings (over 5,000 square metres).

The ‘Clean Business Australia’ initiative comprises three projects with a budget of $240 million over four years. In addition to the Green Building Fund it includes grants for small and medium enterprises to bring new energy and water saving products to market and for manufacturers to improve their production processes to reduce pollution and save energy and water.

Long term, we have the promise of the most significant review of taxation since the Second World War. The initial discussion paper will be released by the end of July this year with the final report due at the end of 2009.
The last attempt to review the Australian tax regime resulted in the ‘Review of Business Taxation – A Tax System Redesigned’ (known more commonly as the Ralph Review) which was published in July 1999. In the covering letter to then Treasurer Peter Costello it was stated that “The recommendations in the report are designed to bring our system into the modern era and enhance the competitiveness of Australian business” - similar sentiments to those expressed by Wayne Swan.

The new challenge that has been thrown into the mix since 1999 is climate change. As John Goddard’s article on pages 4 & 5 illustrates, there has been a significant movement towards green awareness in this timeframe. The challenge will be to create a tax regime that will encourage rather than penalise sustainable practices. The emissions trading scheme is due to be implemented in 2010 and will give industry a clearer guide as to the Rudd Government’s ability to provide solutions that work for both the environment and for business.
Nicola Woodward can be contacted at nwoodward@apexproperty.com.au