Keep your hair on, change is coming to money - just like winter

Changes to the way Australians save, invest, bank and borrow are likely this year, but there’s no need to rush into making uneducated decisions.

WINDS of change are blowing through the world of finance, so prepare for your hair to get messed up.

Rarely has there ever been so much money stuff going on at once. We’ve just had a royal commission smashing the banks, financial planners and insurance companies. We’ve got a Federal Budget in two weeks, and a federal election shortly after that.

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Voters are widely expected to punish the Coalition for its leadership shenanigans just like they did with Labor in 2013, so a change of government as likely.

This will reshape many saving, spending, tax and investment strategies.

The April 2 pre-election Budget is likely to be the party before the hangover. Don’t expect any bad Budget news just weeks from Aussies going to the polls, and don’t expect that Budget announcements will actually happen.

Now is the time to keep an eye on the financial news. Here‘s what to watch.

INCOME TAX

Tax will be a huge battleground in the election campaign. The Coalition’s legislated tax cuts would be significantly scaled back by Labor to strip future tax relief from higher income earners. It may offset that with its own tax cuts elsewhere.

Money is about to get stormy, but don’t be panicked into knee-jerk reactions.

RETIREMENT

Many older Australians are fuming about Labor’s plans to axe share dividend franking credit refunds for self-funded retirees, which would wipe out thousands of dollars of annual income for many. People with a pension or part-pension are exempt from this proposed change.

There’s also talk of Budget sweeteners and election bonuses for some retirees.

INTEREST RATES

It’s not all about the election. The Reserve Bank has kept its official interest rate at record lows for Two-and-a-half years and recent seemed to switch from preparing for future rate rises to angling for future rate cuts.

This will affect variable home loan interest rates, so keep an eye on the mortgage market news. It also spells more pain for savers with cash deposits that could head further south.

SUPER

Rules around superannuation are always changing, no matter who’s in government, and both parties have differing policies around super. However, it still offers the best tax benefits for people saving for retirement, so try to pump in extra cash when you can.

INVESTMENTS

Property investors are set to be hit by Labor’s plan to abolish negative gearing tax deductions for future purchases of established residential properties. And all investors will be hit by Labor’s proposed cut in the capital gains tax discounts.

Much of the pre-election angst comes from Labor proposals that have been around for a while, and you can be sure the Coalition will whip out the “class warfare” card many times in the coming weeks.

However, don’t jump at shadows when it comes to money policies and plans.

Any big changes will have to be approved by federal parliament, which is unpredictable on a good day.

And just like bald people don’t have to worry too much about windy days, Australians with few assets and an average wage are unlikely to feel discomfort.

It’s investors, high-income earners and self-funded retirees who may be blown off their feet.

@keanemoney