Proposed Australian Tax Law
The federal government is yet to formally call an election, although it must be held by 18 May 2019 according to the Australian Electoral Commission. Accordingly, the battle lines on tax policy are being drawn. Oddly, the major parties are approaching voters with different outcomes. Normally, each of the major parties pitch tax incentives, like lollies, in the hope of luring votes. Not this time. It seems the Australian Labor Party (ALP) is confident of getting into power as their policies leave taxpayers worse, not better, off. Juxtaposed against this, the Coalition’s policies appear as incentives, even though they are not proposing much in the way of changes.
As best as possible, we thought it would be useful to provide a summary of the ALP’s proposed policies compared to the Coalition’s, given any tick of the clock a politician may release another proposed tax change subsequent to this article.
|ALP Tax Policies||Coalition Tax Policies|
|$3,000 cap on costs that individuals can claim for managing their tax affairs||No cap proposed|
|Reduce the Capital Gains Tax discount from 50% to 25%. Taxpayers will be taxed on 75% of the capital gain instead of only being taxed on half||No change to the 50% discount|
|Remove negative gearing on the acquisition of investments such as rental properties and shares (i.e. a tax deduction on loan interest charges will be denied or limited). Negative gearing will be permitted on new housing with grandfathering for pre-existing investments||No change proposed to negative gearing|
|Remove cash refunds on excess imputation (franking) credits paid to individuals and superannuation funds||No changes proposed to imputation credits|
|Introduction of a flat 30% tax on discretionary (family) trusts. Currently, the income of a discretionary trust flows to the beneficiaries who are taxed on the income||No changes proposed to discretionary trust system|
|Accelerated depreciation on purchase of business assets equivalent to 20% of the asset cost||
Immediate tax write-off will continue for assets costing under:
· $20,000 until 30 June 2019
· $25,000 until 30 June 2020
|Lower the non-concessional super contributions cap from $100,000 to $75,000||No changes proposed to the existing $100,000 cap|
|Lower the Division 293 threshold down from $250,000 to $200,000. If your income exceeds $200,000, the ATO will impose additional tax equivalent to 15% of concessional contributions to your super fund||No change to the current $250,000 threshold|
|Repeal the concessional super contributions catch up rules. Presently, if your super contributions in a prior year were under the permitted cap, the unused part of that cap can be carried forward for use in a subsequent year||Retain the existing concessional contributions five year catch up rules for members if they have a superannuation balance less than $500,000|
|Remove the ability for individuals to claim a tax deduction for concessional contributions to their super fund||No change to the existing provisions|
|Deny the ability for self-managed super funds to borrow for housing investments using limited recourse borrowing arrangements||Limited recourse borrowing arrangements will be allowed to continue|
|Fast track for an increase in employer compulsory superannuation contribution rate from 9.5% to 12%, although no timeline provided||
No change to previously legislated employer compulsory superannuation contribution rates of:
· 9.5% to 30 June 2021
· 10% to 30 June 2022
· 10.5% to 30 June 2023
· 11% to 30 June 2024
· 11.5% to 30 June 2025
· 12% to 30 June 2026 and beyond
Most of the above information relating to the ALP’s key tax policies comes from a document released during their national conference, held in December 2018, entitled “A fair go for Australia: National platform – Final draft”.
In a nutshell, for certainty with little, or no, increase in taxes, the federal coalition’s position aligns with that criteria. The ALP provides a strikingly alternative position where taxes will increase across a broad range of initiatives.
Written by Chieftains an accounting firm that exists to help business owners increase profits and reduce risks allowing them to astutely provide for their retirement.
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