There’s been a lot happening in Canberra over this last week with the Federal Budget announcement, the Labor Party reply speech and of course, all the talk of the upcoming Federal election.

One thing that has become clear is that the tax policies of the major parties with particular reference to tax cuts – including who will get them, how much and when – will form a cornerstone of this election campaign.

To clear the somewhat muddied waters we have provided a comparison of the Coalition and Labor Party tax policies which have been outlined at this stage.  This may change over the course of the election campaign but it’s a good starting point.

Coalition

Labor Party

Personal tax cuts
The Coalition has announced that they will increase the low and middle income tax offset from $530 to $1,080 and increase the base rate from $200 to $255 for the 2019 income year – this means when individuals lodge their 2019 income tax return they will see the benefit.

This will apply for all financial years until 20 June 2022.

From 1 July 2022:

  • Increase the top threshold of the 19% personal tax bracket from $41,000 to $45,000
  • Increase the low income tax threshold from $645 to $700

From 1 July 2024:

  • Reduce the 32.5% marginal tax rate to 30%
  • The entire 37% tax bracket will be abolished
  • Taxpayers earning between $45,000 – $200,000 will have a marginal tax rate of 30%
 In their reply speech the Labor Party confirmed the following:

  • They have backed the increase to the low and middle income tax offset to $1,080 however they propose to increase the base rate to $350
  • They will roll back the tax cuts already legislated due to come in from 1 July 2024 and will not support tax rate cuts to higher income earners

The Labor Party has also announced a top marginal rate of tax of 49% for those taxpayers with taxable income in excess of $180,000 which reflects a reintroduction of the “temporary deficit reduction levy”.

Other previously announced tax Labor policy change, which may impact individuals, includes a cap on the amounts individuals can claim for managing tax affairs to $3,000.

There has been very little detail provided as to how this cap will operate.

Instant asset write off
From budget night the threshold for the instant asset write off will increase from $25,000 to $30,000 and will be available to companies with aggregated turnover less than $50M Labor has put forward the Australian Investment Guarantee.  This guarantee will allow all businesses in Australia to immediately deduct 20% of any new eligible assets worth more than $20,000, with the balance depreciated in line with normal depreciation schedules from the first year.  Labor has said this will be a permanent change.

 

Superannuation
If passed, individuals aged 65 and 66 will be able to contribute to superannuation without having to pass the work test Currently, Labor’s superannuation policies includes the following:

  • Reduction of non-concessional cap to $75,000 (from $100,000)
  • The threshold for Division 293 tax to be reduced to $200,000 (from $250,000)
  • Abolish catch up concessional contributions to $25,000 per annum
  • Remove the deductibility of personal contributions for employed persons
  • Borrowing by SMSFs to be prohibited
  • Expansion of superannuation guarantee to include parental leave and wages less than $450 per month
  • Committed to the low income superannuation offset
  • Increase superannuation guarantee rate to 12% when prudent

Negative gearing
No proposed changes Limit negative gearing to newly built housing from 1 January 2020

Existing investments will be grandfathered

Capital gains tax
No proposed changes Halve the 50 % CGT discount for all assets purchased from 1 January 2020 to 25%

Investments made before this date will be fully grandfathered

Policy change will not impact superannuation funds

 

Franking credits
No proposed changes From 1 July 2019 remove refundable franking credits for individuals and superannuation funds

Some pensioners will be exempted

Discretionary trusts
No proposed changes Labor will introduce a standard minimum 30% tax rate for discretionary trust distributions to adult beneficiaries

It will not apply to special disability trusts, deceased estates, fixed trusts, farm or charitable trusts

 

If you have any questions on how our findings may impact you or your business please contact Holman Hodge on 08 7099 5000

Lisa Pritchard

Lisa is our tax advisory expert who offers practical and commercial business advise. She is passionate about making tax information simple to understand and relevant to client needs.