With the nation heading towards a federal election in 2019, it is important to analyse and evaluate all policy proposals from the major political parties. We understand in many instances it will be left to accountants who fully understand the implications to advise their clients on what it all means.
The impact on clients will vary depending on their circumstances, so practitioners will need to tailor how they convey the implications on a client-by-client basis. While we have laid out the conceptual foundations of policy announcements, the detailed legislation might differ substantially, so we urge practitioners to be mindful of this situation. This is what we know so far (at the time of writing):
Labor policies mentioned so far:
- Maintaining a company tax rate to the full 30 per cent for entities with turnover exceeding $50 million.
- Higher personal tax rates at the top end and lower personal tax rates at the lower end (that is, less than $125,000). Labor has indicated it will oppose phase 2 and 3 of the legislated personal income tax changes and intends to reinstate the 2 per cent deficit levy.
- An increase in the Medicare levy to 2.5 per cent coupled with a more generous Medicare levy arrangement for lower-paid workers.
- Limit negatively geared investment properties to newly built residential dwellings from a yet-to-be-determined date after the election. Property investments made before this date will not be affected as they will be grandfathered.
Ability to negatively gear other asset classes will also be restricted. It will apply on a prospective global basis to every taxpayer.
- Providing landlords who build new residential dwellings an annual subsidy for 15 years of $8500 a year if the home is let out at 20 per cent below market rates.
- A halving of the capital gains tax (CGT) discount to 25 per cent for individuals.
- A minimum tax of 30 per cent on all distributions from discretionary trusts. Currently distributions are subject to tax in the hands of beneficiaries at marginal income tax rates.
- A denial of certain cash refunds in respect of excess imputation credits.
- A new deduction (the Australian Investment Guarantee), which will enable a 20 per cent deduction in respect of the purchase of any new eligible asset worth more than $20,000.
- Capping of deductions for managing tax affairs to a maximum of $3000. This cap will impact on individuals, trusts and partnerships.
- Whistle-blower rewards for tax evasion and higher penalties for tax exploitation promoters.
- Establishment of a new second commissioner (appeals) within the ATO.
– oppose catch-up contributions on concessional contributions and tax deductibility on personal superannuation ––contributions,
– lower annual non-concessional contribution cap to $75,000 and further lower high-income super contribution threshold to $200,000,
– increasing the superannuation guarantee (SG) to 12 per cent when fiscal circumstances allow,
– phase out the $450 minimum monthly threshold to receive super guarantee (SG) contributions, and
– higher penalties for employers not paying SG.
The coalition’s current tax policies:
- Companies with an aggregated turnover of less than $50 million have a reduced company tax rate of less than 30 per cent.
Tax cuts already enacted as follows:
- 27.5 per cent 2020 income year,
- 26 per cent for the 2021 income year, and
- 25 per cent for the 2022 income year and for subsequent income years.
- The government has legislated changes to personal income tax thresholds to be rolled out in three tranches over the next seven years.
- No change to current arrangements regarding negative gearing of investment property.
- No change to the CGT discount, which currently sits at 50 per cent for individuals.
- No change to the current arrangements regarding trust distributions from discretionary trusts. Currently distributions are subject to tax in the hands of beneficiaries at marginal income tax rates, which could result in a lower effective tax rate for those distributions.
- No change to the current arrangements regarding imputation, in particular, full refund of excess imputation credits. This means excess imputation credits can be converted into cash refunds.
- No changes in relation to depreciation – the $20,000 immediate asset write-off is available to 30 June 2019. There is no certainty beyond this date.
Establish a Small Business Concierge Service within the Australian Small Business and Family Enterprise Ombudsman’s office to provide support and advice about the Administrative Appeals Tribunal (AAT) process. It will also create a dedicated small business taxation division within the AAT.