The lead up to the 2019 Federal Election has brought a number of proposed policies from each of the major parties. In an effort to cut through the noise, the Morrows One Team aims to outline the key Taxation and Superannuation policies and provide our clients a clear analysis to determine how they will be impacted, dependent on the party that wins. It is important to note that the policies outlined below must go through both houses of parliament to be enforced legally.
For a further in-depth analysis of the proposed policies, please visit the following links:
The application of these policies to your particular circumstances may be complex. Accordingly, if you have any questions relating to how the proposed policies may affect you or your business, please contact your adviser for more information by calling 03 9690 5700 or set up a meeting to have a friendly discussion.
Tax Policy Comparison:
|Proposed ALP Tax Policy||Proposed Coalition Tax Policy|
|30% minimum tax rate on discretionary trust distributions to mature age beneficiaries (people over the age of 18), eliminating ‘income splitting’ to minimise tax.||The Coalition has not indicated changes to discretionary trust taxation regulations.|
|Removal of imputation credit refunds which will eliminate the cash refunds given for excess dividend imputation credits.
The ALP has guaranteed pensioner protection which excludes pensioners from changes to excess dividend imputation credits policy.
|The Coalition has not indicated changes to imputation franking credit policy. As a result, cash refunds for excess dividend imputation credits will continue.|
|Introduce 49% top marginal tax rate for taxpayers with taxable income in excess of $180,000. The ALP will consider tax cuts for high income earners when the budget is in ‘sustainable surplus’.||Flatten tax brackets from 32.5% to 30% for middle income earners, by 2024. Abolition of the 37% tax bracket for high income earners. This is already legislated and will result in lower tax rates by 2024. Ref: http://jaf.ministers.treasury.gov.au/media-release/060-2019/|
|Discontinue negative gearing on investment property, commencing 1 July 2020.
Property investors will no longer be able to deduct rental losses.
|The Coalition has not indicated changes to negative gearing. Property investors will continue being able to deduct rental losses from investment properties.|
|Personal tax cuts targets for individuals who earn less than $40,000.No effect for earners between $48,000 and $126,000.||Increasing the tax offset to $1,080 for low and middle-income earners. Taxpayers will be able to access this offset from 1 July 2019.
From July 2020, there will also be an increase of the threshold for the 19 percent tax bracket, from $41,000 to $45,000.Further increase of the low-income tax offset from $645 to $700.
|$3,000 cap on deductions for individuals for management of tax affairs.||The coalition has not indicated a cap for deductions for the management of tax affairs. However, the ATO has made adjustments to Item D10 – Managing tax affairs, to obtain a more detailed breakdown of what can be claimed at this label.|
|New disclosure requirements to ATO of residency or citizenship of other countries, to tighten debt deduction loopholes utilised by multinational companies.||The Coalition has not indicated new disclosure requirements regarding international residency or citizenship.|
|Reduce the maximum general Capital Gains Tax (CGT) discount from 50% to 25%, with exceptions for:
• Grandfathered Investments
• Investments made by superannuation funds
• Assets of small business owners
|The Coalition has not indicated a desire to change the maximum general CGT discount from 50%.|
|The ALP has not indicated desire to lower corporate tax rates for small – medium enterprises.||Lower corporate tax rate for small – medium enterprises, from 27.5% to 25 per cent by 2021-22.|
|Introduction of an Australian Investment Guarantee from 1 July 2020. This allows immediate 20% write off for eligible depreciating assets.||As of 7:30pm (AEDT) 02/04/2019 there was an increase in the asset-write off threshold to $30,000 (from $25,000) and expanding access to medium sized businesses with annual turnover over less than $50 million.
No further policies were proposed.
Superannuation Policy Comparison:
|Proposed Labour Superannuation Policy||Proposed Coalition Superannuation Policy|
|Non-concessional cap to be reduced to $75,000 (currently $100,000).||The Coalition has not indicated changes to the non-concessional cap to be reduced (currently $100,000).
The Coalition has indicated that they will extend access to the bring forward arrangements, which currently allow those aged less than 65 years to make three years’ worth of non-concessional contributions (capped at $100,000), to their super in a single year. This is now extended to those aged 65 and 66.
|Income threshold for the extra 15% contributions tax for high income earners (Division 293 tax threshold) to be lowered from $250,000 per annum to $200,000 per annum.||The Coalition has not indicated a desire to change the current $250,000 Division 293 threshold.|
|Deductibility of personal contributions for employer supported persons to be removed.
Currently, a tax deduction can be claimed for contributions up to $25,000.
|Retain recently legislated relaxation of personal superannuation rules.|
|End freezing of the superannuation guarantee at 9.5 per cent and fast tracking the superannuation guarantee increase to 12 percent.||The Coalition has not indicated a desire to change the current 9.5% Superannuation Guarantee rate until the first increase in 2022 (to 10%), and gradual progression to 12% by 2026.|
|Abolish catch up concessions.
The catch-up concession is the difference between concessional contributions you make plus those that are made for you and your annual concessional contributions cap of $25,000. Taxpayers can carry forward the shortfall for up to five years and claim a personal tax deduction up to the catch-up amount if total superannuation is below $500,000.
|Retain new CC’s five-year catch-up rules for eligible members if they have a total superannuation balance of less than $500,000.|
|Restore the prohibition on direct borrowing by SMSFs on housing investments via Limited Resource Borrowing Arrangements.||The coalition has not indicated a desire to change the current LRBA rules.|
|$450 weekly gross income superannuation guarantee threshold to be phased out.||The Coalition has not indicated a desire to phase out the superannuation guarantee threshold.|
|The ALP has not indicated changes for voluntary superannuation contributions.||New voluntary superannuation contributions, without meeting the Work Test, from 1 July 2020.
The Work Test requires that the individual work a minimum of 40 hours over a 30-day period.
Australians that do not meet the Work Test will now be able to make voluntary contributions.
|The ALP has not indicated changes to the current age limit for spouse contributions.||Increase the age limit for spouse contributions from 69 to 74. Currently people aged over 70 years cannot receive contributions made by another person on their behalf.|