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Taxing times as voters weigh up election options

On Saturday, May 18, Australians will vote to choose the our next Federal Government.

At every Federal poll there are many different candidates with many different policies  – but ultimately all policies need to be paid for – and the vast majority of that money comes from taxes collected by the ATO.

This election contains proposed changes to tax law from various parties that could have a significant impact on investors, small business owners and salary and wage earners alike.

It is not our intention (or our place) to suggest any particular strategy with regards to your voting. However, as professionals in tax and accounting, we felt that our clients and other followers may find the table below a useful summary of the key tax issues and impacts of the policies being supported by three of the parties likely to have a major say in the election outcome.

We have included links to articles that explain each issue in more detail, as they are currently available. We encourage you to read up on these and engage in conversations with your current local member, or those contesting the seat in your local electorate.

And yes, we acknowledge there are other parties, such as the United Australia Party and One Nation, who also have published tax policies. These can be found via a quick Google search – and we encourage you to do so if you are interested.

We have seen many times over the past three decades  that what is promised during an election campaign and the final legislation passed can be very different. But it still helps if you can head into the voting booth with a working knowledge of what each party is promising AND how they intend to pay for those promises. Always remember, it is YOUR money they are collecting and spending.

 

 

                      Liberal

                               Labor

             Greens

Negative Gearing

                      No change

                            Limit negative gearing to new housing

                                from 1 Jan 2020. Any investments made prior to the changes will not be affected.

If you buy an established house as a rental property or borrow to invest in shares (as examples) and your expenses are more then your income, from 1 Jan 2020 you will not be able to use those losses to offset any of your other income.

https://www.alp.org.au/negativegearing

                          Remove all negative

                          gearing for property investors

CGT Discount

No change

Reduce the capital gains discount for assets held longer then 12 months to 25% from 1 Jan 2020. (currently 50%)

This could increase the tax you pay on not only investment property sales but also share, business and other investments sales that make a capital gain.

https://www.alp.org.au/negativegearing

Remove all CGT concessions for property investors

Franking Credit

No change

Making franking credits a non-refundable offset, proposed to come in to effect 1 July 19. Their pensioner guarantee sees  pensions protected from these changes as well as pre-existing self-managed super funds.

While franking credit can still be used to reduce tax payable, no cash refunds for unused franking credits will be given. This means dividends would be taxed at the individuals nominal tax rate.

https://www.chrisbowen.net/issues/labors-dividend-imputation-policy/

No change

Small Business deductions

Instant asset write-off of $25,000 will apply until 30 June 2020

Immediate 20% deductions for eligible business assets (currently 15%)

No change

 

Deduction for managing tax affairs

No change

Limiting deductions on managing tax expenses to $3,000 per individual per year.

https://www.brisbanetimes.com.au/money/tax/labor-s-3000-cap-on-claims-for-tax-advice-in-the-spotlight-20190426-p51hnm.html

No change

Super deduction for individuals

No change

Remove the recent changes made to deductibility for personal super contributions & catch-up concessional contributions

No change

Taxation of trusts

No change

Put a minimum 30% tax on distributions made to adults from discretionary trusts

https://www.accountantsdaily.com.au/tax-compliance/12556-trusts-tax-reform-set-to-go-ahead-under-labor

No change

Non-Concessional contributions & Division 293

No change to current cap

Lowering annual cap to $75,000 (currently $100,000) and Reducing threshold to $200,000 (currently $250,000)

https://www.superconcepts.com.au/Insights-and-support/blog/smsf-insider/2019/04/08/superannuation-and-the-election-making-comparisons

No change

Tax Rates

Doubling the low and middle-income tax offset to $1,080, raise the threshold for the 19% tax rate from $41,000 to $45,000 in July 2022 and flatten tax brackets so everyone earning between $40,000 to $200,000 pays a marginal rate of 30% from 2024.

Doubling the low and middle-income tax offset to $1,080 and increase tax cuts for people earning less then $48,000, including a $350 tax cut for workers earning up to $37,000.

Increasing the top individual rate from 45% to 49% for earnings over $180,000

https://www.alp.org.au/tax_refund_for_working_australians

 

Doubling the low and middle-income tax offset to $1,080. Repealing the income tax cuts from 2018 & reintroducing the deficit levy permanently, increasing the tax rate of a person earning more then $180,000 by 2%. Increasing company tax rate to 30% for  businesses earning more then $10m a year.

Useful links comparing tax policies

https://www.abc.net.au/news/2019-03-29/tax-changes-you-need-to-know-ahead-of-the-federal-election/10945466

https://www.theguardian.com/australia-news/ng-interactive/2019/apr/15/who-should-i-vote-for-policy-guide-to-the-2019-australian-election

Contact us if you have any questions about how these policies apply to you and your tax planning.

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