The ALP’s proposed tax changes – what it means for you …

With an election just around the corner, the ALP under Bill Shorten is certainly not making themselves a ‘small target’ by releasing many tax policies. The one that has received a lot of media time is in relation to the proposed scrapping of refundable franking credits. In addition to that, we have counted a further 11 tax policies affecting income tax, capital gains tax and superannuation which will affect nearly all taxpayers in some way.

Lets look at these below:

Income Tax Reforms

Key ALP Tax PoliciesComparable Coalition Tax Policies
Restrict deduction on personal tax-related expenses to a $3,000 cap per individual, per year.No cap on personal tax-related expenses is proposed, although the ATO has made adjustments to Item D10 – Managing tax affairs to obtain a more detailed breakdown of what is being claimed by taxpayers at this label from the 2018 “I” returns
Reduce the maximum general CGT discount from 50% to 25%, with exceptions for:
• Grandfathered investment;
• Investments made by superannuation funds (which are effectively taxed at 10% after the CGT discount); and
• Assets of small business owners.
The Coalition has not indicated a desire to change the maximum general CGT discount from 50% for eligible taxpayers.
Limit negative gearing to investments in new housing, with grandfathering from pre-existing investments.
Labor has proposed any losses from new investments in shares and existing properties (which we assume includes commercial property) will still be permitted to be used to offset investment income tax liabilities (but not against salary and wages).
Any deferred losses can then be carried forward to offset the final capital gain on the investment.
The Coalition has not indicated a desire to change the current negative gearing rules.
Remove the ability for certain taxpayers to claim excess imputation credits as cash refunds.The Coalition has not indicated a desire to change the current ability for eligible taxpayers (including individuals and SMSFs) to receive cash refunds for excess imputation credits.
Apply a minimum tax rate of 30% to all distributions from discretionary trusts (non fixed trusts) to mature individual beneficiaries (those over 18)The Coalition has not indicated a desire to change the current rules in relation to the taxation of discretionary trust beneficiaries at their applicable margin rate.
Introduction of an Australian Investment Guarantee from 1 July 2020
This accelerated depreciation for business proposes to immediately allow a 20% write-off for eligible depreciating assets.
The Coalition has announced that from 29 January 2019, the instant asset write-off threshold for SBE taxpayers will increase to less than $25,000 and from Budget night to 30 June 2020 the instant asset write-off threshold for SBE taxpayers will increase to less than $30,000.
49% top marginal tax rate for individuals with a taxable income above $200,000.47% top marginal tax rate for individuals with a taxable income above $200,000.

Superannuation Reforms

Key ALP Tax PoliciesComparable Coalition Tax Policies
Lower the non-concessional contributions (NCCs’) cap to $75,000 (down from the current $100,000)The Coalition has not indicated a desire to change the current $100,000 NCCs cap (indexed).
Lower the Division 293 tax threshold to $200,000 (down from the current $250,000)The Coalition has not indicated a desire to change the current $250,000 Division 293 tax threshold.
Repeal the newly introduced concessional contributions (‘CCs’) catch-up rulesRetain the new CCs five-year catch-up rules for eligible members if they have a total superannuation balance of less than $500,000
Repeal the recent reforms allowing all eligible individuals to claim a tax deduction for personal superannuation contributions.Retain the recently legislated relation of the personal superannuation deduction rules (ie, the removal of the “10% test” from 1 July 2017)
Prospectively restore the prohibition on direct borrowing by the SMSFs on housing investments via Limited Recourse Borrowing Arrangements (‘LRBAs”)The Coalition has not indicated a desire to change the current LRBA rules.
End the freezing of Superannuation Guarantee rate at 9.5% and fast track the employer compulsory contribution percentage to 12% - although firm dates have not been provided.The Coalition has not indicated a desire to change the current 9.5% Superannuation Guarantee rate until the first increase in 2022 (to 10%) begins the gradual progression to 12% by 2026.

If you have any questions about the above or want to discuss how these could affect you contact us here.