In case you hadn’t noticed, we have a Federal election on 18th May. Whilst at Innovus we are politically agnostic (and the political views of our team are their own), we have put together the following summary of announced Labor and Liberal-National Coalition policies to help you in making your own assessment. I’m sure like us, you will be glad when it is all over.
| Labor | Liberal-National Coalition |
| Superannuation | |
| End the ability for individuals to make personal superannuation tax deductible contributions unless less than 10 per cent of their income is from salaries. Impact: individuals desiring to maximise their deductible contributions will need to go back to salary sacrifice arrangements rather than being able to manage their contributions themselves | Australians aged 65 and 66 will be able to make voluntary superannuation contributions without needing to work a minimum amount. Previously, this was only available to individuals below 65. Impact: Recognises the need to extend superannuation contribution benefits to those who work beyond age 65
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| End the ability to make catch-up concessional contributions for unused cap amounts in the previous five years. Impact: Reduction in the tax-deductible contributions individuals can make over time unless they maximise contributions every year
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| Reduce the post-tax contributions cap to $75,000 per year down from $100,000. (the ability to make three years of post-tax contributions in a single year reduces from $300,000 limit to $225,000 limit). Impact: Limit the ability to contribute for example windfall gains like an inheritance into superannuation
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Extend access to the bring-forward arrangements (the ability to make three years of post-tax contributions in a single year) to individuals aged 65 and 66. Impact: Recognises the need to extend superannuation contribution benefits to those who work beyond age 65
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| Disallow refunds of excess franking credits from 1 July 2019 – this would mean SMSF members in pension phase no longer receive refunds for the franking credits they receive for their Australian share investments. Impact: Those not in receipt of Aged Pension will have their cash flow impacted, thereby increasing the need to rely upon self-funded pension payments and reducing the longevity of their pension balance
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| Increase the age limit for individuals to receive spouse contributions from 69 to 74. | |
| Ban new limited recourse borrowing arrangements. Impact: Ends the ability of individuals to use their superannuation balance as a strategy to invest in residential property
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| Lower the higher income 30per cent super contribution tax threshold from $250,000 to $200,000. Impact: More individuals will have to pay the higher tax rate on their superannuation contributions.
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| Taxation | |
| Support the stage 1 tax cuts Impact: We can expect a small reduction in personal income tax from this financial year. | Stage 1 tax cuts: From July 1 2018, increasing the top threshold of the 32.5 per cent tax bracket from $87,000 to $90,000. Impact: We can expect a small reduction in personal income tax from this financial year.
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| Match the $1,080 low and middle income tax offset. From 1 July 2018, individuals earning below $37,000, will get a $350 a year tax offset, with this amount increasing for those earning between $37,000- $48,000 to the maximum $1,080 offset. Impact: Low income earners can expect a small reduction in personal income tax from this financial year. | From 2018-19 taxpayers earning between $48,000 and $90,000 will receive $1,080 as a low and middle income tax offset. Individuals earning below $37,000 will receive a base amount of $255 with the offset increasing at a rate of 7.5 cents per dollar for those earning $37,000-$48,000 to a maximum offset of $1,080. Impact: Low income earners can expect a small reduction in personal income tax from this financial year.
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| Stage 2 tax cuts: From 1 July 2022, increasing the top threshold of the 19 per cent personal income tax bracket from $41,000, to $45,000.
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| Stage 3 tax cuts: From 1 July 2024, reducing the 32.5 per cent marginal tax rate to 30 per cent which applies from $120,000 to $200,000. The 37 per cent tax bracket will be abolished.
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| Introduce a 30 per cent tax rate for discretionary trust distributions to people over the age of 18. Impact: Trust income received by people over 18 will now be taxed at 30 per cent rather than on the marginal rate paid on their other income.
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| Limit negative gearing to newly built housing from January 1 2020. (Existing investments are grandfathered under the current law) Impact: Reduce the tax effectiveness of investing in residential property which is not newly built.
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| Reduce the capital gains tax discount for assets that are held longer than 12 months from the current 50 per cent to 25 per cent. (Existing investments are grandfathered under the current law). Impact: An effective 33 per cent increase in the imposition of capital gains tax
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| Limit the deductions for the cost of managing tax affairs to $3,000. Impact: Increase the need to segment taxation advice from other advice. Reduce the availability of a tax deduction for costs which had previously been fully deductible |
If you have any questions about how these policies will affect you, get in touch.