The NTAA recently published a summary of the key tax reforms proposed by the Labor party, and we have reproduced this in the table below. We have updated the table to include key tax reforms announced by the Coalition in the 2019/20 Federal budget, and the Opposition’s Budget Reply speech.
Income tax reforms
| Key Labor Tax Policies | Comparable Coalition Tax Policies | |
| 1 | From 1 January 2020, reduce the maximum general CGT discount from 50% to 25%, with exceptions for:
Ref: ’A fair go for Australia’, paragraph 135 and ALP website: Labor factsheet, ’Positive ’plan to help housing affordability’ | The Coalition has not indicated a desire to change the maximum general CGT discount from 50% for eligible taxpayers. |
| 2 | From 1 January 2020, limit negative gearing to investments in new housing, with grandfathering for 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 Ref: ’A fair go for Australia’, paragraph 135 and ALP website: Labor factsheet, ’Positive plan to help housing affordability’ | The Coalition has not indicated a desire to change the current negative gearing rules. |
| 3 | Remove the ability for certain taxpayers to claim excess imputation credits as cash refunds. Ref: Leader of the Opposition’s media release, 13 March 2018 | 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. |
| 4 | Apply a minimum tax rate of 30% to all distributions from discretionary trusts (non-fixed trusts) to mature individual beneficiaries (i.e., those over 18) Ref: ’A fair go for Australia’, paragraph 131 and Leader of the Opposition’s media release, 30 July 2017 | The Coalition has not indicated a desire to change the current rules in relation to the taxation of discretionary trust beneficiaries at their applicable marginal tax rate. |
| 5 | 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 Ref: Shadow Treasurer’s media release, 13 March 2018 | The Coalition has extended and increased the instant asset write off threshold as follows.
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| 6 | Restrict deductions on tax-related expenses to a $3,000 cap per year. The cap is expected to apply to individuals, partnerships, trusts and self-managed super funds. Ref: Shadow and Assistant Shadow Treasurer’s joint medial release, 13 May 2018 | 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 'l’ returns. |
| 7 | Labor will support the Coalition’s personal tax cuts from 1 July 2018 for low and middle income earners with taxable incomes up to $126,000. Labor will provide an additional tax cut of between $95 and $28 for low income earners with taxable incomes less than $40,000. Labour has expressed opposition to the Coalitions further tax cuts planned for 1 July 2024 Ref: Opposition’s Budget Reply Speech, 4 April 2019 | The Coalition announced they will increase the personal tax cuts previously legislated so that low and middle income earners with taxable incomes up to $126,000 will receive a tax cut of between $255 and $1,080 from 1 July 2018 (increased from between $200 and $530) From 1 July 2024, the Coalition intends to reduce the 32.5% tax rate to 30%, and remove the 37% tax bracket so that 96% of taxpayers face a marginal rate of 30% or less. |
| 8 | It is unclear whether Labor will support this proposal. | From 1 July 2019, eligible farmers and tourism operators will be able to apply for a refund of luxury car tax, up to maximum of $10,000. |
Superannuation reforms
| Key Labor Tax Policies | Comparable Coalition Tax Policies | |
| 1 | Lower the non-concessional contributions ('NCCs’) cap to $75,000 (down from the current $100,000). Ref: ’A fair go for Australia’, paragraph 41 | The Coalition has not indicated a desire to change the current $100,000 NCCs cap (indexed). |
| 2 | Lower the Division 293 tax threshold to $200,000 (down from the current $250,000). Ref: ’A fair go for Australia’, paragraph 41 | The Coalition has not indicated a desire to change the current $250,000 Division293 tax threshold. |
| 3 | Repeal the newly introduced concessional contributions (‘CCs') catch-up rules. Ref:’ A fair go for Australia’, paragraph 41 | Retain the new CCs five-year catch—up rules for eligible members if they have a total superannuation balance of less than $500,000. |
| 4 | Repeal the recent reforms allowing all eligible individuals to claim a tax deduction for personal superannuation contributions Ref:’ A fair go for Australia’, paragraph 41 | Retain the recently legislated relaxation of the personal superannuation deduction rules (i.e., the removal of the ‘10% test’ from 1 July 2017). |
| 5 | Prospectively restore the prohibition on direct borrowing by SMSFs on housing investments via Limited Recourse Borrowing Arrangements (‘LRBAs’). Ref: ’A fair go for Australia’, paragraph 136 | The Coalition has not indicated a desire to change the current LRBA rules. |
| 6 | End the freezing of the Superannuation Guarantee rate at 9.5% and fast track the employer compulsory contribution percentage to 12% —although firm dates have not been provided. Ref: ’A fair go for Australia’, paragraph 39 | 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. |
| 7 | It is unclear whether Labor will support this proposal. | From 1 July 2020, the Government intends to increase the age limit from 65 to 67 before the “work test” restrictions apply to be eligible to make voluntary or self-employed super contributions. The increase in the age limit is to coincide with the increase to the Pension eligibility age increase. |
| 8 | It is unclear whether Labor will support this proposal. | From 1 July 2020, eligibility for the spouse contribution offset will be extended by giving spouses aged 70 to 74 eligibility if they meet the work test. In line with the budget measure above, they will not need to meet the work test until age 67. |
Source: NTAA Voice, January/ February 2019, updated by Gill Mckerrow 5th April 2019 for 2019/20 Federal Budget announcements
