Warnocks May Newsletter: The 2019 Federal Election - Tax Policies of Labor, Liberal and The Greens

Labor

The Australian Labor Party has an ambitious tax and superannuation reform agenda which it has published in stages over recent years. ALP modelling suggests that most of the revenue raising measures that impact individuals will mainly affect high income earners. This is especially so in policy areas such as negative gearing and franking credit refunds. Business tax reforms are largely designed to increase tax transparency and to reduce gearing deductions claimed by multinationals against their Australian tax base. The Following proposals are some of those that will be of interest to our clients.
Proposals Impacting Individuals L1. Removal of imputation credit refunds
L2. 50% CGT discount reduced to 25% to commence 1 January 2020 (existing assets to be grandfathered).
L3. Negative gearing restrictions for real estate and other passive investments to commence 1 January 2020 (existing assets to be grandfathered)
L4. A 30% minimum tax rate on discretionary trust distributions to adult beneficiaries
L5. Personal tax cuts targeted at low to middle brackets.
L6. 49% top marginal tax rate for taxpayers with taxable income in excess of $180,000.
L7. $3,000 cap on deductions for management of tax affairs (e.g. tax agent fees)
L8. Beneficial ownership tracing: establish a publicly accessible central registry (companies and trusts).
L9. Require disclosure to ATO of residency or citizenship of other countries.
L10. Small and medium-sized businesses with a turnover of up to $50 million a year will have their tax rate reduced to 25 per cent by 2021-22.
L11. Australian Investment Guarantee: From 1 July 2020, businesses will be able to “immediately expense” 20% of the value of eligible depreciable assets in the first year of all new assets, with the balance depreciated in line with normal depreciation schedules from the first year.
L12. Thin Capitalisation: debt deductions - Eliminate safe harbour and arm's length debt test in the thin capitalisation rules and have a single test (world-wide gearing ratio).
L13. Public disclosure of how much tax is paid on a country-by-country basis by significant global entities.
L14. Mandatory shareholder reporting of tax haven exposure (changes to Corporations Act 2001).
L15. ATO's tax transparency reports: reduce threshold for reporting for private companies to $100 million turnover.

Superannuation Policies
(Policies are taken from April 2018 draft ALP National Platform) L17. Non-concessional cap to be reduced to $75,000 (currently $100,000). L18. Income threshold for the extra 15% contributions tax for high income earners to be lowered to $200,000 p.a. (currently $250,000 p.a.).
L19. Abolish catch-up concessional contributions.
L20. Deductibility of personal contributions for employed persons to be removed.
L21. Borrowing by SMSFs to be prohibited.
L22. Superannuation Guarantee coverage to be expanded to now include both parental leave and salary and wages of less than $450 per month.
L23. Increase in the Superannuation Guarantee rate to 12% ahead of the current timetable "when prudent".
L24. Develop guidelines for tax haven investment by superannuation funds.Other tax-related measures L25. Board of Taxation: community sector representative to be appointed.
L26. Whistle blower laws: rewards for whistle-blowers up to $250,000.
L27. Public reporting of AUSTRAC international funds transfer data.
L28. Government contracts: tax domicile disclosure for all firms tendering for Government contracts worth more than $200,000.
L29. Increase penalties for individuals and entities promoting tax evasion and avoidance.
L30. Allow the Commissioner of Taxation to name individuals and entities as a penalty for the most serious of tax offences.
L31. Funding 10 free tax clinics to provide assistance with administrative tax matters to low income taxpayers and microbusinesses.
L32. Provide $5million a year to ”Tax Inspectors Without Borders” with a portion of that funding assisting the ATO to send tax experts to developing countries who request help.
L33. Cut the Managed Investment Trust withholding tax rate from 30% to 15% on tax distribution attributable to investments in build-to-rent housing to encourage institutional investors into the housing market

Liberal

The Liberal / National Coalition's policies mainly focus on reducing tax for low to middle income earners and helping small businesses Coalition Proposals impacting individuals C1. Increase the Low and Middle Income Tax Offset.
C2. Increase the top threshold of the 19 per cent tax bracket to $45,000 by the 2022/23 year.
C3. Reduce the 32.5 per cent tax rate to 30 per cent by the 2024/25 year.
C4. Increase in the Medicare levy threshold. Small business C5. Increase the instant asset write-off threshold to $30,000 for businesses with a turnover of up to $50 million. This applies from 7.30pm on 2 April 2019 to 30 June 2020. Superannuation C6. From 1 July 2020, persons aged 66 will be able to make personal superannuation contributions, both concessional and non-concessional, without meeting the Work Test.
C7. Increase the age limit for spouse contributions from 69 to 74 years.
C8. Extend access to the bring-forward arrangements for non-concessional contributions.

Greens

The Greens’ policies are based on the philosophy that the needs of the people should drive the economy. Greens’ Proposals impacting individuals G1. Cap deductions so that individuals earning above $300,000 per year cannot deduct to a level below 35 cents in every extra tax dollar.
G2. Remove $6.5 billion in public subsidies to private health companies and reinvest it in health services, including expanding “Denticare”.
Greens’ Proposals impacting individuals G1. Cap deductions so that individuals earning above $300,000 per year cannot deduct to a level below 35 cents in every extra tax dollar.
G2. Remove $6.5 billion in public subsidies to private health companies and reinvest it in health services, including expanding “Denticare”. Main measures impacting business G3. Introduce a 40% super-profits tax for large oil, gas and mining companies.
G4. Fee-free University and TAFE 5-point plan to be funded by gas royalties and removal of fossil fuel subsidies.
G5. Reduce the threshold for public reporting to $50 million.
G6. Restoring the company tax rate to 30% for businesses earning more than $10 million per annum.
G7. Re-introduce an economy-wide carbon price on direct emissions from facilities which emit more than 25,000 t of CO2-e per year to reduce emissions to drive a transition in renewables, and reduce household costs.

Acknowledgement: Much of this newsletter is sourced from the Chartered Accountants Australia & New Zealand Tax News – Edition 14 (published on 6 May 2019).
Disclaimer: The information in this newsletter is provided for informational purposes only and should not be relied upon as specific advice. Warnocks Pty Ltd does not accept any liability in respect of this information.