With the 2019 Federal Election expected to be held in May and the possibility of a change of government, there are still a number of key tax bills stuck in Parliament waiting to be passed into law. Given there is very limited sitting time left until the election, it is looking more and more likely that these tax bills will not be passed into law until well after May 2019 (if at all). The two most important outstanding bills affecting our clients are summarised in the table below:

Proposed law change Overview Current status
Removal of CGT main residence exemption for foreign tax residents
  • Foreign tax residents will no longer have access to the capital gains tax (CGT) main residence exemption from 9 May 2017.
  • Properties acquired before 9 May 2017 will be grandfathered and exemption available under the current law until 30 June 2019.
Introduced to Parliament on 8 February 2018 and not yet passed into law.
Superannuation guarantee amnesty
  • 12 month amnesty period from 24 May 2018 to 23 May 2019.
  • Employers who voluntarily disclose previously undeclared superannuation guarantee shortfall will not be liable for administrative charges and penalties. Also, any catch-up payments will be deductible.
Introduced to Parliament on 24 May 2018 and not yet passed into law.

 

In addition, the Australian Labor Party’s proposed tax policies may become a reality in the near future should they win the upcoming election. Some of their proposals, if legislated, are expected to have significant ramifications on Australia’s taxation landscape. However, it is important to remember that even if Labor wins the final policy and law is subject to change as it goes through the Parliamentary process.

To recap, a summary of the Labor Party’s major tax policies announced to date are listed below:

Labor tax policy Overview Proposed application date
Individuals and private
Reduce 50% CGT discount  to 25%
  • Halve the general CGT discount from 50% to 25% for assets held on capital account for longer than 12 months.
  • Existing investments to be grandfathered.
  • Excludes investments by superannuation funds and assets of small business owners.
TBA
Removal of imputation (franking) credit refunds
  • Remove imputation credit refunds for individuals and superannuation funds.
  • Imputation credits can continue to reduce tax payments.
  • Excess imputation credits will no longer be refundable.
  • Labor policy is silent on its application to companies and whether they can continue to convert unused imputation credits to tax losses.
From 1 July 2019
30% tax on discretionary trust distributions
  • Impose a 30% minimum tax on discretionary trust distributions to adult beneficiaries.
From 1 July 2019
Removal of negative gearing
  • Limit negative gearing for real estate and other passive investments (including shares).
  • Existing investments to be grandfathered.
TBA
Increase top marginal tax rate by 2%
  • Raise the top marginal tax rate by 2% (to 49% including the Medicare Levy) for taxpayers with taxable income in excess of $180,000.
TBA
Tax cuts for low to middle income taxpayers
  • Introduce bigger tax cuts than the Liberal Party’s proposal for taxpayers earning less than $125,000 a year.
From 1 July 2019
Limit deductions for cost of managing tax affairs
  • Limit the amount an individual can deduct for the cost of managing tax affairs at $3,000 a year.
  • Carve-out to be provided for small businesses.
From 1 July 2019
Business
Australian investment guarantee (i.e. accelerated depreciation for business)
  • Accelerated depreciation allowing businesses to claim an immediate 20% deduction in the first year for newly purchased depreciating assets.
  • The balance will be depreciated over the effective life of the asset from the first year in line with normal depreciation schedules.
  • Applies to eligible investments that are valued over $20,000.
  • Does not apply to certain investments, including structures & buildings and passenger motor vehicles.
From 1 July 2021
Tax transparency threshold reduced to $100m
  • Lower the reporting turnover threshold for tax transparency data for private companies from $200m to $100m.
TBA
Superannuation
Reduction to non-concessional contribution cap
  • Reduce the non-concessional cap from $100,000 to $75,000.
TBA
Reduce high income threshold for contributions tax
  • Reduce the income threshold from $250,000 to $200,000 for the extra 15% contributions tax for high income earners.
TBA
Other
  • Abolish catch-up concessional contributions.
  • Remove deductibility of personal superannuation contributions for employed persons.
TBA

 

More information

If you wish to discuss any aspect of this Client Alert then please contact your Director.

Disclaimer.

This material is general commentary only. None of the material is, or should be regarded as, personal or financial product advice. Accordingly, no person should rely on any of the contents of this publication without first obtaining specific advice from Hill Rogers. Every effort has been made to ensure that the content is accurate, however it is not intended to be a complete description of the matters described. Hill Rogers, its Principals and agents accept no responsibility to any person who acts or relies in any way on any of the material without first obtaining such specific advice.